"We Are A Data Company" Cliff Reid, CEO Complete Genomics

Dr. Cliff Reid, CEO Complete Genomics, Has A Master Plan To Sequence 1 Million Genomes!

Without a doubt the hottest company in the genomics sector right now is gene sequencing powerhouse Complete Genomics. In just the last four years the company has come out of nowhere to dominate the market for low cost sequencing of human genomes in large quantities. Although Complete Genomics is now slated to sequence an incredible 5,000 human genomes in 2010, this is nothing compared to what the company has in store for the years ahead.  Just days ago, in a Singularity Hub exclusive interview with Complete Genomics CEO Dr. Cliff Reid, we have learned that the company is now hoping to sequence 50,000 genomes in 2011 and a whopping 1 million genomes by 2014. Considering that by the end of 2009 only about 100 or so human genomes had ever been sequenced, most of them by - you guessed it - Complete Genomics, this represents an enormous shift in the industry. In the rest of this post I will share with you the juicy details from the interview, followed by the full video of our conversation at the end.

Although companies like 23andme or Illumina have been hogging much of the headlines in genomics recently, the real story may be that Complete Genomics is about to rewrite the game for the entire industry. Simply put, Complete Genomics is the first company to realize that sequencing human genomes is a brute force computational problem that is best overcome through large scale centralization.

Traditionally if a research team wanted to sequence a human genome they would be forced to purchase expensive machines from the likes of Illumina to do the job. These machines, such as Illumina's latest HiSeq 2000, might cost half a million dollars or more up front, require the hiring and training of several staff to operate and maintain the instruments, and require several different types of expensive, specialized materials as continuous inputs. What's more, these expensive and wonderful machines might end up sitting around much of the time unused in between projects. In a world that demands the sequencing of millions of human genomes in the coming years, this model of distributing individual sequencing machines is simply too costly and inefficient.

Enter Complete Genomics: Master of Centralization and Scale

In the next decade we may sequence the genome of nearly every person in the developed world. With 6 billion people in the world and approximately three billion base pairs per genome we are talking about an enormous task of scale and computation.  Years ago Complete Genomics realized that centralization in a dedicated sequencing facility was the answer to this challenge.  Today they are bringing their vision to reality.

Instead of building individual machines that can be shipped off to laboratories, Complete Genomics is turning the traditional industry model upside down and doing the sequencing itself.  Researchers send Complete Genomics a sample of human DNA in the mail, allow them to process it in their sequencing center, and shortly thereafter they will ship back the sequencing results at a cost and speed that is crushing the rest of the industry.

What do I mean by "crushing"?  In November of last year Complete Genomics announced that they had sequenced 3 human genomes at an average cost of materials below $5000 apiece, shattering all previous records by nearly a factor of ten!  Last year Complete Genomics was charging its customers $20,000 per genome and this year they will be charging $10,000 or less.  We can expect the company's costs and the prices it charges its customers to continue to drop dramatically in the next few years. The $1,000 genome is indeed within sight.

Complete Genomics is essentially turning genomic sequencing into an assembly line process with all of its associated advantages. Equipment can run pretty much 24/7 without interruptions, thereby maximizing the output and return from multimillion dollar investments. A small staff can be trained to run an entire facility of sequencing machines. This significantly reduces the human cost of training and labor.  Reagents and other supporting materials can be purchased in bulk on the cheap.

Further streamlining the process and the costs, Complete Genomics is only sequencing human genomes. This is a huge differentiator that people often overlook, yet it is crucial to the competitive advantage of the company. When working with multiple organisms, there are unique factors such as reagents, read sizes, genetic coding idiosyncrasies, and preparation methods that must be accounted for. By focusing solely on human genomes Complete Genomics is further optimizing its operations for low cost and high efficiency.

Although originally slated to go live this January, Cliff Reid says that Complete Genomics' first large scale sequencing center is now going to launch on April 1. It is because of this delay that Complete Genomics' is only targeting 5,000 genomes this year instead of its original target of 10,000. Of course 5000 genomes is still nearly 50 times the number of genomes that have ever been sequenced to date by all companies/institutions combined. Not bad!

Can They Really Sequence 1 Million Genomes In 5 Years?

Although Complete Genomics is aiming for 1 million genomes by 2014, we need to take this target with a grain of salt.  Given that the company is set to deliver only half as many genomes in 2010 as originally planned, who is to say that their 2014 roadmap won't fall equally short?  Yet to focus on a specific number really misses the point.  The key takeaway here is that Complete Genomics is finally ushering in the long awaited era of cheap, high volume genomes through assembly line centralization and scale.  The model seems to be a winner, and even if Complete Genomics were to somehow stumble, it is likely that competitors would be quick to follow suit.

A comparison to Henry Ford's pioneering of the car assembly line with its hugely successful Model T naturally comes to mind, and this is not lost upon Cliff Reid.  Ford famously said "Any customer can have a car painted any color that he wants so long as it is black."  In homage to Ford, Reid joked during the interview that "We'll sequence any organism, as long as its human".

United States Today...Tomorrow The World

Over the course of the next year Complete Genomics will be creating plenty of waves in the industry with the world's first human only large scale sequencing facility here in Mountain View, California.  This facility will single handedly sequence on the order of 50,000 human genomes in the next 18 months.  Impressive - yes - but to get to 1 million genomes in the next 5 years Complete Genomics is going to need more large scale sequencing facilities.  Many of them will need to be in other parts of the world, such as Asia.

Can you say CAPEX?  According to Reid, the current plan is to build up to 10 sequencing facilities in the next several years, each of them able to produce anywhere from 50,000 to 100,000 genomes per year.  Although increased output and redundancy of operations is a key driver of these added facilities, Reid points out that political jurisdiction is an equally important driver.  Governments will be reluctant to see their citizens' genomic data crossing borders.  If Complete Genomics wants to be in the game of sequencing genomes of major countries in Asia they are going to have to go inside those countries to get the job done, and that is indeed where they will go.

More Genomes, More Money - An IPO?

As we can see it is going to take a fair amount of capital for Complete Genomics to pull off its master plan.  Last quarter the company secured $45 million in funding despite a very harsh economic environment.  Yet this cash infusion is only a temporary measure to get the first facility or two up and running.  More money will be needed to realize the company's vision for ten or more sequencing facilities and 1 million genomes in the next 5 years.  As Reid says in the interview "Fast growing companies like ours inhale cash".

Of particular interest to many following this hot story is whether or not an IPO is in the company's future.  Although legally and strategically we can't expect Reid to full out confirm an upcoming IPO, he does the next closest thing with the following comment "We also hear rumblings of the public offering market becoming open to certain companies and we would consider that a very attractive option".  Investors get your cash reserves ready - an IPO looks like a strong possibility.

What Will We Do With 1 Million Genomes?

One argument I often hear from people is that all this genome sequencing business is a big waste of time.  After all, more than fifty genomes have already been sequenced and what do we have to show for it?  Where is the medical revolution that genetics was supposed to unleash?  Will there really be a demand for the sequencing of 1 million genomes in the next 5 years even if Complete Genomics can provide it?

Are you freaking kidding me!  One million genomes is just the tip of the iceberg folks!  Over the next decade or two we will probably sequence tens of millions of human genomes, and - yes - this data WILL be useful.

As with nearly all hot topics of the day - and genomics is no exception - our imaginations have gotten ahead of the technology.  The medical revolution promised by genomics will indeed become reality, but it will take many more years than people thought.  It turns out that by sequencing only a handful of human genomes there is only so much information that can be learned.

As Reid likes to say, there are only about 1,000 major human diseases out there.  One million sequenced human genomes will allow us to study the genetics of each of these 1,000 diseases, each with a pool of 1,000 genomes for comparison.  The information that will be teased out of this data will indeed produce the medical revolution that we have all been waiting for, but first we need tens of thousands of genomes to perform the required analysis.  We need the data!

We Are A Data Company

One of the things I love most about Complete Genomics is their laser focus on doing only one thing: sequencing human genomes.  This extreme focus on doing one thing well has been a proven secret to success for many of the world's greatest companies.  It will be no different with Complete Genomics.

Rat genomes, worm genomes, and the genomes of countless other organisms will need to be sequenced in the coming years, but Complete Genomics is going to ignore those.  As Complete Genomics comes to dominate the market for human genome sequencing in the next several years, it may be the sequencing of non-human genomes that will provide a still enormous market for the Illuminas of the world.  It is great when a field is so large that there is enough room for pretty much everybody to win.  Genomics is one such field.

In the end Complete Genomics is a data company.  Their gift to the world in the next several years will be to deliver the vast store of data that is locked within the individual genomes of each of us.  Understanding this data, and converting this understanding into real world medical solutions, however, is not Complete Genomics' game.  They will leave that task to other companies.  Complete Genomics is not the company that will directly give us the medical revolution that we have been waiting for, but indirectly their role is equally important.  They are giving us the data.

But Who Are The Customers?

Although it is exciting to think of average citizens purchasing their genomes directly from Complete Genomics, at least for the next two years Reid explains that the real demand will come from research institutions and corporations.  These organizations have the budgets, not to mention the desire to discover the next big medical breakthrough, to justify the purchase of thousands of genomes from Complete Genomics.  Individuals will indeed be able to purchase there own genomes in the future, but at least for the next 2 years individuals will not be the key driver in this business.

Complete Genomics - We're Watching You!

Well, that about sums up the interview with Complete Genomics, but our coverage of the company has only just begun.  We will be monitoring the progress of the company closely, so stay tuned for more posts in the future.  In the meantime, be sure to check out a full video of the interview below: