PacBio, After 7 Years and $580M, Starts Shipping New Generation DNA Sequencer

4/27/11Follow @xconomy

Pacific Biosciences has spent seven long years in R&D, and raised $580 million, to arrive at a milestone that all businesses must reach sooner or later.

Today, it has officially started selling its much-anticipated commercial product.

Menlo Park, CA-based PacBio (NASDAQ: PACB) is announcing today that it has begun commercial shipments of its PacBio RS machine for DNA sequencing. This means that 11 customers who have been testing out beta versions of the product since last summer have agreed to pay the full list price of $695,000 to keep the new instrument in their labs. Anticipation of PacBio’s commercial push has been building for a couple years now, and PacBio has most recently been promising customers and investors that it would begin shipments during the second quarter, which it did.

PacBio is seeking to carve out a niche in what it calls “third-generation” sequencing that attempts to push the envelope even further on high-speed, low-cost gene sequencing. PacBio is seeking to carve out its place in a sequencing industry currently led by San Diego-based Illumina (NASDAQ: ILMN) and Carlsbad, CA-based Life Technologies (NASDAQ: LIFE). All of the companies are moving at breakneck pace to bring down the cost of sequencing whole genomes to below $10,000, and possibly to as little as $1,000 for a complete human genome in the next few years. As the price comes down, and more scientists gain access to sequencing technology, the market for sequencing is thought to be getting much bigger. The DNA sequencing market is expected to grow from $1.2 billion in 2009 to more than $3.6 billion by 2014, according to Scientia Advisors.

Hugh Martin

So far, PacBio’s beta test machines have been put through their paces at elite scientific centers like the Broad Institute of MIT and Harvard, Washington University in St. Louis, Cold Spring Harbor Laboratory on Long Island, The Sanger Institute in the U.K., and at agricultural biotech giant Monsanto (NYSE: MON). As the market expands, more scientists will be able to ask questions about subtle gene mutations involved in cancer, changes in viral pathogens like the one that caused the cholera outbreak in Haiti, or ideas on how to genetically modify optimal traits into a new form of corn or soybeans.

All of that is the blue-sky stuff of dreams for PacBio, which has been riding a wave of enthusiasm—witness its $200 million IPO from last October. But now the pressure is on for the company to deliver on its promise. When I met with PacBio CEO Hugh Martin a few weeks ago at his office, he was in a reflective mood, celebrating his seventh anniversary at the company, but also sounding a bit antsy about how the company needed to get its product on the market—and pronto.

“My first reaction, looking back, is that it took a lot longer than I thought it would take when I started,” Martin says. “It was a lot harder problem than I thought it was, and it took a lot more money than I thought it was going to take.” While that certainly added to the risk, there’s a big potential for reward. He adds: “It’s not very often that really big ideas come around that are big enough to sustain a 7-year effort, $580 million, and then result in a successful product or family of products. When it happens, really big long-lasting companies get built. That’s what we want to do.”

The PacBio instrument is clearly different from the market leaders. Illumina and Life Technologies use common polymerase chain reaction (PCR) techniques to … Next Page »

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