The Ultimate Generation Sequencer. Click on picture to enlarge. |
September 28, 2012
September 21, 2012
Why did the BGI buy Complete Genomics?
Earlier this week,
the world's leading sequencing services company BGI announced a takeover bid
for its competitor Complete Genomics. That Complete
Genomics is being acquired could have been expected, but that the buyer is the BGI
may come as a surprise.
Complete Genomics' technology is well regarded,
and their business model is unique in the industry. Rather than building
sequencing machines and selling them, they offer sequencing as a service. This
means that researchers, and potentially clinicians as well, send their samples to the
company and receive the sequence data back without ever having to enter a lab.
The reason why
Complete Genomics has chosen this path is probably that their technology
benefits from economies of scale, which would not be applicable otherwise.
Complete Genomics charges around $5,000 to sequence a human genome, which is a fair price
considering that researchers save the capital cost associated with
purchasing a sequencing machine, and the hassle of acquiring the expertise to run them.
Nevertheless,
Complete Genomics has been struggling financially for some time. They have not been profitable in any period since they were formed,
and instead they incurred significant quarterly losses that showed no sign of improvement.
This depressed their share price, and as a result made it more likely that they would eventually be taken over.
Why is Complete Genomics doing this?
The advantage for
Complete Genomics of being bought by the BGI is that they're not going to go bust. Understandably, the board of Complete Genomics decided against playing hard to
get and has accepted BGI's offer of £3.15 per share, which is 18% more than the
share's closing price the previous business day. Not all shareholders are happy about this.
Some strongly feel that $3.15 is not enough,
although most analysts seem to disagree with that.
Why is the BGI doing this?
If Complete
Genomics' motivation for this deal is clear, there are at least two potential motivations for the BGI.
The first one is that they are currently dependent on Illumina's sequencing technology. Access to Complete Genomics technology will ease that dependency, and enable them to offer additional value to their current customers.
The first one is that they are currently dependent on Illumina's sequencing technology. Access to Complete Genomics technology will ease that dependency, and enable them to offer additional value to their current customers.
Secondly, although they are the market leader in research services, their presence in the United States is not as strong as it could be. Access to Complete
Genomics' customer list will help them to expand their presence in that crucial market.
Is this good or bad for the market as a whole?
Considering that
Complete Genomics in the medium term would have kept struggling, and in the
long run may well have gone out of business, this deal is probably beneficial
to customers. It means that Complete Genomics technology will still be available,
as the company is likely to continue its operations based at its current Silicon
Valley headquarters.
Thanks to Joshua
Randall at the Sanger Institute for his insights on this.
September 14, 2012
What is going on with China?
State-owned
enterprises make up most of the market capitalisation of China’s stock markets
and account for some of the country's largest companies, according to the
Economist magazine.
State capitalism has also been particularly good at producing national
champions that can compete globally.
The BGI, formerly known as
Beijing Genomics Institute, is a great example of this. It is by far the
largest sequencing centre in the world, and it is busy expanding overseas. It
is currently establishing subsidiaries
in Copenhagen,
Sacramento, and Philadelphia, and it has deals with companies and research
centres around the world.
One reason for its
success is that it can sequence more economically that others. This is probably
due to economies of scale, but also because it benefits from government
subsidies such as a $1.6bn line of credit
from the China Development Bank.
The BGI dominates
Chinese genomics. According to Omics Maps,
there are 201 next generation sequencing
machines in the country. 83 percent of those are owned by the BGI.
Which is not to say that there aren't any other genomics companies. Shanghai Biochip,
also trading as Shanghai Bio Corporation, is one of
them. It offers diagnostic products, research supplies, and research services that include DNA sequencing. Its English website
also has a section on personal genetic testing, although this is still under
construction.
A second example of
a Chinese genomics company is Beijing Berry Genomics, which
performs pre-natal diagnosis by sequencing. It is financed by Legend, a Chinese
venture capital firm that is also a controlling shareholder of the computer manufacturer Lenovo.
The company develops technology that can detect trisomy 21 and other chromosomal abnormalities in foetuses during pregnancy. It seems that it is using a sequencing-based
method that is similar to that of market leader Sequenom.
Overall, there is plenty of government investment in genomics and in particular in
sequencing in China, and at least for the BGI, the investment seems to pay off
for the time being. The ultimate test of this will however be whether the BGI will be able to pay back its $1.6bn loan when it is due in 2020.
Update
On September 17th, the BGI agreed to buy the sequencing company Complete Genomics for $118, affirming its dominance of the sequencing services field.
Other countries, other genomics
September 7, 2012
Which is the best 'ome of them all?
The battle of the
'omes is on, and the winner is decided by Google and
PubMed, the biomedical publication database:
'Ome sweet 'ome |
The victory of the
genome is of course a foregone conclusion. Besides that, it's surprising that
the reactome gets so many Google hits, although a PubMed search returns less
than a hundred publications containing the term.
I might compile the
same figure in a year or so to see if the ranking has changed. In the meantime,
have a look here
for a critique of 'omics that goes a bit deeper.
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