Friday, 16 November 2012

How do genomics companies make money?

Genomics is a relatively young discipline, and it is also quite fragmented. There are bacterial genomics, cancer genomics, agrigenomics, pharmacogenomics, and so on.

Which leads me to this post's question: Which sub-discipline of genomics spins out the most companies? This is important, because it is related to the question of why we think that genomics is useful.

Main source of income for a panel of 72 genomics companies. More than half of companies generate their income by selling to the research community.

The result is that almost half of all genomics companies exist to support either academic or commercial research. I'm not an economist, but this is hardly what I would have expected from a mature and self-sustaining industry. Selling mainly to researchers should probably not be the long-term goal of the genomics industry as a whole.

The second biggest category is Genomic Diagnostics. This category would be even bigger if I hadn't split out Cancer Genomics separately. The implication is that most people think that the best way to make money in genomics, other than selling to researchers, is to develop diagnostics.

To decide whether this is true, it would be necessary to compare the sales and profit margins of the companies in my sample. This could warrant another blog post, but I'm not confident that I have enough data to make a call.

Methodology

The panel of genomics companies I used is the same than I used in previous analysis. It consists of 72 companies, all of which are listed on Crunchbase. All of them have received at least some third party funding.
 
I assigned a label to each company, depending on how they make money and who their customers are. If the customers are research labs or other genomics companies, I assigned the label Research Services and Equipment. To all remaining companies, I assigned one of the other labels, depending on how they claim to make most of their money according to their website.

17 comments:

  1. For a larger sample you could start here:

    http://grouthbio.com/Genome_Software_Service.php
    http://grouthbio.com/Genome_Inst_Supplies.php

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    1. Hi Christian,

      Thank you for your suggestion.

      Routh's list is more complete, but it contains lots of companies that are relatively small and have never received any external funding, as opposed to the companies in my Crunchbase list. I think having venture capital funding as an extra filter is useful to address the question I asked in this post.

      If I go ahead with analysing sales and profit margins, I'd probably use Routh's list though.

      Best wishes,

      Art

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  2. Art, appreciate the analysis, interesting stuff.

    "I'm not an economist, but this is hardly what I would have expected from a mature and self-sustaining industry. Selling mainly to researchers should probably not be the long-term goal of the genomics industry as a whole."

    I don't think that the genomics industry is in any way mature and has not even approached an end point.

    Genomics is maturing, yes, but NGS has introduced massive disruption and opportunity in The Way Things Are Done. It would be far more appropriate in my mind to consider scientists the "early adopters" for these technologies. Full commercialization and market pull in the diagnostics space (Personalized medicine, pharamcogenomics, food/water/pathogen monitoring) are all coming.

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    1. Thanks for commenting.

      When I did the analysis above, I was surprised how many companies were selling to scientists or other genomics companies. I never had expected genomics to be mature and fully agree with your assessment of genomics as a maturing industry.

      But the lack of companies to "outsiders" was more pronounced than I would have thought. Hence my choice of words.

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  3. Art, I think it's a stretch to call genomics a "mature industry". It may be self-sustaining but it's also changing fast with a high rate of technological innovation.

    If you think of genomics as a suite of tools for interrogating living organisms, it make sense that research would be a focus. I would also expect that much of the work done in the other categories could also be called research. The exception may be diagnostics, but even there you'd see a lot of work being done outside the regulated clinical lab environment, i.e. not being used to assay patient samples for physicians. I don't see this as a problem with genomics companies, it's just indicative of the deliberate pace of technology adoption outside research laboratories.

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    1. Hi Brian,

      Thanks for commenting. I would like to clarify one point in response to what you wrote: "I would also expect that much of the work done in the other categories could also be called research".

      I consider it likely that all of the companies in my sample do research of some sort, but this is not what this is about. Instead, I asked who they sell to: Either other researchers, both academic and commercial, or non-researchers such as healthcare providers.

      Thanks,

      Art

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  4. Hi Art and Anonymous,
    I agree. It's both young and full of early adopters. This been said, I think that companies bringing more than "genome" will do better. Yet we could see soon emerging the two models: widespread vs specialized. Illumina vs Biomarkers-only firms.

    I would also add that, on top of diagnostics space cited above, other markets exist: data accessibility, long term storage, law issue, healthcare reimbursement...

    Looking forward more post from you Art

    Pierre

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    1. Hi Pierre,

      Thanks for commenting. I guess like any other industry, genomics is creating its own ecosystem of companies.

      In a way, how I approached this question may be misleading. If you think about e.g. the automotive industry, there are hundreds of suppliers of car parts, consultancies, IT specialists, supply chain management consultants, and so on, but only a handful of actual car manufacturers such as Volkswagen or Toyota. Which means that most companies in the automotive industry sell to companies in the same industry. This doesn't mean it's not a mature industry.

      Nevertheless, I'm still confident that for genomics the conclusion holds.

      Regards,

      Art

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  5. Hi Art, thanks for analysis, will be interesting to watch as companies expand from the research category into others in order to capture more of the value chain.

    Sorry for this administrative question, but how can I subscribe to your blog so that when you post it sends me an email?

    Thanks, Elaine

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  6. Hi Elaine, thanks for your comment.

    If you have a Blogger account, you can add my blog to that for automatic updates whenever there's a new post. I also advertise new posts on Twitter and Google+

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  7. Hi Art. I am not able to easily identify the 14 companies that use genomic approaches for diagnostics. Do you have a list you'd be willing to share?

    Thank you.
    Momo Vuyisich

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    1. Hi Momo,

      The 14 companies from my panel that do self-described genomic Dx are:

      CardioDx
      Crescendo Bioscience
      Exagen Diagnostics
      Genomed
      Inform Genomics
      Mira Dx
      Oryzon Genomics
      Riley Genomics
      Sequenta
      Vacunek
      XDx

      Hope that helps,

      Art

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  8. That is great. Thanks for all the useful info!

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  9. I think the analysis in this post in nonsensical, because there is no such thing as a "genomics company". This is like asking whether "molecular biology companies" or "immunology companies" make money outside their field - such companies simply don't exist and genomics is a scientific sub-discipline, but not a market. There *are* biotech companies or drug development companies, for example, and these companies certainly do make a lot of money in general and do not sell only to researchers.

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    1. Hi, and thank you for your comment.

      Whilst I admit that "genomics company" is not the most elegant term, I think it does make sense to group companies that are active in the field together and to analyse them in the way I have done.

      From your comment I'm not sure whether you object to calling these organisations "genomics companies", or whether you think that they don't have anything in common and shouldn't be grouped together in the first place. Maybe you could clarify?

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    2. Hi Art. This is Anon from the previous post. To reply: neither in this post, nor in the other post to which you refer, can I find how you get the list of companies from crunchbase *exactly*. I assume you searched for companies containing genome/genomics in their name or description and then pruned manually to get down to 72 entries?

      Irregardles of this, the problem I have with your analysis is that I have absolutely no idea what a "genomics company" is supposed to be. I have never heard this term and I am a genomicist. I am not critizing the choice of words. What I am criticizing is that you have an arbitrary chosen label and then group companies under this label, then make statements about them.

      For example, imagine I would claim there is something like "ACME companies". Then I select companies how I see fit and group them under the label ACME companies, then make statements about them. That's basically what is happening here. I think it's easy to see how with your methodology, one can arrive at any desired conclusion.

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    3. Hi again,

      You've convinced me that I need to define more clearly what a genomics company is. I might write a post about this.

      But: This doesn't invalidate the post above. You write that by being selective on which companies I include I could arrive at any desired outcome. This may be true in theory, in practice this would only be a concern if I somehow had an agenda to show that most genomics companies make money from other companies in the same sector. Which I don't.

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