Precision Medicine (PM) is a transformative healthcare approach for disease prevention and treatment; it uses a patient’s genetic information, medical history, environmental factors, and lifestyle to determine the most effective treatment option that has the least amount of side effects.
PM has already gained traction in the pharmaceutical industry and is poised to become an integral part of the healthcare space. Nearly 25% of new molecular entities approved by the US Food and Drug Administration were classified as precision medicine in 2019, up from a mere 5% in 2005. Many drug developers have turned to biomarkers (biological markers or gene variations present in a patient, or disease such as a tumor), which is the foundation PM uses to generate accurate targets. For example, biomarkers were used in more than 61% of clinical trials for cancer treatment in 2019 compared to just 18% in 2000.
The precision medicine industry can be categorized into six broad segments based on the type of solution offered, encompassing: genetic testing companies, pharmacogenomic test developers, bioinformatics companies, in-vitro companion diagnostic devices, and test manufacturers, drug discovery and development companies as well as multiomics platforms. Overall, there is a high concentration of startups in the genetic testing and drug development segments.
Traditional diagnostic companies, meanwhile, have branched out into companion diagnostics, while big pharma companies such as Pfizer, AstraZeneca, GSK, and Roche, have a presence in multiple segments.
Having opted for early-stage public listings due to the heavy capital needed during the development process, more than 60% of the drug discovery and development startups as well as companion diagnostic testing companies in the industry hub have access to public funding.
A majority of drug development startups (nearly 80%) were incorporated in or after 2015, coincided with the launch of the Precision Medicine Initiative in the US. They have seen rapid advancements in recent years, and several of them are now conducting clinical trials for their drug candidates while partnering with leading incumbents as part of their go-to-market strategy. Larger players in the companion diagnostics segment have also tapped into public funding via initial public offerings to support commercial operations and enhance clinical studies.
The genetic testing startups have raised significant funding from private investors and the segment is dominated by early and growth-stage startups Grail, Tempus, Color, and Helix. Early-stage startups PathAI and Syapse are the highest privately funded companies in the Bioinformatics segment.
Illumina, a next-generation sequencing (NGS) company, is engaged in developing, manufacturing, and marketing DNA sequencing and array-based solutions for genetic and genomic analysis. It is focused on serving the life science research market, including academic institutions and genomic research centers as well as biotechnology and pharmaceutical companies. The company entered the NGS space by acquiring Solexa in 2006. Since then, its sequencing technology aided the decline in genetic testing costs from USD 100 million in 2001 to less than USD 600 in 2020.
It developed a range of sequencing instruments to accelerate research into diseases, drug development, and molecular tests. These instruments have applications in areas such as oncology, genetic diseases, and prenatal testing. Its latest product NovaSeq X Series was launched in September 2022 which can generate more than 20,000 genomes per year. The firm installed more than 17,000 active sequencer systems by the end of 2021.The company opened its first manufacturing site in China in August 2022 to meet the growing demand in the region, and has planned to achieve complete localized production within the next five years.
In terms of acquisitions, Illumina acquired liquid biopsy testing startup GRAIL in August 2021 for a total consideration of USD 8 billion. After a year-long review by antitrust regulators in the US and EU, a ruling in favor of Illumina was announced in September 2022, while the EU blocked the acquisition because it could lead to anti-competitive practices in the market. In response to the decision, Illumina was exploring possibilities of divesting GRAIL and appealing the decision.
In June 2022, the firm acquired the metagenomics company IDbyDNA. The two firms initially partnered in May 2020 to co-market IDbyDNA’s Explify platform, a DNA search engine that can detect and identify more than 50,000 microorganisms and 3,000 pathogens.
Key customers and partnerships
Illumina develops a variety of next-generation sequencing products for in vitro diagnostic use (companion diagnostics) via partnerships with large pharmaceutical companies such as Eli Lilly, Bayer, Bristol-Myers Squibb, Merk, Janssen Biotech and Roche. In October 2022, the company also partnered with big pharma AstraZeneca for a research collaboration to advance drug discovery using artificial intelligence-based genomic analysis.
The company also collaborates with other precision medicine companies, such as Syapse, QIAGEN, and GeneSeeq, and has strategic partnerships with healthcare systems and insurance providers.
Funding and financials
Founded in 1998, Illumina became a public company in 2000, trading on Nasdaq under the symbol “ILMN.” It reported a non-GAAP net income of USD 892 million for the fiscal year 2021, up 34% YoY. Revenue reached USD 4.5 billion for the year, up 40% YoY. For the nine months ended September 2022, the net income turned negative USD 4.3 billion from a positive of USD 0.65 billion due to USD 3.91 billion goodwill impairment charge in Q3 2022 but revenue was up by 5% YoY to USD 3.5 billion. Illumina reduced its expected topline growth to 1%, while non-GAAP earnings per share are forecast to reach USD 2.35–2.50. In November 2022, the company also announced it would lay off 5% of its workforce globally, amounting to over 9,100 individuals in total within Q4 2022.
The company also launched a venture fund called the Illumina Accelerator in 2014 to invest in genomic startups. By September 2021, Illumina Accelerator had invested in 61 genomics startups globally and had raised more than USD 1 billion in funding.
Companion Diagnostics (CDx) tools:
Two main types of incumbents are actively involved in the precision medicine space: 1) traditional diagnostic companies such as Abbott Molecular and Thermo Fisher Scientific that have entered the genetic testing space and companion diagnostics (CDx) for precision medicine, and 2) traditional drug developers such as AstraZeneca, Roche, GlaxoSmithKline, and Pfizer that have added precision oncology and other targeted therapies to their portfolio.
In most instances, big pharma companies and traditional diagnostic companies have developed/built out in-house capabilities to branch out into precision medicine. Some big pharma companies such as Roche and Janssen also have in-house diagnostic operations and expanded into companion diagnostics required for precision drugs. Other incumbents have expanded their precision medicine capabilities and service via acquisitions. There are several collaborations and strategic partnerships that have also taken place between different players in the precision medicine ecosystem including partnerships between 1) traditional drug developers and diagnostic companies where the latter develops CDx tests for the former’s targeted treatments, 2) traditional drug developers and startup drug developers to co-develop, combine, license and commercialize precision drugs or targeted treatments, as well 3) traditional large pharma companies and startup companion diagnostic developers that co-develop CDx tests.
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