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As SNP-Genotyping Space Evolves, Major Players Continue Refocusing Their Business Strategies


About 18 months ago, companies in the high-throughput genotyping market started feeling a squeeze. Fierce competition drove down the price per SNP and the profit margin of genotyping, leaving main players such as Applied Biosystems, Illumina, and Sequenom to either improve their technologies, move them into other markets, diversify, or get pushed out.

Orchid Biosciences is an example of the latter category. Unable to keep up with competing prices, the company sold its SNP-genotyping business to Beckman Coulter and moved into paternity testing, SNP-based forensics, and prionics [see 1/17/2003 PGx Reporter]

If the big genotyping-platform companies have met with any success, it’s because they’ve taken a combination approach.


Illumina, for one, decided on a strategy of moving into high-throughput RNA analysis in addition to genotyping, selling its BeadLab platform to the high-throughput genotyping market and its BeadStation to the next level down.

“Between 12 and 18 months, most of the genotyping dollars will be spent in the very high-throughput labs around the globe,” Illumina CFO Tim Kish said in July 2003. “After that, of course, it will be important to address the middle markets — the smaller markets, if you will.” [see PGx Reporter 9/18/03]

For Illumina, the strategy seems to be taking hold, but it hasn’t had to jump the high-throughput ship at all. “Illumina is pretty close” to achieving the high-throughput players’ early-2004 goal of reaching cost-per-genotype of one penny, said Eric Schmidt, an analyst with SG Cowen Securities.

With nine BeadLab platforms installed and operating worldwide, Illumina considers itself the strongest player in the “very high throughput” market, said CEO Jay Flatley. This market is “in the range of $30 million to $50 million,” he wrote in an e-mail to Pharmacogenomics Reporter this week.

Flatley sees the next throughput-level down as dominated by Illumina, Affymetrix, and companies working with Affy. “We see that market growing and growing dramatically,” he said. “The competitive space, I think, has changed in that a number of companies that used to be high throughput have changed business models and moved into different segments,” said Flatley. Companies left the space either because they couldn’t compete or because their technology worked better in other markets, he added.

In the meantime, Illumina has sold more than the 20 BeadLabs and BeadStations, which was the company’s 2004 goal, Flatley wrote in the e-mail.

The BeadLab and BeadStation platforms “address most of the market for genotyping,” wrote Flatley. He estimated a genotyping market size of $200 million, for which the two platforms account for “probably $150 million.” Both systems also “address the [gene-] expression applications,” which Flatley estimated at $500 million (see chart).

In the year leading up to June 30, that approach has increased Illumina’s revenue from $4.3 million at the end of the first quarter 2003 to $10.8 million by the close of the first quarter 2004 — a 251 percent rise. Net loss narrowed in that period by $5.1 million, from $9 million to $3.9 million.

Illumina’s year-over-year product revenues were up from $2.7 million in the quarter ended June 30, 2003, to $9 million in the similar period this year, while research and development expenditures have remained flat for the past 18 months.


Of the three high-throughput companies, Sequenom has had the most turbulent ride. Once a front runner in the SNP-genotyping tools and services market with its MassArray product, the company abandoned the service business in the middle of 2003 and closed its pharmaceuticals business two months ago [see PGx Reporter 8/5/2004]. That unit suffered three consecutive declining year-over-year quarterly revenues as of June 30.

“It’s become clear over the last 18 months that Sequenom has become a laggard in this market,” said Schmidt, the SG Cowen analyst. “You kind of wonder why they made the stretch [into pharma] in the first place if they had such a great business in genotyping to go after.”

Shedding Sequenom’s pharma unit is part of a recovery plan CEO Toni Schuh repeated last week to investors at the Merriman, Curhan, Ford, and Company Investor Summit in San Francisco. First introduced July 29, the plan will eliminate 50 staff positions by the end of the year, and “dramatically reduce cash burn” by $10 million a year, said Schuh. By the end of the year, cash burn will be about $32 million and the company would likely end the year with $35 million in cash, he added [see PGx Reporter 9/23/2004].

Now Sequenom seems to be swinging back toward genotyping in a hurry. Two days after the conference call, the company introduced Assays by Sequenom, also known as AbS, “a custom design and validated assay product offering for the MassArray system,” said Mike Terry, Sequenom executive vice president of sales and marketing. Based on current pricing and customer projections provided by a company spokesperson, the new service may generate between $1.2 million and $2.5 million in annual revenue from existing MassArray customers [see PGx Reporter 9/23/2004].

Sequenom’s overall revenue and the revenue of its Genetic Systems business decreased for the two consecutive quarters ended June 30, compared to the year-over-year period. For the period ended March 31, Sequenom’s Genetic Systems revenue of $4.8 million made up the bulk of overall revenue of $5.1 million. In the comparable period during the previous year, the company’s revenues totaled $7.4 million, with $6.5 million from Genetic Systems and the remainder from its Pharmaceuticals business.

A long-expected increase in sales of the bench-top, mid-throughput Compact MassArray instrument also seems to be at the front of Sequenom’s drive to find new customers. Sequenom CFO Steve Zaniboni said during the company’s first-quarter earnings conference call that the high-throughput genotyping market is “reaching saturation.”

Both the Compact MassArray and Assays by Sequenom will reach out to the company’s “new customer set,” which includes researchers involved in “applied genetics or clinical-type research,” said Terry. Sales of the Compact MassArray started below expectations in the first quarter, but picked up during the second quarter, as four of the seven MassArray sales by June 30 comprised the bench-top system.

Wall Street may not be quick to react positively. “I’m not sure that investors are going to buy into that strategy [of relying on greater Compact MassArray sales] until Sequenom starts to put up some better financial numbers,” said SG Cowen’s Schmidt. Sequenom has at least a crack at getting back into the market, he added.

Moreover, Schmidt said he doesn’t really believe in a saturated high-throughput market. While Illumina was busy becoming the market standard, more than doubling second-quarter sales of 2003 with sales in the comparable period this year, the company may have simply taken away some of Sequenom’s business, he said. The market may be getting tighter, “but I think the market is still growing, and margins continue to be good for companies like Illumina, while the costs are coming down,” he added.

Unsurprisingly, Flatley, Illumina’s CEO, is also skeptical of the idea that high throughput is filled to capacity with competition. Starting about one year ago, consortia of researchers focused on a particular disease area began emerging to pool their data and talent, creating new customers for high-powered genotyping platforms, he said. Flatley puts the number of these consortia at “six or eight,” and he expects the number to grow. In the next year, this phenomenon will be driven by “the advent of fixed-content chips being readily available at lower prices” for BeadLabs and BeadStations, Flatley said.

The North American Rheumatoid Arthritis Consortium, for example, recently contracted Illumina to co-perform a genotyping study [see GenomeWeb 9/16/2004]. Financial details of the agreement were not disclosed.

Not everyone agrees on their position in the genotyping continuum, said Flatley. “If you talk to Sequenom, they call themselves high throughput because they have a system that is the highest that they can develop. Our highest system is beyond what anyone else can do, we think.” Illumina’s midlevel BeadStation, which the company says can analyze 400,000 – 600,000 genotypes per day, is high throughput by most companies’ standards, Flatley said.


When Applied Biosystems entered the high-throughput genotyping market at the beginning of the year with the launch of its SNPlex system, it was entering territory already dominated by the other two players. Although it had the power of its large parent company, Applera, setting the stage for entry by building the Applera Genome Initiative, a 220,000-SNP collection, ABI still ended up with a somewhat different slice of the genotyping market.

The SNPlex platform’s sales are incorporated into ABI’s Real-time PCR/Other Genomics products category (see graph, p. 6)

Applied Biosystems had revenues of $439.6 million for the period ending June 30, 2004, compared to $432.9 million in the comparable period last year. For the same periods, respectively, ABI reported revenues of $139.8 million and $164.1 million for its DNA Sequencing product category; $120.8 million and $96.7 million for its Real-Time PCR/Other Applied Genomics product category; $119.5 million and $85.1 million for its Mass Spectrometry product category; $49.9 million and $51.3 million for its Core DNA Synthesis and PCR product category; and $30.5 million and $35.7 million for its Other Product Lines category.

In the throughput game, there was nowhere for ABI to go but up when it launched SNPlex; the company is able to outlast sudden shifts in the high-throughput market because it was never a pure-play genotyping company.

“We’re actually ramping up pretty aggressively with the SNPlex genotyping system now,” said Josh Goldsmith, ABI’s senior product-line manager for the SNPlex platform. He chalks this up to SNPlex’s low cost-per-genotype, which was one of the platform’s main selling points when ABI first launched it. The product was expected to identify SNPs at a rate of one per penny.

— CW

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