This story has been updated to include additional background information on Tute's acquisition of Knome from a source close to the deal.
NEW YORK (GenomeWeb) – Tute Genomics has acquired some of the assets of Knome for an undisclosed amount and has integrated these portions of the company's former product portfolio into its cloud-based genome informatics platform.
Specifically, Tute is integrating the genome interpretation software previously offered as part of Knome's KnoSys platform into its system, adding the solution to its existing offering for annotating, prioritizing, and reporting on genomic variants. Knome launched KnoSys as an appliance in 2012, marketing it as an alternative to cloud-based solutions for customers who preferred to analyze their data locally for privacy or regulatory reasons. The appliance couples a grid computing platform with a variant interpretation solution that Knome developed to help clinical labs filter, interpret, and classify variants and generate reports.
Moving the interpretation software to the cloud "allows us to give both the security and even a lot of the performance you get in a local solution [with] the scalability of the cloud," according to Josh Forsythe, Tute's vice president of marketing. However, Tute would be willing to offer KnoSys locally to customers who, for various reasons, prefer to run their analysis in house, he told GenomeWeb.
When it first launched KnoSys in 2012, Knome initially charged around $125,000 as a starting price but then revised its pricing scheme in two years later. When GenomeWeb spoke to Knome Co-founder Jorge Conde in 2014 following a $13 million fundraiser early that year, he declined to disclose details on the new pricing scheme, stating at the time that those details were still being finalized.
Tute this week declined to disclose how many KnoSys systems Knome actually sold prior to being bought. A source familiar with the acquisition, who wished to remain unnamed, told GenomeWeb that the company sold very few systems but declined to give a specific number.
According to the source, while prospective customers liked the system's software, the upfront hardware costs proved to be a major barrier, and ultimately very few actually ended up purchasing systems and sale cycle times were long. At issue was the cost of the specialized hardware that the company coupled with the software which could set users back as much as $100,000, according to the source. With many commercial bioinformatics companies offering cheap web-based analysis, unless a customer has reason to analyze large volumes of samples, it's more cost effective to pay per genome analyzed.
Another contributing factor to reduced platform sales was the fact that the KnoSys platform did not offer customers a complete plug-and-play solution that allowed them to go from sequence all the way through to clinically actionable results, the source said. Adding in the missing features would have taken more time and money than the company had to spend.
By late 2014, Knome realized that KnoSys would not be able to compete with other products in the market and began reassessing its plans for the product and the company as a whole, the source said. Its management and board decided that the company's best bet would be to offer KnoSys on the cloud in addition to offering it as an appliance, and to seek further investments to develop the features needed to complete the solution.
Since to that point Knome had not implemented anything on the cloud, the executive team determined that it would be in the firm's best interests to partner with an existing cloud-based bioinformatics vendor rather than try to go it alone. Working with an existing vendor would also help Knome save on costs and time that would have otherwise been spent on hiring experienced staff as well as on bringing the cloud-based version of the solution to market.
More specifically, the company decided that Tute was the best fit because both companies have complementary business models and because Tute is "well positioned to move the KnoSys software to the cloud and to combine [it] with other offerings to meet more of the customer's needs," the source said.
Forsythe noted that Tute's "primary focus is still the cloud but that doesn't exclude us from offering a local solution per our clients' requests." He declined to disclose specific pricing information for the local offering stating that associated costs would be based on users' needs and would depend on factors such as level of implementation and integration required at the customer's site.
Moving forward, Knome's interpretation software will be sold as part of Tute's existing offering. The company charges on a per-genome or -exome basis, and its $250 price tag covers six months of data storage on its platform. The companies' products do overlap in a number of ways but there are some differences in capabilities that make them complementary, according to Forsythe. For example, in the Tute platform, there are ways to filter and prioritize genomic variants based on publicly available genomic annotations and proprietary scoring algorithms that Tute has developed that aren't available in Knome's software, he said. Knome's system, for its part, offers greater functionality for developing in silico panels and supporting sequencing assays.
"Knome's approach to how in silico panels are defined is more flexible and precise than what Tute Genomics has offered to date," Forsythe explained. "Where the Tute platform excels in terms of in silico panels is in the extensiveness of genomic annotations offered. The combined technologies provide greater breadth of panel development and more precision in how panels are defined."
Tute officials declined to comment on whether the new addition to its business will pull in additional customers although Forsythe did note that the addition to its offering should make the company more competitive moving forwards. "It establishes our position as the go-to solution for genome annotation, interpretation, and clinical reporting," he said. Tute CEO Reid Robison added that the acquisition enables Tute to provide a more complete offering to clinical laboratories and test developers, one that offers more robust filtering and querying capabilities and functionality for developing gene panels, among other features. "That does significantly expand our reach ... and gets [us] closer to that ideal product market fit for genomic medicine."
Forsythe and Robison also declined to comment on what the acquisition means for other components of Knome's product portfolio. In addition to KnoSys, Knome offered two services: KnomeDiscovery, which provides end-to-end genome and exome analysis and interpretation including alignment, variant calling, and interpretation; and KnomeBase, which helps clients prioritize and validate candidate variants, genes, and pathways.
The unnamed source told GenomeWeb that up until the company closed its doors, it was still offering these services but it was not actively promoting them since the bulk of its efforts were being put towards developing and commercializing KnoSys. — Tute did not acquire the software associated with these services as part of its acquisition agreement, the source said. Tute also did not purchase the aforementioned associated hardware, as Knome had already shut down that part of the business in early 2015 because it proved unprofitable and unsustainable, the source said.
Forsythe and Robison also declined to comment on how the acquisition will affect current Knome customers and partner companies. In 2013, the company signed an agreement with Omixon to include Omixon's targeted human leukocyte antigen typing capabilities as part of its services offering. Last year, it agreed to provide KnoSys for free to startups associated with LabCentral, which provides shared laboratory space to life sciences and biotech startups. Also last year, Knome formed a pact with Personal Genomics that allowed the latter to distribute KnoSys to international customers.
Forsythe said that Tute had already been in touch, independently, with some of Knome's existing partners and that the company would continue to engage with those clients in the coming weeks. Tute is also not discussing its plans for remaining Knome employees; however, the unnamed source told GenomeWeb that the Knome has shuttered its office in Cambridge, Massachusetts and that some of company's personnel are currently supporting the transition of the company’s technology to Tute. Previous Knome employees have recently gone on to work with firms such as GenomOncology and Syros Pharmaceuticals. Prior to joining Tute, Forsytheworked at Knome. Meanwhile, former Knome CEO Wolfgang Daum left the company earlier this year and is now chairman and CEO at Toma Biosciences.
Knome officially opened its doors in 2007. The company, which was co-founded by Harvard University geneticist George Church, initially planned to offer a whole-genome sequencing and analysis service — called KnomeComplete — directly to customers. In 2009, the company added an exome sequencing service to its direct-to-consumer roster and also began offering sequencing and analysis services to researchers. In 2010, the US Food and Drug Administration sent a letter to the company, arguing that KnomeComplete qualified as a diagnostic device and required the agency's review. In 2011, Knome shifted its focus to the research market and focused on offering analysis services to clients there. In 2012, it launched KnomeClinic, a software suite for interpreting human genomic data. Later that same year, the company unveiled the KnoSys system, however it didn’t officially launch platform until early 2014, the unnamed source said.
In addition to the $13 million raised from investors in 2014, Knome raised $5.8 million in 2013 and $5 million in 2011.