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Business Growth, Life Science

Whole Genome Cost is Not the Whole Story

Contributed by: Alejandro Gutierrez

The cost of whole genome sequencing is a proxy for the performance of sequencing instruments – but looking at it alone can lead to the wrong conclusions. The obsessive focus on how this cost is plummeting reinforces the impression that competition is entirely cost-driven, implies that there is no differentiation between technologies, creates the sense that sequencing (and more specifically, whole human genome sequencing) is the only application of this technology and that all companies are competing solely for this market, and supports the overly simplistic conclusion that the sequencing instrument business will soon be a profit-free endeavor. Current reality, however, is almost the complete opposite of these suppositions.

Consider the performance proxy itself. The reason why the cost of a whole genome sequence has been chosen is that it provides an iconic, readily-communicated means of comparing what in fact are very different technologies. It is an imperfect measure, to say the least. First, there is no consistent definition of “cost” – some estimates only include variable reagent (materials) costs, others include labor and equipment amortization; some include sample preparation, others include downstream data capture and analysis, others only cover sequencing itself. Second, it is difficult to make apples-to-apples comparisons between platforms because there are differences in quality and coverage. Some platforms must sequence the same base multiple times in order to eliminate errors. Thus, a valid comparison must look at the cost of comparable-quality output. Furthermore, some platforms can cover a larger proportion of the entire genome than others, which requires additional adjustments. Third, cost estimates are rarely transparent and may involve both unintentional fudges as well as valid but opaque methodological differences. In sum, while whole genome sequencing cost is a useful measure to assess the overall cost of sequencing and reflects the rapidly improving performance of the industry, it is a blunt tool for comparing competing platforms, and its widespread use propagates the fallacy that these technologies are easily comparable, even interchangeable.

Even if a more robust cost metric existed, it would only help to understand one aspect of competition in the industry. The basis of competition today focuses on multiple dimensions. Besides cost per base, the most obvious are read length, accuracy (or quality) and throughput. Each of these factors is determined by the underlying technology of the instrument, and they are often interdependent. For example, in some platforms, the use of longer reads results in lower accuracy; and throughput is a key determinant of cost. Other important competitive factors include: instrument cost, flexibility (or scalability), input requirements, and time/effort for sample preparation. Together, all these factors determine the types of applications that are best suited for a given platform.

Besides these intrinsic factors, purchase decisions are also influenced by a customer’s existing installed base of instruments (if any), the reputation of the vendor, the service and support offerings, and the customer’s needs.

It is also important to note that even as the cost of sequencing has dropped, instrument prices have remained relatively stable over the last few years. Manufacturers have maintained prices while performance has increased – a pricing strategy that is familiar from other technologies, from personal computers to iPods. For example, the first version of 454’s sequencer, the GS20, released in October, 2005, was originally listed for $500K and retailed for $400-$500K. The GS FLX, released in January 2007, listed for the same price as the GS20. Top-of-the-line Sequencers sold by Illumina and Life Technologies list in the range of $400-$700K. Together these three platforms represent a large majority of next generation instruments sold to date. Pricing for third generation platforms are (or are expected to be) the same or higher: Helicos’ HeliScope lists for ~$1M, and Pacific Bioscience’s first release is expected to retail for around $600K.

Over the medium-to-long term, it is unlikely that instrument prices will remain stable or even increase in real terms. Unlike the aircraft industry, where very high barriers to entry have enabled a limited number of competitors to raise real prices over time, the sequencing industry will experience a decline in average prices as new entrants and aggressive players seek to gain market share and open up new markets. Already one platform, the Polonator, has been priced at $170K, though at this price it lacks the service and support options offered by the major providers. The pace of this decline will be influenced by the strategic choices made by individual companies.