Hype and biotech go hand in hand, but genomics takes exaggeration up a few extra notches. When genomics companies fail, they tend to crash especially hard. Yet every now and then, a company that’s monumentally hyped falls flat and then figures out a way to become a solid, if not spectacular, player.
That’s the storyline that’s slowly taken shape at Pacific Biosciences.
Menlo Park, CA-based PacBio (NASDAQ: PACB), readers may recall, had a few minutes of fame on Wall Street. Backed by big-name venture capitalists like Kleiner Perkins Caufield & Byers, it debuted with an $800 million market valuation on its IPO day in the fall of 2010.
Of course, PacBio seduced investors with a promise of technology revolution. Forecasts were that it would sequence whole human genomes for $100, in about 15 minutes, by 2013. The “third-generation” of sequencing had arrived. Medicine, we were told, would be transformed.
That was 2010. None of those predictions came true. Not even close. Few scientists bought the $700,000, one-ton instrument. The few who bought the bulky machine let it gather dust. Competitors sprinted ahead. Layoffs were made. New management was summoned. Two years after the IPO, PacBio had a market valuation of less than $70 million and a technology value of $0. Investors appeared to have flushed $600 million of cash down the toilet.
When I visited newly installed CEO Mike Hunkapiller in his office in the fall of 2012, I knew he was a historically important figure in the development of genomics. I also thought he was an understated, down-to-earth guy with the kind of experience necessary to execute a turnaround. But cash was running low, and so was confidence in the community of genomics researchers. I thought it was time to get the company obituary ready.
Turns out, PacBio didn’t die. It may never threaten the dominance of Illumina (NASDAQ: ILMN) in genomics, and may never become profitable. But in Hunkapiller’s do-what-you-say-you’re-going-to-do-and-grind-it-out way, PacBio has improved. Its instrument now has a niche. Illumina is miles ahead on the factors that count most for customers—speed, cost, and sequencing throughput (bandwidth). But PacBio is making a name for its high-accuracy genomes, its ability to detect structural genetic variations (like RNA transcripts) that other tools can’t, and for creating high-quality genomes of small organisms like bacteria, viruses, and worms. Last fall, PacBio’s stock surged when it struck a deal with Roche to develop technology for the lucrative market to come in genomic diagnostics, where some of PacBio’s technical advantages might be more highly valued.
“It’s going to be very, very hard for anybody to take on Illumina,” says Keith Robison, a computational biologist with Cambridge, MA-based Warp Drive Bio, who uses the various sequencing instruments and writes the Omics! Omics! blog. “But PacBio is a pioneer in finding applications that don’t work well on Illumina.” If you are a scientist working in one of those areas, this is a big deal. Robison adds: “In my world, the microbial world, we want high-quality genomes, and PacBio is almost the only game in town.”