Even though the hype around the Human Genome Project has long faded, the market for sequence analysis software is still healthy, according to at least two firms that have survived and prospered despite the recent downturn in the bioinformatics sector.
DNAStar and Gene Codes still see strong sales of their flagship sequence analysis software suites, Lasergene and Sequencher, according to company officials. The privately held firms, founded in 1982 and 1988, respectively, have remained profitable in a market that has seen more than its share of high-profile flame-outs, as well as increasing competition from free and open source alternatives.
"Sequence analysis software has been around for a long time, but it's still a very strong market," Tom Schwei, vice president and general manager of DNAStar, told BioInform this week.
Frank White, worldwide marketing manager for Gene Codes, echoed Schwei's comments. "Clearly there's a lot of need for sequence analysis," he said, although "the market has changed over the last three to five years."
A decade ago, he said, it was only the major genome centers that had serious sequence analysis requirements. Now, however, "it is being dispersed to the masses."
White said that Gene Codes' market research indicates that there are more people working with sequence data than there were five or eight years ago, "but a lot of them are only working with a little bit of information at a time -- they're looking at one gene, they're looking at a region of a gene, they're working on pathogens," White said.
According to White, factors driving demand for old-school sequence analysis software include the availability of sequence data in the public domain, as well as the recent "upsurge" in resequencing, SNP discovery, and population genomics studies.
"So the total amount of sequencing that they're doing is perhaps less," he said, but the demand for user-friendly analysis tools is actually on the rise.
DNAStar's Schwei agreed that most of his company's current customers are end-user biologists. "It's not just sequencing genomes. It's really doing more of the analysis work," he said. "It's very small projects, where they're trying to understand the sequence of DNA they're working with, they're trying to create primers, they're doing some in silico cloning, possibly some SNP detection by doing some comparison of genomic sequences -- a pretty wide variety of things."
Schwei and White said that they are keeping an eye on the rapidly developing next-generation sequencing market, where Curagen's 454 Life Sciences subsidiary is quickly building market share, and competitors like Solexa and Helicos BioSciences are close behind. While it's likely that these emerging instruments will drive further demand for sequence analysis software, both officials characterized the market as too early-stage to discuss their development plans in that area.
Mixed Licensing Strategy, Expanding Product Suite
As an example of the rise in demand for its tools, Schwei cited an agreement that DNAStar disclosed this week with the University of Michigan to expand an existing network license for Lasergene to enable campus-wide access to the software.
Schwei declined to provide specific terms of the agreement, but he said it was an extension of a "long-standing" relationship between the firm and the university, and that several thousand researchers could ultimately access Lasergene under the deal.
DNAStar said in a statement that it has put "a renewed emphasis" on site license arrangements similar to the one with the University of Michigan. Schwei told BioInform that this strategy is in response to "centralization" of core facilities and IT functions at many large institutes. "IT managers want only so many packages to support," he said.
"One of the key things that has contributed to the success of this company in light of so many commercial bioinformatics companies failing over the years is to have a particular set of expertise and know what we're really good at doing."
Organizations can also benefit from the "economies of scale" associated with a site-wide license, Schwei said. Pricing for Lasergene starts at $1,500 for an academic desktop license and can go into six figures for a site license, he said.
The company plans to pursue a "mixed strategy" that marries the single-seat licensing it has relied on in the past with these larger, enterprise-wide deals, Schwei said.
Although DNAStar faces competition from a number of commercial vendors, including Gene Codes, Schwei said that he considers freely available software to be the primary competitor to Lasergene -- especially in the academic market.
While acknowledging that it's difficult to compete against freeware -- and impossible to do so on price -- he said that DNAStar has been able to hold its own because of the level of support it provides, which includes annual product upgrades, a development roadmap in line with changes in the major operating systems, and solid tech support. "Many customers don't realize that you don't get that with freeware," he said.
"Freeware will always be there," he said, but some customers recognize the advantages of a well-supported commercial option. For example, he said, "it may take 12 freeware packages to achieve 80 percent of what Lasergene does, so there's some convenience in having all those tools in one package with a consistent interface."
Competition also comes from the commercial sector, where Invitrogen recently launched a free version of the Vector NTI sequence analysis package formerly marketed by InforMax as part of its strategy to build an e-commerce platform to sell its reagents.
Schwei said that DNAStar actually benefited from that move, because Invitrogen does not plan to upgrade Vector NTI to support the latest version of Apple's OS X operating system, version 10.4, also called Tiger (Invitrogen's notice on the subject is available here). For example, Schwei said that DNAStar has signed another site license for Lasergene with an undisclosed institute that opted to abandon Vector NTI for this reason. He added that the company is in discussions with a second organization for a similar agreement.
Going forward, DNAStar is looking to expand its product portfolio beyond sequence analysis. The company developed a free gene expression visualization tool called ArrayStar in collaboration with NimbleGen so that NimbleGen's customers could manipulate data from its array platform. While that project is complete, Schwei said that DNAStar has "active development" ongoing in the microarray analysis area, and expects to disclose more information on the project "within the next 12 months."
The market for sequence analysis software is "relatively mature," Schwei said. Even though DNAStar believes that market "still has legs," he said "we aspire to greater things than that."
Two Companies, Two Markets
Gene Codes has already diversified its business, though in a completely different way. In late 2001, the firm was tapped to develop high-throughput DNA analysis software to help identify the victims of the Sept. 11 World Trade Center attacks [BioInform 07-01-02].
The outcome of the project was a new product, M-FISys (Mass Fatality Identification System); a sister company, Gene Codes Forensics, that pushed its staff from around 15 to around 50; and an entirely new customer base in the forensic market.
But the effort had its downside, as well. While the firm focused on the WTC identification project for two and a half years, "we did no marketing and virtually no development" on the core Sequencher side of the business, White said.
Over the past two years Gene Codes realized that "we had some catching up to do," he said. White -- formerly program marketing manager at IBM Healthcare and Life Sciences and director of business development at InforMax -- joined the company last summer to help revive its marketing efforts.
While declining to disclose financial details, White described both sides of Gene Codes' business as healthy, and said that Sequencher holds the largest share of the sequence analysis market despite the marketing lull.
Last month, the company released a new version of Sequencher, version 4.6, which includes a new feature called a Variance Table that allows users to identify SNPs and heterozygotes across large collections of sequences.
The two flagship products are both focused on DNA sequence analysis, although M-FISys is much more complex, and handles many types of data that Sequencher doesn't. In addition, their markets are vastly different, White said. Sequencher is shrink-wrapped desktop software that researchers can buy, load, and use. M-FISys, on the other hand, requires a great deal of customization and training.
"Different countries and different law enforcement agencies have different requirements -- what the data format is, what kind of privacy and security issues they have, what technologies they use," White said. In addition, because the customer base for M-FISys is government and law-enforcement agencies rather than individual researchers, the sales cycle is far longer and much more complicated.
Unlike DNAStar, White said that Gene Codes is not looking into expanding its product line beyond its core expertise in sequence analysis. Although the firm hasn't ruled out adding some new functionality, "We have no immediate plans to add something entirely new," White said.
"We look for opportunities to develop things that make sense, to leverage the expertise we have," he said. "One of the key things that has contributed to the success of this company in light of so many commercial bioinformatics companies failing over the years is to have a particular set of expertise and know what we're really good at doing. I don't want to say we will always stick entirely to that, but we recognize that expertise in one or two areas doesn't automatically translate to expertise in other unrelated areas of work or research. We would pick our areas of expansion very carefully"
-- Bernadette Toner ([email protected])