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.

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.


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

This post is a part of a series on genomics in different countries, which has already covered Canada, France, Germany, and Japan.

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.