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Business Growth, Life Science

How Long For Helicos?

Contributed by: Alejandro Gutierrez

In mid-April, Helicos Biosciences, the first company to market a single-molecule, next generation DNA sequencing platform, announced its financial results for 2009. Yesterday it announced poor Q1 results and restructuring plans. The company faces a precarious future as it burns through its cash reserves and strives to generate new equipment sales. Its auditors have questioned its viability as a going concern.

Why has Helicos struggled so much – and why has it not been able to convert its first-mover advantage in single-molecule sequencing into a successful market entry? The causes of the firm’s troubles are mainly strategic, and can be traced back to several key choices around technology, market selection and pricing.

Technology

Although Helicos introduced a key innovation in its single-molecule approach, its platform is, in most other respects, a second generation platform akin to Life TechnologiesSOLiD or Illumina’s GA II. It offers short reads of up to 35 bases, with throughput comparable to that of the GAIIx and SOLiD 3. Like these platforms, the HeliScope uses a step-wise process to add nucleotides, which results in extended run times.

Helicos’ single molecule technology does carry important advantages. It eliminates the need for sample amplification in preparation for sequencing, which results in:

  • A simplified and expedited workflow;
  • A reduction in reagent costs, since fewer enzymes and nucleotides are needed when sequencing single molecules; and
  • Elimination of the biases (and consequent inaccuracies) introduced by amplification.

On the other hand, an important drawback to single molecule sequencing is a higher raw error rate. This can be overcome with repetitive sequencing, but increases the cost per base for a given accuracy rate, offsetting some of the gains from lower reagent costs.

In relation to other second generation platforms, Helicos’ read length and throughput have remained stagnant, while the SOLiD and GA platforms, and the HiSeq 2000 in particular, have continued to improve – dramatically so in the case of throughput.

Market selection

From the start, Helicos decided to target the high end of the research market – the same segment that has first adopted every new sequencing technology to appear over the last five years, and one that offers fertile ground for experimentation with new systems. Unfortunately, the research market is one where Helicos’ most prominent point of differentiation, its single molecule technology, did not offer a compelling value proposition – at least not when examined relative to read length and throughput. Compounding this problem was Helicos’ decision to price its system at a roughly 100% premium over that of its competitors – which further deflated its value proposition.

In targeting the high-end research market, Helicos decided to compete against a set of entrenched and much better funded competitors: Illumina and Life Technologies, and to a lesser extent, 454 Life Sciences. Heading into this battle, Helicos was handicapped by several disadvantages beyond its weak value proposition:

  • A lack of brand name recognition or reputation;
  • Significant uncertainty surrounding its start-up status and its ability to stand behind a $1M investment; and
  • The need to build a sales force from scratch.

Given all these factors, it is not surprising that Helicos’ was unable to drum up substantial sales after it launched. According to the firm, it had received orders for a total of just 10 instruments as of December, 2009.

New strategy

Helicos can be credited with not only recognizing its predicament but also with the decision to abandon its foray into high-end research and refocus on the clinical diagnostics market. In this market, in theory, Helicos’ value proposition is stronger. Unlike in research, single molecule sequencing and the lack of amplification are attractive selling points for clinical testing. Last October Helicos announced the sale of an instrument to Correlagen Diagnostics, and followed that up with a PR push to explain its new strategy.

It is likely, however, that this refocusing will not yield the results Helicos needs to survive. The clinical diagnostics market, while potentially attractive for sequencing, is relatively immature compared to the research market. Among the obstacles to the emergence of this segment as a market for next generation sequencing are: a relatively limited number of clinically useful, NGS-enabled tests; an uncertain regulatory framework; and a less-than favorable reimbursement environment.

Furthermore, the clinical diagnostic market will place a premium on various performance parameters which instruments designed for the research market usually do not address: ease of set-up and use, manageable infrastructure requirements, standardization of inputs and outputs, and rapid turnaround times (the average run on a Helicos takes 8 days).

Time is short

Even as Helicos pursues its new strategy, the arrival of new platforms on the market will make success ever more difficult. Pacific Biosciences has launched a long-read, single molecule technology that provides real time (as opposed to step-wise) sequencing and can thus deliver results much faster. Life Technologies has also announced a long-read, single molecule technology. Illumina, for its part, is working on a new platform aimed at the clinical market.

Helicos has stated that it needs to raise substantial capital in 2010 in order to continue to operate – and it has now laid off half its staff. It may need to consider even more radical strategies.