Diagnostics Are Warming Up in Era of Fast, Cheap Sequencing, Says MDV’s Rowan Chapman

2/7/11Follow @xconomy

Quite a few players in the movement toward super-fast, super-cheap gene sequencing see a mix of arcane science, breathless hype, and modest results. Despite a decade of talk about personalized medicine, nobody walks into a doctors’ office today and gets a universal test that can predict their medical future or give advice on how to avoid nasty diseases.

Yet when Rowan Chapman looks around today, she sees the next-generation of DNA sequencing as paving the way for specific diagnostic tests that would have been impossible to imagine before. And each of them can generate hundreds of millions a year in revenue in the not-so distant future.

“You’re going to see a lot of diagnostic applications enabled by next-gen sequencing,” Chapman says. “Without the throughput we have today, it would have been impossible, really cost prohibitive.”

Chapman, one of the featured speakers today at Xconomy Seattle’s “Computing in the Age of the $1,000 Genome” event, has been watching this field evolve over the past decade through her role as a partner focused on life sciences for Mohr Davidow Ventures. Her firm is riding high at the moment, a few months after one of its major investments, Menlo Park, CA-based Pacific Biosciences (NASDAQ: PACB), pulled off a $200 million IPO to support its new super-fast DNA sequencing machine. The PacBio instrument, and others from San Diego-based Illumina and Carlsbad, CA-based Life Technologies, are making DNA sequencing so fast and so cheap that they are improving business models for entrepreneurs with ideas for new kinds of diagnostic tests.

Diagnostics have traditionally been cheap commodity products that have never quickened the pulse of venture capitalists in the same way new biotech drugs do. Genomic Health (NASDAQ: GHDX) is usually held out as one of the paragons of the new wave of diagnostic companies. It has built a more than $150 million a year business on a single $4,000 test—based on hard-core genetic analysis—that predicts relapse rates of women with breast cancer. But there are many other genetic tests coming along, and they don’t have to follow that same model of a one-time, expensive test, Chapman says.

Chapman, like all VCs, loves to talk at length about companies in her firm’s portfolio—so the reader needs to keep that in mind. But there were two examples in the current Mohr Davidow portfolio she pointed to that are being enabled by the so-called next-generation sequencing.

First, there’s South San Francisco-based Crescendo Bioscience. This company has a molecular diagnostic test for patients with rheumatoid arthritis. This test, introduced to the U.S. market in November, looks at 12 different biomarkers in a blood sample to provide a quantitative measurement of the activity of inflammation at work in a patient with rheumatoid arthritis. It’s the kind of thing that doctors can use to see if a generic drug is effectively getting the disease under control—as opposed to the more subjective measurements of today, like looking at whether a patient’s knuckles are swollen, and asking patients if they feel pain.

A more precise scientific diagnostic in rheumatoid arthritis is potentially very big business. Three of the world’s top six best-selling drugs last year were biotech medicines for this condition, and related autoimmune disorders. The treatments cost upwards of $20,000 a year per patient, they don’t work for everybody, and even for those who do get relief, results can vary. Doctors and health insurers have an obvious … Next Page »

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