With two more animal genotyping agreements under its belt, Genaissance Pharmaceuticals has further positioned itself in cattle identity and sheep scrapie-susceptibility testing, markets that combined will be worth as much as $8.5 million this year.
The agreements, which also serve to replace some of the company’s lost human genotyping business, were signed with different divisions of the US Department of Agriculture: developing assays for cattle identity genotyping with the Agricultural Research Service and sheep scrapie-susceptibility genotyping with the Animal Plant Health Inspection Service.
Both identity genotyping and disease susceptibility testing in animals have been refuges for struggling pharmacogenomics concerns, especially those that focus on SNP genotyping and haplotyping, and they may represent a growing market within a decade — depending on choices made by regulators and animal producers.
In scrapie genotyping, Genaissance will compete with seven other certified testing companies. However, the company is not pursuing work related to animal drugs, said Gerald Vovis, Genaissance executive vice president and chief technology officer.
Genaissance will receive approximately $100,000 to help develop the assays, said Steven Kappes of the US Meat Animal Research Center.
The total cattle parentage market may be as large as $5 million per year, according to a “conservative estimate,” said Abraham Oommen, CEO and co-founder of Lincoln, Neb.-based GeneSeek. Based on the scrapie-revenue estimate of Orchid CEO Paul Kelly, the combined scrapie-related genotyping market in Europe and the United States may total $3.5 million per year, assuming the number of United Kingdom sheep accounts for about half of the total.
Animal genotyping is using up some of the excess genotyping capacity Genaissance built up “for the human side,” said Vovis. Genotyping is useful for cattle producers who may be interested in tracing individuals in their herd — for example, to trace an infected cow — or they may want to verify an animal’s heredity or specific traits.
The $5 million market for cattle identity testing may not be more than 5 percent of the potential animal genotyping market, Oommen said. Cattle are now the most genotyped food animals, and there are about 80 million head of cattle in the US, he added.
Genaissance and GeneSeek have had success with bovine genpotyping. The companies used Sequenom’s MassArray technology to identify Alberta, Canada, as the origin of the bovine spongiform encephalopathy-infected cow found in Washington state in December 2003 [See PGx Reporter 1/15/2004]. The total loss to the Canadian economy due to the BSE-infected cow was close to $2 billion, estimated Mike Terry, Sequenom vice president of global sales and marketing.
According to Terry, there are three factors that will lead to a “huge increase” in animal genotyping: the development by the USDA of its National Animal Identification System, which may include genotyping; and biomarkers, which are gaining stature because of buyers’ increased interest in verifying an animal’s breed or farm origin, and buyers’ growing interest in linking traits, such as “superior marbling of beef” with SNPs, he said.
The animal genotyping market may grow to a “pretty high” level, said Vovis, although he was unwilling to estimate its size. Genaissance is not going to “spend money to develop the market,” hoping instead to establish itself “as this area and market develops,” he said. Premium cattle producers and government health mandates would be among the animal genotyping market’s primary drivers, said Vovis.
One positive sign that the market for animal genotyping is poised to grow is the participation of companies like Merial. The firm, which launched a cattle DNA testing service last year, is owned by Merck and Aventis. And if it’s a player in the space, “it can’t be that the numbers are small numbers,” said Vovis.
Fragmented on the Farm
The farm isn’t for everyone, though. Entrants into animal genotyping aren’t always prepared for the “fragmented market” and “totally different” considerations involved, said GeneSeek’s Oommen. Extremely inconsistent sample quality is one reason why some companies move out of animal work, he said.
Indeed, animal genotyping won’t provide a shelter for all struggling genotyping shops. “Right now that market’s pretty small,” said SG Cowen analyst Eric Schmidt, adding that animal genotyping probably represents fewer than 10 percent of all testing, including human testing. “This whole area has been slow to take off, and I’m sure the same goes for the tests that Genaissance is conducting,” said Schmidt.
The number of animal genotyping tests conducted annually will increase as costs come down, Vovis said. “So, in the next two to three years, I think [animal genotyping] can become a substantial market,” he said. Identity genotyping has more potential than scrapie susceptibility, he added.
While the USDA tests a bovine brain sample for BSE, for example, it keeps the cow’s carcass off the market, said Vovis. Low prices would encourage the use of genotyping to keep track of the carcass, he said.
Identity testing may be more attractive to cattle ranches because cattle parentage is very difficult to determine, said Vovis. Demand for genotyping will also increase as the list of genes related to food-animal traits grows, and as “bigger agricultural companies” move in and add to available research, he added.
GeneSeek’s Oommen reckons the market will mature in 10 years. “The reason we’re in this business is that we know it’s eventually going to be big,” especially when genetic data opens to the public domain, he said. The potential size of trait-related genotyping, which is more cost effective than simple identity testing, is in the range of $5 million to $10 million, said Oommen.
In Genaissance’s agreement with USDA’s Animal Plant Health Inspection Service, the company, along with seven other laboratories certified by APHIS to conduct scrapie-susceptibility testing, will be reimbursed for testing already-infected and potentially infected sheep flocks.
There are fewer than 4 million sheep in the United States, and fewer than 1 million in Canada. By comparison,there are about 40 million sheep in the United Kingdom, with a similar number in the rest of the EU. Altogether, these countries account for about 75 million sheep.
According to Genaissance’s Vovis, the income generated through the contract depends on “how much testing the government decides on and how it allocates the work,” while factors contributing to revenue include data accuracy, price, and turnaround time.
One successful player in scrapie testing is Orchid Biosciences. For the past three-and-a-half years, the Princeton, NJ-based firm has been under contract with the UK government to conduct scrapie-susceptibility testing on its sheep. “The company is moving into animal testing areas because those areas are opening up,” said Orchid CEO Paul Kelly.
Animal genotyping is a market in which the company’s infrastructure can be used “where there are ways to make money in genotyping,” said Kelly. About 10 percent of Orchid’s gross revenue comes from the UK contract, said Kelly. Orchid generated $50.6 million in revenue in 2003.
“It’s not a small market, and we don’t publish the price of our government testing, but when we sell the test privately, it’s around [$36 to $54] per test,” said Kelly. The testing market in the US is very small in comparison because only sick animals and those in contact with sick animals are tested, he added.
The UK scrapie testing market is growing at about 20 percent per year, said Kelly. The company performs about 70 to 80 percent of the UK’s sheep genotyping, totalling more than 1 million tests, Kelly said. Orchid also has a contract with the government of Northern Ireland, and it hopes to expand further into the EU as the scrapie mandate comes into effect, he added.
Beginning in April 2005, EU legislation requires member states to have compulsory genotyping programs to remove most scrapie-susceptible rams in “high genetic merit” flocks, said Pat Brophy of the UK Department for Environment, Food, and Rural Affairs National Scrapie Plan Branch, in an e-mail. According to the UK NSP, between 29,000 and 580,000 sheep will be genotyped per year under a regime consistent with the EU legislation.
Since the scrapie market is driven by governments, and the level of vigilance is higher in the EU, the number of tests may number in the hundreds of thousands, said Vovis. In the US, scrapie susceptibility testing depends on convincing producers of the added value of tested animals.
The interest of private producers in scrapie testing is “pretty high,” especially for those who suspect their flock has been exposed to the disease, said Paul Rogers, deputy director of policy for the American Sheep Industry Association.