Oct. 16, 2006 | Last month, at an industry conference, I heard a number of distinguished speakers discuss the prospects for the $1,000 genome and the critical path to get there. Everyone in the audience seemed excited and asked many compelling questions to sort out exactly when we would arrive at that point and what will the world look like then. And it struck me that perhaps we were debating the wrong question. But first some background.
Back in 2003, the NIH estimated that by 2008 it would cost $100,000 to decipher the human genome. Companies such as Solexa and 454 argue that we are poised to reach that threshold by early next year. Today we are able to identify a host of genetic mutations and in many cases correlate them to an individual's phenotype. Speakers at the conference I attended speculated that by 2013, we would be able to illuminate 90 percent of an individual's genome for a mere $1,000. Clearly we are constrained by storage limitations and the computational challenges of so much data. But those issues most people believe are solvable - albeit at a meaningful cost.
There have been extraordinary advances recently in sequencing technologies and platforms, which have changed little since the dideoxy sequencing method was conceived in the late 1970's. Many of the advances have leveraged off-the-shelf components and massively parallel "sequence by synthesis," which account for the dramatic decrease in costs. The tremendous advances in computing power have also contributed much of the cost savings. And now the tremendous relevance of many of the bioinformatics tools should continue to drive this productivity trend forward. That productivity will no doubt be spurred by the announcement this month of a $10-million X Prize that will be bestowed on the person or group that makes the most profound advance to routine $1,000 genomic sequencing.
But as a venture investor who really wants to believe in the $1,000 genome, I have a dilemma. I perceive a yawning gap between where we are today and our collective ability to create valuable, important and "self-financing" companies. At some point, all viable companies need to be able to demonstrate revenue models that outstrip the amount of capital and expenses required to drive those revenues streams.
Defining the Holy Grail is critical. Industry is focused on the $1,000 genome - it makes for good press, and it's a great sound bite. But investors want to see revenue and profits. The goal of simply reaching the $1,000 genome threshold inherently lacks a business model. What are the applications or products or services that will be unleashed by reaching that milestone?
So therein lies the dilemma: investors see a gulf between investments today in those companies striving to achieve that objective and what the therapeutic benefits will be. Investments in bioinformatics and tools companies that are focusing on solving this issue could end up being too narrowly defined and serving a finite group of customers. The challenge is for vendors of these products to speak to a much broader audience and help the investor better understand down stream revenue opportunities.
Tell me how to cure cancer, not how to sequence the genome. What are the "applications" that are created with the ability to affordably sequence a patient's genome? While everyone presumes great benefits will be realized, the clarity and articulation of those benefits remains vague - particularly the business models to realize those benefits. Although not ideal, there is a loose parallel to the Internet that has some relevance. The Internet was conceived and built decades before the valuation explosion at the end of the 1990's - it took entrepreneurs with great vision and the ability to compellingly share those visions to develop the applications that were subsequently unleashed by the Internet.
Recently, Kathy Gibson, VP of Research Informatics at Pfizer, told me: "We have re-organized by process instead of function." She talked extensively about the "engineered processes" at Pfizer and how the company was re-oriented in order to be better aligned with market opportunities and demands. In addition to driving meaningful productivity improvements, Gibson was focused on how to drive greater therapeutic developments in light of the tremendous new sources of biological and chemical data.
So bring it on. I welcome the $1,000 genome and applaud all the great work to get us there. But in order for a venture capitalist to make money, please tell us what we are supposed to do with it!
Michael A. Greely is managing general partner of IDG Ventures. E-mail: mailto:firstname.lastname@example.org.
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