May 1, 2012 (Vol. 32, No. 9)

An Expanding Role in Clinical Applications Opens New Markets

Much of the media and investor attention paid to next-generation sequencing surrounds the instrumentation market. However, the sequencing services market is growing as well, at a projected compound annual growth rate (CAGR) of 28% from 2011 to 2016, an astounding double-digit pace that demands notice.

At the heart of this growth are falling sequencing prices, the increasing capacity of service providers, and new applications, particularly in the clinical realm. With the price of sequencing nearing the much-anticipated $1,000 genome and the clinical industry warming to this exciting technology, the services market is approaching a convergence of favorable market dynamics that are expected to generate a windfall. By 2016, the market for commercial service providers alone is forecasted to reach $550 million.

The number of applications enabled by next-generation sequencing technology has grown significantly since the first platform hit the market. As sequencing technology improves, and the price to sequence a genome decreases, this will enable new applications and the actual and potential customer base will expand.

Service providers now offer a multitude of applications, and the list continues to grow. Such offerings include whole-genome sequencing, targeted resequencing, exome sequencing, DNA methylation, de novo sequencing, RNA-Seq (also called mRNA-Seq or transcriptome sequencing), ChIP-Seq, microRNA sequencing, small RNA sequencing, LncRNA sequencing, and shotgun sequencing.

These applications can be conducted using samples from thousands of different organisms representing a wide variety of research fields and industries. Therefore, the next-generation sequencing services market continues to grow its customer base by increasing sequencing’s applicability to various research aims.

The movement of sequencing into clinical applications, which has started to emerge on a small scale, presents a tremendous opportunity for service providers in the future. Pharmaceutical companies are expected to adopt sequencing for drug-response studies, patient-stratification in clinical trials, and advancing personalized medicine. Physicians can already write prescriptions for the sequencing of clinically relevant genomes.

Exome sequencing has also demonstrated tremendous utility in the clinical setting for diagnosing diseases. Companies such as Illumina, Expression Analysis, SeqWright (now part of GE Healthcare), and Ambry Genetics have achieved CLIA certification in their laboratories, and others are following suit to prepare for the clinical market. While the use of sequencing in clinical applications is at its nascent stage, it is expected to increase as the cost of sequencing further approaches the $1,000 genome milestone.

While the average market price per genome by commercial service providers fell dramatically between 2009 and 2012, this decline is expected to slow from 2012 forward as competitors squeeze out extra costs and count on technology improvement to lower prices. The market price per genome for whole-genome sequencing is expected to hover around $4,000 for the full year 2012.

Approximately 25 companies compete in the U.S. next-generation sequencing services market, with new competitors entering the market every year. Given double-digit market growth and the huge market potential in clinical sequencing, several competitors are expected to enter the market through 2016.

A direct-to-consumer (DTC) sequencing services market, providing exome and whole human genome sequencing direct to individual customers and physicians, will emerge over the next several years. This market will attract existing service providers from both the next-generation sequencing services market and the DTC genetic testing market, and also prompt the emergence of new competitors.

Illumina already launched an Individual Genome Service that provides DTC sequencing and sequencing of clinically relevant genomes prescribed by physicians. Foundation Medicine offers sequencing-based clinical diagnostics, and 23andMe launched a pilot exome sequencing program.

With CLIA certification growing among sequencing service providers, several competitors are likely to move into this space over the next two years. While whole exome sequencing may be the early offering of this new market for most providers, as the market price for a complete human genome plus analysis drops to $1,000 per genome, whole-genome sequencing will be the main service offered. The DTC sequencing services market is expected to take shape over the next five years.

Christianne Bird is a senior industry analyst for the life sciences group at Frost & Sullivan. Contact Britni Myers ([email protected]) for more information.

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