The Battle for Gene Sequencing Dominance 产前DNA检测走红背后的基因江湖

摘要: 经历了2015年的热捧,2016年的资本小幅理性回归,2017年上半年的热潮趋缓后,泛泛的基因测序将无法持续吸引资本的目光,未来行业热点在于技术突破,或者商业模式的突破。

11-13 08:18 首页 财经GLOBAL

After a bonanza in 2015, a slight, rational correction in 2016, and a slowdown in the first half of 2017, the gene sequencing industry has remained a topic of considerable controversy for the past few years.


By staff reporter Sun Aimin


Gene-sequencing giant BGI’s listing is one of the most highly anticipated offerings on the A-shares in the last few years. The company also serves as a sort of microcosm for the industry as a whole, which has drawn attention from both investors and the general public.


After a bonanza in 2015, a slight, rational correction in 2016, and a slowdown in the first half of 2017, the gene sequencing industry has remained a topic of considerable controversy for the past few years.


The current development trend of the gene sequencing industry is quite similar to that of the Internet industry before 2000, except that a number of solid apps and sophisticated business models have already emerged in gene sequencing.


But a bubble has formed, and it remains to be seen whether the capital industry can stay calm and gradually recognize the real conditions of the entire market from technological and business perspectives and slow down the speculation. 


War in a Red Ocean Market


Ever since the second generation of sequencing technology emerged in 2006, DNA sequencing costs have declined at a pace faster than Moore’s Law predicted. The cost of whole genome sequencing has fallen from $3 billion to $1,000 and is expected to continue to fall to $100 within a few years. This precipitous drop has sparked a market boom.


More than 200 companies entered the gene sequencing industry in China since the new technology breakthrough just over a decade ago, competing intensely in various sectors. Aside from BGI’s recent IPO, BerryGenomics was listed at the end of 2016 through a reverse merger, and so far another 18 gene companies have landed on the National Equities Exchange and Quotations (NEEQ).


Non-invasive Prenatal DNA Testing is the best known gene sequencing service.


BGI, BerryGenomics, Novogene, Annoraod, and Daan Gene, which were the first to enter the sequencing industry, are now in the upper echelon of the industry. They typically cover the upper, the middle, as well as the lower reaches of the industry. Late-comers in the industry usually focus on niche markets. 


First-tier companies in the industry have established business models, stable cash flows, and product offerings all through the industrial chain. It looks like everything is in place, but a key factor remains missing. 


In China, any genetic testing product to be used in clinical care must be approved by the China Food and Drug Administration (CFDA); while medical institutions that provide diagnosis of genetic testing fall under the jurisdiction of the National Health and Family Planning Commission (NHFPC). So far, the CFDA has only issued registration certificates for non-invasive prenatal testing (NIPT), which means other clinical applications have not yet been approved.


Therefore, some of the companies have no choice but to focus on scientific research.


BGI derived most of its revenue from its founding until 2014 from basic research services. . However, the lack of independent pricing power due to suppression from upstream suppliers and the rise of competitors have forced BGI’s revenue from research down by more than RMB50 million per year between 2014 and 2016.


The whole industry is facing this problem.


The era of easy money-making, when companies could simply buy equipment from upstream suppliers, and serve research and development institutions by offering sequencing reports, is over. To have an edge in future competition, companies need to develop clinical medicine and health apps for end consumers based on sequencing data.


Throttled by Upstream Suppliers


In the United States and other developed countries, the gene sequencing industry is also thriving. Even corporate giants such as Google, IBM, Sony, and Samsung are scrambling to get a foothold. 


For the domestic sequencing industry, the biggest threat from US companies is their superior sequencing equipment.


The global upstream sequencing equipment market is basically an oligopoly of three American companies. As of 2015, three US companies -Illumina, Life Technologies, and Pacific Biosciences - together owned 94 percent of the global gene sequencer market, with Illumina at the head of the pack. 

(Photo: VCG)


Domestic gene sequencing companies have made different attempts to get rid of the control of upstream suppliers. BGI, for example, acquired US sequencer maker Complete Genomics.


Another option has been to “co-exist peacefully” with leading sequencer makers and cooperate with them in sequencer development. BerryGenomics, Annoraod, and Novogene have each signed cooperation agreements with Illumina to develop sequencers together.


Zhongke Zixin Technology Co., Ltd., on the other hand, launched a second-generation BIGIS sequencer in August 2015, which was said to be “the first practical home-grown sequencer with independent intellectual property rights.”


An industry insider said, “It is difficult for China to produce sequencers developed in-house that are better than Illumina’s in the short term.”


Homogeneous NIPT


Non-invasive Prenatal Testing (NIPT) uses high-throughput gene sequencing prenatal detection technology to detect and assist in the diagnosis of clinical diseases caused by fetal chromosomal abnormalities.


NIPT has much higher sensitivity and specificity compared with traditional screening. It uses high-throughput gene sequencing technology to analyze changes in the proportion of each chromosome to determine whether a fetus has a chromosomal trisomy with an accuracy rate of 99 percent or higher while reducing the false positive rate and false negative rate.


However, its path towards “legitimacy” has been quite bumpy.


After being halted by the CFDA and the NHFPC in February 2014, the NHFPC determined the first batch of pilot institutions for clinical application of high-throughput sequencing technology at the end of the same year and approved seven pilot institutions in Beijing and Guangdong. It was not until October 2016 that more pilot institutions were approved.


Based on available data, Caijing estimated that nearly 20 genetic testing companies were offering NIPT services by the end of June 2017.


“The Technical Specification for Prenatal Screening and Diagnosis of Cell-free Fetal DNA in Peripheral Blood of Pregnant Women” formulated by the NHFPC clarifies technical and service standards for NIPT. However, it also has caused products in the market to become homogeneous.


This is one of the main battlefields for major sequencing companies.


Given the same technical standards and routes, second-tier gene testing companies and even start-ups can compete in the field of NIPT.


Which Niche Markets Are “Dark Horses”?


Due to the recent slowdown, ordinary gene sequencing has been unable to attract the attention of capital investors. Going forward, the future of the industry will lie in breakthroughs made in technologies or business models. 


The biggest and most promising market for clinical application of gene sequencing lies in the diagnosis and treatment of tumors, which is estimated by Illumina to have a market capacity of $12 billion.


Gene sequencing technology can be applied to individual tumor therapy in two aspects: one is in detection of cancer susceptibility genes, which uses DNA sequencing technology to confirm the gene that caused a specific disease or to find out whether the subject carries a tumor susceptibility gene and search for tumor-targeted drugs or other appropriate treatment suited for a patient The other is in detection of drug targets for tumor-targeted drugs, which finds out whether a patient carries drug targets before the use of molecular targeted drugs to achieve individualized treatment of tumors, improving medication efficiency, achieving the best results, and reducing treatment costs.


In addition, using ctDNA (cell-free DNA from tumors in patients’ blood) gene detection to dynamically monitor tumors is also a more mature application. As far as early screening of tumors is concerned, Grail is raising funds to accumulate data and build algorithms for different types of cancer in order to enhance the accuracy of tumor prediction.


On March 27, 2015, the Bureau of Medical Administration and Hospital Management under the NHFPC published a list of the first batch of clinical pilot units for high-throughput gene sequencing used to diagnose and treat tumors.


Unlike NIPT, gene testing of tumors is an entire field, rather than a single product. Service products in this field will be highly diversified since there are different types and development stages of tumors, which presents a challenge for regulation.


The Next Big Thing


Jenny Zeng, President of Magic Stone Alternative Investment, told Caijing that both in Silicon Valley and among domestic Internet giants, application of big data from artificial intelligence and machine learning based on genetic sequencing is widely considered “the next big thing.”


In fact, many Internet leaders have already entered the gene market. For instance, Gloria Gene works with JD.com, an online marketplace, to offer genetic health services. IBM, Intel, Alibaba, and Huawei have made genetic big data an important part of the cloud platform strategy. Cloud computing and artificial intelligence combine to facilitate the integration of clinical big data and genetic data, which is very likely to give birth to a multi-disciplinary industry.


In the future, upstream sequencing devices in this field will become smaller, even as small as tablets, mobile phones, or USBs. B2B will change into B2C. In the middle, accumulation of big data combined with gene sequencing technology and data mining technology such as AI, as well as cloud computing, will bring about changes in genetic big data. At the downstream application level, the development of more algorithms will enable clinicians to determine the correlation between genes and various diseases, therefore benefiting diagnosis, treatment, and prediction of diseases.


However, He Dacheng, Doctoral Tutor at Beijing Normal University’s College of Life Sciences stressed that precision medicine based on genetic sequencing and the sequencing industry’s product marketization will inevitably raise questions about the privacy of personal data. He said: “Going forward, laws and regulations are needed to regulate the behavior of market participants in both health management and drug development fields.”


The gene sequencing industry has become a standardized industry accepted by the capital market and the general public. Moreover, the medical industry tends to grow when the economy slows, as capital from the real estate, energy, and other industries may shift to healthcare.


Translator: Xiong Jing

Copy Editor: Michele Scrimenti

Chinese Editor: Wang Xiao

English Editor: Kang Juan


(This article was originally published in the July 24, 2017 issue of Caijing Magazine.Click "阅读原文” at the bottom to read the original Chinese article.)


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