Craig Venter’s Enabler, Seattle’s Blue Heron, Grows With Synthetic Genes Made to Order

5/27/10Follow @xconomy

When genomics pioneer J. Craig Venter stepped before the cameras last week and claimed that he engineered the first bacterial cell with an entirely synthetic genome, he actually had a lot of help. One of the key players he relied on behind the scenes was a privately held company in Bothell, WA, called Blue Heron Biotechnology.

Venter’s team in San Diego and Maryland went through an elaborate process to “boot up” the bacterial cell by stitching together more than 1,000 stretches of DNA that were each more than 1,000 chemical base units in length. The sequences were designed on a computer, but Venter’s team hired the people at Blue Heron to take care of the next vital step—the job of synthesizing all that data into genes that gave rise to the famous bacterial cell. Blue Heron was singled out for a kudo in the J. Craig Venter Institute’s press release, and got a line in Nicholas Wade’s story in the New York Times. (Blue Heron even got a little publicity from hometown KOMO-TV.)

Beneath the scientific implications and ethical debate, there’s actually an intriguing business story. For Blue Heron, it’s emblematic of its growing capabilities in the emerging field of synthetic biology, and the increasingly powerful things it can enable its customers to do. The company is one of five contract firms around the world that are ushering in an “industrialized” era of molecular biology. The idea is to take a time-consuming, costly process of synthesizing genes in the lab, and automate it into something much cheaper, faster, and more reliable.

While the Seattle-area company doesn’t disclose its revenue, or say whether it is profitable, it currently provides its service to 19 of the world’s top 20 pharmaceutical companies and a growing cadre of academic researchers, says John Mulligan, Blue Heron’s founder and chief scientific officer. The company’s business is “sustainable” for the future with its current team of about 35 employees, he says.

“Customers are saying ‘At this price, it doesn’t make sense to do any molecular biology internally anymore,’” Mulligan says. “Several companies have outsourced [DNA synthesis] completely.”

The field has made dramatic strides over the past decade. Mulligan, who previously ran one of the sequencing centers at Stanford University that played a role in the Human Genome Project, left to start Blue Heron in 1999. He got some seed investment in the early days from Leroy Hood and David Galas, a couple of the co-founders of Darwin Molecular, a one-time highflier where Mulligan worked for a time in the mid-90s.

Back in Blue Heron’s founding days, cost was the big barrier preventing the synthesis of DNA sequences in any systematic way. But the price per base pair, or chemical unit of DNA, plummeted about 90 percent over the company’s first nine years. That made it cheap enough for drug companies to order manufactured genes, rather than assign the task of making them to young scientists or skilled technicians in-house.

And the trend has only continued. Two years ago, Blue Heron would synthesize genes for about $1.50 to $2 for each chemical base pair of DNA—now the same genes can be had for 40 cents to $1 per base pair, Mulligan says, depending on their complexity. Some researchers order short genes that are only 200 chemical units long, but Blue Heron can synthesize really complicated genes that can go as long as 200,000 units long, Mulligan says. If a customer wants to slip in a single letter variation here and there, an insertion of an extra letter or a deletion, Blue Heron has shown over time it can deliver the exact sequence the researcher wants, within one to three weeks of turnaround time.

While falling per-unit prices sound bad for Blue Heron’s overall revenue, Mulligan says his company has been able to offset that decline a couple ways. One is by getting increasing order volume from academics who otherwise wouldn’t buy at higher prices, while richer pharmaceutical customers are running ever-more ambitious experiments. Cheap genes on demand now make it possible for researchers to order up 1,000 different variations of genes for an antibody drug candidate, so a pharma company can filter out the candidates with the very best properties in a far more efficient manner than the process they used a few years ago, Mulligan says.

And Blue Heron has been able to remain stable by keeping its internal costs down. The payroll has been limited to about 35 people for the past six to eight years, while Blue Heron has invested more and more in automated equipment. That has enabled the company to increase its output of manufactured genes 10-fold. “We have one of the highest revenue per headcount rates in the gene synthesis industry,” Mulligan says.

That’s no small thing in a globally competitive niche. Blue Heron’s rivals include Germany-based GeneArt, Coralville, IA-based Integrated DNA Technologies, Menlo Park, CA-based DNA 2.0, and Piscataway, NJ-based GenScript. Hard data on the size of the market these companies are pursuing is elusive, but Mulligan says biomedical researchers alone spend at least $1 billion worldwide each year on acquiring and modifying DNA, and there are growing uses for advanced materials and biofuels.

Venter has been using the Blue Heron service for at least five years as part of his synthetic biology quest, Mulligan says. Steady progress like Venter’s has paid off with repeat orders, Mulligan says.

“It helps to have built up a history, the technical capability to carry out the work, and many customers who have worked for us for years and trust us,” Mulligan says. “Those are assets you can’t create overnight.”

While trust takes a long time to build, it can be lost in a heartbeat. So while ethicists are debating the implications of Venter’s new synthetic bacterial cell, Mulligan was pretty open about a totally different ethical question that’s vitally important to his company.

It turns out that the five custom-gene manufacturing companies, while fierce competitors, have voluntarily joined hands to regulate themselves through the “International Gene Synthesis Consortium.” These companies have mutually agreed on standards designed to make sure that bioterrorists can’t order up a recipe for a plague-like pathogen, or dupe each of the companies into handing over key ingredients that could be assembled separately in a lab. Blue Heron has been working with federal officials, including some from the FBI, to make sure potentially dangerous genes don’t get into the wrong hands, Mulligan says. Blue Heron has a screening process to make sure that a researcher has a legit interest in learning something about a certain pathogen in order to develop, say, a plague vaccine.

While I’m normally pretty skeptical of the effectiveness of self-regulation, the gene synthesis consortium strikes me as a possible exception. After all, if terrorist ever got hold of a dangerous bioterror weapon that they were able to order over the Internet from one of the contract firms, that would kill the entire industry overnight.

“To get five fierce competitors to agree to work together on screening standards, in an international group, would be very hard to do with conventional regulation where no one company has jurisdiction over everybody,” Mulligan says. “The regulators are enthusiastic, and we are too. It’s definitely in our enlightened self-interest.”

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