Genomics: A promising investment opportunity

This is a guest post from Zhen-Xia Chen. Do you have a response to Zhen-Xia’s post? Respond in the comments section below.

The name of “genomics” originated with the birth of a new journal “Genomics” in 1987.   The journal adopted the term genomics for “the newly developing discipline of mapping/sequencing (including the analysis of the information)” [1].  The new discipline was born from “a marriage of molecular and cell biology with classical genetics and is fostered by computational science” [1].  Interestingly, Thomas H. Roderick, who dreamed up the word genomics, came up with the name in a bar when he attended an international meeting in Bethesda.  It seems genomics has some connections with National Institutes of Health, whose main campus located in Bethesda, from its beginning [2].

Until 2012, the U.S. government has invested 14.5 billion in genomics [3], and investment from venture capitals is increasing.  According to a survey on investment in 72 VC-funded genomics companies from 2006 to 2012, the total investment value increased year by year.  Although the number of genomics investments decreased from 22 in 2011 to 16 in 2012, the average genomic investment value increased from $15.1 million in 2011 to $24.5 million in 2012, suggesting that it may be harder for genomics startups to get investment, but the winners would get more investment [4]. In the 72 VC-funded genomics companies, most of them (38/72) have income mainly from research service and equipment [5].  Other companies have main income from health and agriculture applications, including diagnostics (14), drug discovery (7), microbial genomics (6), cancer genomics (5), and agrigenomics (2) [5].  In the period between 2005-2012, US attracted $1.7 billion in funding, while Europe only attracted $213 million.  Inside US, California is most attractive to VCs, and have got 1,090 million [6].  Most of top biotech VCs (12/16) have investment in at least one genomics companies, suggesting that genomics is part of a healthy VC investment portfolio [7].  Google ventures, for example, have invested in three genomics companies: DNAnexus, Foundation Medicine and 23andMe [8].

Why VCs are over genomics?  The reasons may include its wide applications, fast development and high revenue potentials.

Genomics may have wide applications in agriculture, livestock, ancestry, forensics, bioenergy, and medicine. For example, by identifying, validating and screening of marker genes that present in a plant variety or animal lineage which are associated with desirable traits in an industrial scale, genomics can be used to improve the crops and livestock quicker, better and more cost-effectively than any other technology.  In 2013, Monsanto, a leading technology-based agriculture company has partnered with Synthetic Genomics Inc., which was founded to commercialize genomic-driven technologies, to improve crop yields and prevent loss from disease.  Genomics can also be applied to discover ancestral origins of a person and trace the lineage with a personalized analysis of his or her DNA.  As of March 2014, 23andMe, a personal genomics biotech company that provides genetic testing and interpretation to individual consumers, has genotyped approximately 650,000 individuals.

The potential application of genomics in medicine is great. By identifying the genetic variants of patients, doctors may be able to determine whether a treatment harms or heals [9].  The process from genomic information to clinic includes five steps, including understanding the structure of genomes, understanding the biology of genomes, understanding the biology of disease, advancing the science of medicine and improving the effectiveness of healthcare [10].  Most accomplishments in the HGP period are in the first step.  So far, we have found about 60 genetic variants that are deemed worthy for use in clinical care [9].  For example, women with certain variants in the BRCA genes have 80% chance of developing breast cancer, and thus may have preventive mastectomies.

The second appealing feature of genomics for investment is fast development.  The development of genomics was greatly facilitated by the Human Genome Project (HGP).  HGP, initiated in 1990 and finished in 2003, is an international scientific research with the goal of determining all the sequence, including 3 billion base pairs, of the human genetic instruction set.  After HGP, more genomes from other complex organisms (e.g. chicken, mouse, rat, chimpanzee, dog, etc.) have been sequenced, and more projects on human genomics (e.g. ENCODE, which aims at finding out all the functional elements in the human genome; 1000 Genomes, which aims at finding out the variations among human genomes; The Cancer Genome Atlas, which aims at finding genetic mutations responsible for cancer; etc.) have been launched.

DNA sequencing technology, which is the fundamental to genomics, is developing fast.  The sequencing of a human genome costs 13 years and $3 billion in HGP, while only 1 day and less than $1000 now.  The cost decrease of DNA sequencing has profoundly outraced Moore’s Law (the doubling of “compute power” every two years), indicating exceedingly well improvement of sequencing technology (Figure 1).

Our knowledge about diseases, including rare diseases caused by single genes, and complex diseases associated with multiple genes, is also developing fast with the development of genomics.  It’s estimated that there are ~8400 monogenic diseases, among which ~5100 have known genomic basis.  With genome-wide association study (GWAS), genes associated with many complex diseases, e.g. type 2 diabetes, Alzheimer’s disease, autism and breast cancer, have also been found (Figure 2), and genetics tests based on the knowledge can be applied to the diagnosis.

Genomics is also being applied to clinic fast.  On Nov. 19, 2013, the U.S. Food and Drug Administration (FDA) allowed marketing of Illumina MiSeqDX sequencer as diagnostic devices.  As stated in FDA’s own press release, next-generation sequencing technologies are “becoming more accessible for use by physicians”, and “The new technology also gives physicians the ability to take a broader look at their patients’ genetic makeup and can help in diagnosing disease or identifying the cause of symptoms.” [11]

The last, and maybe the most, appealing feature of genomics for investment is high revenue potential.  It’s reported that every $1 invested in HGP has triggered $178 in US economic activity.  The $14.5 billion the US government invested in the human genome effect since 1988 has helped drive $965 billion in economic impact, $293 billion in total personal income and $169 billion increase in economic output since 2010 [12]. In 2012 alone, genomic related research development and commercialization activities generated $65 billion in US economy, 152,314 supported jobs and $18 billion in personal income [12].

Some VC-funded genomics companies have already showed good performance.  For example, prenatal DNA sequencing, the noninvasive screening from a syringe of an expecting mother’s blood to discover whether an unborn child has a genetic disorder, was recognized as one of the “10 Breakthrough Technologies 2013” by MIT Technology Review.  At least seven companies, including Ariosa, Beijing Berry Genomics, BGI, LifeCodexx/GATX, Natera, Sequenom and Verinata, have developed prenatal tests with the technology [13].  Take Ariosa for example, the price of its Harmony test is $795, and it has sold 150,000 tests from its market entry in May 2012 to September 2013.  In other words, Ariosa has got about $120 million by selling the test in 16 months.

In summary, genomics is a promising investment opportunity because of its wide application, fast development and high revenue potential.

References:

1. McKusick V, Ruddle F (1987) A new discipline, a new name, a new journal. Genomics 1: 1.

2. Kuska B (1998) Beer, Bethesda, and biology: how “genomics” came into being. J Natl Cancer Inst 90: 93.

3. Battelle (2013) The impact of genomics on the US economy.

4. Wuster A (2012) How bad a year has 2012 actually been for genomics investments? : Seqonomics.blogspot.com.

5. Wuster A (2012) How do genomics companies make money? : Seqonomics.blogspot.com.

6. Wuster A (2012) Who is the most attractive? : Seqonomics.blogspot.com.

7. Wuster A (2012) Which VCs are most active in genomics? : http://seqonomics.blogspot.com.

8. (2013) As Deal Growth Stagnates, Are Venture Capitalists Over Genomics? : http://www.cbinsights.com/.

9. Ginsburg G (2014) Medical genomics: Gather and use genetic data in health care. Nature 508: 451-453.

10. Green ED, Guyer MS (2011) Charting a course for genomic medicine from base pairs to bedside. Nature 470: 204-213.

11. Laine S (2013) FDA allows marketing of four “next generation” gene sequencing devices. http://www.fda.gov: FDA NEWS RELEASE.

12. Research UfM, Technology B (2013) The Impact of Genomics on the U.S. Economy.

13. Wuster A (2013) How is non-invasive prenatal testing getting on? : http://seqonomics.blogspot.com.

About the author

This article was written by Dr. Zhen-Xia Chen, a postdoctoral visiting fellow at the Laboratory of Cellular and Developmental Biology (LCDB) at the National Institute of Diabetes and Digestive and Kidney Diseases (NIDDK)/National Institutes of Health (NIH).  She received her PhD from the Center for Bioinformatics in the College of Life Sciences of Peking University in China.  Besides a Bachelor of Science degree at biotechnology from the College of Life Science and Technology in Huazhong Agricultural University, she also received a Bachelor of Arts degree at Journalism from the School of Journalism and Communication in Wuhan University.  She can be reached at [email protected].