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Applying More Pressure on ABI, Roche Inks DNA-Sequencing Deal with 454

Update: In an e-mail, ABI spokesperson Lori Murray said ABI believes capillary electrophoresis will be the “gold standard” in DNA sequencing for “several years,” not the two- to three-year range previously cited.

Only a few of weeks after Beckman snatched up next-generation DNA sequencing technology firm Agencourt Bioscience, Roche Diagnostics threw its hat into the ring by signing an exclusive agreement with 454 Life Sciences to sell its nanotechnology-based sequencing instrument (see BioCommerce Week 5/5/2005).

454 is widely considered to have the most advanced of the newer alternative sequencing technologies, which hold the promise of eventually delivering the $100,000 genome — and, potentially, the Holy Grail of genome sequencing, the $1,000 genome. Although other start-ups working on similar technologies have yet to showcase a prototype, 454 has already placed one of its instruments at the Broad Institute.

The arrival of the first of these DNA sequencers surely has the manufacturers of the traditional capillary electrophoresis instruments looking for a way to maintain their seat at the table over the long-term. Beckman made its move already. And now Roche, parent company of Roche Diagnostics, the world's top molecular diagnostics player, has jumped in.

These developments have inspired to ask when Applied Biosystems and GE Healthcare, the DNA sequencing instrument market leaders, will make a move to either acquire one of these newer technologies or partner with their inventors.

To be sure, ABI, which holds the lion's share of the sequencing instrument market with its 3700 and 3730xl machines, is not going to lose its dominant position anytime soon. "Let's just lay it out there: ABI owns the sequencing market," said Adam Chazan, an analyst for Pacific Growth Equities who covers ABI and several of the molecular biology instrument manufacturers tracked by BioCommerce Week.

But as sales of big-ticket capital equipment continue to slip in the molecular biology research space (see BioCommerce Week 4/7/2005 and 4/14/2005, and the alternative sequencing technologies make their way into the hands of more researchers, the pressure is building on ABI.

The firm recently stated that it had identified 35 companies that have "alternative" sequencing technologies, but it is not providing any names or saying whether it is interested in acquiring any of them. Besides 454, Solexa and Helicos are working on sequencing technologies that have drawn quite a bit of attention — and Solexa's CEO John West is a former ABI executive. ABI also has been relatively quiet on whether it is developing its own alternative to capillary electrophoresis-based sequencing.

"If they want to maintain their dominant market share, they'll have to do something — either develop the technology internally or seek out these other companies to partner, acquire, or whatever," Chazan said.

Roche's Play

Roche's decision to enter the sequencing fray may seem surprising considering the firm has never been involved in the market before. Terms of the 454 pact call for Roche Diagnostics to obtain rights to exclusively distribute 454's sequencing technology, including kits and reagents, and has rights to sell to all markets except regulated diagnostics.

The deal is potentially worth $62 million to 454, which is a unit of New Haven, Conn.-based biopharmaceutical company Curagen. But it could also mean a large payoff for Roche in the future, particularly as a hedge that 454's technology could play a role in molecular diagnostic applications.

A Roche spokesperson said the firm has a renewable five-year exclusive license for the life science research market and holds an exclusive option to take a diagnostic license during the initial five-year term. The company said it does not have specific information on diagnostics applications, but said possible new apps include large-scale comparative sequencing of microorganisms such as bacteria, fungi, and viruses; sequencing of complex genomic mixtures such as environmental samples; new approaches to cancer research by way of large-scale human exon sequencing; and deep sequencing, which is used to detect rare sequence variations in a high background of normal sequences.

With the 454 alliance and a previously announced pact to sell gene expression-analysis technology from Exiqon, Roche will undoubtedly have a significant impact on many research instrument manufacturers looking to cross over into the molecular diagnostics market in which it is the leading player.

According to one industry observer who asked to remain anonymous because of his ties to the industry, Roche is aiming to be a dominant player in the sequencing market — and its ability to offer other research tools for gene expression and genotyping will make it a tough competitor. The same source said he expected ABI to counter with a move soon.

Dennis Gilbert, ABI's chief scientific officer, recently told BioCommerce Week that "next-generation sequencing methodologies such as single-molecule detection and stepwise sequencing are generating enormous excitement with their promise of high throughput and low cost in life-science research, clinical practice, and personalized medicine. While significant technical challenges still remain for successful commercialization of the $1,000 genome, we realize the rewards of delivering such a promise are immense." (see BioCommerce Week 5/5/2005)

But even if ABI had an interest in acquiring one of these firms, some question if the firm would be willing or able to make that move right now. The company has gone through a year-long restructuring, which resulted in it being divided up into four units.

ABI currently has around $600 million in cash, and, as Chazan pointed out, "they could put that to work in any way they would like." But "even if they thought this was a direction they needed to head in, they probably don't have the bodies in place to execute," he told BioCommerce Week.

"We see [capillary electrophoresis] as being the gold standard for the next two to three years," Lori Murray, an ABI spokesperson, told Pharmacogenomics Reporter, a BioCommerce Week sister publication, this week. "We have a number of internal development programs and we are evaluating external technologies" for possible acquisitions or other agreements, she said.

GE Healthcare is another potential contender. Asked to comment on whether the Roche/454 alliance and the impending acquisition of Agencourt by Beckman will spur her company to develop a play in the new-sequencing technology market, Kristin Silady, a GE Healthcare spokesperson, said the company is "always looking for new science and technologies and evaluating the market landscape."

She referred BioCommerce Week to a September 2003 statement issued by Amersham Biosciences, which GE Healthcare acquired last year, in which Amersham announced the release of its MegaBACE 4500 DNA sequence analyzer. Amersham billed the platform as a step up from the 4000 instrument and claimed it "improves the average sequencing read length by approximately 15-200 base pairs."

GE Healthcare does not break out sales of its MegaBACE product line.

Last April, Trevor Hawkins, who at the time was Amersham's senior vice president of development and new business initiatives in the discovery systems business, said the MegaBACE platform has "a very bright future." He also said that GE "sees the field of DNA sequencing is extremely central to us. ... "

"We see that [for] MegaBACE and all of our DNA sequencing applications — whether it be the MegaBACE, TempliPhi, our enzymes, our dyes — we will continue to supply those to the research field," Hawkins told GenomeWeb News, a BioCommerce Week sister publication. "But we also have begun a path of moving into the diagnostics field." He was referring to a partnership Amersham penned with Bayer last year to co-develop a suite of infectious-disease tests based on the MegaBACE technology.

Hawkins said it is "too early to tell" if any of these technologies will experience a boost in R&D funding courtesy of GE, but stressed that "we will continue to develop the MegaBACE, continue to develop our enzymes and our dyes, because we see us as a continually important area."

— Edward Winnick ([email protected])

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