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As R&D Budgets Shrink and Data Grows, Bioinformatics Service Providers Could Gain in Popularity

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By Uduak Grace Thomas

For research organizations that need bioinformatics tools but don’t have the requisite computational infrastructure and informatics expertise in house, outsourcing may be an increasingly viable option.

Indeed, several recent moves by bioinformatics services firms indicate that the market for their offerings is strong. For example, 5AM Solutions, a life science informatics service provider based in Reston, Va., announced this week that has opened a new office in San Francisco office and increased its Bay Area staff to support a "growing number" of clients in the biotech mecca.

In addition, Genstruct last week changed its name to Selventa as part of a corporate-wide "rebranding effort" intended to emphasize its renewed focus on providing consulting services for drug developers (BI 12/3/2010).

A recent white paper published by UK-based bioinformatics services company Eagle Genomics notes that "with reducing research and development budgets, revenue streams under threat from near-expired drug patents, and general loss of consumer confidence leading to reduced sales, every organization in the biotech world …is faced with making difficult decisions about the future structure and purpose of R&D teams."

As a result, the report concludes, outsourcing is "vital to the ongoing ability of bioinformatics teams to effectively support R&D activities within their organizations."

At least one high-profile example serves as proof that large pharmaceutical firms are looking to outsource their bioinformatics needs rather than house them internally. In 2001, Merck purchased Seattle-based Rosetta Inpharmatics for around $620 million — a transaction that provided the pharmaceutical firm with a ready-made internal bioinformatics group with considerable expertise in gene-expression analysis. However, in late 2008 Merck closed the Seattle site in a restructuring, and the following year it sold Rosetta's software business to Microsoft (BI 6/5/2009).

Meanwhile, Stephen Friend and Eric Schadt, former employees of the Rosetta Inpharmatics group, created the non-profit Sage Bionetworks organization in 2009 to build on biological network-modeling projects they had begun while at Merck. The pharma giant provided an undisclosed amount of data and logistical support for the effort when it launched.

Merck has continued to support the project financially in return for Sage's help in integrating large molecular and clinical datasets related to its drug discovery work (BI 3/31/2010) — essentially regaining the same capabilities it had previously with its Rosetta Inpharmatics group, but via an outsourced model.

While pharma's dwindling R&D budgets represent one opportunity for bioinformatics service shops, rapid advances in sequencing technology development have also increased demand for bioinformatics outsourcing — particularly among sequencing services companies looking to shore up their informatics capabilities in order to provide added value to their customers.

For example, Genomatix Software and genomic service provider Eurofins MWG Operon joined forces earlier this year to offer next-gen sequencing, read mapping, analysis of ChIP-seq and digital gene expression data, and annotation services (BI 07/09/2010).

In April, bioinformatics provider DNAStar and bioengineering firm Scarab Genomics teamed up to launch a next-generation DNA and RNA sequencing services business that includes "a full range of sequencing services including library preparation, coordinating the most appropriate sequencing technology and platform, assembly, analysis, annotation, and visualization of end results." (BI 04/09/2010)

Other DNA sequencing service firms tout their bioinformatics services as a differentiator in the market. Eureka Genomics, for example, has developed a suite of proprietary bioinformatics tools that it says give it an edge over its rivals in the highly competitive sequencing services sector (BI 3/12/2010).

Eagle Genomics, meantime, has positioned itself as something of a bioinformatics-staff-for hire for smaller labs that need assistance with open source tools. The company provides genomics data management and integration services, data analysis pipelines, and open-source technical support and customization, among other services, to both commercial and academic groups.

Citing a report published in 2009 by market research firm Business Insights, Eagle noted in its white paper that the bioinformatics services market grew by approximately 25 percent year-over-year between 2007 and 2009, and that this growth rate is expected to continue until at least 2014, reaching a total value of more than $1 billion.

A Case Study in Outsourcing

Sometimes the size and specificity of the bioinformatics project make outsourcing the most logical choice.

For example, Martin Lawrie, managing director of Cytocell, a UK-based diagnostics probe company, told BioInform that his company recently chose to outsource some bioinformatics work because "we had a specific project in mind" that did not require a full-time position and because the company lacked the kind of compute power and the expertise needed to do the project in-house.

Cytocell used Eagle Genomics' services to map about 30,000 bacterial artificial chromosome clones, a subset of larger collection of 220,000 clones that the company owns.

Lawrie explained that the company purchased the clones three years ago with the aim to use them to create a comparative genomic hybridization array. However, as the array market shifted toward oligonucleotide-based arrays, Cytocell decided to use the clones to produce custom-made fluorescent in situ hybridization probes.

"In order to do that, obviously we had to have all of those clones or at least a subset of those clones mapped to one of the BAC genomes databases so that we knew where the clones actually were, which is why we went to Eagle Genomics," he said.

The pros for Cytocell, according to Lawrie, included "not having to gain that experience in house, not having to spend a fortune on additional computing resource, and effectively not having to worry about it."

Speaking more generally on the cons, Lawrie noted that with outsourcing, it could take longer to receive results than it would with an in-house group, and that data security could be a concern.

Bernadette Toner contributed to this article.


Have topics you'd like to see covered in BioInform? Contact the editor at uthomas [at] genomeweb [.] com.

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