NEW YORK (GenomeWeb News) - Solexa provided some insight last week into how it intends to tackle the next-generation sequencing market in the wake of its OEM reagent agreement with Invitrogen. In a presentation to investors, Solexa CEO John West said that the company has identified around 100 potential customers that it will initially target for its instrument.
As the firm competes with companies like 454 Life Sciences, Helicos Biosciences, and Agencourt Personal Genomics (soon to be part of Applied Biosystems) for leadership in the next-generation sequencing field, all teams are still in play, but the knock-out rounds are likely to start soon as these firms scramble for a limited pool of initial customers.
Recruiting a famous player to one's team is always good way to build confidence, and Solexa views its agreement with Invitrogen as one way to lure potential customers to its platform.
"For a company like us that is not known as a reagent manufacturing company, I think it will give the customers kind of a comfort, knowing they are getting high-quality reagents," Gary Schroth, Solexa's R&D director for gene expression, told GenomeWeb News last week.
Under the terms of the agreement, the California-based reagent manufacturer - one of the world's largest - will supply Solexa with many of the standard reagents for its sample-preparation kits. "We would have to buy them anyway to put into our kits, and we are delighted to work with a partner of the stature of Invitrogen to supply us," Linda Rubinstein, Solexa's vice president and chief financial officer, told GenomeWeb News.
Solexa will keep a tight grip, though, on its proprietary reagents and consumables, including the flow cells in which the sequencing reactions take place, as well as the reversible terminator nucleotides and the polymerase that form the heart of its sequencing biochemistry. The company assembles the flow cells in-house from glass slides, surface reagents, and primers. It builds the polymerase and the reversible terminator nucleotides - which include nucleotides, fluorescent dyes, and reversible terminator blockers -through a "combination of purchasing and final assembly and testing" at its own facilities.
Though Invitrogen has expertise in fluorescent probes through its ownership of Molecular Probes, which it acquired in 2003, this knowledge will not be put to use under the current deal, according to Rubinstein. Also, Invitrogen, which has a worldwide distribution network, is not going to sell consumables for Solexa but will merely provide the company with standard reagents. Solexa will assemble these into kits and sell them under its own brand. The first three sample preparation kits will be for shotgun genome sequencing, gene expression analysis, and small RNA analysis, respectively.
However, Invitrogen expects the relationship "to develop beyond that," Lisa Filippone, Invitrogen's business area manger for PCR and nucleic acid separation, told GenomeWeb News sister publication BioCommerce Week last week.
The deal lays the foundation for Invitrogen to become more involved with Solexa's proprietary reagents in the future. "Invitrogen has the ability to work with us as we continue to optimize reagents and come up with second-generation things," Rubinstein said, although she declined to provide further details.
Targeting the Top 100
For now, the deal might have a positive psychological effect on potential Solexa customers who have known Invitrogen as a trusted source for reagents.
In a presentation to investors last week, Solexa's CEO John West singled out the first 100 such potential customers that the firm will be able to access "with an initially small sales force" it is building.
These customers, he said, comprise Solexa's existing customers for its MPSS-based service, genome centers, core labs that have already purchased existing high-end sequencing instrumentation, and companies that offer DNA sequencing as a commercial service, besides a number of core facilities at pharmaceutical and biotechnology companies. These 100 customers, Rubinstein told GenomeWeb News, do not represent "the universe of customers" but are "meant to be indicative of the kind of customers."
Rubinstein said that beyond the handful of well-funded large genome centers - among which she counts the Wellcome Trust Sanger Institute, the Broad Institute, Washington University, the Department of Energy's Joint Genome Institute, Baylor College of Medicine, and the Venter Institute - that have the means to bring in new technologies early on, her company has seen interest from smaller centers that participated in the Human Genome Project but "are no longer in that top tier of genome centers" because large-scale sequencing with current capillary-based technology is too expensive and requires bulky sample-prep equipment.
These mid-tier centers, she said, "could participate in genome-scale projects with just a handful of [our] instruments," which bring the costs for sequencing down and allow for easy sample preparation.
The question is whether these mid-sized sequencing centers - as well as academic sequencing core facilities - will have the near-term funds to purchase Solexa's instrument, which will list around $400,000, with flow cells and consumables going at $3,000 to $5,000 per run.
"It's going to vary from institution to institution," said Rubinstein. Her company identified 100 labs that have bought a high-end ABI sequencer, listed at $350,000, in the past "There are resources that are available to these folks, and in some cases, folks will have those funds and the interest to purchase near term," she said.
Academic sequencing core facilities, Schroth maintained, "have been aware of us for months now and are starting to plan in their budgets for purchasing the next-generation equipment."
It is unknown, though, how many users will be ready yet to commit to Solexa's - or anybody else's - next-generation sequencing platform. "As with any other technology, there are going to be some folks who are going to be early adopters, and some folks who are going to wait and see the results that come out as other labs complete their studies," Rubinstein said.
In his presentation to investors, however, West pointed to the success of two other DNA analysis platform vendors - Affymetrix and Applied Biosystems - in generating revenues quickly. Affymetrix, he said, created $311 million in revenues from instruments and consumables within the first three years of selling its microarray platform. He also pointed out that Applied Biosystems sold its first 1,000 3700 instruments within 11 months, and generated $476 million in revenues from that instrument in its first three years on the market. West used to be vice president of Applied Biosystems' DNA platforms business. "Sometimes, when you have a new technology that is displacing something that is existing, the ramp-up rate can be substantial," he said.
However, 454 Life Sciences - the first company to bring a next-generation DNA sequencer to market - sold only about 30 units within a little more than a year, and users have said that the instrument is not going to replace traditional Sanger sequencing but rather complement it. 454's current GS20 has a lower throughput, but longer read-length, than Solexa's first commercial instrument will have.
Also, comparisons with the reigning world champion - at the moment, ABI - are potentially dangerous. ABI's takeover of Agencourt Personal Genomics may in fact create a challenge for Solexa and other players, given that some users may prefer to stay with the same vendor when they opt for a next-generation sequencing instrument rather than switch to someone else they have not worked with before.
But ABI is too far behind, according to Rubinstein. "I think that they are very much where Lynx and Solexa were almost two years ago when [the companies] first announced that they were merging," she said, adding that Agencourt "is probably at least 18 months away from having an instrument at the stage that we are now. With a lead that long, I don't think a lot of customers - particularly the biggest customers - are going to wait to make their purchases," she said.
ABI has said it plans to offer early-access sequencing services for "key individuals" by the end of this year, and place early-access instruments sometime in 2007. But ABI has been known to come from behind - at the time of the launch of the 3700 sequencer, Amersham's MegaBace instrument had already been on the market for 18 months.
As Solexa moves to join 454 Life Sciences in selling instruments, the company has provided its employees with an additional incentive: Earlier this month, Solexa amended its bonus plan so that bonuses will in part "be determined based on the timing and amount of sales of Solexa's Sequencing-by-Synthesis instrumentation systems and related services," according to a filing with the US Securities and Exchange Commission last week.
Julia Karow covers the next-generation genome-sequencing market for GenomeWeb News. E-mail her at [email protected].