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10x Genomics Showing 'Little Concern' for Patent Lawsuit Consequences, Customers Say


NEW YORK – 10x Genomics executives have told existing customers not to worry about access to its assay kits while the company faces a court order limiting its ability to sell those products.

Multiple customers who had already purchased its single-cell analysis system said that Pleasanton, California-based 10x told them the permanent injunction, issued as part of a patent infringement suit, would not bar 10x from continuing to sell reagent kits to them. This message was conveyed in emails sent in June and July or by sales representatives.

Indeed, in the finalized injunction, issued Aug. 14, Judge Richard Andrews of the US District Court for the District of Delaware made provisions for 10x to continue to sell to its "historical installed base." However, the firm is barred from selling its original gel beads in emulsion, or GEM, reagent kits to new customers and must pay Bio-Rad Laboratories a 15 percent royalty on all sales of those products. 10x has appealed the finding of infringement, the permanent injunction, and several other aspects of the case.

But 10x does not plan to continue to sell older GEM products indefinitely and hasn't uniformly disseminated its plans to "transition" customers to a new, non-infringing product, using its Next GEM chips.

"I've been surprised at how little concern the 10x people have shown. They've really played it down and not made a big deal about it," said Greg Gibson, a researcher at Georgia Tech who uses transcriptomics to study human genetics. He said his 10x sales rep initiated the transition after his lab expressed concern about the effects of the injunction. He has a "low level of concern" about transitioning to Next GEM kits, he said, "because of the track record of 10x in delivering high-quality data."

What 10x has told potential investors and a federal appeals court has a different tone. The firm disclosed that it has not yet developed Next GEM-based kits for two of its products — its Chromium single-cell copy number variation solution and its linked reads sequencing technology to provide long-range genomic information from Illumina's short read sequencers. (It has developed Next GEM versions of its single-cell gene expression, immune profiling, and ATAC-seq solutions.)

In a request to stay the injunction, attorneys for 10x told the US Court of Appeals for the Federal Circuit the firm "will suffer clear and immediate economic harm the moment it has to stop selling product lines for which it has no new system. Even as to the three other lines, the commercial launch of a new scientific research tool is a complex process, which typically takes months of intensive effort. Abruptly accelerating a process as the injunction requires almost guarantees hitches that could cost 10x good money and lose it good will."

And in a preliminary prospectus for its planned IPO, announced last week, 10x wrote, "we cannot assure you that we will be able to make our Next GEM microfluidic chip work with all of our solutions; that our Next GEM microfluidic chip will allow our customers to retain the level of performance or quality they have come to expect using our GEM microfluidic chip; that our Next GEM microfluidic chip will replace the sales of our GEM microfluidic chip; or that we will be able to manufacture our Next GEM microfluidic chip in sufficient volumes and in sufficient quality in a timely fashion."

10x also said it plans "to gradually phase out our GEM microfluidic chips and anticipate[s] that our Chromium products utilizing our Next GEM microfluidic chips will become an increasing percentage of our sales and will constitute substantially all of our Chromium sales by the end of 2020."

10x disclosed that it held approximately $300,000 of GEM microfluidic chips in inventory, as of June 30, though its unclear how many kits that translates to.

In July, prior to the finalized injunction order, a 10x spokesperson told GenomeWeb in an email "We have already been transitioning customers to our patented Next GEM product and expect to continue doing so in a methodical manner."

But the firm did not respond to follow-up questions about when it began those transitions, what those entailed, how long they would take, and whether it would begin transitioning customers all at once or on some other schedule. When pressed for answers last week, a different 10x spokesperson said the firm's filing for an initial public offering would preclude it from answering those questions, beyond what it had revealed in documents submitted to the US Securities and Exchange Commission and in an email to customers from CEO and Cofounder Serge Saxonov, sent July 29.

GenomeWeb spoke to five 10x customers at three academic institutions about what the company has told them about the situation. All expressed confidence that 10x would handle the transition to the new product line well, although at least one had been initially unaware that 10x faced the injunction. Almost all of them said they would be unable to do their research on another single-cell analysis platform, including Bio-Rad's. Two wrote letters to Judge Andrews in 2018 to say so.

"There are critical applications for which the 10X system provides the only option," Gibson wrote in a letter dated Jan. 4. "It follows that if we were to lose the ability to use the 10X instrument the research we support would be severely impacted." The 10x system "provides much greater throughout, greater consistency and repeatability, and for large projects is far more cost-effective. We retain the Bio-Rad ddSeq system for small studies of cell lines, and for pilot research by colleagues with less experience in single cell genomics, but to say it is equivalent is unambiguously false," he wrote.

None of the customers said they've used Next GEM kits yet. Some customers expressed concerns about effects the transition would have on their own research, or on others'.

"You never like to switch products mid-experiment," Gibson said. "There are always batch effects." He added that "there will probably be some misinterpretations as a result" of the new chips. "I expect there will be an effect, but it will be statistically correctible." Even an improvement to the technology could create batch effects that less sophisticated research groups might interpret as biological effects, he suggested.

"There's a general naivete about batch and technical effects in any sort of RNA analysis," he said. "It wouldn't surprise me if some papers reported artefacts as a result of the changeover."

He added that he has not yet seen any data comparing older products with the new ones, either from 10x or from his own lab.

Neither has Hassan Chaib, director of laboratory operations at the Stanford Center for Genomics and Personalized Medicine's Genome Sequencing Service Center. His core lab offers the 10x linked-read, single-cell RNA profiling, and single-cell immune profiling solutions. "We ordered the transition kit," he said, "but we didn't have a chance to test it."

"We're waiting for the right project or customer that is willing to do this kind of testing," he said. "Someone has to take the old chips versus the new chips to see if they're working the right way."

"I'm hoping 10x are validating all this data," he said. "We don't have the funding or resources to do this, it's not our business at all. Even if you give me the money to do it, I'm not going to be excited to do it." Separate validation would be required for each different cell type, he said. "It's not like you do it just one time." Any validation study "will be valid only for that cell type," he said. "If you change the context or change the experimental design it may work, it may not."

"It's blind trust," he said. "It may be equivalent, it may be better, but somebody has to take the lead."

"It becomes our business if data is affected," Chaib said. "We may reach to another provider, but there are not lots of providers that can compete."

Bing Ren, a researcher at the University of California, San Diego, told GenomeWeb in July that he had not been informed of the potential injunction. His lab uses both the single-cell gene expression and ATAC-seq kit. He later said he spoke to his sales representative, who "assured me that we as a standing customer will be able to order the same chips. He would let me know when they have comprehensive data for comparison of current and new chip[s.]"

"We were not explicitly told that we will have to transition by the end of 2020," Ren added.

10x also mentioned the transition to Next GEM technology in its preliminary prospectus, where it wrote, "we cannot guarantee that our customers will quickly switch to using our Next GEM microfluidic chips in their research. Customers may delay transitioning to our Next GEM microfluidic chips for a variety of reasons, including if they have experiments underway for which they do not want to introduce additional variables. More significantly, customers may decline to purchase our products altogether if they do not believe that our Next GEM microfluidic chips can produce results that are reliable, consistent and comparable to our GEM microfluidic chips."

The firm has posted to its website a document claiming "comparable performance" between its Chromium Next GEM Single-Cell Gene Expression v3.1 kit and its older kit.

Elsewhere on its site, 10x has posted links to submission forms to download datasets that match the description of the ones used in its comparison study.

The permanent injunction is set to take effect Wednesday, Aug. 28. The appeals court is likely to make a ruling on whether it will stay the injunction today or tomorrow, said Jacob Sherkow, a law professor at New York Law School and an expert on patent cases. "The district court has already said no to a stay," he said, "but it seems the Federal Circuit has been happy to overturn permanent injunctions" in recent life sciences patent suits.

In at least two recent cases, that appeals court has seen a public interest in keeping infringing medical devices and drugs on the market during the appeal, which can take about 10 to 12 months. Still, the facts of the 10x case made it hard to guess which way the court might rule. "It's a little difficult to make the argument that if 10x gets yanked, people will start dropping like flies," he said.

Chaib and Snyder noted that they've suffered research disruptions due to reagents before, when in 2009 Illumina shipped defective paired-end sequencing reagent kits.

"When people change things, things happen," Chaib said. He noted that Illumina was able to solve its issues. "Now people don't talk too much about it," he said.

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