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Floragenex Aims to Expand Customer Base as It Carves out Niche with RAD-seq Services

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In a crowded market of genomics service providers, Floragenex has carved out a niche for itself by focusing exclusively on a single technology for marker discovery and genotyping: Restriction-site Associated DNA sequencing, or RAD-seq.

Earlier this month, the Oregon-based company struck a co-marketing agreement with Eurofins MWG Operon in Germany, which will promote Floragenex's RAD-seq services in Europe (GWDN 6/6/2013).

Founded in 2006, the company, which has four full-time employees and no sequencers of its own, has been providing its services to customers in about 20 countries around the world. In 2011, Floragenex closed a six-figure Series A funding round with Illinois Foundation Seeds, a seed company, but is otherwise revenue-funded. The company is profitable and has had six consecutive years of revenue growth, according to Rick Nipper, Floragenex's president.

"It's still a very young technology, and the growth curve for it is accelerating," Nipper said. "We think it has a lot of opportunities in terms of revenue growth and potential."

RAD-seq is used to discover genetic markers as well as for SNP genotyping and works in species that do not have a reference genome. To date, the company has done projects involving more than 75 plant, animal, and microbial species. The technique, developed by Eric Johnson, a professor of biology at the University of Oregon's Institute of Molecular Biology and a co-founder of Floragenex, reduces genomic complexity by interrogating only between 0.1 percent to 10 percent of a genome.

The RAD-seq process starts with a restriction enzyme to cut the DNA at distinct sites. Researchers then attach adaptors to the ends, shear the fragments, ligate a second adaptor, and use high-throughput sequencing to determine the DNA sequences flanking the restriction sites, followed by variant calling.

According to Floragenex, the main advantage of the method is its "ability to simultaneously examine tens of thousands of genetic loci with vastly reduced sequencing costs versus whole-genome approaches."

The company licenses intellectual property related to RAD-seq exclusively from the University of Oregon, and other patents from Keygene, a seed company in the Netherlands. Floragenex believes it is the only commercial provider of RAD-seq services, although others offer related services that also use restriction enzymes to reduce genome complexity.

The company, which has a molecular biology laboratory in Portland and a separate office in Eugene, started out by offering microarray-based RAD services but switched to next-gen-sequencing in 2008 using Illumina's Genome Analyzer platform.

It focuses on the front and back end of the RAD-seq process: the preparation of RAD libraries, a "technically demanding and complex protocol" that involves internal know-how as well as IP, and the data analysis, which uses strategies that are "somewhat specific for RAD sequencing," according to Nipper. The company subcontracts the sequencing to a network of third-party providers. It currently uses the HiSeq 2000 but might start using the HiSeq 2500 in the near future.

Over the last few years, Floragenex has migrated much of its data analysis work to a cloud-based computing platform. "It's just so effective, you do not have to worry about hardware procurement and buying clusters and buying hard drives and these other pieces of equipment," Nipper said.

Customers receive their data back from the company through the cloud as well. Following the analysis, Floragenex moves the results to a data center in a geographic area near the customer, from where they can download it. All data are encrypted and "secured under best practices," Nipper said, and apart from being convenient, cloud-based data delivery is more environmentally friendly because "you're not shipping hard drives around the world," he said.

Floragenex offers three types of RAD-seq services: genetic marker discovery, genotyping, and data analysis. Marker discovery, which typically involves small numbers of samples, is the "most mature" area, Nipper said, and researchers often incorporate those SNPs into downstream genotyping platforms, such as microarrays. The company offers low-density and high-density discovery services, which generate between 500 and more than 10,000 markers, and a full-service project typically costs several thousand dollars, with turnaround times of three to four months, according to the firm's website.

Genotyping projects tend to be larger, involving up to several hundred samples, and prices per sample are lower. The company offers both low- and high-density RAD genotyping services, either with our without sequence data analysis, and has seen "tremendous customer interest and growth in terms of revenues in that service line over the past several years," Nipper said. Using RAD-seq for both marker discovery and genotyping "provides a single process solution," according to the firm, eliminating the need for a separate genotyping platform.

Floragenex recently introduced separate analytics services for RAD sequence data, after seeing interest from customers in just that part of the service. While some customers want the entire RAD-seq package, others "would like to take on the sample prep and sequencing on their own, and then outsource the bioinformatics to a third party," he said.

In addition to its commercial services, Floragenex participates in scientific collaborations, where it contributes services at reduced cost. Last month, for example, the firm announced a project with the Thünen Institute in Germany that will use RAD-seq to study genetic variation in fives tree species in Africa and Central Asia, with the goal to develop genetic markers to determine the geographic origin of timber and to prevent illegal logging.

Most of Floragenex's customers are academic investigators with a wide range of research projects, ranging from ecological genomics to population genetics, phylogenetics, molecular systematics, linkage mapping, and QTL studies.

More than half the company's revenues come from outside of North America. The recent partnership with Eurofins is designed to help the company reach more customers in Europe, Nipper said, noting that it can be difficult to work across time zones. Eurofins has "a very deep sales team and a lot of connections within Europe," he said, and will promote Floragenex's services, which will still be conducted in Oregon.

"It's an important partnership. We want to make RAD sequencing more available and more accessible to people and scientists around the world," he said, adding that Floragenex is considering similar agreements elsewhere.

While Floragenex appears to be the only commercial provider of RAD-seq, the company does face competition. A number of techniques exist that are closely related to RAD-seq, for example genotyping-by-sequencing, or GBS, which is offered by the Institute for Genomic Diversity at Cornell University; and DArT, offered by Diversity Arrays Technology in Australia, which also reduces genome complexity using restriction enzymes prior to analysis.

Competition also comes from less specialized sequencing methods, such as RNA-seq, whole-genome sequencing, and amplicon sequencing, Nipper said.

Floragenex plans to compete on quality, cost, speed, and customer service. "Our customers are all scientists, all of them are trying to answer these basic questions in biology and science, and they're looking for somebody who can help them," he said.

Andrew Hipp, a senior scientist in plant systematics at the Morton Arboretum in Lisle, Ill., is currently conducting a study of the evolutionary history of oaks, for which Floragenx is performing RAD-seq on about 300 samples.

His lab started using the company's service in 2010 for a small project and has been very satisfied. "They gave us a great deal of help at the beginning, just understanding technically what we needed to do to get good data, and then working with us to get good preliminary data for a grant," he said.

Floragenex also helped them answer some questions about technical artifacts at no cost, and the partners are in the process of publishing those findings.

Hipp said he has also used GBS services elsewhere, but even though those data were more economical, "they weren't as useful to us for answering the questions we wanted to [answer]."

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