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A Lighter 800-Pound Gorilla, Applied Biosystems Takes Aim at Genotyping

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The SNP-genotyping space is about to become very interesting. Applied Biosystems has crept onto the scene with a three-pillar strategy designed to take aim at market leaders Sequenom and Illumina. But a weak tool market has wounded the sequencing giant, even forcing it to issue a terse warning to investors that “deteriorating” business will hamstring top-line growth for the remainder of this fiscal year.

Also, despite its dominance in the sequencing arena and around $520 million in cash and equivalents on hand, ABI finds itself in a game of catch-up with a resilient pack of genotyping veterans.

“We’ve made some very large R&D investments in the last year” in the SNP-genotyping sector, said Dennis Gilbert, vice president of genomics at ABI, commenting on the $100 million the company has spent in getting its genotyping machine off the ground. “We see this as where we want to be.”

ABI hopes the machine will be fueled with data collected by the Applera Genomics Initiative. Begun last year and wrapped up a couple of months ago, the AGI has accumulated approximately 220,000 SNPs — 70 percent of which are not available in public databases, the company claims.

The AGI has become the company’s primary genotyping pillar, with the soon-to-launch SNPlex instrument and ABI’s genotyping-service business comprising the remaining two legs.

“This gives us a pretty good resource,” Gilbert told SNPtech Reporter. “We think we’re pretty much positioned, relative to content, for any kind of application. We’ve pretty much completed the bulk of this effort. Now it’s really how we take that [information] and commercialize it.”

To Market

Each of Applera’s three units — Celera Genomics, Celera Diagnostics, and ABI — invested around $33 million in the AGI, and each of the groups had a hand in the research: Celera Diagnostics performed association studies, Celera Genomics did the resequencing, and ABI developed the assays.

Consequently, Gilbert said each of the units will have broad access to the AGI data and tools: Celera Genomics will use the SNPs for internal drug discovery; Celera Diagnostics will use them in marker-discovery work, and to attract reference labs and other customers; and ABI will use some of the data to develop gene-expression and genotyping assays.

Additionally — and some say most significantly — the SNPs will be used to develop additional TaqMan assays that will be marketed to pharma and academic labs. However, ABI’s goal “is not to use this data and license the SNP content [to generate] revenue around licensing the content from a commercialization perspective,” said Gilbert. “We don’t feel the SNPs themselves are where we want to focus. We want to turn these things into assays that people can do experiments with.

“We think that will be the competitive thing: If you make [assays] cheap and easy, then that’s what I think will move this field forward,” he explained.

A second pillar of ABI’s genotyping strategy is its SNPlex instrument. The platform, which uses the company’s 3730xl and 3730 sequencers, and is based on ABI’s oligo ligation-reagent and electrophoretic-detection technology, will eventually produce 1 million genotypes per instrument per day at a cost of $.01 per genotype or less, ABI said. The tool underwent a limited release in January and is expected to meet its first formal customer in the second half of the year, according to ABI spokeswoman Lori Murray.

“I think we know that we need to bring the price of genotyping down,” said Gilbert, echoing the broad industry assessment that equates market success with affordable genotypes. “SNPlex, for us, represents [technology that] is going to start having people think about going to whole-genome analysis and getting SNP costs down.”

Lastly, ABI offers genotyping services that the company runs out of its Integrated Laboratory Services group, said Murray. Here, ABI uses in-house bioinformatics tools to help customers develop assay sets based on SNPs collected from Celera Genomics, the public databanks, and ABI’s popular Assays-on-Demand, said Murray.

Grim Snapshot

However, ABI has entered the SNP space during a lull in the life-sciences market and a dark spot in the global economy. In fact, last week Applera issued a rare guidance to investors warning of a “deterioration of business conditions” beyond previous expectations.

Because of delays in life-sciences funding from governments in the United States, Japan, and Europe — half the company’s total revenues are from government and private-research labs, which themselves rely on government funding - together with macroeconomic issues reverberating from the Middle East, ABI said it now expects lower-than-expected revenues and earnings for the second half of its fiscal year. The warning came almost three months after ABI cut about 10 percent of its staff, or roughly 400 regular positions and 100 contract and temporary positions.

“ABI might not be the 800-pound gorilla [in the genomics jungle], but it’s at least 300 pounds,” said Edward Tenthoff, who covers Applera for ThinkEquity Partners in New York.

Tenthoff, who is bullish on genotyping, said ABI will encounter a substantial challenge from Sequenom, Illumina, and a quiet lead-in to genotyping by gene-expression giant Affymetrix.

“This year, especially the second half, will see a much more significant interest on the part of pharma and biotech,” said Tenthoff, who helped take Sequenom and Orchid Biosciences public while an analyst at Robertson Stephens. “But ABI is getting into a market that has been dominated by strong” — yet significantly smaller — “competitors.”

The MassArray from Sequenom — “the most established player,” according to Tenthoff — took top honors in the market last year because the system was “by far the cheapest technology,” he said. Sequenom’s challenge, if it wants its MassArray to stay ahead of ABI’s SNPlex, will be to sell more units — easier said than done when few labs are buying.

Illumina’s BeadArray platform, on the other hand, has the advantages of high throughout, low cost per SNP, and “a slick little assay system,” said Tenthoff. However, Illumina’s platform, which managed to find two homes since its launch late last year, suffers from “questionable fiber-optic efficacy,” he added. Plus, Illumina’s high-throughout tool was slow out of the gate because a deal with ABI to do-develop a similar tool collapsed.

“Clearly, Illumina has been massively delayed as a result of its failed collaboration with ABI,” said Tenthoff. “They are a little bit behind the ball” because of that problem. Neither company would comment on the issue, which is in low-level legal wranglings

Not to be left behind, Affymetrix, through its Perlegen spinoff, has been performing “massive resequencing” projects that are not limited to coding regions, which have been the foci of Sequenom and Celera Genomics. “I think the next-generation SNP chips ... from Affymetrix are going to be legit, and I think they are going to get [price per genotype] down,” Tenthoff said. “We are going to start to see Affymetrix really step up their genotyping effort. Affy needs to develop chips, get content, leverage that GeneChip brand into genotyping,” he said. After all, there is “clear convergence” between gene expression and genotyping: ABI’s SDS “does both; Sequenom’s Mass-Array now does both; Affy will do both; Illumina will do both,” he said. Tenthoff does not own shares in ABI, Affy, or Illumina, but does own shares in Sequenom.

To be sure, ABI is marching into the genotyping market with a handful of potent advantages. Insiders agree that the AGI has armed it with great content, and ABI’s Foster City, Calif., facility is an “assay factory,” said Tenthoff. Plus, ABI has more money in the bank than Sequenom, Illumina, and Affymetrix combined.

“The bottom line is, the ball is still up in the air,” he said. “Because of pharma’s spending habits and decreases, they haven’t really stepped up their [genotyping] effort yet. I don’t think any one’s out of the game yet, to be honest.”

—KL

 

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