$1,000 Genomes, Here We Come

A decade ago, everyone thought that sequencing the first genome would lead to an astounding number of cures for diseases. Human Genome Sciences' (Nasdaq: HGSI  ) investors landed a 10-bagger in a bit less than a year. Now, the hype is back -- but this time, it may be justified. One genome may not have done it, but cheap sequencing should make new cures a reality.

Three years ago, it cost $1 million to sequence a human genome. Stock Advisor pick Illumina's (Nasdaq: ILMN  ) newest sequencer, HiSeq 2000, which it introduced Tuesday, has that cost down 100-fold, to less than $10,000.  Illumina's stock was up nearly 16% on the day of the announcement.  

In addition to producing cheap sequences -- well, "cheaper," since it's still out of my price range -- the HiSeq 2000 is also fast. The machine can produce data about 3.5 times faster than Illumina's latest update to its older Genome Analyzer machine.

With competition from upstarts like Pacific Biosciences and larger companies like Roche and Life Technologies, Illumina needs to get machines into the hands of researchers as quickly as possible. In addition to selling the sequencers, Illumina sells the reagents to run the machine -- a nice razor-and-blade model. At a cost of more than half a million dollars for each machine, researchers are likely to continue using the HiSeq 2000 even after another company develops a faster and cheaper model -- but only if they've actually bought a machine. Illumina is off to a good start; 128 machines are already sold to an international genomics institute, BGI. They're expected to begin shipping next month.

The real winners
While yesterday's announcement is a great one for Illumina -- until another company comes along and beats it on speed or cost -- the real winners in the quest for cheap sequencing are the people who will use the sequences.

The initial beneficiaries will be companies like Knome, Navigenics, and 23andMe, which analyze customers' genomic sequences to tell them what their DNA says about their characteristics. Thousands of genetic differences have been linked to certain traits -- medical ones like susceptibility to cancer, and more benign ones like the type of earwax you have -- but sequencing additional genomes is bound to help researchers discover new genetically-linked traits.

As more medically relevant traits are discovered, the fields of electronic medical records and sequence analysis will collide. Expect Google (NYSE: GOOG  ) , Microsoft (Nasdaq: MSFT  ) , WebMD, and other companies with patient-focused health-record websites to add genome sequences to the information they're willing to store.

Down the line, drug companies will be the true beneficiaries of cheap sequencing. If you look at the profile of many drugs, you'll find that they work well on a subset of patients and don't work well for other patients. Some of that may be due to chance, but there's likely a genetic component to it as well.

For instance, a variation in a gene doesn't convert Bristol-Myers Squibb's (NYSE: BMY  ) and sanofi-aventis' Plavix from its inactive form to its active form, and causes patients to not respond to Plavix at the normal dose. For Amgen's (Nasdaq: AMGN  ) Vectibix, and Erbitux from Eli Lilly (NYSE: LLY  ) and Bristol-Myers, the drugs' effectiveness is determined by a mutation in the tumor that the cancer drugs are treating. 

In both those cases, the genetic differences that cause decreased effectiveness were discovered after the drugs were on the market. Essentially, the drugs worked so well that they were able to show a clinical response even when nonresponsive patients reduced the average effectiveness.

But as more drugs and better drugs are developed, that average response rate continues to increase, and drug companies need to clear an ever-higher standard. Removing non-responders from the trial can help them do just that. Today, discovering genetic variations that result in non-responders can be costly, but sequencing the genomes of a thousand patients in a clinical trial won't be that expensive just a few years from now.

Keep an eye on the cost of sequencing, Fools; it has the potential to make you rich faster than you'd expect.

Editor's note: A previous version of this article misstated the HiSeq 2000's price. The Fool regrets the error.

Illumina is an active Stock Advisor pick. Let Fool co-founders David and Tom Gardner show you their top stock picks absolutely free with a 30-day trial.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Microsoft is an Inside Value pick. Google is a Rule Breakers recommendation. The Fool has a disclosure policy.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 14, 2010, at 11:12 AM, dcsilver wrote:

    How can you not mention HLCS? A CAPS 4 star stock and a main competitor of Illimuna.

    Helicos BioSciences is a life science company focused on innovative genetic analysis technologies for the research, drug discovery, and diagnostic markets. Helicos' proprietary True Single Molecule Sequencing, tSMS(TM), technology allows direct measurement of billions of strands of DNA enabling scientists to perform experiments and ask questions never before possible.

  • Report this Comment On January 14, 2010, at 2:18 PM, TMFBiologyFool wrote:

    Yes, I did gloss over Helicos, mostly because it didn't fit nicely in the two competitor categories (it's not really an upstart since it has a sequencer on the market and it's certainly not a large company).

    I have written about Helicos' technology before. Unfortunately I can't keep every reader happy every time.

    -Brian

  • Report this Comment On January 14, 2010, at 3:21 PM, dcsilver wrote:

    My question is how does Helicos technology and much cheaper DNA sequencer play into the mix. The stock has been all over the place the last few months....

  • Report this Comment On January 15, 2010, at 10:51 AM, madmilker wrote:

    well, my money is on BMY.

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