This story was originally posted on Jan. 14.
A little over a year after setting up a lab and declaring its goal of establishing a Sanger-based sequencing factory to analyze human genomes, Genome Corp is throwing in the towel.
Having raised $750,000 in startup funding, the Providence, RI-based company lost its prospective Series A lead investor last fall after Complete Genomics revealed a similar business model and faster commercialization plans, according to a company official. The funding was pulled despite the fact that Genome Corp had passed the investor's due diligence on its technology, intellectual property, and business model.
Genome Corp is currently looking to sell its assets and IP, while its co-founder, president and CSO is now serving as a consultant for Complete.
Genome Corp was co-founded by Kevin Ulmer in 2007 with $250,000 in startup funding from the Slater Technology Fund, a Rhode Island-based state-backed investment fund. Twenty years earlier, Ulmer had founded Seq, a company that pursued single-molecule DNA sequencing. In 2004, he also consulted full time for Helicos BioSciences. Richard Horan, senior managing director of the Slater Fund, is a former Seq CEO and a Genome Corp director.
The startup was planning to scale up electrophoresis-based Sanger dideoxy sequencing into a massively parallel process and to set up a sequencing factory that would provide human genome sequencing services (see In Sequence 10/9/2007).
A little over a year ago, the company set up shop at Slater's incubator facility in Providence and began developing components of its technology. After receiving two additional $250,000 investment commitments from Slater in 2008, bringing its total funding to $750,000, Genome Corp last summer signed a term sheet with Bill Frezza at VC firm Adams Capital Management, which would have been the company's lead Series A investor.
Frezza conducted a due diligence investigation of the firm's technology, IP, and business model over the summer, which convinced Adams Capital that Genome Corp could succeed, even with Pacific Biosciences' single-molecule sequencing technology looming on the horizon, according to Ulmer.
However, in early October, Mountain View, Calif.-based Complete Genomics, which had operated quietly for two years, revealed that it was pursuing a very similar business model as Genome Corp — sequencing human genomes as a service, rather than selling DNA sequencing instruments — albeit using a short-read sequencing technology. Complete said at the time that it would start offering a human genome for $5,000 by mid-2009 (see In Sequence 10/7/2008).
That, Ulmer said, would have been difficult for Genome Corp to pull off. "I could not look Bill in the eye and tell him that I would be able to do comparable things and sufficiently undercut their prices in the two years that we estimated it would take us before our service was ready to be fully operational," he told In Sequence last week.
And although Complete Genomics has not yet publicly shown any results that back up its claims of being able to provide high-quality human genomes for that price, Ulmer had followed the firm's patent applications and believed that its approach was indeed posing serious competition. He had even met with Complete co-founder Rade Drmanac last summer, prior to signing on with Adams Capital, but was not aware that Complete was already sequencing its first human genome at that time.
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As a result, Adams Capital pulled out. "They just didn't want to invest in a company that was going to chase what they perceived to be a market leader," Ulmer recalled. "So that left us with no lead investor prospect, and it was also simultaneous with the global financial meltdown, which meant that the prospects of finding a replacement for them were not really feasible."
And although Genome Corp was in discussion with other VC firms that were interested in joining the Series A round, "everybody basically pulled into their shell in that timeframe," according to Ulmer. "So it left us in this awkward position of essentially having passed through the due diligence on all aspects of this …everything was green lights, but the practical realities of raising funding for the company in that timeframe more or less evaporated."
The remaining Slater funding is now allowing the company to wind down its operations while it is looking to sell its assets and intellectual property. In the meantime, Ulmer aligned with Complete Genomics, where he has been working as a full-time consultant since December.
Regarding its IP, Genome Corp is currently in discussion with "half a dozen" companies who have "the interest and the resources to take this technology further and probably view it as a longer-term possible alternative to the platforms or technologies that they are working on now," according to Ulmer.
The IP consists of four patent applications that cover different aspects of the technology, including electrophoresis, imaging, and a front-end microencapsulation method. That method, which Genome Corp has been working on over the last year, provides compartments for amplifying single fragments of DNA, switching reagents to perform the Sanger dideoxy chemistry, and cleaning up the reactions, and the company has been "successful in doing proof-of-concept experiments," Ulmer said.
In parallel, the firm had been working on designs for a high-throughput continuous electrophoresis system that it had planned to build following the Series A financing. Genome Corp worked closely on these designs with Annelise Barron, a professor of bioengineering at Stanford University and a member of the firm's scientific advisory board.
In fact, if Genome Corp does not receive what it believes to be "adequate value" for its IP in the current market, it plans to "take it back into an academic home and further develop the technology there," Ulmer said, adding that the firm is considering Barron's group as well as academic groups in Rhode Island.
"And then, when the financial markets come back and we have further development of the technology itself, and we can be a little more certain about its future performance in terms of the throughput and cost, [we will] bring it back out again as a commercial venture at that time," he added.
Despite his belief in the value of Complete Genomics' technology, Ulmer still thinks that Sanger sequencing has advantages. "My view is that [Complete Genomics], and anyone else, could do better if they had Sanger-length and –quality reads. It simplifies and reduces the cost of any assembly or mapping exercise substantially. And those computing costs of mapping or assembling genomes will become one of the large components of the overall cost of full-genome sequencing in the not-too-distant future."
The output of massively parallel Sanger sequencing, he believes, will "be the best possible data to input into any kind of genome assembler or genome mapper, and maybe the only one that would allow you to do routine, de novo assembly."
"It's all a question of whether we can make it cost-competitive with these other methods."