DNA Sequencing Equipment and Services

May 2012

CHAPTER ONE: EXECUTIVE SUMMARY ................................................................................ 1

Introduction ................................................................................................................................... 1
New Systems, Services Create Uncertainty ................................................................................ 2
A Period of Rapid Adoption, But Lower Prices ......................................................................... 2
Further Longer-Term Challenges................................................................................................ 2
Rapid Growth Overall, But Intense Competition ........................................................................ 3
Customers Research Models Evolving ...................................................................................... 4
Established Next-Generation Systems Seeing Slowdown .......................................................... 4
Background .................................................................................................................................... 5
Scope and Methodology.............................................................................................................. 7
Applications and Definitions ...................................................................................................... 7
Types of Samples ........................................................................................................................ 9
DNA Sequencing Strategies........................................................................................................ 9
CHAPTER TWO: SEQUENCER MARKET TRENDS .............................................................. 11
Industry and Technology Trends............................................................................................... 11
Market Fragmenting Into Multiple Product Types and Applications ....................................... 11
Continual Improvements Expand Sequencer Market ............................................................... 12
Acquisitions and Collaborations for New Technologies .......................................................... 13
Patent Infringement, Other Legal Disputes............................................................................... 13
Slow Path to Potentially Large Clinical Markets ...................................................................... 13
Spread of Targeted Enrichment, Sequence-Capture Products and Services ............................. 14
Synergies Appearing Between Life Science Companies Products .......................................... 15
Consumer Genomics, Genetic Testing, Pharmacogenetics Still Entering Mainstream ............ 16
NHGRI Funding, Budget, Periodic Strategic Planning ........................................................... 18
NHGRI Shifts Funds from Centralized Sequencing Centers .................................................... 23
NHGRI White Paper #4: The Future of Genome Sequencing .................................................. 26
Genome Projects and Consortia ................................................................................................ 29
The Cancer Genome Atlas (TCGA) Project ............................................................................. 29
National Plant Genome Initiative .............................................................................................. 33
NSF/USDA Microbial Genome Sequencing Program .............................................................. 38
CHAPTER THREE: DNA SEQUENCING SYSTEMS AND TECHNOLOGIES ................... 45
454 Life Sciences (Roche) ........................................................................................................... 47
Genome Sequencer FLX, FLX+, Junior ................................................................................... 47
Illumina ........................................................................................................................................ 49
HiSeq, HiScan SQ, MiSeq, Genome Analyzer IIx ................................................................... 49

Copyright 2012 Kalorama Information

Reproduction without prior written permission, in any media now in existence or hereafter developed,
in whole or in any part, is strictly prohibited.

Intelligent Biosystems (Qiagen)/Azco Biotech .......................................................................... 51

LI-COR Biosciences 4300.......................................................................................................... 52
Life Technologies/Applied Biosystems ...................................................................................... 52
ABI Prism 310 Genetic Analyzer .............................................................................................. 53
ABI Prism 3100-Avant Genetic Analyzer ................................................................................. 53
Applied Biosystems 3100 Genetic Analyzer ............................................................................ 53
Applied Biosystems 3130 Genetic Analyzer ............................................................................ 53
Applied Biosystems 3130xl Genetic Analyzer ......................................................................... 54
Applied Biosystems 3500 Genetic Analyzer ............................................................................ 54
Applied Biosystems 3730 DNA Analyzer................................................................................ 54
Applied Biosystems 3730xl DNA Analyzer ............................................................................ 55
ABI SOLiD 4, 5500, 5500xl, 5500xl W Genetic Analyzers .................................................... 55
Ion Torrent Personal Genome Machine (PGM) ....................................................................... 56
Pacific Biosciences ...................................................................................................................... 57
PacBio RS................................................................................................................................. 57
Technologies Under Development ............................................................................................. 58
Introduction .............................................................................................................................. 58
Human Microbiome Project Technology Development Awards ............................................. 58
CHAPTER FOUR: SEQUENCING MARKET ANALYSIS ...................................................... 69
Revenues Forecast ...................................................................................................................... 69
Historical Revenues .................................................................................................................... 75
Overall Market Forecast ............................................................................................................ 79
Sequencing For a Clinical Purpose ........................................................................................... 81
Roche ........................................................................................................................................ 81
ABI 82
Illumina .................................................................................................................................... 83
Affymetrix ................................................................................................................................ 83
B.C. Cancer Agency ................................................................................................................. 84
Emory Genetics Lab ................................................................................................................. 85
Bacterial and Viral Applications for NGS ................................................................................ 86
eGenomics ................................................................................................................................ 87
BGI 88
Pacific Biosciences ................................................................................................................... 88
Clinical Sequencing vs. Research Sequencing Markets ........................................................... 89
CHAPTER FIVE: COMPETITIVE ANALYSIS ........................................................................ 93
Introduction................................................................................................................................. 93
Benchtop and Third-Generation Sequencers Bring Instability ................................................. 93
Second-, Third-Generation Battle Still Undefined, Unresolved ............................................... 94
Increased Flexibility with Purchasing ...................................................................................... 95
Copyright 2012 Kalorama Information
Reproduction without prior written permission, in any media now in existence or hereafter developed,
in whole or in any part, is strictly prohibited.

ABI Capillary Electrophoresis Holds Onto Large Segment ..................................................... 95

DNA Sequencer Market Shares ................................................................................................. 95
Smaller Companies Experiencing Struggles ............................................................................. 97
Features and Strengths of Second-Generation Sequencers ..................................................... 99
454 Life Sciences GS FLXStrengths/Advantages ................................................................ 101
454 Life Sciences GS FLXWeaknesses/Disadvantages ....................................................... 101
454 Life Sciences GS JuniorStrengths/Advantages .............................................................. 101
454 Life Sciences GS JuniorWeaknesses/Disadvantages ..................................................... 102
Applied Biosystems SOLiDStrength/Advantages ................................................................ 102
Applied Biosystems SOLiDWeaknesses/Disadvantages ...................................................... 102
Illumina HiSeq/HiScan SQStrength/Advantages .................................................................. 103
Illumina HiSeq/HiScan SQWeaknesses/Disadvantages ....................................................... 103
Illumina MiSeq - Strength/Advantages................................................................................... 103
Illumina MiSeq-Weaknesses/Disadvantages .......................................................................... 104
Life Technologies PGM-Weaknesses/Disadvantages............................................................. 104
Pacific Biosciences PacBio RS-Strength/Advantages ............................................................ 104
Pacific Biosciences PacBio RS-Weaknesses/Disadvantages .................................................. 104
CHAPTER SIX: INTELLECTUAL PROPERTY AND LITIGATION .................................. 105
Developments ............................................................................................................................. 105
Helicos Patent Infringement Suit Against PacBio, Life Technologies, and Illumina............ 106
Intelligent Bio-Systems and Columbia University Sue Illumina for Infringement................. 107
Illuminas Two Lawsuits Against Complete Genomics for Infringement .............................. 108
Illumina Sues Life Technologies Over Ion Torrent Systems .................................................. 108
Class Action Shareholder Lawsuit Filed Against Pacific Biosciences ................................... 108
Affymetrix Dismisses Suit Against Pacific Biosciences and Former Employees .................. 109
Life Technologies Defeats VisiGen Stakeholders After Arbitration ...................................... 109
Catalyst Assets Sues Life Technologies for Infringement ...................................................... 110
Patent Interference Between Life Technologies and Pacific Biosciences .............................. 110
Life Technologies and Illumina Dispute Over Amplification on Solid Surfaces ................... 111
LadaTech Sues Illumina Over DNA Amplification Patent..................................................... 112
Illumina Files 841 Patent Infringement Suit Against Affymetrix ......................................... 112
Affymetrix and Illumina Settle Case Over 243, 432, 531, 365, and 716 ......................... 112
Applied Biosystems and Illumina Claims and Counter-claims Over Sequencing
-by-Ligation Both Unsuccessful.................................................................................... 113
Fluidigm and Applied Biosystems Agree to End Case ........................................................... 115
Beckman Coulter and Applied Biosystems Settle Outstanding Legal Disputes ..................... 115
Cepheid and Idaho Technology Settle Dispute Over PCR Patents ......................................... 116
Enzo Biochem Disputes CalTech Sequencing Patents ........................................................... 116
Huang v. CalTech ................................................................................................................... 116
Applied Biosystems and Amersham plc (GE Healthcare) Settle Sequencing
Patent Litigation ............................................................................................................ 117
Early ABI (Life Technologies) Patents ................................................................................... 118

Copyright 2012 Kalorama Information

Reproduction without prior written permission, in any media now in existence or hereafter developed,
in whole or in any part, is strictly prohibited.

CHAPTER SEVEN: DEALS ....................................................................................................... 121

List of Deals in the Sequencing Industry ................................................................................... 121
CHAPTER EIGHT: CORPORATE PROFILES ...................................................................... 141
454 Life Sciences (Roche) ......................................................................................................... 141
Complete Genomics .................................................................................................................. 145
Illumina ...................................................................................................................................... 146
Life Technologies ...................................................................................................................... 151
Pacific Biosciences .................................................................................................................... 158
CHAPTER NINE: CHALLENGES AND STRATEGIC RECOMMENDATIONS .............. 163
Market Challenges .................................................................................................................... 163
Fragmentation of Market Complicates Competition .............................................................. 163
Lower System Prices and Higher Output Restrain Revenues ................................................ 164
Market Slowed by Data Analysis and Interpretation Bottleneck ........................................... 164
Clinical Applications Present Range of Requirements and Challenges ................................. 166
Threat of New Entrants Despite Increasing Barriers .............................................................. 166
Potential for Saturation in High-End Segments ..................................................................... 167
Services Experiencing High Growth, But Eating Into Tools Companies Revenues ............. 167
Pharmacogenomics, Personal and Consumer Genomics Slowed by Regulatory and Medical
Dogma .......................................................................................................................... 168
Biases at Multiple Levels Raise Issues of Standards, Quality Metrics ................................... 169
Strategic Recommendations..................................................................................................... 170
Intense Competition Requires Constant Innovation ............................................................... 170
Balance Risks by Diversifying ............................................................................................... 170
Prepare for Applications Opened by Decreasing Cost ........................................................... 171
Address Growing International Demand ................................................................................ 172
Create User-Friendliness Through Tailored Software Tools.................................................. 172
Increase Value by Combining with Complementary Technology or Content........................ 173
Explore Demand in Expanding Routine Industry Segments .................................................. 174
Establish Early Connections With End-Users ........................................................................ 174
Move Towards Diagnostic Environment Requires Partnering ............................................... 175

Copyright 2012 Kalorama Information

Reproduction without prior written permission, in any media now in existence or hereafter developed,
in whole or in any part, is strictly prohibited.

CHAPTER ONE: EXECUTIVE SUMMARY ...................................................................... 1

Figure 1-1: DNA Sequencer Revenues, 2001-2011 .............................................................. 5
CHAPTER TWO: SEQUENCER MARKET TRENDS .................................................... 11
Table 2-1: NHGRI Budget by Year Including ARRA Supplement, 2006-2012 ................. 18
Figure 2-1: NHGRI Budget including ARRA (2006-2012) ............................................... 19
Table 2-2: Est. NHGRI Budget by Mechanism, 2012 ($M)................................................ 20
Figure 2-2: NHGRI Budget ................................................................................................. 21
Table 2-3: NHGRI Budget by Activity, 2010-2012 ($thou) ............................................... 22
Figure 2-3: NHGRI Budget by Activity, 2012 .................................................................... 23
Table 2-4: NHGRI Funding, Large-Scale Sequencing Centers 07&12 ............................ 24
Figure 2-4: NHGRI Funding, Large-Scale Sequencing Centers 07&12........................... 24
Table 2-5: NHGRI Funding, Centers for Mendelian Genomics, 2012................................ 25
Figure 2-5: NHGRI Funding, Centers for Mendelian Genomics, 2012 .............................. 25
Table 2-6: NHGRI Clinical Sequencing Exploratory Research Awards, 2012 ................... 26
Table 2-7: Fuge Funding Recipients ................................................................................... 31
Table 2-8: Plant Genome Comparative Sequencing Program (PGCSP)
Awards, FY 2011 ................................................................................................................ 36
Table 2-9: NSF / USDA Microbial Genome Sequencing Program
Awards, 2008-2011 ............................................................................................................. 40
Table 2-10 Other Initiatives and Consortia Using DNA Sequencing, 2012....................... 41
CHAPTER THREE: DNA SEQUENCING SYSTEMS AND TECHNOLOGIES ......... 45
Table 3-1: DNA Sequencer Products/ Technologies, 2012 ................................................. 46
Table 3-2: NIH Human Microbiome Project Technology Devt Awards, 2010 ................. 59
Table 3-3: NHGRI $1,000 Genome Grant Awards, 2009 ................................................... 60
Table 3-4: NHGRI $1,000 Genome Grant Awards, 2010 ................................................... 61
Table 3-5: NHGRI $1,000 Genome Grant Awards, 2011 ................................................... 62
Table 3-6: NHGRI Advanced Sequencing Technology Awardees, 2009 ........................... 63
Table 3-7: NHGRI Medical Sequencing Discovery Awards, 2009 .................................... 64
Copyright 2012 Kalorama Information
Reproduction without prior written permission, in any media now in existence or hereafter developed,
in whole or in any part, is strictly prohibited.

Table 3-8: NHGRI Understanding Genome Function Awards, 2009 ................................. 64

Table 3-9: NHGRI Population Genomics Awards, 2009.................................................... 65
Table 3-10: NHGRI Advanced Sequencing Technology Awardees, 2009 ......................... 66
Table 3-11: Other Initiatives and Consortia Supporting Technology
Development, 2012 ............................................................................................................ 67
CHAPTER FOUR: SEQUENCING MARKET ANALYSIS ............................................ 69
Figure 4-1: Cost of Sequencing a Genome ......................................................................... 70
Table 4-1: Market Forecast by Segment (Systems, Consumables,
Services) , 2011-2016 ........................................................................................................ 71
Table 4-2: Sequencing Market Revenues Growth Rates by Segment,
2011-2016 (Systems, Consumables, Services) ................................................................. 72
Table 4-3: Sequencer Equipment Market, 2001-2011 ($M) ............................................... 76
Table 4-4: Growth Rates, Sequencer Equipment Market, 2001-2011 ($M) ....................... 76
Figure 4-3: Sequencer Equipment Market, 2001-2011 ($M).............................................. 77
Figure 4-4: ABI Sequencing Revenues, Q3 2001 Q3 2008 ............................................. 78
Figure 4-5: ABI Sequencing Revenues, Focus on Q4 2004 Q3 2008.............................. 79
Figure 4-6: DNA Sequencer Market Forecast, 2011-2016: ................................................ 80
Figure 4-7: Breakout of DNA Sequencing Market by Application .................................... 90
(Clinical vs. Research) 2011 ............................................................................................... 90
Figure 4-8: Breakout of DNA Sequencing Market by Application .................................... 91
(Clinical vs. Research) 2016 ............................................................................................... 91
CHAPTER FIVE: COMPETITIVE ANALYSIS ............................................................... 93
Table 5-1: DNA Sequencer Market Shares........................................................................ 96
Figure 5-1: DNA Sequencer Market Shares ...................................................................... 97
Figure 5-2: Pacific Biosciences Quarterly Revenues, 2011-2012 ($M) ............................. 98
Figure 5-3: Complete Genomics Quarterly Revenues, 2010-2012 ($M) ............................ 99
Table 5-2 Comparison of Sequencers Performance, mid-2012 ....................................... 100
CHAPTER SIX: INTELLECTUAL PROPERTY AND LITIGATION ........................ 105
Table 6-1: Patents ............................................................................................................. 119

Copyright 2012 Kalorama Information

Reproduction without prior written permission, in any media now in existence or hereafter developed,
in whole or in any part, is strictly prohibited.

CHAPTER SEVEN: DEALS .............................................................................................. 121

Table 7-1: Deals in the Sequencer Market ....................................................................... 122


Copyright 2012 Kalorama Information

Reproduction without prior written permission, in any media now in existence or hereafter developed,
in whole or in any part, is strictly prohibited.

Two: Sequencer Market Trends

32

The organization has now funded over XXX projects over the last several years.
Some of the projects are outlined in the following table. The funding for phase II
projects was mainly intended to refine the technology platforms funded in the first
phase, with three channels for applicants:
x

Channel 1technology platforms organized under host institutions

Channel 2technology platforms organized as a nodal network

Channel 3research projects

DNA sequencing is specifically mentioned under Channel 2, included along with

the technologies that many laboratories can typically provide. This situation is
contrasted with other technologies included in Channel 1 that tend to be more scarce,
found in perhaps one or two labs in the country. The group intends for Channel 2 type
technologies to be organized into nodal networks, where the nodes coordinate to
provide efficient services but at the same time can excel in their own specialized
areas.
The FUGE IIAction Plan 20072011 specifically included DNA sequencing
of cod and salmon, in participation with international efforts. There are at least two
other large initiatives that seem to have put more resources into sequencing these fish,
the FishPop Trace project and the International Collaboration to Sequence the
Atlantic Salmon Genome, briefly described in the table at the end of this chapter.
One of the areas that FUGE is focused upon is marine research or blue
biotechnology, with one of its goals being to create a biomarine cluster.
According to the Action Plan 2007-2011, xx xxxx NOK was reserved for
strengthening competence in the marine research communities in this area through the
GenoFisk platform. The FUGE II report further states:
Marine functional genomics research will be aimed towards the mapping of
genetic conditions that are relevant for the development, growth rate, feed utilization,
taste, reproduction, stock adaptation and resistance to diseases for fish species which
are strategically important for Norway.

Copyright 2012 Kalorama Information

Reproduction without prior written permission, in any media now in existence or hereafter developed,
in whole or in any part, is strictly prohibited.

Four: Sequencing Market Revenues

76

Table 4-3
Sequencer Systems Market, 2001-2011 ($M)

Year
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

Revenues ($M)
$
372
$
380
$
364
$
333
$
310
$
335
$
385
$
465
$
510
$
535
$
560

Table 4-4
Growth Rates, Sequencer Equipment Market, 2001-2011 ($M)

Year
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
CAGR

%
2%
-4%
-9%
-7%
8%
15%
21%
10%
5%
5%
3.2%

Copyright 2012 Kalorama Information

Reproduction without prior written permission, in any media now in existence or hereafter developed,
in whole or in any part, is strictly prohibited.

Five: Competetive Analysis

95

Increased Flexibility with Purchasing

In addition to the increased flexibility in the features, companies have been
providing flexibility in the purchasing of its systems. When the HiSeq was
introduced, Illumina began to allow customers with recently-purchased Genome
Analyzers to upgrade, with a large promotional discount depending on the age of the
Genome Analyzer. Customers who had just recently received their Genome
Analyzers were given essentially a full trade-in credit. In addition to the upgrades,
Illumina has been offering a trade-in program for labs purchasing a MiSeq who
already own other companies systems or a Genome Analyzer. Some of the
refurbished Genome Analyzers are being offered on lease, reagent contracts, or other
arrangements to lower budget labs.
Life Technologies has been offering a similar trade-in program, whereby SOLiD
systems and CE systems can be traded in for the PGM and Ion Proton. Customers
buying the PGM will have the ability to get full credit towards the Ion Proton.
ABI Capillary Electrophoresis Holds Onto Large Segment
ABIs capillary electrophoresis-based systems are still favored by many scientists
due to precedent and their superior read lengths. But the market seems to be shrinking
slowly. Either third-generation systems, or improvements in second-generation
systems, may deliver a serious blow to CE if they match or beat CEs read lengths.
This process will be slowed by regulatory processes in some customer segments, and
by precedent in others. As a result of Life Technologies introduction of the Ion
Torrent systems, the company has new life, and the threat to ABI is somewhat offset.
ABI will continue to receive significant consumables revenues from the thousands of
CE-based sequencers installed.

DNA SEQUENCER MARKET SHARES

The following tables and figures present the market shares of the DNA
sequencing companies in 2011. As illustrated, Life Technologies leads the market,
Copyright 2012 Kalorama Information
Reproduction without prior written permission, in any media now in existence or hereafter developed,
in whole or in any part, is strictly prohibited.