By Julia Karow
Complete Genomics this week posted flat revenues for the third quarter as its order book grew by 3,400 genomes. Due to technical problems associated with an upgrade that temporarily shut down its sample prep facility, the company had to delay the delivery of some genomes planned for the fourth quarter, reducing the total number of genomes it will ship this year by up to 20 percent.
The company recognized $4.2 million in revenue from more than 700 human genomes during the third quarter, or about $6,000 per genome, compared to $4.2 million from over 300 genomes, or about $14,000 per genome, during the same quarter last year.
During the quarter, it signed orders for about 3,400 additional genomes, worth approximately $17 million in revenue, which translates to an average per-genome price of $5,000. Those orders include two previously disclosed large contracts for 2,700 genomes, worth $14 million, from the National Cancer Institute and the Inova Translational Medicine Institute (IS 8/9/2011).
The remaining orders of 700 genomes came from a large number of institutions, including 25 new customers the company signed up during the third quarter, bringing the total number of customers who have used its service to more than 100.
Going forward, Complete Genomics sees translational medicine as an important new market for its services, said CEO Cliff Reid during a conference call to discuss the earnings, adding that it is "in early-stage discussions" with several institutions who are looking to use whole-genome sequencing in translational studies.
The company currently derives about 85 percent of its genome orders from 15 to 20 percent of its customers. These large contracts are its "primary way to building backlog" at the moment, Reid said, adding that it will probably take another year or two before the firm will be able to distribute its revenue "across a large base of buyers."
While Complete has so far focused its business on the US, Canada, and Western Europe, it has just hired its first employee in Asia — in Singapore. Asia and the Middle East are "big growth areas" that the company will start investing in next year, Reid said.
So far this year, Complete has booked about 6,100 genomes, worth $31 million. As of Sept. 30, the firm had a backlog of 4,800 genomes, worth approximately $24 million.
To keep up with incoming samples, the company expanded its sample preparation capacity during the third quarter, a process that "did not go smoothly," Reid acknowledged.
He explained that due to a "combination of instrumental and environmental problems," the company was forced to shut down its entire sample prep operation for about 30 days. While the problems have been fixed and the lab is now running at full capacity again, this caused a delay in the delivery of about 700 genomes that will now be shipped early next year rather than in the fourth quarter. No genomes were lost in the process, he added.
As a result, the company now expects to deliver between 900 and 1,200 genomes in the fourth quarter, bringing total shipments for the year to between 3,200 and 3,600. This wide range "reflects uncertainty in the cycle time for genomes that are currently in process," according to the firm. Complete said earlier this year that it planned to ship 4,000 genomes in 2011. Last year, it delivered 800 genomes.
The sample prep glitch will also temporarily increase the turnaround time for Complete's service from a current 62 days to about 80 to 90 days. It is expected to drop to under 60 days next year, Reid said.
Mo' Better Genomes
As reported earlier, Complete currently has 24 sequencing instruments in production, which have a throughput of one genome per day. During the current quarter, the company began upgrading them with higher-density arrays that increase the throughput to 1.5 genomes per day. Once all sequencers are upgraded by the first quarter of next year, the company will have a capacity of more than 1,000 genomes per month.
After expanding its computing facility in the third quarter, the firm is currently able to assemble and annotate more than 1,000 genomes per month, Reid said.
It is also making "good progress" on its second-generation sequencers, which it plans to put in production by mid-2012. These will initially have a throughput of about six genomes per day, a four-fold improvement over the current generation. Following further optimizations that will increase the yield of usable DNA nanoballs, throughput is expected to increase to eight genomes per day "relatively quickly," and, eventually, to 10 genomes per day, Reid said.
He explained that the new instruments will have four cameras instead of two, and will use larger chips with "modestly" higher DNA density, so more DNA can be read per unit time. Each new sequencer will cost the company on the order $500,000 to $1 million.
Complete plans to continue to use at least some of the old instruments for customer service and for internal R&D projects, he said.
As previously reported, Complete is also working on third-generation instruments that will increase the throughput to 80 genomes per day (IS 9/20/2011). Reid said the company has the new cameras required for that instrument in house and is "pleased" with their performance.
Along with improving its sequencing instruments, Complete Genomics is also working on improving its sample-prep workflow, which has so far been a semi-automated process that is difficult to scale up. While the company will continue to "incrementally optimize" the existing sample prep protocol, it is also working in parallel on fully automating sample prep with custom robots, Reid said, a project will take about 24 months.
The company is still working on its long fragment read technology for diploid sequencing, which Reid said is "one of our top priorities." It has a paper in preparation that will describe the method and its use on seven genomes. Already, it has performed one pilot project with the technology and plans to do "a couple more" early next year, prior to launching the technology commercially "around the middle of next year."
Also around mid-2012, it plans to gain CLIA certification for its facilities.
In the third quarter, Complete was able to sequence about 97 percent of each genome, and Reid said it can call about 96 percent of the exome. He added that some customers use its whole-genome sequencing service mostly for analyzing the exome "because our exome coverage is so much higher than what you can get with an exome kit."
Q3 Results
Research and development expenses for the quarter nearly doubled to $9.5 million from $5 million during last year's third quarter.
Sales and marketing expenses more than doubled to $3.5 million from $1.6 million a year ago; while general and administrative costs rose to $3.8 million from $2.3 million in the third quarter of 2010.
Complete's net loss widened to $21.6 million from $20.5 million in the third quarter of 2010.
The company ended the quarter with $105.1 million in cash, cash equivalents and short-term investments.
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