Issue Date: August 18, 2014
Next-Gen Sequencing Is A Numbers Game
Sequencing the human genome the first time cost $3 billion and took 13 years to complete. That was in 2003. Eleven years later, next-generation sequencing technology has brought the single-genome price close to $1,000 and cut the time to days.
These advances have enabled new opportunities for genomic studies. For example, Genomics England, set up by the U.K.’s Department of Health, plans to sequence 100,000 human genomes by the end of 2017. The project will focus on individuals with cancer and rare diseases in the hope of transforming diagnosis and treatment.
Next-generation sequencing, or NGS, is moving quickly into research, clinical, and diagnostic applications. As it does, users and regulators are learning how to handle the technology and the resulting genetic information. While researchers move up the learning curve, instrument developers are close behind. Armed with a dizzying array of technologies, they are competing with each other to introduce faster sequencing, higher accuracy, and even lower costs.
So far, Illumina leads the race. In January, the San Diego-based firm launched its HiSeq X Ten system with a price tag of $10 million. Consisting of 10 ultra-high-throughput sequencers, each capable of generating up to 1.8 terabases of data in less than three days, the system can sequence about 18,000 human genomes per year.
Illumina uses a sequencing-by-synthesis method. After DNA fragments are amplified on a chip, sequencing occurs by synthesizing a DNA strand complementary to the target strand by enzymatically attaching fluorescently labeled nucleotides one at a time. When reactions occur, the labels are optically imaged to identify what was attached, and the cycle is repeated.
Although Illumina says it has pushed the per-genome price under $1,000—including instrument and operating costs, but not overhead and data handling—the X Ten system is cost-effective only for large-volume users. The company has already found at least 13 such customers, including the Boston-based Broad Institute, the U.K.’s Wellcome Trust Sanger Institute, Australia’s Garvan Institute of Medical Research, and the Sidra Medical & Research Center in Qatar.
Even before the X Ten, Illumina commanded more than 70% of the $1.3 billion NGS market, according to the research firm Frost & Sullivan. Two-thirds of that money is spent on reagents and consumables and the rest on instruments sold by Illumina, Thermo Fisher Scientific, Roche, and Pacific Biosciences, usually for between $50,000 and $750,000.
“Newer instruments will generally fall into the category of low- to mid-throughput, benchtop-sized sequencers for both the research and clinical spaces,” says Christi Bird, life sciences senior industry analyst at Frost & Sullivan. They will tend to sell for less than $100,000. Although she expects some market share losses as new firms enter the business, the erosion will largely be offset by expansion of the pie overall. Frost expects the overall NGS market to grow about 16% per year through 2018.
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Sales of X Ten systems no doubt look good on Illumina’s bottom line, but the firm insists that selling a range of systems is important to its growth strategy. It has developed a portfolio to target different markets, applications, and throughput needs, explains Joel Fellis, senior manager for systems and genomic services marketing. “We’re interested in making sequencing much more widely accessible, easier to use, and focused on end-to-end solutions.”
In January, for example, Illumina launched the NextSeq 500, a $250,000 benchtop machine priced between its small-scale MiSeq and workhorse HiSeq 2500 systems. In about a day, the NextSeq can run a whole 3 billion-base genome, 20 prenatal test samples, 16 exomes, 48 gene-expression samples, or 96 targeted panels. “It really is expanding our customer base,” Fellis explains.
Besides a core life sciences analysis market worth about $5 billion per year, Illumina targets the $12 billion research and clinical oncology market, the $2 billion reproductive and genetic health area, and about $1 billion in emerging prospects, such as infectious disease and food. Clinical sequencing will be a “turning point” as it drives the NGS business into diagnostics, Frost’s Bird predicts.
In November 2013, Illumina became the first company to receive Food & Drug Administration clearance for an NGS system used in diagnostics. The approval covers its MiSeqDx instrument, reagents for isolating and copying genes, and gene analysis software. As a result, labs will be able to use the system to develop and validate tests that involve sequencing any part of a patient’s genome. FDA also approved Illumina kits to detect cystic fibrosis-related mutations.
With the new instrument, Illumina is testing the diagnostic waters for the industry in a fast-changing regulatory climate. “Illumina’s recent approval enhances marketing, increases the FDA’s comfort level, and stays ahead of potential shifts in regulatory oversight,” Mizuho Securities USA stock analyst Peter Lawson pointed out in a recent report to clients.
Not surprisingly, Illumina and other NGS companies plan to develop and register more diagnostic systems, as do some leading diagnostic developers that have bought NGS start-ups. The German diagnostics firm Qiagen acquired U.S.-based Intelligent Bio-Systems in 2012. Similarly, in April, the U.S. lab products and diagnostics supplier Bio-Rad Laboratories acquired GnuBio of Cambridge, Mass.
Both the GnuBio and Qiagen NGS systems are being designed to go from sample through DNA library preparation, sequencing, and data analysis. Bio-Rad isn’t giving a timeline for selling a GnuBio system, but beta systems were available in 2013. Qiagen anticipates launching its benchtop GeneReader system for clinical applications in the second half of 2015.
Meanwhile, England-based QuantuMDx is developing what it says will be a low-cost, simple-to-use device for 15-minute bedside diagnoses. It uses disease-specific cartridges and sequencing on nanowire biosensors. It plans to commercialize its handheld, chip-based device in 2015 for, it claims, “the price of a smartphone.”
California-based GenapSys has a bread-loaf-sized device using what it calls GENIUS, for Gene Electronic Nano-Integrated Ultra-Sensitive, technology. The four-year-old company is aiming for a $50 genome and point-of-care diagnostic use. According to analysts, performance data on the system could appear this year, with commercialization targeted for 2015 at a cost of a few thousand dollars.
Until these technologies are ready to compete, Illumina will enjoy the earlymover advantage. Since it started selling sequencers in 2007, its sales have nearly quadrupled, reaching $1.4 billion in 2013. Goldman Sachs stock analyst Isaac Ro believes that Illumina will continue to dominate the NGS market for the next few years.
Thermo Fisher holds second place in the NGS market, with about 16% of sales. Its Life Sciences Solutions business has a decades-long history in gene sequencing and as a result offers several of the major technologies. Applied Biosystems Inc., a predecessor company, supplied Sanger sequencing instruments to decode the first human genome. In 2007, ABI launched its first NGS system based on sequencing by oligonucleotide ligation and detection, known as SOLiD.
Unlike highly accurate but less parallelizable Sanger methods, NGS systems carry out massive numbers of reactions, or sequence reads, at one time. Like Illumina’s approach, SOLiD uses sequencing by synthesis of amplified DNA fragments on either a bead or chip. Instead of nucleotides, it uses fluorescently labeled probes that are repeatedly ligated to the growing strand, optically imaged, and cleaved off. How long these processes can be kept going determines the “read length” that can be sequenced in a run.
The first lower-cost, nonoptical system appeared in 2010 after Life Technologies—now part of Thermo Fisher and formed from the 2008 merger of ABI and Invitrogen—acquired Ion Torrent for $725 million. Its systems use sequencing by synthesis, but with unlabeled nucleotides on a semiconductor chip. The chip electrically senses the release of hydrogen ions when bases attach. The full sequence is read by sequentially adding bases and tracking reactions across millions of microwells.
Today, Thermo Fisher continues to sell all the sequencing products, although NGS is growing the fastest. “The applications really drive what is the right choice of technology,” says Mark P. Stevenson, president of the Life Sciences Solutions unit. Sanger sequencing, although saddled with lower throughput and higher cost than NGS methods, is easy to use and offers long read lengths. “Over the years we have updated Sanger sequencing with faster reactions and newer software,” Stevenson adds.
“If you have just a few samples to run and want to know a small part of the DNA very accurately, then Sanger sequencing is still the best method,” Stevenson says. The industry considers it a “gold standard,” and the method is widely used in clinical diagnostics and for DNA analysis in forensics.
Thermo Fisher reports that it has sold more than 15,000 Sanger sequencers and more than 2,500 Ion Torrent systems. In 2013, the Ion Torrent business generated revenues of about $185 million, according to Goldman Sachs’s Ro. He predicts the business will grow about 30% this year, 20% in 2015, and then about 10% annually through 2018.
Since acquiring the Ion Torrent technology, Thermo Fisher has improved its performance, but the method has “just begun to be optimized,” Stevenson says. Although Thermo Fisher has looked at other technologies such as nanopore detection and even made small investments, they have “some way to go before having the same throughput or accuracy as the Ion Torrent,” he maintains.
Similarly, Illumina remains focused on its core chemistry, according to Ro. “While the company continues to research nanopore and single-molecule technologies, it is not yet convinced that the quality of data can be as high as sequencing by synthesis,” he says. This month, Illumina did receive a $592,000 National Institutes of Health grant to create a sequencing system around a hybrid protein and solid-state nanopore array.
The more gene sequencing technology is used, the more researchers are finding out what it can—and can’t—do. For example, medical and research centers are generating data on millions of genomic variants. Not only has handling all those data become a challenge, but much of the data is not understood. To overcome this, NIH is supporting a four-year, $25 million Clinical Genome Resource program evaluating which variants play a role in disease relevant to medical care.
Whole-genome and large population studies are expected to yield some of the necessary associations. However, a recent Stanford School of Medicine study found that even though NGS methods generally capture, or cover, most of the genome, “depending on the sequencing platform, 10 to 19% of inherited disease genes were not covered to accepted standards for single-nucleotide-variant discovery” (J. Am. Med. Assoc. 2014, DOI: 10.1001/jama.2014.1717).
The problem is even bigger. “Variations in the genetic blueprint are not just confined to single-base changes—the famous single-nucleotide polymorphisms that people go after—but are present at all different size scales,” explains Jonas Korlach, chief scientific officer at Pacific Biosciences and a company founder. Thousands of bases can be involved in structural variations such as insertions, deletions, inversions, and repeats, many of which have connections to cancer, Huntington’s disease, and other disorders.
For example, fragile X syndrome, the leading cause of heritable cognitive impairment and autism, arises from the expansion of a nucleotide repeat sequence in a specific gene. But sequencing the region has proven extremely difficult, Korlach says. Sometimes such DNA simply can’t be amplified. “Those pieces will often just fall out of the sample prep all together, and they will never get to the sequencer,” he says.
Pacific Biosciences’ technology is designed to overcome problems that stem from the gene sequencers themselves. If the region of interest is present many times in the genome, the read length must be long enough to cover the region and more. Otherwise, “it looks like a sky piece in the jigsaw puzzle when you don’t have any tree branch to tell you where it might go,” Korlach says. “The piece is scientifically useless because you won’t be able to place it on the reference map of the human genome.”
Illumina and Ion Torrent technologies have read lengths up to a few hundred base pairs, while Sanger sequencing covers several hundred. In contrast, Pacific Biosciences’ technology has average reads of about 8,500 bases. Some users have reached tens of thousands of bases. Its RS II system costs about $700,000.
Pacific Biosciences’ single-molecule real-time sequencing is a sequencing-by-synthesis approach that doesn’t use an amplified set of DNA fragments and doesn’t require stopping and starting the reaction to add reagents and image results. Reactions on individual DNA molecules are tracked in real time across 150,000 nanoscale wells where isolated polymerases read the DNA and incorporate fluorescently tagged nucleotides. Because detection occurs only at the bottom of the wells, the background noise from the other reactions is reduced.
Stability of the sequencing process depends in large part on the polymerase. Pacific Biosciences has modified a simple bacteriophage enzyme, slowing it down so that it incorporates about three bases per second and its detector can keep up. To prevent inadvertent photo damage that could stop the process, the company has put a protective scaffold on the enzyme.
Although fast and cheap sequencing will yield much useful knowledge, it has come at a price because of the shorter read lengths, Korlach argues. Pacific Biosciences “wanted to build a technology first and foremost that gives the highest quality of sequence information,” he says.
The 10-year-old company launched its first sequencer in 2011 and has since improved its chemistry, detection, and throughput. On target for 70% sales growth this year, to about $47 million, Pacific Biosciences has installed more than 100 systems and has a market share of a few percent. Its business has seen “a nice boost as the platform continues to improve and be useful in several niches,” Mizuho’s Lawson says.
Long reads and high accuracy are critical for de novo sequencing, or deciphering a genome without comparison to an existing version. In February, Pacific Biosciences published a de novo human reference genome, one of just a few ever assembled. It is now focusing on providing nonhuman reference genomes. For example, it is collaborating with Sanger Institute and Public Health England to complete the sequences of 3,000 microbial strains.
To branch into the rapidly growing human diagnostics field, Pacific Biosciences signed a deal in late 2013 with Roche worth up to $75 million. The companies plan to develop a system for clinical use that Roche will sell. Pacific Biosciences will get income from manufacturing the instrument, software, and certain consumables.
In June, Pacific Biosciences also joined with the Dutch diagnostics firm GenDx. The companies will offer products for full-length human leukocyte antigen gene sequencing, which is gaining in clinical use. HLA sequencing is difficult in part because of high levels of sequence homology, but it gives clues to autoimmune and other diseases.
As new technologies such as Pacific Biosciences’ rise, others are falling by the wayside. In late 2013, after an unsuccessful $6.8 billion attempt to acquire Illumina, Roche decided to close down its 454 Life Sciences NGS business and sunset its midrange sequencers by the end of 2016. The business still accounts for about 10% of the NGS market. Roche acquired 454 Life Sciences in 2007, two years after 454 launched the first NGS instrument based on a sequencing-by-synthesis method. It is called pyrosequencing and uses a luciferase to detect the release of pyrophosphate and emit light that is detected by a camera.
In its favor, the 454 technology offered high accuracy and read lengths of up to 1,000 bases. But “from a technological perspective, it had reached its maturity point in being able to compete with some of the newer technologies,” says Vinod Makhijani, vice president and project leader on the business development team for Roche’s sequencing unit. “The throughput of the instruments had pretty much reached its maximum, and we were unable to significantly lower the cost, so the market started to move away from 454.”
Just when it looked like Roche was out of the business, in June it agreed to spend up to $350 million to acquire five-year-old Genia Technologies. The California firm is developing single-molecule, semiconductor-based sequencing. Nucleotides are identified through base-specific tags that are cleaved and detected electrically as they go through protein nanopores. Roche believes that Genia’s technology can reduce sequencing costs while increasing speed and sensitivity.
Later in June, Roche signed a deal to invest up to $15 million in Seattle-based Stratos Genomics. Its sequencing-by-expansion approach aims to convert a DNA template into a larger surrogate molecule using a polymerase and custom expandable nucleotides. The result, which the company calls an Xpandomer, contains reporter molecules that mirror the DNA sequence and can be read off when a single molecule passes through a nanopore. Stratos believes the approach can overcome resolution and signal-to-noise problems seen with other nanopore technologies.
Single-molecule, nanopore, and semiconductor technologies are considered a step beyond current NGS methods. “We obviously wanted to go with platforms that we consider disruptive,” Makhijani says. “All of these technologies that we are looking at offer significant scalability.” Like other new technologies, they will likely enter the research market first and have the potential to evolve into clinical diagnostics.
Other small companies with intriguing but unproven technologies are close behind. Quantum Biosystems, a Japanese start-up, released raw data in February for its silicon-chip-based, direct electrical detection method. About a year ago, England-based Base4 signed a deal with Japan’s Hitachi High-Technologies to build a nanopore-based sequencer.
Most interest has been in the U.K.’s Oxford Nanopore Technologies as it moves closer to launching a new sequencing device. Its MinION uses protein nanopores held in a polymer membrane to sequence single-stranded DNA in real time. Individual bases are identified through changes in electrical current as a linear, single-stranded DNA molecule moves through a nanopore.
The nine-year-old company is conducting an early-access program for the MinION. The disposable device, which is about the size of a USB memory stick, is expected to sell for less than $900.
Still, interest in Oxford Nanopore’s device may have hit a lull. In a survey of gene sequencing system users published in January, Mizuho’s Lawson found that about 50% of respondents expect the firm to provide “the next big leap in sequencing technology.” The number was down from 70% in 2012, “likely due to the delays and slow pace of commercialization,” he says.
Full information on MinION’s performance will come when the access program is complete. In February, analysts heard an early-user report that indicated read lengths were averaging 5,000 bases, but errors were also popping up.
Despite such fits and starts, participants in the NGS field expect the move toward faster, cheaper, and better tools to continue. “There still is a lot of room for prices to drop,” Frost’s Bird says. Rapidly falling sequencing costs don’t necessarily hurt the market, however, because they drive sequencing throughput and make the technology accessible to more users.
In response to strong market growth and new opportunities, the number of companies will expand threefold over the next five years, Bird predicts. Unable to sustain such a large competitor base, the business will then enter a new phase, she says. It will be marked by a mergers and acquisitions race among top competitors and large-company entrants, along with many start-up failures.
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