Good morning from Mountain View, CA, and from the close of the 2012 Personalized Medicine World Conference, which brought together thought leaders of business, government, healthcare-delivery, research and technology. Four themes that emerged from this year’s program:

• Greater optimism, triggered by the 2011 approvals of two major oncologic agents paired with companion diagnostics: vemurafenib (Daiichi Sankyo and Roche / Genentech) for patients with metastatic melanoma with a mutant biological pathway known as BRAF V600E and crizotinib (Pfizer) for patients with non-small-cell lung cancer that overexpresses a protein called ALK. Walter Koch from Roche and Hakan Sakul from Pfizer proudly discussed their development processes and speedy approval timelines. Those approvals were also cited by several other talks as examples of major progress made in the quest to deliver the right drug to the right patient.

• Greater clarity from the FDA. Although the FDA was not able to meet its self-imposed deadline of year-end 2011 to finalize guidance to industry on the best practices for developing companion diagnostics, Elizabeth Mansfield reiterated Commissioner Hamburg’s commitment to personalized medicine and told the audience to expect final guidance before the end of June. Mansfield also said that the FDA would provide guidance on how to co-develop a drug & test in parallel, as well as how to “enrich” clinical trials through careful selection of patients, based on their genetics. Both of these important regulatory steps could happen in 2012. The most surprising revelation, though, was Mansfield’s staffing: her group has just four people to evaluate all personalized-medicine-related medical devices.

• More sequencing. Just a few weeks ago at the JP Morgan Healthcare Conference, 800-lb sequencing gorillas Illumina and Life Technologies / Ion Torrent announced that scientists can expect the $1,000 genome by the end of 2012. Piggybacking on that announcement, Mostafa Ronaghi, chief technology officer of Illumina, presented a thorough overview of his company’s progress to date, bragging that 90 percent of all sequences produced worldwide had been produced on an Illumina instrument. Among other projects, Ronaghi’s team is working on techniques to accurately cover the 8 percent of the genome that cannot be sequenced because of repetitive regions. (Ronaghi made his presentation just hours before news broke of Roche’s unsolicited $5.7 billion takeover bid for Illumina.)

• More translational bioinformatics. Given the implied data glut that whole genome sequencing will produce, last week’s conference revealed more accomplishments in the application of bioinformatics to the remedy of disease. One of the unsung heroes of this year’s conference was Elizabeth Worthey from the Medical College of Wisconsin, who walked the audience through a case study of a pediatric patient presenting with undefined inflammatory bowel disorder. Worthey’s whole exome sequencing and variant analysis of the patient revealed a key mutation in the XIAP gene. A cord blood transplant ultimately cured the child, who was eating, drinking and playing again within four months.

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San Diego-based Illumina, the market leading maker of DNA sequencing instruments, has just made it through a rough year, and now it may be entering its final chapters as an independent company.

Illumina (NASDAQ: ILMN) said last night that it has gotten an unsolicited (that’s polite PR language for hostile) takeover bid from Switzerland-based Roche. The offer values Illumina at $44.50 a share, or about $5.7 billion. That represents about an 18 percent premium over Illumina’s closing stock price of $37.69 on Tuesday. Roche said it plans to run a “tender offer” in which shareholders are being asked to tender their shares at its price until Roche has corralled enough shares to take control. Illumina, in a brief statement, asked shareholders to do nothing until the board makes a recommendation.

The offer must look like a screaming low-ball offer to Illumina shareholders, given that the company traded as high as $79.40 a share in the last year. But Illumina has gone through a rough stretch of late, as it fell short of its quarterly sales goal last fall, and made layoffs, as customers worried about potential federal research budget cuts, and competitors like Life Technologies, Complete Genomics, and Pacific Biosciences all fought hard for their share of a fast-moving market for sequencing tools. Still, Illumina is the dominant player in the market, and the DNA sequencing market is expected to grow as machines get faster and cheaper, making them available to many more scientists. The market is expected to grow from $1.2 billion in 2009 to more than $3.6 billion by 2014, according to figures from Scientia Advisors.

Given the opportunity, I’ve got to imagine the Illumina board is seething at this unsolicited takeover bid. It sounded like it in last night’s terse, but diplomatic, statement.

“Consistent with its fiduciary duties and responsibilities, and in consultation with its financial and legal advisors, Illumina’s Board of Directors will thoroughly review Roche’s proposal and make a recommendation to stockholders in due course that the Board believes is in the best interests of Illumina stockholders. Illumina stockholders are advised to take no action at this time pending the Board’s recommendation.

Analysts at Bernstein, quoted by Dow Jones, didn’t sound so excited about the deal either. Roche has sought to become a diversified healthcare giant that makes drugs and diagnostics, and while high-powered genetic instruments like those from Illumina are primarily research tools today, many in the industry believe they will have more value in the future as diagnostic tools.

“Large scale genomics may, or may not, have an important role in clinical practice in the next 10 to 15 years, but Roche feels it needs to have the option to play just in case the hype eventually becomes reality,” is how analysts at Bernstein interpreted the Swiss company’s move Wednesday, according to Dow Jones.

Quintin Lai, an analyst with Robert W. Baird who covers Illumina, said he believes Roche is mostly interested in using Illumina tools for making products to diagnose cancer. “We think Roche covets the clinical diagnostics potential that ILMN’s technology provides,” Lai wrote today in a note to clients. “We have noted that next-generation sequencing is attracting strong interest in the area of cancer diagnostics and therapy selection.”

Illumina shares shot up 45 percent, all the way to $54.63, in speculation that takeover bids from Roche, or possibly another company, will run much higher. This will certainly be an interesting story to watch unfold over the coming weeks.

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In 2004, I was an enthusiastic postdoctoral researcher in Eric Lander’s lab at the Broad Institute, with the job I had dreamed of since I was 10 years old. Growing up in Paducah, KY, I read Isaac Asimov’s The Genetic Code. And while I understood nothing of its meaning, I fell in love with the idea of being a human geneticist when I grew up.

I had a particular disease passion that had also been part of the plan since that time: autoimmune genetics. You see, I have a remarkable family. Nearly one-third of my relatives within 3 degrees have an autoimmune disorder. Even at my young age, I somehow knew those weren’t good odds. I knew that “things run in families” and that my family seemed to have autoimmunity in spades. You can imagine my surprise when 20 years afterwards, I realized I was, in fact, a human geneticist in the most renowned tank of genomic thinkers around studying autoimmune disease.

It was a thrilling time to be a geneticist. The human genome sequence was complete. The first thorough map of variation in the genome (single nucleotide polymorphisms or SNPs) was nearly complete. Unconstrained by data to the contrary, it felt like we were turning a corner to truly identify the variation that conferred risk to disease.

But in May of 2004, I began to get very nervous because of an unexpected result we found with one of the most talented teams of autoimmune geneticists in existence: the International Multiple Sclerosis Genetics Consortium. Parenthetically, these folks are absolutely who you want at the front lines of genomic inquiry. They are dogged, thoughtful, and careful about the research they do.

At that time, we were following up on one of the key variants that conferred risk to multiple sclerosis or MS: HLA-DRB1-0201 (or “DR2″). As background, about 40 percent of all patients with MS have the DR2 variation in their genome. By comparison, only 20 percent of the general population has this variant. When you run the statistics, it turns out that this is probably one of the strongest associations in all of autoimmune genetics. So it seemed very reasonable to all of us involved that if we gathered enough patients who had MS and looked separately at the patients with and without DR2, we would expect that we might uncover that there were two types of MS.

To imagine this hypothesis, I visualize genetic “skylines.” While MS may appear to be a “single” disease population based on clinical measures, we hypothesized that the disease resulted from two different genetic skylines. Our experiment was to determine whether … Next Page »

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Mark Twain used to toss around a saying about three kinds of lies. There are lies, damned lies, and statistics. This week in biotech, we saw some statistics that could lead some people to get a false impression that everything is just peachy in biotechland.

If you measure the state of life science innovation by the amount of money flowing in, things look swell. Venture capitalists poured $4.73 billion into 446 biotech companies last year, according to the MoneyTree report by the National Venture Capital Association and PricewaterhouseCoopers, based on data from Thomson Reuters. The venture industry association’s press release cheerily noted that overall venture funding jumped 22 percent last year. While software is still the No. 1 and faster-growing sector of the two, biotech held its own, with a solid 22 percent gain in dollars invested compared with a year earlier.

You have to dig deeper to see what’s really going on. There is still a good amount of money going toward late-stage development of drugs people started working on 10-15 years ago. But there is an alarming drop in support for today’s cutting-edge biotech startups. Last year, just 153 U.S. biotech and medical device startups got their first round of financing, the lowest amount of seed investment activity in 15 years, as reported by Ryan Flinn of Bloomberg News.

There’s something really wrong with this picture. Most any biologist will tell you we are living in a golden age of discovery, at a time when we will soon be sequencing entire human genomes for $1,000 in one day. We are able to ask questions about how life works that nobody could even imagine asking a few years ago. It ought to be the time to charge ahead with basic research, and early-stage R&D to test exciting new concepts in diseases like cancer, diabetes, Alzheimer’s, HIV, and more.

But everywhere you look, the story is about cuts, cuts, cuts. The National Institutes of Health, the primary government agency that supports basic biomedical research, used to write checks for one out of every three grant applications, but it’s now down to about one out of every six, NIH director Francis Collins said earlier this month at the JP Morgan Healthcare Conference. Pharma companies are cutting back on R&D, firing workers left and right, and leaning on cheaper outsourced vendors everywhere they can. As many as one-fourth to one-half of biotech venture capitalists are thought to be slowly going out of business, as they are unable to raise new investment funds. The same IPO investors that want to buy Facebook shares look at biotech stocks like a four-year-old looks at lima beans.

There are good reasons why we see all those things happening. Pharma companies have created enormous inefficiencies for themselves through mega-mergers, and now they need to spend years trying to get their houses in order. Biotech as an industry has overpromised and underdelivered, and many investors are tired of it. The FDA, stung by various drug safety scandals, has been cautious about approving new drugs (although there are signs that FDA leadership wants a more balanced approach). And of course, our society is still struggling to come to terms with healthcare reform, and the realization that it’s unsustainable to spend infinite amounts of money on healthcare.

John LaMattina

All that said, an entrepreneur or a bold Big Pharma executive is the kind of person who looks at that picture and believes he or she can overcome the hurdles, and form a plan to turn vision into reality. But there aren’t that many people out there with the can-do spirit, or guts, to put down real money behind really talented teams devoted to the discovery of new drugs. And because everybody’s talking about how to go from Phase I to Phase II with drugs people invented years ago, there’s a real possibility that once those projects run their course, we’ll all look around in 2020 and wonder where all the wonderful new drugs are going to come from.

“You can really get into a vicious cycle when you have to eat your own seed corn,” says John LaMattina, a senior partner with PureTech Ventures, and the former president of R&D at Pfizer.

There are exceptions, of course, with a few people trying creative new ways to plant seed corn. Third Rock Ventures and Atlas Venture are a couple of VC firms that have remained active, continuing to bet big on the edgiest stuff coming out of the labs. Most every Big Pharma company has set aside cash for corporate venture firms that are seeking to help fill the void being created by the shrinkage of traditional VC. Pfizer, Johnson & Johnson, Sanofi, Bayer, and deserve credit for working on creative new collaborations with top biomedical universities and research centers, which seek to minimize some of the problems with the fruitless alliances of the past. J&J made news this past week when it unveiled an incubator for 18-20 startups in San Diego which looks to fill up some lab space it had vacated through its own internal R&D cutbacks.

Right now, we are in an age of experimentation with new organizational structures for supporting biomedical R&D. The hope is that these new organizations can reduce the time, money, and high-risk profile that has made life sciences such a hit-or-miss investment over the years. Pharma companies know they don’t … Next Page »

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Like a lot of biotech executives focused on developing drugs, Martin Tolar has long been skeptical of the value of genomics in bringing about personalized medicine. But over the past few months of scoping out new opportunities, he’s become enough of a believer to jump into genomics with both feet, as the new CEO of Cambridge, MA-based Knome.

“You always hear about genomics and the revolution that never happened,” Tolar says. “There was Millennium and deCode, and others who raised lots of money. But I looked at this and said, ‘No, this is incredible, it’s really happening.’ All the pieces of equation are coming together.’”

Tolar, the former CEO of Wellesley, MA-based NormOxys, is joining Knome just as it has completed its fourth year in business, which was by far its best. The company is announcing today that it has won a new contract to analyze and compare 1,000 genomes for scientists at Johns Hopkins University, who are looking for genetic variants linked to asthma in African American and African Caribbean populations. It’s the latest addition to Knome’s roster of about 100 customers for its genomic-analysis software service, although the Hopkins project is by far the biggest. Knome isn’t disclosing the value of the new project, but the company expects to generate $20 million in revenue in 2012 from academic, biotech, and pharmaceutical industry customers, Tolar says.

Tolar joins Knome after his previous company—which raised $17.5 million in May 2010—discovered in clinical trials that its experimental drug worked in a different way than its scientists thought. The NormOxys drug was shown to alter the PI3 kinase pathway, instead of releasing controlled amounts of oxygen into cells. Tolar didn’t say much about the situation, other than that the NormOxys drug is still moving forward in clinical trials for a different use, and that he was more excited by the task in front of him at Knome.

Martin Tolar

Knome’s previous CEO, Jorge Conde, is staying with the company as chief strategy officer, and will focus on product development, Tolar says. The management team is being further filled out by Jonas Lee, a board member who will now join the company as chief marketing officer, while Marc Rubenfeld, formerly of Beckman Coulter, is joining as vice president of operations.

The timing is right for Knome to grow in 2012, Tolar says, because the torrid pace of innovation with faster/cheaper DNA sequencing hardware has created … Next Page »

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Pacific Biosciences is bringing in an industry pioneer, Michael Hunkapiller, as its new CEO after a disappointing first year on the market with its new breed of DNA sequencing instrument.

The Menlo Park, CA-based company (NASDAQ: PACB) said today that CEO Hugh Martin has resigned effectively immediately, and is being replaced by Mike Hunkapiller, who helped build Applied Biosystems (now part of Life Technologies) into one of the DNA sequencing industry leaders over the past two decades.

Martin will get a severance package that includes a one-year lump sum equal to his base salary, a six-month consulting contract at $20,000 a month, and accelerated vesting of his PacBio stock options, according to a regulatory filing. Hunkapiller will start with a base salary of $400,000, and will get an option grant to buy as many as 1 million shares of PacBio stock, according to the filing.

The writing could have been interpreted as being on the wall back in October, when Hunkapiller, 63, a member of the board since 2005, stepped up his involvement to become full-time executive chairman of the PacBio board. The company introduced its new $700,000 sequencing machine to the market in April, and hit its first quarter sales goal. But then PacBio, and other rival sequencing companies, ran into challenges as scientists worried about federal research budget cuts that are curbing their ability to buy expensive new scientific tools. PacBio cut 130 jobs in September—28 percent of its workforce—and said it generated $10.6 million of sales in its second quarter on the market. That was a slight drop from its debut quarter.

Hugh Martin

Investors have punished the company for its performance, driving the stock down from a high of $16.85 a share all the way to $2.96 at the opening of today’s trading. The company, which has raised more than $580 million from investors, now has a market valuation of about $160 million. The company went public at about an $800 million valuation in October 2010.

“We are thankful for Hugh’s dedication and efforts in transforming PacBio from an early stage R&D company to a leader in single molecule technology,” said Bill Ericson, a general partner at Mohr Davidow Ventures and PacBio’s lead independent director, in a statement. “Mike brings unmatched expertise, experience and relationships with customers in the life science tools market and is uniquely qualified to lead the company through its next stage of growth.”

Martin added in the statement that, “I am in support of this decision and am looking forward to identifying my next exciting career venture.”

The PacBio instrument uses a different technology than other sequencers made by San Diego-based Illumina (NASDAQ: ILMN) and Carlsbad, CA-based Life Technologies (NASDAQ: LIFE). PacBio’s instrument has been used by scientists in high-profile investigations, providing fast answers to help scientists understand the Haitian cholera outbreak and the German E.coli scare of the past couple years. The instrument in its current form isn’t ideal for sequencing human genomes, and its larger competitors, as well as Mountain View, CA-based Complete Genomics (NASDAQ: GNOM) have made that more of a focus.

Hunkapiller also has another gig with Alloy Ventures, and he said he will continue to represent Alloy on the boards of a trio of small companies—NuGen, Verinata Health Systems, and RainDance Technologies.

Martin, who was listed as 57 in the company’s last proxy statement, has been public about his diagnosis with multiple myeloma, a serious cancer of the bone marrow, although he said back in October he was feeling fine physically, and he appeared to be fine when he appeared at an Xconomy genomics event that month in San Francisco. The disease was considered a death sentence a decade ago, but 5-year survival rates have dramatically increased with the introduction of new therapies from Millennium: The Takeda Oncology Company and Celgene.

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There’s a long-held belief that, if caught early, colorectal cancer is almost always treatable through surgery alone. But according to Ann Arbor-based Everist Genomics, nearly one in three Stage 2 colon cancer patients who have surgery alone, without adding chemotherapy, will suffer a recurrence of their cancer. And more than 80 percent of those patients, Everist says, will die from their disease.

Those statistics inspired Everist Genomics to develop OncoDefender-CRC, a molecular diagnostic test that identifies patients at high risk of cancer recurrence. The test became commercially available for the first time last month.

“The essence of personalized medicine is to diagnose a problem before there are noticeable symptoms,” says Alex Charlton (pictured above), executive vice-chairman of Everist Genomics. “If we’re treating patients very early, we save lives and it costs much less.”

The scientific team at Everist Genomics identified research which revealed that patients with high-risk Stage 2 colorectal tumors can benefit greatly from adjuvant therapy, with three-year disease-free survival rates increasing from 84.7 percent in patients who did not receive chemotherapy to 96.4 percent in those who did. Improvements in five-year overall survival rates increased from 86.4 percent to over 98 percent.

These discoveries led the scientists at Everist Genomics to begin a two-year development program to find out the combination of genes and their expression levels that would identify patients with these high-risk early stage colorectal cancer tumors. Everist Genomics integrated molecular diagnostics with its proprietary learning algorithm, Evolver. The computer-based model analyzed and evaluated possible combinations of genes and gene expression levels to identify the genomic culprits. Out of 25,000 genes, there are five specific genes tied to colorectal cancer recurrence. Knowing how those genes behave, Charlton says, represents a huge breakthrough in preventative treatment.

“The key to effective personalized medicine and utilizing genomics is you have to know which genes represent the risk of disease in the first place,” Charlton says. “It’s easier said than done. It’s an exercise in expert detective process.”

Everist just received regulatory approval for a second molecular test called OncoDefender-MMR (MMR stands for “mismatched repair”), which will be able to predict a person’s risk of getting cancer in the first place. Armed with that kind of information, Charlton says, patients would be able to make significant lifestyle changes that could decrease their cancer risk.

“What cancer is, at the very simplest level, is an overproduction of certain cells in a certain part of the body,” Charlton says. “The OncoDefender-MMR test will detect … Next Page »

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Take a guess who made the following statement:

“I think the biggest innovations of the 21st century will be at the intersection of biology and technology. A new era is beginning.”

A. Bill Gates

B. Steve Jobs

C. Paul Allen

The comment has gotten little attention in the last few weeks, but it jumped off the page at me toward the end of Walter Isaacson’s revealing new biography of Steve Jobs. The Apple co-founder never had much to say about biology while he was alive, but the opportunities started to dawn on him as he was dying of pancreatic cancer, Isaacson wrote. One of the silver linings of his illness, Jobs said, was how it sparked a passion in his son Reed, a college undergraduate, to learn about genomics at a time that reminded the elder Jobs of personal computing in the 1970s.

While Jobs’s star is burning so brightly in the aftermath of his death, that same statement could easily have been made by tech mogul contemporaries like Gates and Allen. Gates is devoting his fortune to developing technologies that can fight illness in the developing world. Allen has bankrolled an open-source project that enables neuroscientists to access 3-D functional maps of the human and mouse brain. I don’t think it’s an accident that all of these people, so famous for their technology visions, have turned so much of their attention toward biology in recent years.

While much has been made of Jobs’s ill-advised decision to delay surgical removal of his tumor, fewer people seem to have noticed that he had this biotech epiphany toward his end. He had the genome of his tumor completely sequenced, so his doctors at Stanford University could tailor treatments most likely to work against the molecular pathways particularly active in his cancer. Essentially, he flipped all the way from Western medical skeptic to personalized medicine fan in a couple years. It’s a part of the Jobs story that could end up being a significant part of his legacy.

I’m also hopeful that since millions of people are reading this book, it will help rekindle some of the public imagination for biotech.

Don’t get me wrong, I’m not saying let’s bring back irrational exuberance. I’ve written a lot here in these pages this year about the problems biotech is facing—lack of investment, lack of stable business models, lack of jobs, regulatory challenges, overpriced cancer drugs, Big Pharma R&D cuts. It’s all quite depressing. For the most part, the industry is plagued by a crisis of confidence.

This crisis of confidence is the part that puzzles me … Next Page »

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Today marked the official launch of the New York Genome Center, a collaboration among 11 top academic institutions that’s designed to accelerate genomic research. The initiative—supported by the City of New York and private and public institutions—is being guided by two of our Xconomists: Rockefeller University’s Marc Tessier-Lavigne, who will serve on the center’s board of directors, and Columbia University’s Tom Maniatis, who will chair its scientific advisory board.

Tessier-Lavigne and Maniatis both spoke at today’s opening event, and emphasized the importance of the center’s mission to foster cooperation between academic institutions that might normally consider themselves to be rivals. Columbia and Rockefeller University are both participating, along with such big-name institutions as Memorial Sloan-Kettering Cancer Center, Cold Spring Harbor Laboratory, and New York University. Representatives from all the participants began working together to plan the initiative in mid-2010. “If we can maintain this level of team effort, the New York Genome Center will be a huge success,” Maniatis said at the beginning of his remarks today.

The idea behind the Genome Center is for the participating institutions to share discoveries, so scientists can identify the molecular causes of disease and, in so doing, accelerate the development of drugs that can be targeted to specific patient populations. It will include … Next Page »

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A few days after Xconomy New York debuted in April, famed biotech pioneer and Columbia University professor Tom Maniatis gave us a preview of the New York Genome Center, a proposed coalition of academic institutions coming together to support genomics research in the city. His vision is now reality: The Center officially launches tomorrow with an unveiling featuring Maniatis (pictured above) and several other NYC scientists.

The New York Genome Center, which will open in February, will be equipped with state-of-the-art molecular scanning technologies, and it will be set up to allow New York institutions to share data and resources. According to a media advisory, 11 academic medical centers and research organizations are joining the center, including Memorial Sloan-Kettering Cancer Center, Mount Sinai School of Medicine, and Cold Spring Harbor Laboratory.

Among the speakers at the launch event tomorrow will be Maniatis, a 30-year veteran of Harvard who is now chair of the department of biochemistry and molecular biophysics at the Columbia University College of Physicians and Surgeons, which is also participating in the Genome Center. Maniatis, who is one of our Xconomists, founded Genetics Institute and was one of the key figures in the growth of the Kendall Square biotech cluster in Cambridge, MA. He has long been interested in bringing that entrepreneurial spirit to the Big Apple. “I’d like to see something like Kendall Square,” said Maniatis in our April interview with him. “It’s enriched the academic and business life in Boston in an amazing way, and it would be great to see that happen here.”

The financiers behind the New York Genome Center have not yet been revealed. But according to the media advisory, it will require a total of $125 million from “diverse private and public sources,” and a “substantial portion” of the money has already been committed.

It’s been an active year for genomics research initiatives in New York. Mount Sinai recently opened its own such research center, called the Institute for Genomics and Multiscale Biology. The center’s director, Eric Schadt (also an Xconomist), told Xconomy in October that his goals included “collaborating deeply with 12 disease-oriented institutes so that we can better understand how to diagnose and treat disease.”

One of the speakers at tomorrow’s unveiling will be Xconomist Marc Tessier-Lavigne, a former executive of Genentech, who became president of New York’s Rockefeller University in March 2011.

Tune back in to Xconomy New York tomorrow afternoon for comments from Tessier-Lavigne and Maniatis on the debut of the city’s new Genome Center.

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Pacific Biosciences saw its sales flatten in its second quarter on the market with a new breed of DNA sequencing instrument, and now it’s shuffling things around a bit on the org chart to see if it can kickstart its growth.

The Menlo Park, CA-based company (NASDAQ: PACB) said today it generated $10.5 million in total revenue in the quarter ended Sept. 30, just a smidge lower than the $10.6 million in revenues it reported in the prior three-month period, which was its commercial debut. PacBio’s net loss widened to $29.3 million in the most recent quarter, up from $22.5 million in the prior quarter.

Separately, the company announced that board member Mike Hunkapiller is taking on a more active role as executive chairman of the board. Hunkapiller, a general partner with Alloy Ventures, is best known as the co-founder and former president of Foster City, CA-based Applied Biosystems during that company’s rise to prominence in the sequencing instrument market. Hunkapiller will come in to work three days a week, and work with president and CEO Hugh Martin, according to PacBio spokeswoman Nicole Litchfield. Martin will not scale back his duties at the company, and is “doing fine” physically, Litchfield says. (Martin has multiple myeloma, a cancer of the bone marrow. He looked fine when I saw him Monday at an Xconomy genomics event.)

PacBio’s slowing sales performance shouldn’t come as a surprise. The company is selling a new $700,000 DNA sequencing instrument during a shaky economy, at a time when scientists are nervous about potential cuts to the National Institutes of Health—the principal agency that allows researchers to buy fancy new tools. The company cut 130 jobs, about 28 percent of its staff, in September when it became more clear that sales were going to be slower than hoped. PacBio is also slugging it out in a fast-moving, competitive field with Illumina (NASDAQ: ILMN), Life Technologies (NASDAQ: LIFE), and Complete Genomics (NASDAQ: GNOM) all pushing for a growing piece of mindshare and revenue in this new wave of sequencing.

Hugh Martin

“I have spent much of my career on the leading edge of sequencing technology and I believe PacBio’s single molecule, real-time technology will disrupt the sequencing market,” Hunkapiller said in a PacBio statement. “I am delighted that Hugh and the Board asked me to take on this newly created role and look forward to devoting more time to advising the company on how to accelerate adoption of their products in important applications.”

The company, which went public a year ago at $16 a share, began life as a public entity with an $800 million valuation. Today its stock closed at $4.07, giving it a valuation of about $207 million.

PacBio’s valuation suggests that Wall Street is assigning almost zero value to its technology. The company closed September with about $193.7 million in cash reserves, down from $216.6 million in cash it had at the end of June.

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Scientists will soon be able to obtain the full 6 billion letter string of DNA that makes us who we are for $1,000, and the cost might drop all the way to $100 or less. Probably 1 billion people will get their DNA sequenced when prices go that low.

It’s a big opportunity with big hurdles that will have to be overcome. There are technical problems (software and storage) scientific cultural challenges (data sharing), and ethical challenges (consumer privacy) that have to be solved before the data’s potential for changing health and medicine can be realized. There’s plenty of caution among regulators and insurers, who are wondering what to do with this coming mountain of DNA data.

These were some of the themes that came up yesterday at our big event in San Francisco, “Computing in the Age of the $1,000 Genome.” As Ashley Dombkowksi, the chief business officer of 23andMe put it succinctly, “It’s not about the $1,000 genome or $100 genome. It’s the million-dollar interpret-ome. That’s where real value is.” Of course, no one has gotten there yet. You can read some of the other quotes by searching on the Twitter hashtag for this event, #1kGenome.

I’d like to thank all the speakers and attendees who made this event a big success. That includes the event host, QB3, and the event sponsors: Alexandria Real Estate Equities, Complete Genomics, Fenwick & West, and Silicon Valley Bank. We’d also like to thank the underwriters of Xconomy San Francisco who provide long-term support for our work: Alexandria Real Estate Equities, AMRI, Fenwick & West, Goodwin Procter, J. Robert Scott Executive Search, the Kauffman Foundation, Latham & Watkins, Morrison Foerster Cleantech Group, Silicon Valley Bank, and the U.S. Department of Homeland Security’s Science & Technology Directorate.

My colleague Wade Roush snapped a bunch of photos of the action, and you can see a few of them below in thumbnail images. For a larger image, just click on the thumbnail. We’ll have more photos to post on the site later in the week. And at the pace genomics is moving, we’ll definitely have a lot more to write about here for the weeks and months ahead.

	NEXT IMAGE >>
	Computing in the Age of the $1,000 Genome – Cliff Reid of Complete Genomics
	photo by Wade Roush

… Next Page »

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[Updated: 6:45 am, 10/26] San Diego-based Illumina is doing some restructuring to make up for third-quarter sales that fell way short of investors’ expectations.

The market-leading maker of DNA sequencing instruments (NASDAQ: ILMN) said today it is going to restructure (i.e., make job cuts) that will add up to a $15 million to $17 million charge on the company’s income statement, mostly in the fourth quarter. The disclosure was part of the company’s third-quarter financial report, in which Illumina said it generated $235.5 million in revenue—a 1 percent drop compared with the same period a year ago. The company’s quarterly profits plunged to $20.2 million, a 43 percent decline from $35.4 million a year earlier.

[Updated layoff numbers] Illumina didn’t provide details of its restructuring plan in today’s financial release, although it did say in a subsequent filing it is eliminating 200 jobs, or about 8 percent of its workforce. It also declined to offer a specific revenue forecast, although the company did say it expects sales to be higher this quarter than last quarter because of the commercial rollout of a new desktop sequencing instrument called MiSeq.

News of cutbacks shouldn’t come as a surprise. The company first reported that its sales were falling short—about $40 million short of Wall Street expectations—in an announcement on Oct. 7. Researchers who buy Illumina products are still uncertain about how they will be affected by the possibility of budget cutbacks at the National Institutes of Health.

“We view the move as likely prudent, although the expectation points to a bearish outlook on HiSeq,” said Tycho Peterson, an analyst with JP Morgan, in a note to clients this morning, that referred to the company’s flagship instrument.

Illumina had 2,100 employees as of January 2, according to its annual report filed with the Securities & Exchange Commission.

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We’re getting ready here at Xconomy SF to head over to QB3 at UCSF Mission Bay this afternoon for our big event, “Computing in the Age of the $1,000 Genome.“

This event will bring together an ensemble cast of speakers talking about one of the big challenges in computing today, and how medicine and society at large will end up using this new deluge of DNA data. There will be no PowerPoint, lots of interactive conversation, and plenty of time for networking.

Registration will start at 1 pm, and the program will go from 2 pm to 5:30 pm, followed by a cocktail/networking reception. You can still get tickets at the door if you’ve been planning to come. We will be tweeting live under the hash tag #1kGenome. This is going to be a great event. See you there.

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When complete human genomes can be sequenced for $1,000 or less, how will this change society? Will all newborns in wealthy countries get sequenced automatically as part of their permanent medical record? Will society start discriminating against people based on their genetic makeup, like the “Gattaca” nightmare scenario?

Bioethicists have been discussing these questions for a long time, but my personal sense is that it’s a debate society at large hasn’t really tuned into yet, but will be forced onto the agenda in the next couple years if scientists really are enabled to sequence 1 million human genomes. That’s why I’m really looking forward to a fascinating closing keynote chat about these issues at our next event in San Francisco—”Computing in the Age of the $1,000 Genome.”

This chat will come at the end of a half-day forum that will feature some of the emerging startups in genomic computing; strategies from Fortune 500 companies seeking to help scientists manage the DNA data deluge; and a conversation on how physicians are beginning to use the fast/cheap tools of genomics for personalized medicine.

All of the fascinating things we’re bound to hear could become moot if something careless happens and society decides to apply the brakes for ethical reasons. So that’s why I’m excited to have a trio of big thinkers together to talk about these issues at the end of the day, right before the networking hour. Here’s who you can expect to hear from:

—Thomas Goetz, executive editor, Wired, and the author of “The Decision Tree: Taking Control of Your Health in the New Era of Personalized Medicine.” Goetz is accustomed to taking the big picture view of what’s going on in technology and medicine, and raising the key questions. He’ll be the moderator.

Sue Siegel

—Sue Siegel, general partner, Mohr Davidow Ventures. Siegel, a former president of Affymetrix, has been thinking about the societal implications of her investments in life sciences for a long time, and sees this story unfolding through her work on the boards of many emerging companies, including PacBio, Crescendo Bioscience, Navigenics, On-Q-ity, and Raindance Technologies.

—John Wilbanks, senior fellow, Kauffman Foundation for Entrepreneurship. Wilbanks has long pursued an interest in open science. His latest work for the Kauffman Foundation is in developing a standardized genomic informed consent system for patients. He is also a director of Sage Bionetworks, a nonprofit led by a former Merck executive who’s seeking to spark an open source movement for biology.

I’ll be the emcee of this gathering, keeping the trains running on time, making sure we have plenty of time for networking between sessions, and for your questions. There’s still time to get tickets, which you can get here at the registration page. See you there on Monday.

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Illumina has long been about hardware, hardware, hardware. The San Diego-based company became the market leader in DNA sequencing instruments by focusing on the hardware and the consumable chemicals to run the machines. Its scientific customers were basically on their own when it came to finding software to analyze all the DNA data Illumina machines could pump out.

But things have changed this year. Now Illumina (NASDAQ: ILMN), driven to fend off hungry rivals like Life Technologies (NASDAQ: LIFE), Complete Genomics (NASDAQ: GNOM), and Pacific Biosciences (NASDAQ: PACB), is looking to take a page out of the Apple playbook. The Illumina strategy is becoming more about combining hardware and software in a simple way that works well together.

“A lot of people here are inspired by Apple,” says Alex Dickinson, an Illumina senior vice president. “The amazing thing about Apple is the seamless integration between hardware they provide, and software and services. Look at the iPhone and iTunes. They stepped that up, introducing iCloud, which offers extraordinary seamless integration.” (I’m sure my colleague Wade will disagree with that last statement about iCloud, but that’s another story).

Dickinson will be on hand at our next big Xconomy event “Computing in the Age of the $1,000 Genome” on Monday, Oct. 24 in San Francisco, to elaborate more on where Illumina is going with this.

Illumina is being driven in this combined hardware/software direction by customers, who are telling the company that sequencing itself has gotten so fast and cheap that they can’t really analyze and interpret the data fast enough to keep up anymore. Since whole genomes can be sequenced now for $4,000, it doesn’t take a genius to see the interpretation and analysis getting even more overwhelming when the price of sequencing drops to a highly-accessible $1,000 per genome, as many observers predict it will within a couple years.

Alex Dickinson

Illumina’s newest version of its MiSeq desktop sequencer reflects the Apple-inspired integration. The MiSeq, which costs about $125,000, is now supported by a cloud-computing program called BaseSpace, which is supported by Amazon Web Services. Illumina touted this new offering as the “Most Intuitive and Fully Integrated Personal Sequencer Experience” when the product was announced earlier this month at the American Society of Human Genetics conference in Montreal.

Here’s how Dickinson described the new tool:

“We built a graphical interface into the instrument itself,” Dickinson says. “You check a box on instrument, and it can start streaming your data into BaseSpace. The user gets a Mozy or Dropbox-like ability to get automated off-site data backup. And once that data is up in the cloud, the next step is for us to offer tools for bioinformatics. Borrowing from Apple, we are building an open app store. We have five apps that are Illumina-made apps to start with, and we are working with other companies to bring them in. Just like with Facebook and iPhone app, people have access to develop on this platform.”

Getting this right will be easier said than done. Sequencing is just now starting … Next Page »

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San Diego-based Illumina, the world’s leading maker of gene sequencing instruments, is getting more serious about software as its customers continue to drown in a sea of cheap DNA data.

Victoria, BC-based GenoLogics is announcing today it has raised $8 million in what it called a “strategic financing” led by Illumina (NASDAQ: ILMN), the world’s leading maker of DNA sequencing instruments. GenoLogics plans to use the money to develop genomics software tailored for cheaper desktop sequencers, to build up its sales and marketing efforts, and develop new applications that can go beyond the research bench and be used in the clinical setting. Illumina’s chief commercial officer Tristan Orpin will join GenoLogics board in connection with the deal.

“The strategic investment by Illumina illustrates our companies’ collective commitment to helping our customers overcome some of the most challenging barriers to next-generation sequencing adoption, namely data management,” GenoLogics CEO Michael Ball said in a statement. “Illumina provides important insights to these challenges and we look forward to working jointly with them.”

GenoLogics was founded in 2002, and has now raised at least $26.5 million since 2005 from a syndicate that includes Illumina, as well as Kirkland, WA-based OVP Venture Partners, GrowthWorks Capital, and Yaletown Venture Partners. The company’s big idea is to create a centralized system that keeps track of data from biological experiments across multiple instruments and applications.

Demand for genomics software has traditionally been thin, as researchers have opted in many cases for custom-made, open source programs. But genomics researchers have been struggling with information overload the past couple years, as companies like Illumina, Life Technologies, Complete Genomics and others have driven the cost of sequencing entire human genomes down to $4,000 or less—creating huge new demand to sequence large volumes of biological samples that need to be analyzed and interpreted.

While scientists may be crying for help with their data, there are limits to the amount they can spend on this type of software. Illumina missed its third-quarter sales forecast by about $40 million after reporting that scientists were skittish about purchasing its tools and chemical reagents as the U.S. National Institutes of Health is facing the threat of budget cuts.

Illumina CEO Jay Flatley downplayed the importance of software in an Xconomy interview in April 2010, but the company has changed its views more recently about the need to integrate its hardware with software. Illumina struck a co-selling partnership with GenoLogics earlier this year. Alex Dickinson, an Illumina senior vice president, will be able to talk some more about the company’s evolving strategy about DNA data analysis at the next Xconomy event in San Francisco on Monday Oct. 24, titled “Computing in the Age of the $1,000 Genome.”

GenoLogics has about 60 employees, according to a company fact sheet. Its customers include the University of Washington, the University of Southern California, Jackson Laboratory, Pfizer, and Sanofi.

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[Updated: 11:18 am PT] One of the most fastest-moving, highest-impact innovation stories in history is happening in genomics. Lucky for those of us who follow the business on the West Coast, this epic story is playing out right where we live, right now.

Everyone in the Valley knows about Moore’s Law, and how computing power and speed doubles every 18 to 24 months, but fewer realize that the rate of progress in whole-genome sequencing is outpacing the rate of progress in the semiconductor business. That’s why I’m psyched to have pulled together many of the leaders in this field for a half-day conference, “Computing in the Age of the $1,000 Genome.” The conference is now less than a week away, on Monday October 24. It will be hosted by the folks at QB3, in Genentech Hall at UCSF’s Mission Bay campus.

This event will feature a cast of speakers from Complete Genomics, PacBio, 23andMe, Microsoft, EMC/Isilon, PerkinElmer, Stanford University, Mohr Davidow Ventures, and a handful of hot Silicon Valley genomic computing players like DNAnexus, Ingenuity Systems, and NextBio.

We’re putting these speakers together with terrific guest moderators from Fortune, Wired, and leading life sciences companies for a series of interactive chats. There will be no PowerPoints, and plenty of time for networking. Promise.

So, here’s how the afternoon will flow:

1:00 pm: Registration and networking.

2:00 pm: Welcoming remarks, QB3.

2:05 pm: Opening keynote chat: How new DNA sequencing technologies are creating computing’s next big challenge.

Luke Timmerman, Xconomy national biotech editor (moderator)

Hugh Martin, CEO, PacBio

Cliff Reid, CEO, Complete Genomics

2:40 pm: The challenges big computing companies are wrestling with in genomics.

Tim Hunkapiller, consultant, Life Technologies (moderator)

Paul Rutherford, chief technology officer, EMC/Isilon

Jim Karkanias, senior director, Microsoft Health Solutions

Alex Dickinson, senior vice president, Illumina [Added speaker: 11:18 am PT]

3:10 pm: Networking break.

3:45 pm: Strategies from the new wave of genomics computing startups.

Rob Arnold, general manager, Geospiza unit, PerkinElmer (moderator)

Andreas Sundquist, co-founder and CEO, DNAnexus

Doug Bassett, chief scientific officer, Ingenuity Systems

Ilya Kupershmidt, co-founder and VP of products, NextBio

4:15 pm: How will doctors use all these genomes for personalized medicine?

David Ewing Duncan, author, “Experimental Man” (moderator)

Atul Butte, associate professor, Stanford; co-founder, NuMedii

Ashley Dombkowski, chief business officer, 23andMe

4:45 pm: Closing keynote chat. The big medical and societal implications of the $1000 genome.

Thomas Goetz, executive editor, Wired (moderator)

Sue Siegel, general partner, Mohr Davidow Ventures

John Wilbanks, senior fellow, Kauffman Foundation; director, Sage Bionetworks

5:30-6:30 pm: Networking Reception.

As with all Xconomy events, we make special discount tickets available for people in startup companies, and for students (which applies to undergrads, graduate students and postdocs at any of the institutions around the Bay Area like UCSF, Stanford, and UC Berkeley). There is still time to get tickets for this opportunity to learn about the state of the art in genomics, and meet the personalities who are driving progress. I’m looking forward to seeing lots of readers there on Monday, and posing a few questions to these folks myself.

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If there’s anybody in the world of genomic computing with dreams of world domination, like a Bill Gates or a Mark Zuckerberg, it might be Andreas Sundquist. Others may have similar ambitions, but the co-founder of Mountain View, CA-based DNAnexus is one of the few with the chutzpah to say that he thinks a cottage industry of today, which measures its revenue in tens of millions, will soon count its money in the tens of billions.

“When you look at DNA sequencing and what’s happening, the sequencing itself is commoditizing. What’s not commoditizing is what you do with the data downstream,” Sundquist says. “We are building a new industry here. Within the next three years, I think we’ll see upwards of 1 million sequenced genomes. I really think that’s going to happen.”

And the long-term market opportunity for computing systems that analyze/visualize/interpret all that data, as full genome prices plummet from $4,000 to $1,000 and below? “It’s easily a $100 billion market.” And yes, I did ask him to clarify over the phone that he meant billion, with a “b.”

Sundquist, one of the speakers at Xconomy’s “$1,000 Genome” event next Monday at UCSF Mission Bay, has reason to be bold these days. He raised $15 million last week in a second-round financing led by Google Ventures and TPG Biotech, with classic tech investors like First Round Capital, SoftTech VC, K9 Ventures, and Felicis Ventures also on board. The company, which Sundquist co-founded with colleagues from Stanford University in 2009, isn’t saying yet how much revenue it generates, how many customers it has, or who they all are. But as part of the financing, DNAnexus and Google said they have agreed to collaborate on a free public site that will be a mirror image of one of the deepest and most valuable datasets in genomics today—which the National Center for Biotechnology Information is phasing out because of federal budget cuts.

Andreas Sundquist

Providing that valuable resource to customers is just one step in the process, Sundquist says. The bigger vision is for DNAnexus to prove, through its relatively low-cost, easy-to-use, Web-based interface, that it can serve as a default plug-and-play genomic analysis system for biologists. These are people who don’t typically have much math training, and often have limited access to the bioinformatics experts who have traditionally helped them play around with the data.

It’s not uncommon today for researchers to run a sequencing instrument to get the data, and then spend months “playing around with the data,” as Sundquist said in an Xconomy feature in July 2010. The goal is to minimize the amount of time a scientist has to spend fiddling around to find out what tools are available, downloading them, and figuring out how to make formats compatible with their instrument,

The pressure to come up with simple interpretation tools is going to be immense in the future, Sundquist says. One analyst, Isaac Ro of Goldman Sachs, noted in a recent report to clients that current sequencing labs spend just 2 percent of their budgets on computing, but that is fast climbing … Next Page »

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The first few years at NextBio were about serving research customers. Then came Big Pharma and biotech companies.

But now, as genomics has outpaced Moore’s Law in terms of speed and cost improvements, a new type of customer is sniffing around. Physician/scientists are suddenly leaning on NextBio’s software to comb through genomic reports in order to make decisions about personalized medical treatment. Done right, this kind of individualized experiment could build new knowledge for well-controlled studies in the future, and maybe could even help certain terminally ill patients in the here and now.

Cupertino, CA-based NextBio, which has helped scientists analyze DNA data since 2004, has seen this third type of customer emerge in the past few months. Essentially, sequencing of entire human genomes, or gathering other forms of genetic data, has gotten so fast and cheap that physicians at top medical centers, in some cases, are able to incorporate hard-core genetic analysis into last-ditch ideas for treatment. Once the doctor has used a DNA sequencing instrument to generate reams of data on the patient’s genetic profile, they need help merging that dataset with what’s known about other similar patients in the published scientific literature. Theoretically, this layering of information might help a doctor get an idea about how the individual’s tumor might respond to a certain combination of chemotherapy.

NextBio, a cash-flow positive company with 75 employees, already has a long list of academic and industrial customers for its biology software service. Those customers, including Merck, Amgen, and Pfizer, pay hefty annual licensing fees for NextBio software. The main idea is to help them find correlations between data in the public and private domains, says CEO Saeid Akhtari. But this new “translational research” service to physicians on a case-by-case basis, at $2,500 per patient for a single-day turnaround time, has become the fastest-growing revenue segment for NextBio.

Saied Akthari

By 2015, these individual genetic reports will likely represent a majority of the company’s business, Akhtari says.

“We see a new market emerging, that’s more translational. These are people with one foot in research and one foot in the clinic,” Akhtari says. “The need has always been there, but the cost is now low enough [physicians] can afford to generate the data on individual patients.”

This trend, which Akhtari’s co-founder Ilya Kupershmidt will be able to discuss at Xconomy’s “$1,000 Genome” event in San Francisco on Monday, October 24, raises some very interesting scientific and ethical questions. NextBio, for example, is careful to position this service as just added information for physician/scientists in their research, and emphasizes that it’s not intended to be a diagnostic tool—which would raise questions at the FDA about regulation. Many of the physicians who have started using the reports often need to team up with genetic counselors to help with interpreting the data, and communicating it to patients, to make sure there’s informed consent and no misplaced enthusiasm about where it might lead.

Here’s an example of how the system might work today. A patient with metastatic melanoma, a deadly form of skin cancer, might have a sample of their tumor … Next Page »

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