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ABI and Solexa, Pitching Wall Street, Flesh Out Strategies for Their Sequencers

NEW YORK (GenomeWeb News) — As Solexa and Applied Biosystems prepare to roll out their next-generation sequencers, investors are getting curious about how they will compete against each other and where each might have an edge.
 
During an investor and analyst conference this month the two companies individually offered a glimpse of what they hope their respective systems will be capable of doing, what researchers will likely use them for, and where they see their markets. It turns out both shops will target similar applications but differ wildly on their market size estimates.
 
Solexa shipped its first 1G Genome Analyzers to two early-access customers in late June and has said in the past that it wants to launch the instrument widely by the end of this year. Applied Biosystems, meantime, said it will place the first units of its Agencourt system – christened AGA, for Advanced Genetic Analysis – by mid-2007 in large-scale genome centers and core sequencing facilities.
 
Both shops claim their tools will be better and cheaper than the competitions’. “We believe this instrument and the consumables are going to be very cost-competitive with some of the our competition, and it’s also a very flexible platform,” said Kevin Corcoran, ABI’s vice president and general manager for genetic analysis, during a talk at the Thomas Weisel Healthcare Conference in Boston earlier this month.
 
He claimed that the AGA technology has “the highest potential throughput and also the highest read quality” compared to the more than 40 technologies ABI tested before it decided to buy Agencourt Personal Genomics from Beckman Coulter in May.

ABI says the ultra-high-throughput sequencing market could reach $400 million by 2010 with about 60 percent coming from resequencing and de novo sequencing and about 40 percent from gene expression analysis. Solexa says the combined market today is around $2 billion.

 
But Solexa, pointing to its earlier market entry, does not seem to fear the competition. “We claim we will have cost and throughput advantage over [ABI] when they come out with their system,” said Solexa CFO Linda Rubinstein during a separate discussion at the same meeting. Omead Ostadan, the company’s vice president marketing, also pointed out high data accuracy as an important metric for Solexa’s technology.
 
Solexa, which has spent the past few years stacking its executive suites with ABI alumni, has “a performance lead, and a cost lead, and a time lead, and we intend to maintain that through successive generations” of the instrument, Rubinstein added.
 
Solexa said in the past that its first fully commercialized instrument will initially be able to read one gigabase, or a billion DNA bases, per run, while ABI told GenomeWeb News in June it plans to ramp up the raw data output of its instrument to 1.2 gigabases per run.
Solexa’s 1G Genome Analyzer lists for $395,000, and the company estimates a typical user will purchase $100,000 to $200,000 worth of consumables per year. “Our business model is … very much a razor and razor blade model,” Rubinstein said, “but this is a space where the razors can be very profitable as well as the razor blades.”
 
ABI said in June its AGA instrument will be "competitive" in price with its 3730XL capillary electrophoresis sequencer, the high-end version of which lists for $365,000. The company has not yet talked about the price for consumables.
 
Helicos also presented at the meeting but was unable to provide copies of its slides or transcripts of its presentation in time for this publication.
 
Applications
 
In terms of applications for their instruments, ABI and Solexa each agree they will be useful for de novo sequencing, resequencing of whole genomes and focused regions, and gene expression profiling. ABI’s Corcoran also briefly mentioned karyotyping.
 
However, the companies appear to have a different take on whether their tools will complement or compete against microarrays for gene-expression applications. “We expect in the near-term to position our system to be complementary to hybridization microarrays,” Rubinstein said during the investor conference.
 
“We think there are a number of different applications and performance areas where hybridization arrays don’t quite meet the needs of the customers, and that our technology, coupled with an array, could actually add significant value to the discovery and assay work of customers within expression profiling,” Ostadan explained later.
 
Corcoran, on the other hand, seemed to suggest that the AGA technology could replace arrays to some extent, pointing out that high-throughput sequencers can analyze gene expression in organisms for which arrays do not exist.
 
Also, because of the digital nature of using sequencing to analyze gene expression, “all the problems that have been associated with hybridization methods for gene expression go away with this type of technology,” he said during the investor meeting. “What I mean by that is, you get very, very reproducible experiments. And you can start to look at things that are changing in a very small way.”
 
ABI and Solexa also predicted that the study of cancer will become a major application for their high-throughput sequencers. “We are frequently asked, ‘What is going to be the next wave of sequencing?’ “ said Rubinstein. Her answer is the NIH’s cancer genome project, which is kicking off with the $100 million Cancer Genome Atlas pilot project that was announced last December. Solexa and ABI have both been pitching the large sequencing centers that will receive funding from TCGA later this year.
 
Asked by an audience member about the killer app for the Agencourt technology, Corcoran also mentioned cancer analysis first, an area where capillary electrophoresis sequencing has limitations. “You need a technology that allows you to actually quantitate the level of the mutation change [within a tumor] over a course of time, or space,” he said. ABI is currently validating its AGA technology in collaboration with cancer researchers at Johns Hopkins University. This summer, a research team including 454 showed that next-generation sequencing was able to detect mutations that Sanger sequencing missed.
   
How Big Is the Pie?
 
But even as the two companies make similar claims about their instrument and its applications, they differ in their market size estimates. Corcoran said he believes the market for ultra-high-throughput sequencing could reach about $400 million by 2010 with about 60 percent coming from resequencing and de novo sequencing and about 40 percent from gene-expression analysis.
 
Rubinstein, on the other hand, estimated today’s total market for sequencing and gene expression analysis to be approximately $2 billion, and said Solexa’s technology could currently address about $1 billion of this, split about equally between sequencing and expression profiling. “We anticipate that this market can grow in parts through new applications that we will enable on our instrument,” she said during the investor conference.
 
Will the market for next-generation sequencing likely expand? Solexa thinks it will. “I see there is potential for many, many labs to be interested in sequencing if the cost came down, if it becomes routine, as there is more data out there to compare it to,” Rubinstein said.
 
Corcoran agreed that the technology is “going to open up new markets that you cannot cost-effectively approach today with capillary electrophoresis [sequencing].” However, he cautioned that the technology, which creates data on the order of gigabytes and terabytes, is “not for the faint of heart,” requiring an informatics team for analysis.
 
Next-generation sequencing technologies “are essentially a fire hose,” he said. “There is a huge amount of information [coming] out of these. Like a fire hose, you are not going to use it for everything.”

Julia Karow covers the next-generation genome-sequencing market forGenomeWeb News. E-mail her at [email protected]

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