How To Make Money Selling Personal Genomic Services

by Dr. Hsien-Hsien Lei
Posted May 8, 2008 in Business of DNA

Given my limited knowledge of how to run a business (my sister’s the Harvard MBA of the family), I’d always thought having a bigger market is the key to success (as I alluded to in my previous post, Using Dispoable Income for Genetic Tests). There is, of course, another way of increasing company profits as Steve Jobs demonstrated with Apple:

Apple’s stock has shot up more than 70% over the past year, thanks to Jobs’ strategy of focusing on his most profitable customers and coming up with new things to sell them—the ultra-thin MacBook Air most recently—rather than just chasing more market share. [emphasis added]

~The 2008 Time 100

So what does this mean for personal genomics companies? Perhaps Knome with its $350,000 genome sequencing service isn’t too far off the mark.

NB: If you’ve got an extra $2500 that you don’t know what to do with, check out my list of DNA services you can buy with $2500.

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DNA Video: Leah Sparks of DNA Direct

by Dr. Hsien-Hsien Lei
Posted April 26, 2008 in Business of DNA, DNA Podcasts and Videos, DNA Testing

Interview with Leah Sparks, VP Business Development of DNA Direct from Doug Cress on Vimeo.

San Francisco-based DNA Direct* has created a web- and phone-based virtual genetics clinic. Genetic testing results can be complex, and inmost cases, do not provide definitive “yes” or “no” answers. DNA Direct focuses on personalized test result interpretation and supportive services.

*I’m the Genetic Information Specialist at DNA Direct.

(>> Start a discussion!)

Personal Genomics Takes a Bashing on Physician Oversight, Financial Backing, and Privacy

by Dr. Hsien-Hsien Lei
Posted April 21, 2008 in Business of DNA, DNA Testing, DNA and the Law

Direct-to-consumer genetic testing just can’t catch a break lately. We can expect blogs to be snarky but who knew Forbes and BusinessWeek could invoke a similar tone when writing about personal genomics?

First up, Forbes reveals that New York State’s Department of Health has sent letters to a number of personalized genetic testing companies threatening fines and jail time if they’ve been offering their services without a doctor’s involvement. The concern is that customers may not be able to understand their results and be potentially misled as to their risk of disease.

Both 23andMe and DeCode, which has not received a warning letter from New York so far, argue that the lab testing laws don’t apply because their products are not medical tests. “23andMe’s services are not medical … they are educational,” argues 23andMe spokesman Paul Kranhold.

That argument doesn’t mean spit to the New York regulators, who are concerned about the reliability of the online tests and their potential to send people rushing to their doctor demanding a cure for a fatal disease they may never get. [emphasis added]

BusinessWeek focuses on the financial aspect of the big players in personal genomics–23andMe and Navigenics–pointing out that both companies have received funding from Google. The company’s spokesman, Andrew Pederson, says that Google is “interested in supporting companies and making investments in companies that [bolster] our mission statement, which is organizing the world’s information and making it universally accessible and useful.” The difference between the offerings of 23andMe and Navigenics is portrayed as being interesting, broad-based information vs. valuable, medical-based information.

[Navigenics co-founder David] Agus, director of the Spielberg Family Center for Applied Proteomics at Cedars-Sinai Medical Center in Los Angeles, treats Hollywood celebrities, Saudi royalty, and others with deep pockets, but he conceived the company as a way to avert costly diseases.

Neither article mentions concerns over genetic discrimination and privacy which underlie discussions about regulation and access to genetic data. Two comments to the BusinessWeek article debate the issue.

Nicholas Bolibruch:

To all the naysayers, if you want nothing to do with this, just don’t use the service. Google cannot become big brother unless you voluntarily offer genetic material and make accounts on their system. The benefits of preventative health far outweigh the potential privacy violation. If you don’t like it, don’t use it, simple as that. I’m sure the person who gets genetic screening done and finds out they have a predisposition to some form of disease will be happier knowing they maybe able to prevent the problem in advance. When this saves someone’s life, all the naysayers will certainly have egg on their face.

Gerald:

You cannot say “if you don’t want it, don’t use it.” This creates a negative discrimination for non-users, making them suspicious to insurance companies, employers, etc. It’s the same reasoning totalitarian governments all over the world have always been using: “If you have no reason to hide, let yourself get registered by the authorities.” This opens all the door to neo-facist social structures and as a German for sure I will do all what I can to see history repeating itself, although with different names and forces of a globalised company now behind the same scheme of domination of personal liberties.

But perhaps privacy, confidentiality and consent for research will be moot in the future according to the proposal for an open-consent framework put forth by Lunshof et al. in Nature Reviews Genetics. More from DNA Network members:

• A new model for genetic privacy: you don’t have any at Genetic Future
• Private parts at Genomeboy
• Piracy or Privacy? Some Thoughts. at Gene Sherpas

If anyone ever organizes a biosciences startup school, they need to put regulatory affairs, investment choices, and privacy concerns on the syllabus!

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DNA Direct Announces DNA Perspectives

by Dr. Hsien-Hsien Lei
Posted April 18, 2008 in Business of DNA, DNA Testing

An editorial in the April 10, 2008 issue of Nature discusses “transparency and honesty” in the genetic testing industry. One suggestion was to create a registry in lieu of greater federal regulation. Such a registry would include data about genetic tests and the evidence that supports making such tests commercially available.

Such a registry should be international, harmonizing information in what will doubtless be an industry without borders. This approach seems preferable to stepped-up regulation by agencies such as the Food and Drug Administration (FDA), which — in addition to travelling at the snail’s pace of bureaucracy rather than the lightning speed of burgeoning markets — could easily have the effect of driving less-than-desirable players underground, where sub-standard tests will remain as easy to buy as black-market DVDs.

Daniel MacArthur at Genetic Future has more on the editorial. I’ve also helped DNA Direct, where I work as a genetic information specialist, write a response to the editorial (pdf) in which we announce the DNA Perspectives initiative.

DNA Perspectives will be a collaborative site developed by a wide range of industry experts to objectively evaluate the clinical validity and utility of genetic markers as well as commercially available genetic tests.

Unlike other genetics resources currently available on the Web, DNA Perspectives is designed specifically to assist consumers in evaluating genetic discoveries and commercially available genetic tests with the use of our exclusive rating system. A DNA Perspectives wiki with the latest and most relevant genetics information will be created and maintained by invited genetics experts. DNA Perspectives will be available to the public for free. It is based on the principles of the open source movement: transparency, permeable access, and collaboration. In addition, a special forum will be open to consumers for their comments and personal ratings of genetic tests.

If you’re interested in being updated as DNA Perspectives develops or perhaps becoming involved as an expert contributor, you can submit your email at the DNA Perspectives page.

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Affymetrix and Illumina Moving Gene Chip Manufacturing to Singapore

by Dr. Hsien-Hsien Lei
Posted March 19, 2008 in Business of DNA, DNA Around the World

Here’s one more sign that companies involved with personal genomics may be tightening their belts. Gene chip makers Affymetrix and Illumina are both outsourcing manufacturing from the U.S. to Singapore.

Affymetrix president Kevin King:

Affymetrix is consolidating its manufacturing operations to further increase operational efficiencies, enabling us to remain more competitive in the marketplace. Our recent manufacturing advances have enabled us to produce more (GeneChip) array volumes with a smaller manufacturing footprint.

One of the Affymetrix products to be manufactured in Singapore is the new Genome-Wide Human SNP Array 6.0, which can analyze more than 1.8 million DNA markers.

Affymetrix has already begun laying off workers in their West Sacramento, California manufacturing plant and will be making the move to Singapore by the end of 2008 where they opened a 150,000-square-foot manufacturing plant in 2006. Possible reasons for outsourcing genetic test manufacturing to Singapore include:

• Cheaper labor costs - production workers in Singapore averaged $8.55/hour in 2006 compared to $23.82 per hour in the U.S.
• Lower tax rates
• Faster-growing demand for arrays in China and India make manufacturing in Singapore more cost effective

China’s genomic biotechnology is definitely on the rise. At the beginning of this year, the Beijing Genomics Institute (BGI) announced the complete sequencing of the fourth human genome in the world. BGI also formed a partnership with whole genome sequencing company, Knome. In terms of the local personal genomics markets in China and India, there may be great potential but not for the vast majority of people. For the time being, only the rich and famous in developing countries will have access and the chance to be “exploited” like the rest of the elite, according to Jesse Reynolds at The Cutting Edge News.

In the end, it’s all about the bottom line. Affymetrix chief financial officer John Batty:

I think from an economics standpoint, we have an incentive to get it to at least 50 percent [of Singapore plant capacity] because we can shield half of our revenue from the U.S. tax rate by manufacturing arrays in Singapore and shipping those to non-U.S. customers.

I have no doubts about Singapore producing high quality products for use in genetics/genomics. On the other hand, when outsourcing extends to China and other countries with a less educated workforce, it would be worth remembering that standards of quality control vary between countries. For proof, check out what writer James Fallows observed with airplane refueling techniques in Japan vs. China.

Hey, whatever gets the job done, right?

(>> Start a discussion!)

deCODE CEO Predicts Downswing in Personal Genomics Market

by Dr. Hsien-Hsien Lei
Posted March 5, 2008 in Business of DNA, DNA Testing

With the many genomics and genetics companies launching left, right, and center in recent months, you’d think the market is pretty robust. Not so, says deCODE CEO Kari Stefansson whose company is laying off 60 employees out of a total of 390 or about 15% of its workforce.

It is natural for us to operate the company in such a way that we can make the money that we have last longer than what we had expected to begin with. These are very simple and clear operational standpoints and it would even be wise for other companies in our community to follow our example. [emphasis added]

If what Stefansson says is true, then others like 23andMe, Navigenics, and DNATraits might be looking to tighten operations as well. Although it appears that most personal genomics companies operate with small staffs of less then 50-100, downturns in the market could mean that work is outsourced to independent contractors rather than being performed by full-time employees. (So if you’re looking for a job in the genomics industry, you know how to approach it.) However, not all companies suffer from as much pessimism as deCODE. bizjournals reported last week that Family Tree DNA led by Bennett Greenspan and Max Blankfeld saw a profit gross revenue of around $12.2 million in 2006.

deCODE is behind several genetics products available direct to consumers including:

• deCODEme - A whole genome scan using Affymetrix DNA chips to analyzing over one million single nucleotide polymorphisms (SNPs) per customer.
• deCODE T2 - A genetic test for type 2 diabetes that detects a variation in the TCF7L2 gene.
• deCODE MI - A genetic test for myocardial infarction (aka heart attack, coronary artery thrombosis, or coronary artery occlusion).
• deCODE Glaucoma - A genetic test for exfoliation glaucoma that detects SNPs located in the LOXL1 gene on chromosome 15. (For more, see this Eye on DNA post.)
• deCODE ProCa (previously named deCODE PrCa) - A genetic test for prostate cancer.

Given their wide range of products, it’s surprising that deCODE is suffering from cash flow problems in which earnings, balance sheet, and profits from markets are not enough for them to continue growing. Perhaps this is an indication that the market is starting to experience saturation in the number of companies and services being offered yet has not seen a concomitant rise in the number of consumers willing to pay for personal genomic services.

What’s more interesting is that the price of technology continues to drop. BusinessWeek surveyed the DNA sequencing market and found that new technologies are faster and cheaper. Soon we will even have the coveted $1,000 genome. This means that companies should have to spend less to earn more. For example, Illumina’s margins are declining and their revenues are expected to rise 35% in 2008. And production costs will continue drop as labs open up in countries with lower overhead, e.g., China. So shouldn’t it be easier to make a profit now off of personal genomics than ever before?

In any case, while 23andMe and Knome focus on the rich, famous, and elite, there is a great need to show the general public how genetic testing of all types is relevant to their everyday lives. There aren’t enough millionaires like Dan Stoicescu to fund the entire personal genomics market. Until genetic testing is widely adopted for a variety of commercial uses by a greater segment of the consumer population, the pot of profits will not be big enough to share. In 2008, we will surely see companies drop out and others consolidate.

HT: The Genetic Genealogist, GENEALOGY-DNA

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China Now Exporting Genomic Biotechnology

by Dr. Hsien-Hsien Lei
Posted January 14, 2008 in Business of DNA, DNA Around the World

Early last week, Beijing Genomics Institute (BGI) announced the complete sequencing of the fourth human genome in the world. Later the same week, whole genome sequencing company, Knome, announced a partnership with BGI where BGI will provide genome sequencing, assembly, and annotation capabilities. Knome will be responsible for analytic tools, security protocols, and genetic interpretation services. According the press release, BGI has over 120 sequencing machines, 10 supercomputers, and 500 terabytes of storage.

Given all the quality control issues surrounding Chinese-made products in Summer 2007, I wouldn’t blame anyone for doubting the quality of genomics in China as well. And although I’d already placed my bets on Singapore being the biotech hub of Asia because of my own positive experience with science in Singapore and scientists from the city state, it appears that I may be mistaken.

Nature Biotechnology reports that China is making great strides in health biotech and with a billion-patient market, who can resist? Shenzhen SiBiono GeneTech Co. developed Gendicine, the world’s first commercialized gene therapy for head and neck cancers. Shanghai United Cell Biotech is making the only tablet cholera vaccing available worldwide. Other Chinese biotech companies are working on vaccines for HIV, Japanese Encephalitis, SARS, and pandemic avian influenza (H5N1). And, of course, BGI has been sequencing genomes.

Development of health-related biotechnology in China is not without its obstacles. Some of the issues raised include:

• China’s uncertain financial system
• Rigid restrictions on exports
• Quality control
• Intellectual property rights
• Lack of trust between China-based and international partners
• Barriers created by language, travel, culture, and project management styles.

For biotechnology companies looking to expand their business in China, Stephen M. Sammut of Burril & Company has this advice:

…the country’s industry might be better served if Chinese residents in the West built transnational companies with a footprint in both China and the West.

While this practice is already common, regulations and taxation policies to encourage this approach would address many of the concerns of private and public capital, assure prospective alliance partners, and add depth to the pool of experienced managers. Such an approach would also promote China as a co-development partner rather than a purely low-cost venue to international companies to contract services.

So it appears that Knome is on the cutting edge of both genomics and international business. Because labor costs in China are much lower than in the US, partnering with BGI will surely improve the bottom line as well. Another smart move for a company that’s charging $350,000 and more for whole genome sequencing.

via Innovations Report

Tags: knome, genomics, genome, sequencing, genetics, genes, dna, china, bgi, beijing genomics institute

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Singapore Biotech Sector Loses Stem Cell Researcher Alan Colman

by Dr. Hsien-Hsien Lei
Posted December 18, 2007 in Business of DNA, DNA in General

Singapore, with its well-educated, English-speaking population, has long been thought of as a potential Asian hub of biotech research and business. Up till now, many of the top tier scientists leading the biotech effort in the country have been recruited from overseas, including British scientist Alan Colman who was a member of the team that cloned Dolly the sheep.

Now Alan Colman is leaving Singapore for King’s College London following the departure of molecular and cell biologists David and Birgitte Lane for Scotland’s University of Dundee. Dr. Colman was executive director of the Singapore Stem Cell Consortium. Last year, the World Bank gave Singapore a 50-50 chance of success in the biomedical arena because of an overreliance on “footloose” star researchers rather than local scientists.

According to Reuters, Singapore has invested more than 2 billion US dollars in the biomedical sector. They’ve encouraged start-up companies, new labs, and welcomed controversial projects, such as stem cell research. Although Colman and the Lanes claim they will continue to spend a significant amount of time in Singapore, there are doubts that they will be able to accomplish much for the local sector in such limited amounts of time.

Despite this set of bad news, I’m not convinced the situation is so dire. I personally know of companies in Singapore who are on the cutting edge of genomic technology and research. In addition, a number of my classmates at Stanford and Johns Hopkins were from Singapore (including my husband!) and returned to the country to work for locally-owned, international companies or to conduct research. My family and I will be living in Singapore in the future and I look forward to finding out for myself all the many opportunities available there.

If you’re involved in the Singapore biotech sector, I’d love to learn more about the situation there. Please email me!

via Tomorrow

Tags: singapore, biotech, biotechnology, biomedical, alan colman, genetics, genes, dna

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