Knome Challenged to Keep in Step with Falling Genetic Sequencing Prices

1/20/10

Knome, the personal genomics startup co-founded by leading Harvard geneticist George Church, is navigating rapid change in its business. The Cambridge, MA-based launched in 2007 to make whole-genome sequencing and analysis a personal luxury item rather than just a marvel of modern science, but now it’s facing more competition on the sequencing side of its business and a dramatic decline in fees for its bread-and-butter consumer services.

About two years ago the startup announced that it was charging its first three wealthy customers $350,000 to sequence their entire genomes and then have its scientists interpret and analyze the data for each person. A year or so ago the firm dropped the price for that service to around $100,000, due in large part to a sharp decrease in the cost of sequencing. Last June, that price was then dropped again, to $68,500, where it has stayed, says Jorge Conde, the firm’s co-founder and CEO.

If you had your entire genome sequenced just five years ago, you might have been considered a pioneer on par with the first handful of astronauts who ventured into outer space. But there have since been a series of technological advances in tools used to map DNA, innovations that have brought down the price of whole genome sequencing from about $1 million dollars per genome a few years ago to less than $5,000 today.

Conde says the falling costs of genomic sequencing are a positive development for human health and science. He’s even confident that the lower costs of sequencing opens up a much larger market for Knome than possible at its original $350,000 price tag. Still, the company operated profitably in its early days when its small staff of around five full-time employees served clients who paid six figures for their services. Today, the company is trying to find a way to get back in the black with a larger staff of closer to 20 people and a premium service that costs the same as a fancy Mercedes rather than a nice condo near Kendall Square.

“I think the biggest challenge for us has been in clearly communicating the difference between sequencing and interpretation,” Conde says. He adds that while the price of whole-genome sequencing has fallen sharply, the costs of employing teams of scientists to interpret the data have not decreased nearly as much. The firm is spending more money today on salaries, given that its staff is larger than it was two years ago.

Conde says that the greatest value that his firm brings customers is in the analysis and interpretation of genomic data, for which it employs geneticists, bioinformatics experts, and clinicians. (Indeed, co-founder Church, in addition to heading the non-profit Personal Genome Project, stays involved in the business as a chief scientific advisor.) The actual genomic sequencing is handled by the startup’s partners at the Beijing Genomics Institute in China and SeqWright, a genomic analysis lab in Houston, TX. Indeed, plain genomic sequencing has become a commodity business, with firms such as Mountain View, CA-based startup Complete Genomics advertising whole genome sequencing for less than $5,000 per genome.

Fairly or unfairly, Knome is also often compared with the personal genomic analysis services of firms such as Foster City, CA-based Navigenics, and Silicon Valley startup 23andMe, which was started by a team that includes Google co-founder Sergey Brin’s wife, Anne Wojcicki. Both firms offer DNA tests, not sequencing, for $1,000 or less to tell people whether they have genes for certain diseases. 23andMe also gives customers clues about their ethnic roots based on the genes detected in the firm’s genotyping service. (Rather than sequencing a person’s genome to uncover all the genes in their DNA, those firms get a person’s DNA from their saliva and use test chips to find out whether the person has certain genes for diseases related to diseases or heredity. Conde notes that such DNA tests don’t uncover many genes or variants that give people a more complete picture of their genetic makeup, making it difficult to predict whether a person is at risk of developing, say, heart disease.

Even for those who do get their entire genome sequenced, there are limits to what scientists can tell them about the data because there are vast regions of the genome that are not yet fully understood. But that is expected to change as the U.S. government’s investment in genetic research leads to new discoveries about what the reams of genetic data really mean for human health. The National Human Genome Research Institute, a division of the NIH, received a windfall of $113 million from the federal economic stimulus last year to invest in genetic research, in addition to its normal annual budget of $367 million. The goal of the institute is advance the understanding of our genes to prevent, diagnose, and treat human illnesses.

Conde expects the government research dollars and the reduced costs of sequencing to provide more data to help his firm inform its clients about their health. Their clients can use the software to get updated on how the discoveries impact their health, without the company having to reanalyze their genomes.

To get back into the black, Knome is diversifying its service offerings to appeal to more potential customers. In May, the firm began offering to sequence and interpret a person’s exome, which is the 1 percent or 2 percent of the genome that is most functional for making proteins, for $19,500-$24,500. Then in December, it formally rolled out a service for researchers to provide sequencing and analysis for $12,000 per exome, making sequencing services available to scientists who may not have the infrastructure to perform that work themselves, Conde says.

Interestingly, the lower prices for Knome’s services have dramatically changed the profile of its typical customer, Conde says. The first few people who came through the door back when the price tag was $350,000 were wealthy individuals who saw themselves as genetic pioneers. (Essentially, he says, they wanted to have their genomes sequenced because, for essentially the first time ever, they could.) Many of the firm’s recent customers are people with means, yet they often come to the table with specific questions about their health or genetic composition. For example, one family worked with the firm to help identify genetic signals linked to an aggressive form of Parkinson’s disease that appeared to be prevalent in that family. Others want to find genes for certain physical traits that are common in their families.

The firm has a proprietary browser application that enables its clients to view their genetic information as it relates to certain indicators for diseases or physical traits. The application is updated as new discoveries are made. Conde says that the software side of the business offers his firm the opportunity to get recurring revenue from its customers who pay for software subscriptions to stay abreast of how new findings in genetic research impact their health (The company does not disclose details about revenue, sales figures, or how much capital it has raised.) Conde says that the company is internally funded by the founders, but he hasn’t ruled out raising venture capital in the future. The founders include Conde, Church, and company chairman Sundar Subramaniam, an IT and life sciences entrepreneur who has founded five tech companies that have gone on to complete IPOs, according to his bio.

“Because of the incredible improvements on the sequencing side and all the innovation that has taken place,” he says, “now there’s going to be a tidal wave of genetic data, and we think we’re as well-positioned as anyone to help people begin to wade through that increasing flood of data.”

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