Breaking up is hard to do when your partner has a powerhouse sales force and global distribution network
by Marian Moser Jones and Adrienne Burke
“Making sense out of life” is Illumina’s motto, but these days it might as well be “making sense out of Applied Biosystems.”
Having worked with ABI continuously on the co-development of a genotyping tool since November 1999 — three years during which a product release was set once for the fourth quarter of 2001 and then reset for mid-2002 — Illumina revealed in a candid press release this summer that the launch had been put off yet again. On July 8, Illumina said it was “currently working with Applied Biosystems to understand the exact nature and extent of the delay, and the alternatives for moving the collaboration forward.”
Though the 2001 setback had been announced without finger-pointing, this time Illumina minced no words, saying that it was “disappointed” that ABI had called for the delay and that it would “provide a further update once additional information becomes available.”
As of early August, that had yet to happen. ABI executives, who had for the past year raved at industry conferences about their partnership with Illumina, have now adopted a policy of refusing to speak publicly about the relationship other than to say via a spokeswoman that the project is “being re-evaluated based on various technical and commercial considerations.” They also declined to speak even generally to GT about their strategy for partnering with emerging technology companies.
Illumina spokesman William Craumer says that his company continues to ship arrays to ABI for evaluation, so “development has by no means ground to a halt.” But, he acknowledges, “Where we stand, I don’t know.”
When it was inked in 1999, the partnership called for implementing ABI’s OLA assays on Illumina’s BeadArrays — bundles of fiber optic stalks with wells to hold fluorescent beads. ABI would develop CCD camera-based instruments to read the BeadArrays, and would distribute the technology platform through its extensive network.
Illumina insists that its platform is ready for commercialization. Indeed, simultaneous to announcing the ABI-delay, the company said that it would independently commercialize a genotyping product implementing Illumina’s own Golden Gate assays on the beads, and using a confocal laser scanner and a bioinformatics network that it has developed.
If the BeadArray technology is ready to go, what explains ABI’s mysterious retreat?
Analysts say ABI’s “considerations” for re-evaluation of the system are mostly commercial. The day after Illumina announced it was launching its own genotyping system, ABI announced the launch of its “on-demand” SNP and gene expression assays — ready-to-use, tube-formatted assays designed for use with ABI’s existing sequence-detection instruments.
These assays offer a potential strategic advantage over the BeadArray-based platform in that they are affordable to the low-end researcher who wants to assay a few SNPs as well as the high-end researcher who wants to work with tens of thousands of SNPs. The Illumina platform, on the other hand, is oriented toward the ultra-high-throughput user — a narrow market at the present.
Still, some suspect that there’s more to ABI’s shrugging its launch date with Illumina than its own new assay product release. While a former ABIer says the senior management “has a history of pissing collaborators off,” another source close to the Illumina partnership says that the rumor circulating among the rank-and-file in both companies is that ABI has been “unable to achieve sufficiently high multiplexing levels with its OLA assay.”
With its own Golden Gate assay, Illumina says it is achieving thousand-plex PCR. “If you’re trying to drive down the cost of genotyping, that’s a key source of savings,” Craumer notes. In fact, he adds, the fully integrated BeadArray platform should be able to genotype for less than a nickel per base. Because pennies per SNP is what pharma industry customers are demanding, ABI might well have decided not to bother with further development if its assays can’t offer that with the Illumina product, but might be able to offer this with its own assays on demand.
Backup Plan that Needs Backup
Fortunately for Illumina, CEO Jay Flatley made sure to have a backup plan. Plan B “was built into our initial strategy,” he says. Illumina had all along aimed to develop its own scanning instrument for its gene expression applications that could easily be adapted to genotyping. At a target price that Craumer says is “significantly cheaper” than the $6 million pricetag on Sequenom’s competing ultra-high-throughput genotyping system, Illumina says it will be ready to start selling by year end.
“The idea is to go after the high-throughput customers right away, then develop scaled-down versions with lower price points,” says Flatley. (The system, according to Illumina, can be scaled up to do even more than a million genotypes per day, and for smaller customers, it can be scaled down.)
“At the start we had all the pieces in place to do this,” Flatley says. “We’re obviously very motivated to get our technology widely used.”
And that’s the hitch. Illumina was counting on ABI’s well-established distribution channels and strong sales force to disseminate its technology. Says Craumer, “To the extent that we have a small set of large customers, that’s manageable without a major network. But at this point we’d be incapable of selling these things broadly across a bigger market.
“We need ABI or we need to build up our own channels,” Craumer acknowledges. For now, however, targeting the largest users, he says, “is consistent with our infrastructure.”
To be sure, Illumina’s experience could serve as an object lesson for emerging technology companies anxious to win the attentions of a well-heeled, established player, especially when that player is Applied Biosystems. The message: Don’t count on the collaboration as a sure thing.
“ABI has followed a strategy of licensing in or forming joint ventures or making deals with a lot of different technologies. ... In that type of scenario you are not going to see all of those technologies come to market,” says Laurence Neibor, of Robert W. Baird & Company. “But it would certainly indicate to younger, smaller companies with promising, but either not commercially proven or not technologically proven, technology that ABI may not be the best partner.”
An earlier version of this story appeared in the July 19 edition of Genome Technology’s sister publication BioArray News.