By Monica Heger
Complete Genomics plans to build a new generation of sequencing instruments while pursuing an "aggressive pricing strategy," the company reported this week.
In a conference call to discuss Complete Genomics' first-quarter results, officials also disclosed that the judge hearing the company's ongoing patent-infringement suit with Illumina has dismissed two patents from the case, leaving only one patent at issue.
The company has signed orders for 2,100 genomes, not including a pending order from the National Cancer Institute for 1,128 genomes, and expects to realize revenue from 900 genomes in the second quarter.
The company realized first-quarter revenues of $6.8 million, up from $300,000 for the same quarter a year ago and beating consensus estimates of $5.5 million. Complete Genomics shipped 600 genomes during the quarter.
As previously reported, the company plans to increase its throughput 10-fold — to 10 genomes per machine per day — by the end of next year (IS 3/15/2010). In order to accomplish this, Complete Genomics CEO Cliff Reid said the company is implementing not only "incremental improvements" to existing machines but is also "designing a new generation of sequencing instruments that will be substantially faster."
He did not elaborate on the new machines, but said that the improvements are possible because the company is focused on optimizing its biochemistry, instrumentation, software, and all of its technology solely for human genome sequencing.
As part of the upgrades, the company plans to increase the density of its DNA nanoballs. In test runs, the company has already doubled the array density from 3 billion to 6 billion DNA nanoballs on each nanoarray, Reid said, which will result in an increase of imaging density from 2 pixels per piece of DNA to 1 pixel per piece of DNA.
The company also plans to increase its fleet of sequencers from 16 to 24 by the end of August. The combination of higher sequencing throughput and more machines "should enable us to reach our planned capacity goal of between 800 and 1,200 genomes per month by year end," Reid said.
Additionally, the company has committed to lowering its turnaround time, currently at 70 days, to below 60 days by the end of the year and to below 30 days by the end of 2012.
During the call, Reid also provided an update on Complete Genomics' ongoing lawsuit with Illumina.
Illumina filed suit against Complete Genomics last August, claiming that the company infringed three of its patents (IS 8/10/2010). Complete Genomics countersued in October, denying Illumina's infringement claims and arguing that Illumina's patents are either invalid or unenforceable (IS 10/5/2010).
The three patents are US Patent Nos. 6,306,597, "DNA sequencing by parallel oligonucleotide extensions;" 7,232,656, "Arrayed biomolecules and their use in sequencing;" and 7,598,035, "Method and compositions for ordering restriction fragments."
In this week's call, Reid said that the court earlier this month dismissed two patents from the case, leaving "only one patent asserted against the company in this lawsuit."
He added that Complete Genomics believes it has "substantial defenses against the one remaining patent in question and we continue to vigorously defend against this lawsuit."
According to documents filed on May 4, the court issued a stipulation and proposed order to dismiss without prejudice the claims regarding the '656 and '035 patents, and to also dismiss without prejudice Complete Genomics' counterclaims regarding those two patents.
Illumina is still proceeding on the '597 patent.
The dismissal of the '656 and '035 patents is tied to an ongoing reexamination in the US Patent and Trademark Office, according to the court documents. The reexamination is related to litigation between Illumina and Life Technologies that involves a total of four patents (IS 12/10/2010).
Noting that the USPTO rejected all claims of both patents in December in a non-final action, the court dismissed the two patents from the suit and said that Complete Genomics and Illumina must refrain from filing litigation regarding either patent until the later of Aug. 1, 2012, or "when the portion of all currently pending proceedings regarding the patent[s] to be asserted are final." The "proceedings" refer to both patent reexaminations and the Illumina/Life Tech court case.
'Aggressive' Pricing Strategy
Complete Genomics reported its earnings the same day that Illumina announced a price reduction for its whole-genome sequencing service to $5,000 per genome for 10 samples or more and $4,000 per genome for more than 50 samples.
This move places Illumina in a similar price range as Complete Genomics, which currently offers whole-genome sequencing for between $5,500 and $9,500 per genome depending on the order size, and is on track to offer human whole-genome sequencing for below $5,000 by the end of the year.
Reid said that Illumina's announcement will not affect the company's pricing because "we're already being as aggressive as possible in our pricing strategy." Rather, it "reinforces to the entire marketplace that the superior method for complete human whole-genome sequencing is outsourcing."
For the second quarter of 2011, the company expects to recognize revenue for more than 900 genomes. Over the next year, the company believes its backlog of more than 2,000 genomes could result in $15 million in revenue.
In order to support its increase in commercial operations, the company plans to double its sales force by the end of the year from 12 to 24 sales people. In order to support the increased sales team, the company will also add "substantially" to its marketing team and field application scientists, Reid said.
Complete Genomics realized $6.8 million in revenue for the first quarter of 2011, up from $300,000 for the first quarter in 2010.
Costs and operating expenses increased to $18.9 million from $14.6 million in Q1 2010. Research and development expenses stayed nearly level at $6.8 million, while marketing and sales increased to $2.7 million from $1.2 million in the same quarter a year ago.
Complete Genomics ended the quarter with $68.8 million in cash.
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