GNOM isn't doing too well on NASDAQ. Is the future of Complete Genomics grim, or just under-valued?

Mo’ genomes, mo’ problems – it’s as true for Complete Genomics as it was for Biggie Smalls. The Silicon Valley startup has a revolutionary approach to sequencing the complete DNA of a human being, lowering costs and raising the potential capacity of the industry considerably. They want to be the first company to sequence a million human genomes…but they may have hit a snag. Complete Genomics (NASDAQ: GNOM) saw an enormous fall in its stock price last week after releasing its earnings report for the second quarter. News of rising costs may have driven investors to flee from the stock lowering it to around $8 a share.
That’s less than two thirds of where GNOM was just a month ago, and less than half of its peak value from early this summer! Complete Genomics’ Q2 earning report was quick to point out the areas in which it was performing well. Despite the disappointing news in costs, almost every other major indicator for the company showed positive results. They’re sequencing more genomes than ever before, they have millions of dollars in orders, and their capacity is increasing steadily. So, has Wall Street panicked itself away from a now under-priced stock, or is Complete Genomics truly facing a crisis point in its development?

Let’s take a look at the main figures from Complete Genomics’ 2011 Q2 report:

• The company recognized revenue for over 900 human genomes
• Revenue of $5.9 million compared to $1.1 million in the second quarter of 2010
• Costs and operating expenses were $20.8 million compared to $12.9 million in the second quarter of 2010
• Net loss was $16.0 million compared to $12.6 million in the second quarter of 2010

Clearly the rising costs and net loss are disappointing, but were things so bad as to warrant more than a 33% drop in stock price? Well, comparing to Q2 2010 is only half the problem, it’s the difference between Q1 and Q2 of this year that may be more concerning. As we discussed in May, the first quarter of 2011 was very good to Complete Genomics. They sequenced 600 genomes, had $6.8 million in revenue, and a net loss of only $12.5 million. You can see the issue. Despite sequencing 900 genomes in Q2, Complete Genomics wasn’t able to increase its revenue according to investor expectations.

GNOM soared to more than twice its IPO after Q1 earnings were reported. Now Q2 reports have brought it all the way back down.

What’s the cause of Complete Genomics’ clipped revenue? Spit and blood. Companies that order whole genome sequencing must provide Complete Genomics with the DNA samples they want examined. If they don’t send those samples promptly, then the revenue stream gets stymied. In a conference call following the release of the Q2 report, CEO Cliff Reid pointed to delays associated with the Institute for Systems Biology as a major cause of the drop in revenue. ISB has ordered 600+ genomes from Complete Genomics, but apparently is running into trouble collecting the samples they want. They have the money, they’ll be able to pay Complete Genomics when its time, and Complete Genomics will be able to sequence those samples when they arrive. Until that happens though, things may look worse than they are.

As a young company with relatively few customers (over 80), our quarterly revenue is quite variable. It was higher than analysts expected in the first quarter and lower than analysts expected in the second quarter. We expect this variability to continue until we see a smoothing effect from having many more customers.
—Complete Genomics CEO Cliff Reid

Complete Genomics is painting the irregularity in sample delivery as just one more hurdle they have to clear as they build their new position in the sequencing industry. They still aim on delivering 4000 genomes to customers by year’s end, they’ll just have to clump things up towards the second half of 2011. According to their outlook from the report:

The company shipped approximately 1,600 genomes to its customers in the first half of 2011. In the second half of 2011, the Company expects to ship over 2,400 genomes to its customers including over 600 genomes in the third quarter of 2011. The variability in genomes shipped each quarter reflects the timing of sample arrivals from a few large orders. We expect this variability to decline as order volume grows and provides a smoothing effect on sample arrivals.

So you’re going to drop to 600 genomes in Q3, then jump up to 1800 genomes in Q4? That’s not the kind of steady growth that investors like to see – it’s really no surprise they dropped GNOM.

But I think Wall Street may have moved in error. Complete Genomics may not have properly anticipated (or prepared its investors) for fluctuations in sample delivery, but they are still at the top of their game. Their current capacity for genomes is 600 month, and they look to push that to 800-1200 per month by the end of the year. Of the $20.8 million in costs, $8 million was spent in R&D, representing the biggest single rise in expenditures for the company (up from $4.9 M from Q2 2010 and $6.8 M Q1 2011). In other words, Complete Genomics is still in high growth mode.

Besides, it looks like the research community (those that actually buy bulk whole genome sequencing) are very interested. Complete Genomics pulled in $30M in orders this year (as of July 30th) for some 5700 genomes. A large chunk of those will be for the National Cancer Institute/SAIC-Frederick and the Inova Translational Medicine Institute, representing approximately $14 million in services and 2700 genomes. Complete Genomics’ backlog alone is worth $12 M (2200 genomes), and turn around time is now down to less than 70 days.

What I’m trying to say is, I still believe in Complete Genomics. Or, at the very least, the economic pressure that is pushing Complete Genomics to succeed. Whole genome sequencing is the key to unlocking some of the vast potential of genetic research, and the market for scientific breakthroughs in this field is going to be worth billions of dollars in the years ahead. The company that can cheaply, reliably, and quickly sequence a human’s complete DNA is going to be a billion dollar company, no doubt. Complete Genomics looks like it can win that race. Its capacity is growing steadily, its customer base is growing along with it, and the price per genome is falling – just $4000 for bulk orders of 50 genomes or more. Unfortunately, that decline may be partially responsible for driving some investors away as well, but if so it was likely a shortsighted reasoning:

Prices of complete human genome sequencing has fallen faster than analysts expected, but this price drop is what enabled us to land the Inova deal – a landmark event in personal medicine.
—Complete Genomics CEO Cliff Reid

Maybe Wall Street investors see a different story, but I think GNOM’s recent stock woes are simply a sign that the genomics industry is too new, and too volatile for the mainstream. I hope that Q2 2011 was just a hiccup, but even if I’m right, there’s going to be further hiccups in the next few years. If you’re looking for a sure thing, Complete Genomics probably isn’t the way to go. But if you’re looking for a company and an industry that has an absurdly vast potential…well, then it’s your lucky day. There’s a sale going on, and you can snag some GNOM stock for the same price as the IPO (give or take). If that doesn’t seem like a smart decision to you, keep your eye out for other companies in this field. Even if Complete Genomics crashes and burns, someone else is going to fill this space. The world wants millions of genomes at $1000 or less a piece, and I think that future is nearer than we imagine.

[image credits: Complete Genomics, Google Finance]
[source: Complete Genomics]

I took a look inside Complete Genomics' lab. What I saw turned me into a believer.

The future of human genetics will arrive when we understand how each gene in your DNA interacts with every other gene to form who you are. In order to get that understanding we’re going to need to sequence a huge number of genomes. And in order to sequence genomes we’re going to need Complete Genomics. The Mountain View based startup recently went public (NASDAQ: GNOM); with their requisite silent period ended we finally got a chance to tour their facilities and talk again with their CEO Cliff Reid. We were impressed. Complete Genomics isn’t going to conquer the entire world of DNA testing, but the kingdom of human genome sequencing they’ve carved out for themselves looks amazingly well fortified. As far as I can tell, if CG really takes off no one else will be able to challenge them in whole human genome sequencing for years to come. We asked Cliff Reid about the IPO, the genomics market, and some recent advancements in Complete Genomics’ analytical software. Check out his answers in the videos below.

Complete Genomics doesn’t sell a device, they sell a service. Companies like Illumina make DNA sequencers they sell to other companies. Reid and his gang take DNA samples and return with huge amounts of DNA data. Customers never need to deal with the biochemistry. That full service approach helps Complete Genomics focus on increasing the number of human genomes they can sequence for customers, and lowering the price for each. In the following clip, Reid gives us an update on the company, including the success of the IPO, and a look at its production capability and the current price of sequencing human genomes.

Getting to explore Complete Genomics’ Mountain View facilities was pretty amazing. I was struck by the relatively small size of the sequencing lab (though there’s plenty of room for expansion) and the degree to which automation is used. The company can produce 400 whole genome sequences each month, but there’s only ever two technicians working at any given time in the sequencing room. Robotic instrumentation and equipment makes the lab almost seem like a ghost town, but there’s a lot of action going on. I wish we could have turned our cameras on while touring that place, I bet many of you (and all of CG’s competitors) would have loved to see what they had cooking.

While we didn’t get any trade secrets out of Reid, the recipe for Complete Genomics’ secret sauce is pretty clear. This company is about doing one thing and doing it really well. Other big names in sequencing (Illumina, BGI, etc) are looking to handle many different kinds of genetic reading such as examining RNA, sequencing microbes, and sequencing animals. Complete Genomics is doing just one thing – whole human genomes. With that laser-like focus comes the ability to scale their entire company around a central mission. As we’ve said in previous coverage of this company, economies of scale, and single-mindedness in action will help Complete Genomics get cheaper and cheaper, faster and faster.

Eventually that means you’ll have access to inexpensive sequencing for your own genome.

Yet it will take a while to get there. Most of the whole genome sequencing done today is purchased by research labs, not by individuals looking to understand their own health. That’s how it should be. It’s going to take years for researchers to fully understand our DNA and what the variations in our genes mean. Selling genome information to individual customers like you and me would be premature. For now, Complete Genomics is focusing on the research market and helping them make the discoveries that will revolutionize genetics. Once the price per genome comes down, and the science behind genetics is better understood, Complete Genomics will transition into the consumer market. Reid says as much in the following video:

Complete Genomics isn’t 23andMe, Pathway Genomics, or any of the other companies selling genetic tests on the market today. First off, those groups are only testing a small subset of your entire genome for simple variations in individual letters of DNA (single nucleotide polymorphisms or SNPs). Complete Genomics is sequencing whole genomes – all 3 billion letters of DNA. Just as importantly Complete Genomics is waiting until researchers know more about the genome before they try to offer genome sequencing to consumers. That’s different from the current genetic testing companies that the FDA and congress are worried about. Those businesses will sell you genetic tests today, while much of the science is still not completely understood. Don’t get me wrong, I think there’s a place for that. Complete Genomics, however, is waiting until there’s an actual use for you to know your whole genome sequence before they try to sell it to you.

In the years ahead someone is going to have to process thousands (millions?) of genomes before we understand our DNA well enough to make the sort of pinpoint health recommendations that the public expects from this promising technology. Who’s going to sequence all that DNA? My guess is Complete Genomics. Again, getting back to that focus on whole genome sequencing, the company has built it’s entire technology around reading human DNA faster, better, and cheaper than anyone else.

The center of their business is their fluorescent read technology, which analyzes nanoballs of DNA that correspond to different A, C, T, G ‘letters’ of genetic code (learn more about the nanoballs on the Complete Genomics website). In Reid’s words they, “use silicon to read silicon”. A silicon based semi-conductor camera is precisely aligned with a different silicon wafer full of tiny pockets where the nanoballs sit. When I say tiny, I mean tiny – those pockets are just 300 nanometers across. The camera only has to use a few pixels (soon even fewer will be needed) to optically read each nanoball and determine if it contains an A, C, T or G.

According to Reid, Complete Genomics had reached the limits of optical reading technology. They are (or soon will be) using as little digital information to read each letter of DNA as you possibly could. The best other companies could probably do is match them. Add in the fact that their automated reading technologies are getting faster, and their analytical software is getting smarter, and you can see that Complete Genomics is quickly making itself the foremost leader in whole human genome sequencing.

Even if another company finds a way to sequence whole genomes with the same speed as Complete Genomics, I still think Reid and his cohort will come out on top. By focusing on just one product (whole human genomes) Complete Genomics will develop an unprecedented amount of experience in their field. They’ll discover all the little undiscovered idiosyncrasies that make human genomes unique compared to other sequencing projects and they’ll understand those twists and turns better because human genomes will be the only thing they work with. Single minded focus will help Complete Genomics learn all the tricks, and this will help make them more streamlined, faster, cheaper, and better at analyzing human genomes.

In the following video, Reid discusses Complete Genomics’ technology. Recently, the company announced a particularly exciting advancement in their software for digital analysis of DNA. Now when a researcher sends a genome to be sequenced CG will include information about copy number variation and structural variation – data that can illuminate where in a cancer cell genome that DNA has gone bad. Basically Complete Genomics is making it much easier for scientists to translate genomic data into insights about the nature of cancer. Coupled with a growing assortment of open source analytical code (CGA tools), Complete Genomics’ software is accelerating research into genetics. Pretty cool.

Other companies, like Ion Torrent, have developed DNA reading technologies that use semiconductors rather than optics to sequence genes. These CMOS based sequencing technologies have been hailed as the next step forward in genetics. As you saw in the video, Reid explained the reason why they aren’t afraid of semi-conductor based DNA readers. Can we all say that reason together? Complete Genomics only has to worry about whole human genome sequencing. While we toured the Complete Genomics facility, Reid pointed out that if you calculate how much current CMOS tech will cost to sequence a full human genome, the price would be many hundreds of thousands of dollars (or more). The big advantage semiconductor sequencing has is that it can fit on a desktop. Complete Genomics doesn’t want to fit on a desktop and they don’t want to be portable. They just want to sequence whole human genomes.

The same logic applies to those companies looking to push the boundaries of how much DNA they can read at a time. In the sequencing field, there are both ‘long reads’ and ‘short reads’. The human genome has more than 3 billion base pairs (those A,C,T, G letters). In order to sequence a genome you end up first sequencing smaller chunks of those letters, and then pasting those chunks together to get the full 3 billion letter code. The shorter the chunks you use, the more you need to double check your work and the more complex it is to paste things together. ‘Short reads’ sequence each chunk multiple times (10x or more for some Complete Genomics projects) while ‘long reads’ get away with doing that less. Long reads, however, also tend to be slower and more expensive. As Reid explains, long reads are good for some things, but Complete Genomics isn’t into those things. They have improved software that makes short reads the most economic way for them to proceed with human genomes.

This company knows exactly what it wants to do. And it is doing it really well.

That doesn’t mean I’m completely free of concerns. I’ll stop my blatant cheerleading for a second and do a little math. Reid didn’t give us an exact total for how many genomes they’ve sequenced (that’s ok, we know from other press materials that the number is more than 500 – damn impressive) but he did tell us that his current capacity is around 400 genomes per month. Those sell at a price of $10,000 each (or less if bought in bulk). Assuming there’s enough market demand (which I think there is), that means with current levels of production Complete Genomics could make around $4 million a month in revenue. So, maybe $48 million a year? Remember, even as Complete Genomics increases its production to drive up their revenue, the price per genome is planned to recede. This company has spent “tens of millions” on improving their software, and according to their own reports they spent more than $20 million in Q3 of 2010. Is $48 million per year enough for Complete Genomics to grow? Reid says they are very happy with their IPO, but I know that if I were in his place I would have been even happier if they had raised their original target of $80M instead of the $50M or so they got.

I think this next year is going to be a critical time for the company. Depending on funding and revenue they could have to stay on a conservative growth curve. Or, if they secure the finances, they could really ramp up – trust me, the technology looks like it is more than ready.

I really want a whole genome sequence to cost less than $1000 and not simply because I ‘m itching to peer at my own software code. By the time we hit that price point, researchers will have had the opportunity to look at thousands (tens of thousands?) of genomes and finally get the data they need to puzzle out some of the secrets of our DNA. That future may be nearer than we think. For now, Complete Genomics looks like the company that is going to take us there. I can’t wait.

Update: No person at Singularity Hub currently owns any stock in Complete Genomics or owns any financial stake in the company whatsoever.

[image credit: Complete Genomics]
[video credits: Aaron Saenz/Singularity Hub]
[source: Cliff Reid/Complete Genomics]

Open up your financial umbrellas, Complete Genomics is going to make it rain. The Mountain View startup has built a name for itself as one of the premier providers of whole genome sequencing for humans. Now we are just days away from their IPO. According to the filing statements with the SEC, Complete Genomics will offer 6 million shares of their stock at a price between $12 to $14. To encourage prospective investors to leap at their offer, the company released details of its current and future production. At the beginning of the year, the worldwide total number of human genomes ever sequenced was less than 300. Complete Genomics produced that many in the third quarter of 2010 alone. They hope to produce 400 genomes per month by the end of the year. These are big numbers, and they’re likely to get bigger. Much much bigger. In our interview with CEO Cliff Reid back in January, he claimed that Complete Genomics would sequence 1 million human genomes by 2014, and at prices substantially lower than any on the market today (possibly < $1000). The race to establish whole genome sequencing supremacy is underway, and this IPO will be a sign of how much faith the public has that Complete Genomics can come out on top.

It’s been a big season for genome sequencing. Ion Torrent, a company developing CMOS based DNA sequencing technology was purchased by Life Technologies for $375 million. Critical parts of the CMOS approach to DNA were actually licensed to Ion Torrent earlier in the year by DNA Electronics, a UK company looking to develop handheld genetic scanners that we’ve discussed before. Pacific Biosciences (NASDAQ: PACB), which has developed optics based DNA sequencing tech, had its IPO at the end of October and raised around $200 million. BGI, China’s premier genome institute recently announced it was teaming up with OpGen to further their own optical approach to DNA sequencing. Everywhere you look, from the EU to California to Asia, forces and finances are gathering to see who will provide the next generation of genome testing and analysis.

This heightened activity in the field may be just what Complete Genomics needs to fuel their IPO. With Ion Torrent selling for $375 M and Pacific Biosciences raising $200 M at a similar share price (~$16), Complete Genomics gets a good idea of what it can raise. The $86 million it hopes to pull in through its stock offering will nearly double what it has gained through venture investments. Complete Genomics gathered $39 million in venture funding this August putting it up to around $91 million in total. With another $86 M, Complete Genomics would have the funds to expand its new sequencing centers aggressively – a key requirement if they are to develop as quickly as Cliff Reid seems to be planning. Investors may look at Complete Genomics’s competitors recent financial gains, compare their tech to CG’s rapidly growing capabilities,and flock to the IPO.

Yet such investments are not without their concerns. Even while raising venture funds, Complete Genomics was fighting off patent infringement lawsuits from Illumina - perhaps their main rival in whole genome sequencing. Genetic testing based on SNP (single nucleotide polymorphisms) has faced growing concerns over accuracy and relevance in the light of real and perceived errors. The field of genetics, in general, has faced criticism for the lack of real world benefit for patients in the ten years after the first human genome was sequenced. Investors may see Complete Genomics’ cheap whole genome sequencing, which provides phenomenonally more data than SNP tests, as the technology that will come to dominate genetics and reconfirm its importance in medicine. Or they may see the uncertainty in genetics as a great reason to avoid investing in the field altogether.

The same factors which make investments a risk make them very exciting to techno-optimists like myself. I can’t say for certain that Complete Genomics will be the undisputed leader in whole genome sequencing. There’s too much potential competition from Illumina, and the CMOS and optical approaches developed by others are too attractive looking, to call things in Cliff Reid’s favor at the moment. Still, I do think Complete Genomics has the right approach to sequencing: specialize in one field (human genomes) and use economy of scale to push towards ever cheaper and larger production. 400 genomes a month by 2011 is an amazing accomplishment, especially as the costs for materials for each genome may be as low as $1800. The only way Complete Genomics is going to lose is if some other company can beat that. Either way, scientific research and personal genomics will have won. Cheap and fast whole genome sequencing will provide us with huge amounts of new genetic data that we can use to understand illnesses, and provide better healthcare. When your genome costs less than $1000 to sequence, millions all over the world will be encouraged to get themselves tested and claim an informed ownership of their own genetic information. Win or Fail, Complete Genomics’ IPO is another sign that the next DNA revolution is near.

[image credit: Complete Genomics]
[sources: Complete Genomics, SEC]

Europe’s leading genetic sequencing provider, GATC Biotech, recently announced that it would sequence 100,000 human genomes by 2014. Based in Germany, GATC plan on using sequencing technology from other industry leaders, including Illumina’s HiSeq2000 and Pacific Bio’s PacBio RS single molecule platform, to achieve their goal. They are reportedly already on target to finish 100 human genomes by the end of 2010. To facilitate the ramp up needed to hit the 100k mark in four years, GATC has created a new unit, and has grown their staff to 120 employees. They predict that sequencing customers will come from the pharmaceutical and diagnostic industries, as well as academia. While GATC isn’t adding any new technology to the whole genome sequencing game, they are a major force in Europe, and seem to have the resources necessary to make their goal a reality. With another company competing for sequencing dominance, the chances for cheap reliable access to your own genome are looking better every day.

President Kennedy famously put the US on track to win the space race by setting the goal, “… of landing a man on the moon and returning him safely to the earth.” Whole genome sequencing is now entering a similar race, with similar bold statements by prominent companies. Yet no one seems certain as to where the moon is, metaphorically speaking. Complete Genomics has announced it will sequence a million genomes in the next five years. GATC has its 100k genome goal set around the same time frame. Which of these is the important landmark? Does it really matter if either one succeeds?

Globally, the number of human genomes that have been sequenced is still in the low hundreds. With such a small data set, the number of things we can learn from a genome is still fairly limited. As we mentioned before, it has been 10 years since the first human genome was sequenced and we still haven’t had a revolution in genetics. How many genomes will it take before we get there? We may have major breakthroughs by the time we sequence a few thousand genomes, or it may take us two or three million before we find the connections needed to make big breakthroughs in genetics. Those leaps in understanding are going to be more meaningful than hitting some arbitrary mark (1 million or 100,000) in the number of genomes sequenced.

The real saving grace of all this competition to sequence the most genomes quickest is that it is driving prices down rapidly. Illumina’s HiSeq2000 and other instruments are drastically reducing the reagents costs needed for each genome. Complete Genomics is already looking to offer genomes at less than $10,000 USD this year. With service groups like GATC getting into things, we’ll hopefully see prices plummet in the next five years. That will help research teams, in the pharma industry or academia, find those major breakthroughs in genetics we’ve been waiting for. It will also mean that millions of people around the world would be able to afford to get access to their own sequence, especially if prices fall below the $1000 mark. In the end, I’m not terribly thrilled that GATC is aiming to hit the 100k genome goal by 2014, but I am enthusiastic to see what kind of changes in genetics their efforts might enable.

[image credits: GATC Biotech]
[source: GATC Biotech Press Release]

Testing your family's genetic makeup is about to get a whole lot easier.

Genetic testing, like most technologies leading up to the singularity, has its pros and cons. Would-be parents can feel better knowing they don’t have to pass on life-threatening conditions to their offspring; they might be carriers, but that doesn’t mean their children have to be. For instance, the neurological disorder Tay-Sachs has virtually disappeared because of carrier screening. The foray into this new era of information sharing is bound to effect our lives, but how? A loss of privacy could lead to unjust discrimination. The time of genetic selection using low cost solutions is at hand. But reading genes isn’t exactly like testing for high blood pressure. We should fully understand both the benefits and the consequences of sharing this kind of information before genetic testing is packaged and fed to the masses. Want to know how personal genomics is similar to Web 2.0? Check out the video below.

Shaping one’s own destiny is part of the human equation. When former CEO of Solexa John West ordered whole genome sequencing for his entire family, the industry took notice. By participating, not only could each family member better provide for his or her own health care, but identical genes on opposing chromosomes could be studied in greater detail. For both scientific research and family wellbeing it was a win-win situation. Linda Avey, co-founder of the genetic testing company 23andMe who had her three children genotyped, found that her fraternal twins are identical in the region of the genome where the immune system is inherited; this information would be useful should one of the twins require an organ transplant. Situations like these clearly demonstrate the benefits of gene testing, and soon the service will be available to everyone.

A new market is emerging to make genetic information available to the public. At an average of a few thousand dollars, genetic testing services are now affordable for many families, and the cost is dropping. The genetics testing company Counsyl offers a $350 universal genetic test that looks for genetic diseases using saliva samples. Women are routinely tested as a part of prenatal care, and a good number are stopping their pregnancies if a disease is discovered. One U.S. startup even wants to offer the service for $30 per sequence. But while we can’t yet roll back the price for genetic testing with any assurance, screening for rare and fatal conditions is at present commonplace. Whether or not you consider sequencing your kids the responsible thing to do, knowing your family’s genetic makeup does have its benefits. Carriers of Huntington’s Disease, Cystic Fibrosis and Sickle Cell Anemia can now decide whether or not to take the risk of passing on harmful traits to their offspring. Screening embryos and using only those without genetic problems does seem logical. And it’s only a matter of time before we can genetically select out more diseases.

As the cost of genomic sequencing drops, we may see more commercial niches for gene therapy, including designer athletics and contracting for military personnel. But what are the implications of sharing this kind of information? If embryo screening and artificial design become legally permissible and universally accepted, widespread selective breeding could begin a new era in eugenics that, if unchecked, could favor certain populations over others based on politics, false perceptions and prejudice. Employers could choose to hire or fire based on a person’s genetic history. Privacy and patient confidentiality could be compromised if hospitals and insurance companies see genetic testing as a viable way to curb rising health care costs. Genetic makeup could provide yet another reason for disparities in housing, education, and employment.

Fortunately for now, we can breathe a bit easier. The Genetic Information Non-Discrimination Act (GINA) was passed in 2008 to prevent gene-based discrimination by employers and insurers. But the law does have a number of ambiguities, which leaves the future of genetic rights uncertain. Just because we have the rights doesn’t mean we want the world to have our genetic information. In the video below, Yale Professor of Biomedical Informatics Mark Gerstein touches on the issue of privacy around this new type of information sharing.

In the near future, screening your genes may be as commonplace as getting vaccinated. But the difference between getting the flu shot and eradicating Huntington’s Disease from your bloodline is a big one. At what point will citizens be responsible for cleaning up their own genome? When will that be determined and by whom? The scenarios presented here may seem daunting, and as we’ve seen with nuclear energy, stem cell research and genetic cloning, great power demands responsibility and foresight. There’s no compelling reason to think the human race won’t prevail over adversity. But we need to keep both eyes open as genetic testing develops, or we might just end up selecting out our rights along with all of that other unwanted stuff.

[photo credit: MIT]
[video credit: Fora.tv]
[source: NDSU]

Meet the Wests, first family of recreational whole genome sequencing.

John West is very familiar with whole genome sequencing (WGS). He was a general manager with Illumina after they acquired Solexa, where he had been CEO. So it’s no surprise that John West hired Illumina to sequence him, or even that his wife Judy followed suit. What has caught attention is that he asked his daughter Anne (17), and his son Paul (14) to be sequenced as well and they agreed. This marks the first time that an entire family has publicly undergone WGS without any pressing reason to do so (such as researching a genetic disease). While some may view this as “recreational sequencing” I think that John West is simply ahead of the game. Could the West kids learn something unpleasant about their genes? Sure, but knowing your genome is going to pay big dividends in the years to come. Ethical concerns about having children sequenced are understandable now, but in the future it may be considered unethical not to sequence your children as early as possible.

According to the Times Online, West paid something close to Illumina’s retail price for the sequencing service, that’s nearly $50k a piece or $200k all together. There are relatively few people able or willing to pay that much to peer into the DNA of their families. Complete Genomics, who we see as Illumina’s chief rival, is on the road to providing WGS at a much cheaper rate -$10k or less. Both companies are aiming to hit a $1000 price tag as soon as possible. What few could do at $200k, many will be able to afford at $4k and so, from an economic perspective at least, it seems very likely that we’ll be able to sequence our families soon.

Will we want to? Understanding one’s DNA is the key to benefiting from the growing body of research about genetics. Genetic testing can give you early warnings about devastating illnesses like Parkinson’s, diabetes, and heart disease. We may also need WGS if we are ever to take advantage of certain forms of gene therapy. Those are good reasons for every individual to get sequenced, but there are benefits for families sequencing together as well. As West points out in the Illumina press release, sequencing an entire family lets you explore the importance of variations in the same gene on opposing chromosome copies (compound heterozygote), and may provide insight into medical conditions.

For now, the possible benefits from genetic testing are relatively small, but they are likely to grow with every year. Is the same true for risks of genetic testing as well? Let me be clear here, there is no physical risk to being sequenced – DNA is simply extracted from a saliva or blood sample. The ‘risk’ is how the information provided by WGS could affect one’s life. If you had a large disposition to Alzheimer’s would you want to know? Would learning about it depress you irrevocably? In that case, maybe ignorance would be bliss.

Nonsense.

I’m not a big fan of ignorance, and I can’t see it getting any more appealing in the years ahead. Yes, there is always an emotional weight to learning about a medical condition. That knowledge, however, can often be put to good use, helping us seek treatment that is needed. Even if you have a genetic disposition to a disease with no known cure or associated therapy, wouldn’t you at least want to know that before you start having children?

It all comes back to the kids. When Anne and Paul West agreed to be sequenced, they set an interesting precedent: non-adults consenting to genetic testing. They had, a few years earlier, agreed to a more basic SNP test from 23andMe. More qualified ethicists than I can debate whether a non-adult has to (or even can) consent to a medical procedure. What interests me is whether or not there is any downside to knowing your DNA. There is a concern that once someone’s DNA is on file insurance companies, employers, and potential mates would all rifle through that data looking for reasons to treat you poorly. Who knows, maybe they would, but I doubt we will let it get to that point. All around the world nations are taking steps to outlaw genetic discrimination (including GINA in the US). We won’t have to viciously protect our DNA from being searched, and even if we wanted to, we probably wouldn’t be able. $1000 WGS will eventually get even cheaper (years down the line) and DNA is easy to come by. Unless you’re going to guard your precious bodily fluids every second of every day, someone would eventually be able to spy on your genes.

In other words, I don’t think there was much legal/social risk to what Anne and Paul agreed to, and any risk they did expose themselves to the rest of us will soon be exposed to anyway as well. And for the record, while at least one of the West parents submitted their genome to the NCBI database neither of the children’s DNA was made public at this time. They’ll be able to make that decision for themselves when they turn 21.

So if you’re like John West or I, you probably see WGS for the family as a net-positive. Good chance for improving your own medical care, little risk of being ostracized from society for being a genetic leper. If more people take that view it’s likely that the age at which we will want to genetically test our children is going to get lower. Already there are preconception and prenatal genetic tests to help parents decide to have (or prepare for) children with a chance for genetic illness. Such testing effectively helped eradicate Tay-Sachs from the Jewish community. When it costs less than $1000 to sequence someone, it seems very likely that many parents will opt for the test immediately after (or perhaps even before) birth.

That could lead to unprecedented healthcare opportunities. Right now, our understanding of how DNA relates to disease susceptibilities is based on handfuls of SNPs and small groups of genes. This understanding will seem primitive in a decade. There is so much to learn, so many interactions between genes to trace, so many medical histories to explore and tie in with genetics. We are going to know a lot more in the years ahead and taking advantage of what we know is going to necessitate sequencing at some level. Why not get your child’s WGS done as soon as possible so that you can maximize the possible benefits?

Instead of asking if it is ethical to genetically test children, let’s imagine a time when not testing a child could be seen as a health risk. There are many illnesses in childhood which may have a strong genetic component (various cancers, diabetes, etc). Many of these diseases can be treated better with advanced warning. If you were a parent, wouldn’t you want that warning? If everyone got their children tested for these diseases, it may eventually seem negligent if your child wasn’t sequenced. I think we will be entering such a time sooner than we think. In that case, John and Judy West’s decision to get their children sequenced (and their children’s consent to the WGS) isn’t ethically questionable, it’s demonstrating laudable foresight.

For those wishing to read more about the ethical concerns surrounding the West family’s sequencing adventures I recommend Marc Henderson’s article in the Times Online. Genetic Future author Daniel MacArthur’s analysis of that article is also great reading. In the end, I think the debate centers as much on the fear of changing humanity as anything else. Genetic screening before conception is not such a long jump from making designer babies, and we recoil from the idea of breeding humans the way we breed livestock. Still, parents may reconsider their prejudices against such concepts when they are presented with the ability to help their children be smarter, healthier, and happier. Even if we completely outlaw all genetic selection for embryos, WGS will still be a valuable tool for understanding and dealing with the genes we receive naturally. DNA is data, and sequencing gives us access to that information. It’s hard to argue against knowledge and those that do rarely have the final say in how technology develops.

[image credit: College Hill Life Sciences]
[source: Illumina Press Release, Times Online, Genetic Future]

CG wants to hit 5000 sequences by the end of 2010. Well they already have 500 on order. Time to hit the lab!

Complete Genomics has made some heavy predictions about the number of whole genome sequences it will complete in the next five years, so you know we have to keep tabs on them and see if they’re going to live up to their claims. According to a recent press release, CG has increased the number of current customers from around 10 to more than 30. These new customers include the University of North Carolina, the Institute of Cancer Research UK, the Erasmus Medical Centre in Rotterdam, and many others. With all the new business CG has booked orders exceeding 500 whole genome sequences. That’s a pretty good step towards achieving their goal of 5000 WGS for 2010. While Complete Genomics still has a long way to go before it will hit the 5k or the 1 million mark, this new round of orders is good evidence that they’re becoming the dominant force for sequencing whole human genomes.

Right now, the vast majority of whole genome sequences are used for genetic research. The Institute for Systems Biology ordered 100 genomes from CG, and now Pfizer and VIB are following suit (for unspecified amounts). You’ll notice other new customers listed above are also research institutions. That reflects where the field of genetics is at the moment: there are a few gene therapies available, but mostly we’re still just trying to understand the details of our DNA.

Eventually, however, that will change. At some point our genetic code will be researched enough that we can make powerful conclusions about physical health based solely on a genetic test. Already, we’ve got plenty of personal DNA testing services that will look at small portions of your genes for some valuable (but limited) insights. We’ll soon reach a day when medical treatments will work best if doctors have access to your whole genome. Then everyone will feel a large pressure to get sequenced. By specializing in only human genome sequencing, Complete Genomics has been able to increase their production and decrease their costs. Hopefully that trend will continue. Right now, CG is the cheapest sequencer, providing bulk orders at about $5000 per WGS. When that drops below $1000 many individuals will start to get tested outside of research institutions. When the cost drops below $100 or even $1…it may take years but some day whole genome sequencing will be as common as taking your temperature. Complete Genomics looks like the most likely candidate to get us there.

[image credit: Complete Genomics]

Illumina recently unveiled it's new sequencer, which shows some significant improvements.

The ongoing race to become the household name for whole genome sequencing is speeding up. Industry giants Illumina (ILMN) and Complete Genomics have both made recent announcements which demonstrate how serious this competition really is. The most recent battleground is the JP Morgan Healthcare Conference in San Francisco where thousands of investors and billions of dollars are at stake. Illumina unveiled a new sequencing machine, the HiSeq 2000, which has 30x coverage and 2×100 base pair read length. Importantly, it only requires $10k in materials to process each sample and can sequence two entire genomes over a period of about 8 days. Complete Genomics has countered with some impressive news of their own. This fall they announced the sequencing of 3 individual genomes at an average materials price of just $4400, and future whole genome sequencing (WGS) will be sold at just $20k per sample with large price breaks as order sizes increase. According to their twitter feed, CG told investors at JP Morgan this week that they have delivered 50 genomes and plan to complete a whopping 5000 more in 2010. We’ll get a chance to learn more about Complete Genomics plans for this year when we interview CEO Cliff Reid at PMWC next week. It’s a fierce battle between these two genetic giants, but the war is likely to lead to some amazing benefits to you and I.

As WGS becomes cheaper, we’ll see gains in research, diagnosis, and genetic treatments. What constitutes “cheap” is really at the heart of this competition. Certainly genome prices are falling and will continue to do so. Singularity Hub believes, as many do, that the magic sales tag reads around $1000. At that cost, most individuals in industrialized nations will be able to afford WGS (or pressure their insurance providers to cover it). We would see nearly universal sequencing among those interested in harvesting the benefits of genetic research.

Both companies have a ways to go. Illumina’s price per sequencing is still hovering near $10k or above with the HiSeq 2000, though this is about one fifth the price of their first personal genome studies (~$48k). The new sequencing machine, however, does have some major promise at becoming a definitive tool in the market. The Beijing Genomics Institute has shown interest in purchasing 128 machines! At $690k a piece, that’s a major investment.

Complete Genomics is shooting for the $1000 price line by focusing exclusively on human genomes and economies of scale. Hopefully Singularity Hub will be able to tour their new (and large) facilities in Silicon Valley soon. CG’s commitment to 5000 genomes in 2010 is both promising and concerning. It’s remarkable that the genetics company is following a seemingly exponential ramp up in production going into the new year. Unfortunately, CG had originally promised 10,000 genomes to be completed in this time frame. I’m actually okay with the factor of two discrepancy. As long as CG sequencing is in the thousands, and not hundreds, I think we can be very hopeful for reaching the $1000 benchmark in the next few years.

I should mention that this isn’t a two-horse race. Not really. While Illumina and Complete Genomics are dominating the media feeds and the production benchmarks, there are other genetic sequencing companies. And, it’s still very early in the formation of the WGS industry. We could see a dark horse candidate arrive and become the new household name for sequencing. Genetic expertise isn’t limited to the US and we should all keep an eye out for companies in Europe, China, and India preparing to jump ahead in the race.

As always when dealing with genetics, I find the writing at Genetic Future to be of enormous help in putting new developments in perspective. Along with the Genomics Law Report, GF provided a well reasoned view on the recent developments at Illumina. I would also encourage interested readers to check out CG’s twitter feed, as they put some really juicy news in there on occasion. Hopefully between these sources (and Singularity Hub of course) we’ll be able to keep you abreast of all that is going on in the genetic sequencing industry. This is exciting stuff, folks. Starting now, genetic research is being accelerated by the lowered costs of WGS and we can hope to reap the benefits of those studies in the next five to ten years. In that same time frame you may see personal genomics fall into your budget. That’s going to change our healthcare, the way we plan our lives, and maybe even how we think of ourselves. The genetic revolution is coming.

[image credit: Illumina]

For the first time, researchers at Yale have used whole genome sequencing to make a clinical diagnosis.

A doctor has some tried and true methods of helping her diagnose a disease: examining the lymph nodes, taking your temperature, that whole “turn your head and cough” thing. Now, we need to add one more: whole genome sequencing. Researchers at Yale have sequenced the genome of a patient in order to diagnose his condition, reportedly for the first time. Richard Lifton and his team examined the protein encoding portion of an infant’s DNA to determine whether or not he had Bartter’s syndrome (he didn’t). Though still too expensive to use in everyday clinical work, Lifton has shown that whole genome analysis is an effective and relatively quick method to diagnose some diseases. We’re going to be seeing a lot more of this.

The costs of whole genome sequencing has been falling since the completion of the Human Genome Project. Industry leaders Complete Genomics and Illumina are pushing prices below $50,000 per genome and we could see it drop to $1000 within the next year. Cheap genome sequencing will open up new avenues of diagnosis, but could also allow individuals greater insight into which diseases they should be on the lookout for. IBM announced that it will use silicon chip technology to speed up whole genome sequencing, and we’ve already seen a handheld device that finds special gene variations using CMOS components. As genetic analysis gets faster and cheaper, the medical system will have to adjust to take advantage of the new information, hopefully with amazing results.

Lifton’s analysis of the five month old infant’s genome came at the request of a Turkish doctor who feared the child’s dehydration and lack of weight gain was due to Bartter’s which often leads to fatal kidney disease. In just ten days, the Yale team was able to determine that the baby actually had a mutation in a gene that caused intestinal problems due to congenital chloride diarrhea. Not only that, but they discovered that five other cases referred to them for Bartter’s were due to similar genetic mutation.

While the sequencing used in these tests spanned the entire genome of the patients, only the portions corresponding to protein coding were examined. The protein coding portion of the genome, called the exome, is just 1% of your DNA but 85% of all clinically important mutations occur there. Focusing on the exome allowed Lifton’s team to cut associated costs to one-tenth of what they would be if every gene had to be examined. Price reductions like this could allow genetic analysis to become a common tool in clinical diagnose much sooner than it would otherwise.

So here we have two exciting trends that could improve healthcare: dropping costs in whole genome sequencing, and finding ways to cut prices further by focusing on specific genes. These trends are likely to work in your favor: the genetic analysis that may warn you of high risks of cancer, heart disease, etc could become commonplace in your doctor’s office in the next five to ten years rather than in the next twenty five. While some worry about the lack of privacy, or the institutional prejudice, that could arise from easily sequencing someone’s DNA, I tend to focus on the better medical care that’s almost certain to arise. The more you know about how your body works, the more you can do to keep it healthy.

[photo credit: Yale University]