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Complete Genomics Doing Well in 2011, Thousands More Genomes On Order

Complete Genomics Quarter Report

Q1 2011 was a good time for Complete Genomics as they continue to expand their human genome sequencing services.

The company that could bring about the revolution in human genome sequencing is showing early signs of success in 2011. Complete Genomics is hoping to use a laser-tight focus on human genomes, and efficiencies of scale, to make it the dominant force in human sequencing. They recently released their first quarter report for 2011 and the numbers looks good. 600 genomes were sequenced in Q1 alone, and revenue was at $6.8 million. While still running at a loss, Complete Genomics is closing the gap, has ready cash on hand ($68+ million), and there are over 2000 genomes on back order. The stock is up (NASDAQ:GNOM), and the Silicon Valley startup has announced it will offer 4.5 million shares in the near future. Not only that, but Complete Genomics is increasing its production rate, and lowering its costs. They could hit 1200 genomes per month, 4000+ genomes sequenced, and $5000 per genome by the end of the year. In almost every metric, Complete Genomics is doing well and looking to perform even better in the near future. Didn’t we tell you that these guys knew what they were doing?

Let’s hit a few more numbers released in the report:

  • Revenue for Q1 2011 was up – $6.8 M as compared to $0.3 M for Q1 2010.
  • Costs for Q1 2011 were up – $18.9 M as compared to $14.6 M for Q1 2010
  • Net Loss was down for Q1 2011 – $12.5 M from $14.3 M for Q1 2010.
  • Complete Genomics sequenced 600 genomes in Q1 2011, with current estimated capacity at 400 genomes per month.
  • Median turn around time was 70 days.
  • Required sample size was cut in half – 7.5 micrograms from 15 micrograms.
  • Order backlog was up for Q1 2011 – ~2100 as compared to ~1000 for Q4 2010. (That’s a big increase!)
  • The value of the backlog is estimated at $15 M over the next 12 months.
  • Average price was $9.5k per genome for small orders, and $5k-$7.5k for large orders in the hundreds of genomes.
  • They have released 69 fully sequenced human genomes into the public domain, which have been downloaded 750 times (this is much larger than the current customer base of 45 groups).

To accompany their Q1 report, Complete Genomics also held a phone press conference in which they made several really interesting projections for the future:

  • They expect to increase production capacity to 800-1200 genomes per month by year’s end with improvements on existing equipment.
  • Each of their current instruments can handle about 1 genome per day. Next generation equipment, to arrive in 2012, could handle 10 genomes per day, expanding production greatly.
  • Turn around time could be down to 30 days by 2012.
  • The second quarter should see about 900 more genomes sequenced.
  • The total number of genomes sequenced in 2011 is expected to reach 4000!
  • Average selling price has been falling since Q4 2010 and is expected to be near $5000 by year’s end.

We’ve made it no secret that Singularity Hub likes Complete Genomics. They made some thrilling claims in the past (sequencing a million genomes, falling below the $5000 price, etc) and while their time tables have stretched forward a bit, they’re still expanding at an accelerated rate. The core of their strategy seems pretty simple: find one area of sequencing and outperform everyone in that field. Complete Genomics does nothing but human genome sequencing and they push themselves to produce more at lower prices. In the phone press conference, CEO Cliff Reid directly stated that they are interested in aggressively improving scale by driving prices down. As prices fall, demand goes up in a way that is more than commensurate. This means that Complete Genomics is going to keep pushing us towards lower sequencing costs. I fully expect that in a few years we’ll see the first $1000 genome, and a few years after that we could have a $100 genome arrive. In my opinion, Complete Genomics is likely the company to get us to that point.

Once genomes become cheap to sequence we could finally reach the genetics promised land that we’ve been hoping for since the first human genome was sequenced a decade ago. In order for that to happen we’ll need hundreds of new discoveries by researchers all over the globe. Luckily, those are exactly the kind of people forming Complete Genomics’ current customer base. As Reid and his company continue to provide these scientists with genomes they will eventually be able to translate loose genetic correlations into actionable medical practices. It’s going to take years for that research to be performed, but Complete Genomics’ cheap wholesale sequencing is already moving us towards that direction. In the phone conference, Reid mentioned that they were already seeing themselves written in grant proposals. That’s a good sign that the scientific community is gearing up to take advantage of the services Complete Genomics provides.

GNOMThe stock is up after Complete Genomics announced their Q1 report on May 9th.

It’s not all roses, of course, there are a few thorns. Illumina’s patent infringement lawsuit against Complete Genomics is still ongoing, although the number of disputed patents has dropped from three to only one. (Reid stated that his company was going to continue to fight the lawsuit strongly.) The stock has been on a tear recently, basically doubling since March. While that is mostly a good thing it may mean that it’s slightly overpriced at the moment. Which may be why Complete Genomics is looking to offer 4.5 million more shares – raise money (~$70M) while the getting is good. Also, the stock may be up but they’ve really only reached the levels that Complete Genomics was hoping to set at their IPO (originals plans were for $12-$14, but that was lowered to $8). I’m also curious as to whether or not they really need their upcoming offering to fuel their growth – their current cash holdings of $68.8 M include $20 M in loans, so it could go either way. So overall…some good financial prospects, but I’d say their future rests on the continued performance of their technology seducing more investors as revenue is unlikely to meet costs for years to come.

Overall, however, I think Complete Genomics is a winner – a winner whose coat tails are big enough for everyone to hold onto. Their nanoball array approach to sequencing isn’t going to be the ultimate technology in the field, but it’s the first that’s proven to be able to scale up so quickly and efficiently. As the company continues to increase production and expand their customer orders we’ll see prices drop until the costs for sequencing a genome represent a reasonable investment for every individual. At the rate Complete Genomics is improving, that future is going to happen in this decade, perhaps even by 2015. The beautiful thing is that those falling prices are enabling the scientific research that will make sequencing yourself a smart investment. How copacetic. Good luck to Complete Genomics, and to all their competitors out there as well. Whoever wins the race to be the leader in human genome sequencing, we’re all going to rake in the benefits together.

[image credit: Complete Genomics, Google Finance]
[source: Complete Genomics Press Release and Press Conference Call]

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