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With Sequencing Market Waning, ABI Begins Developing Next-Generation DNA Sequencers

Applied Biosystems President Cathy Burzik acknowledged last week that the firm is working on next-generation DNA sequencing technologies, but said the company is not ready to provide details.

ABI, whose once-flagship sequencing business has been hurt by slumping sales in recent years, has "a number of approaches under development," she said during a Q&A session following her presentation at the UBS Global Life Sciences Conference in New York. Burzik said a "cluster approach" was one possibility for development, but she declined to provide further details, saying that the firm is working on patent filings.

Company officials have been asked frequently over the past year about whether ABI is developing any technologies that would eventually replace its capillary electrophoresis sequencing instruments or whether it planned to partner with or acquire one of the many firms developing alternative sequencing technologies. Up until now, ABI had declined to answer those questions.

Adding fuel to the speculation, Burzik, speaking at the JP Morgan Healthcare Conference in San Francisco in April, said that the firm had identified 35 companies that are developing alternative approaches, such as single-molecule sequencing and DNA clustering efforts. Companies such as 454 Life Sciences, Beckman Coulter's Agencourt Bioscience subsidiary, Solexa, and Helicos BioSciences have the most advanced of these new technologies, with instruments either placed or soon to be placed at major research institutions.


"We have many sequencers out in the marketplace. There is a huge opportunity to develop applications that can rest on those sequencers — resequencing, genotyping, methylation. We have to make sure that the installed base is very effectively utilized and that drives the consumables sales for us."

The promise of these technologies was one of the primary reasons Beckman acquired Agencourt and its sequencing-by-synthesis technology earlier this year (see BioCommerce Week 5/5/2005). And Roche Diagnostics, which is ABI's partner in licensing PCR patents, signed an exclusive agreement in May to sell 454's sequencing instrument — considered to be among the most advanced of the new technologies (see BioCommerce Week 5/19/2005).

However, these newer technologies are still several years away from delivering on the promise of the $1,000 genome, which could usher in new — albeit not widely quantified — markets.

The US National Human Genome Research Institute has also waded into the fray, awarding a total of more than $38 million in two sets of grants last year to 18 companies and laboratories, with the goal of producing new technologies to reduce cost of sequencing a typical mammalian genome by 100-fold within five years, and by 10,000-fold in later years, from its current rate of about $10 million.

The grants were awarded to groups pursuing technologies capable of sequencing 3 billion base pairs for $100,000 or less and groups hoping to bring the cost of sequencing down to $1,000 per genome.

The NHGRI followed up those awards with another set of grants totaling more than $32 million in August (see BioCommerce Week 8/11/2005).

Last week, Burzik reiterated ABI's belief that the newer technologies are not going to make an impact over the next couple of years, and the firm does not see an end to the dominance of capillary electrophoresis in the DNA sequencing market. "We're very committed to sequencing," she said at the UBS conference, noting that the firm has more than 12,000 capillary electrophoresis instruments installed worldwide.

In June, ABI sold 20 of its 3730xl capillary electrophoresis DNA sequencing instruments to the Broad Institute, bringing the institute's total installed base of this type to 126. The Broad said it plans to use the analyzers to sequence new genomes and to perform genotyping studies. But the Broad also has one of 454's instruments in house and is evaluating the technology.

Broad's purchase of the capillary electrophoresis-based sequencers bucked an industry-wide trend, however, as sales of DNA sequencers have decreased over the past couple of years. The primary reasons for this are most large genome centers already have enough instruments in house to run experiments and government funding for sequencing projects has been reduced. But ABI believes opportunities exist to wring more sales out of the instruments, primarily through sales of consumables and new applications.

"We have many sequencers out in the marketplace," Burzik said in a webcast earlier this year. "There is a huge opportunity to develop applications that can rest on those sequencers — resequencing, genotyping, methylation. We have to make sure that the installed base is very effectively utilized and that drives the consumables sales for us." (see BioCommerce Week 4/14/2005).

Burzik said at the UBS conference that although sales to the large genome centers have dropped, much of its DNA-sequencing instrument sales are derived from low- to medium-throughput users — labs at pharmaceutical and biotech companies or academic institutions that purchase one or two sequencers at a time.

Finding Revenue Elsewhere

Burzik also reiterated earlier statements by ABI management that consumables will drive top-line growth for its cell-biology products going forward.

Tony White, chairman and CEO of ABI parent Applera, who joined Burzik at the Q&A session, said that growth in the firm's proteomics business would have to come from new applications, specifically biomarker discovery and validation, since mapping the human proteome is no longer a growth area.

Sales of ABI's mass spectrometry instruments fell one percent during its fourth quarter ended June 30, which Burzik attributed partially to new product releases in January and April not having enough time to gain traction in the market, as well as cyclical factors, including the typical summer lull in spending by pharmaceutical customers and increased competition from new products launched at the American Society for Mass Spectrometry conference in June.

White also sounded more optimistic about potential acquisitions in the near future. The firm has been silent on that front since its restructuring and management shake-up last summer. He said the firm has no debt and strong cash flow, but even more importantly, he said he has confidence in the new management — "a new development" — to make an acquisition "if the right opportunity presents itself."

ABI officials stressed that cultural changes at the firm, including the addition of new executives that have experience in managing multi-product businesses within medical technology companies, over the past year will help focus the company on growing the business.

— Edward Winnick ([email protected])

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