GenapSys Finally Commercializes Desktop DNA Sequencer
Good things come to those who wait, but we’re an impatient bunch here at Nanalyze. It’s no wonder that we decided to write about disruptive technology rather than spend the time actually creating it. Consider that it took an international team of scientists 13 years and $3 billion to map the genes that comprise the human genome. Another 11 years passed before Illumina (ILMN) introduced its next-generation sequencing (NGS) technology in 2014 that completely revolutionized genetic research and genomic medicine by sequencing whole genomes at speed and scale for $1,000. Silicon Valley startup GenapSys spent the better part of 15 years and a quarter of a billion dollars developing its own DNA sequencing technology, promising to again disrupt the industry. Was it worth the wait?
What is DNA sequencing?
Remember, we’re MBAs and not PhDs, so we’ll give you the thumbnail version (mostly culled from the National Human Genome Research Institute and Stanford’s genetics blog) of what exactly is DNA sequencing and why it’s become an important tool in precision medicine and other areas of life sciences.
Genomes are made of DNA, an extremely large molecule that looks like a long, twisted ladder. DNA contains the code to life, made up of four types of chemical building blocks called bases. Each base is abbreviated with a letter, and the order of the letters in the code provides the specific instructions to build proteins that perform a variety of functions. DNA sequencing is how scientists read the genetic information that is carried in a particular DNA segment. The applications are endless, from genetic testing for hereditary disease and other conditions to profiling pathogens like viruses and bacteria from blood samples to sequencing cancer tumors for precision oncology treatments.
A few other things to note: The first commercial DNA sequencing technology was introduced in the 1970s by a guy named Frederick Sanger, which became known as Sanger sequencing. Despite the ascendancy of NGS, led by Illumina, Sanger sequencing is still in use today. Most sequencing techniques, including the one developed by Sanger, are based on the natural process used by a cell to copy its DNA. However, the platform pioneered by Illumina can sequence an entire genome’s worth of DNA in one experiment using robotics and optics. Other types of DNA sequencing have emerged in recent years, such as nanopore-based DNA sequencing that involves threading single DNA strands through extremely tiny pores in a membrane.
Then there’s GenapSys and its desktop DNA sequencer that is based on electronic detection using semiconductor technology.
A Desktop DNA Sequencer
Founded in 2010 by an electrical engineer named Hesaam Esfandyarpour, GenapSys has raised about $249 million in funding from just a handful of firms to bring its cooler-sized DNA sequencer to market. It raised a $90 million Series C in November, the same month when the company finally unveiled its GenapSys Sequencer to the world. A $75 million venture round followed just a few months later in February of this year, led by Oxford Finance, a venture capital firm focused on healthcare companies. Money from this last round was reportedly earmarked to expand marketing efforts into the Asia-Pacific region.
Weighing in under 10 pounds and retailing for just under $10,000, the GenapSys Sequencer was originally conceived by Esfandyarpour while at Stanford University back in 2006. In an online interview in the BioTechniques journal, he explained how he drew upon his experience building semiconductor chips for wireless communications to develop the concept of measuring the electrical signature of sequencing reactions. At the heart of the platform are the company’s Complementary Metal Oxide Semiconductor (CMOS) chips for electrical-based sequencing. Options include chips with either one million, 16 million, or 144 million sensors. Scientists can sequence anything from cancer panels to whole human genomes simply by loading the right chip.
As Esfandyarpour noted, “Our technology could go beyond DNA; it could read proteins or live cells because the array of sensors does not care what you are examining.”
The DNA Sequencing Market
GenapSys is entering a market dominated by Illumina and its NGS technology, despite a relatively humdrum year in which Illumina has underperformed the Nasdaq. Illumina owns an estimated 90% of the DNA sequencing market at present and is rapidly working toward a $100 whole-genome service with its latest machines. A recent analysis by Morningstar concluded that Illumina will continue to be the leader of the pack for at least the next decade, though “ongoing disruptive technology risk in this field” – such as nanopore-based sequencing – could threaten its long-term hegemony. And there’s the ongoing threat from BGI Genomics (300676.SZ) in China, which sports a market cap of $50 billion (against $45 billion for Illumina) and announced earlier this year that it can already sequence a genome for $100.
GenapSys is betting that every biotech lab in the world will want to own its own low-cost, easy-to-use DNA sequencer. At about $10,000 per machine, a lab only has to run 100 tests for $100 to realize a return on investment. The Silicon Valley startup estimates that only about 5,000 out of 400,000 labs around the world today can afford the sort of machines that Illumina offers. Some quick back-of-the-napkin gives us a total addressable market of $4 billion ($10,000 x 400,000 customers).
In what may be the company’s biggest move to date, GenapSys has partnered with Twist Bioscience (TWST), which provides synthetic DNA that can be used in the GenapSys Sequencer. That means customers will have access to a large library of material to work with across a number of applications, including research in oncology, whole-exome sequencing, rare diseases, viral outbreaks, and drug discovery.
We can see this going one of two ways for GenapSys. There’s the model exemplified by the handheld ultrasound device developed by Butterfly Network that can replace large and expensive legacy hardware at a fraction of the cost. On the other hand, DNA sequencing technology is still evolving, and 15 years and nearly $250 million is a lot of time and money to invest in a piece of hardware in a relatively fluid industry. That’s especially true given that Illumina itself released its own desktop machine for under $20,000 just a couple of years ago – and has a strong brand recognition going for it.
In the end, it will come down to whether GenapSys can offer a superior product at a better price.