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The hunt for genetic gold


GENE RESEARCH
What are the genetic indicators for Alzheimer's or Parkinson's diseases? What genetic explanation is there for why some 80-year-olds with genetic links to diabetes, heart disease or cancer never get sick?

Those are some of the wide-ranging questions that scientists are now probing with the help of rapid-fire genetic analysis systems made by Illumina.
The biotechnology company's business has been booming for more than two years. In the last quarter of 2007, its equipment sales tripled. And for all of 2007, its revenue was $366.8 million, up from $184.6 million in 2006, beating the expectations of analysts who closely monitor the field.

Excluding acquisitions and other one-time items, the company has been profitable for the past two years - joining a relatively short list of moneymaking biotech companies.

Illumina's success, some of its customers say, can be attributed in part to a confluence of major scientific advancements outside the company, such as the mapping of the human genome and studies of which variations on the genome are medically significant.

But also key, they say, is Illumina's ability to predict the questions scientists will want to answer with the new genetic data, and give them reliable tools to do so.

"The more experience I've had with members of the company, the more I've come to realize their technology is exceptionally good, exceptionally robust and produces exceedingly high-quality data," said Jerry Taylor, professor of animal sciences and genetics at the University of Missouri.

Illumina, founded a decade ago, is immersed in one of the hottest areas of scientific research right now: genomics. The field involves the study of all the hereditary information encoded in an organism's DNA, the genome that in humans includes 3.1 billion coded pieces of information.

Genomics was also hot eight years ago, when the Human Genome Project was under way and the first rough draft of the human genome was mapped. But investors who bid shares of genomics companies sky-high in 2000 lost interest when people realized it was going to take more time for researchers to drill deeper into the data before it could be of more use for drug discovery.

That time is now upon us, said Eric Topol, a geneticist who heads the Scripps Translational Science Institute in San Diego. The study of the human genome and its variations has advanced to the point where there were more breakthroughs last year than in several of the past decades combined, he said.

The journal Science said these included the biggest scientific breakthroughs of the year.

"It is allowing us for the first time to learn about the genetic pathways of disease like never before," Topol said. "It is the most exciting time in the history of medicine."

Topol said Illumina technology enables him to look further into the genome and is more reliable than competing technologies.

The company provides three major technologies for analyzing the genome: genotyping, gene sequencing and gene expression.

Genotyping is the process of looking at specific regions of the genome to determine what makes an organism, such as a human, unique: Where does the coded information of one person's chain of DNA differ from another person's?

Gene sequencing is the process of looking at the order in which the coded DNA is lined up on the genome, and where and how the sequence differs.

Studying gene expression means determining when a particular gene is turned on and producing a product, such as a protein that causes a biological process.

After the Human Genome Project mapped out the genome of two men, an international scientific collaboration known as the SNP Project charted where there are areas of variation in the sequence of the genomes. Those areas are called single nucleotide polymorphisms, or SNPs (pronounced "snips").

Another international collaboration, the HapMap Project, told scientists which of these SNPs were genetically significant. Illumina technology was used on that project.

When the first phase of the project was completed in October 2005, the field of genomics started to pick up speed, said Illumina Chief Executive Jay Flatley.

Then, when technology was developed to sequence the whole genome in pieces, "the market took off like a rocket ... going from zero to $100 million," Flatley said. "A huge potential energy was built up for genetic-associated disease studies."

Illumina was born as a result of an expedition by co-founder John Stuelpnagel, then a venture capital investor with the CW Group. A veterinarian by training, Stuelpnagel was sent to find promising technology.

Stuelpnagel said he knew he'd found it in David Walt's laboratory at Tufts University.

Walt had developed an array, or a small tray covered in microscopic wells in which many experiments could be run at once. What made it special was that Walt figured out how to make the chemistry used in each of these wells reproducible hundreds of thousands of times, so that many comparative tests could be run on multiple arrays.

It's complicated stuff, so Stuelpnagel likes to describe Illumina's technology as the pick and ax that other researchers can use in their hunt for gold, meaning new therapies and genetic links to disease.

At first, potential customers did not believe Illumina's claims about the accuracy, specificity and capacity of its systems. So they sent biological samples to Illumina for testing, Stuelpnagel said.

That is how Illumina started earning revenue: by running tests for research labs not ready to buy systems for themselves, he said.

When Illumina went public in 2000, it was one of several San Diego companies offering tools for genetic analysis.

At the time, the biotech investment bubble was starting to burst, and many companies were withdrawing their planned initial public offerings. But Illumina went public in July 2000 for $18, and its shares more than doubled to $39.17.

Within 30 days, shares were trading for about $52. But then they started a steady downward trend, stopping under $3.

"Not because of the company; everything here was moving along as planned," Flatley said. "It was just the market."

Since February 2005, when the stock traded for about $10, the company's shares have climbed past $74. One analyst, John Sullivan of Leerink Swan, expects the price to increase to $81 to $90 a share in the next year.

When Illumina announced in January that it was the first to sequence the genome of an African man, it demonstrated the improving productivity and technology of its analyzer for sequencing, Sullivan said in a research report. It also yielded high-quality data, he said.

Illumina's largest competitors are Applied Biosystems, a Foster City, Calif., company with a market capitalization of $5.6 billion, and Affymetrix, a Santa Clara, Calif.,-based company that has a market cap of $1.31 billion, compared with Illumina's $4.1 billion.

Illumina's latest genotyping technology allows researchers to put DNA samples of two people on one business-card-size chip and look at 1 million places on each of the genomes. The probes that the company puts on the chips are like bait to capture the pieces of DNA in which researchers are interested.

Topol said Illumina has the competitive edge because it is also able to offer gene sequencing technology, which complements the genotyping, he said.

"I'd say this is the hottest area of the research right now," Topol said.

Analysts agree.

The sequencing products "position Illumina as the only life science tools company that can completely address genetic researchers' high-density product needs," Sullivan wrote.

Illumina obtained this technology by purchasing a company called Solexa in January 2007, in a stock-for-stock deal.

"What Illumina did in buying Solexa was a really big, hairy, audacious bet," Topol said. "And it's paying off in a big way. Illumina should have the lead in this area for at least a couple of years."

Stuelpnagel admits the Solexa acquisition was a gamble.

"That's what we are, gamblers," Stuelpnagel said. "And that was a pretty big, important decision for us ... although it was the fourth time we've acquired technology that was just starting to get close to being commercial."

Other companies are working on how they might knock Illumina from its perch in the gene sequencing arena. Pacific Biosciences in San Francisco said it is developing products that could sequence the genome faster and more completely. The company said it hopes to have that technology on the market in the next couple of years.

All the competition and the constant advance of supporting science are driving down the cost of running individual genetic tests. And the drop in price is allowing a wider range of researchers to delve into genomics.

"As the price has gone down, demand has more than made up for it," Flatley said.

Typically, a researcher wants to look at genetic samples of at least 1,000 people with a disease and compare those to samples of 1,000 people without disease, Topol said.

It costs between $300 to $600 to run the samples of one person's DNA through these tests, which means a study can cost several million dollars.

Illumina's machines cost about $500,000, then trained people are needed to run a machine and interpret the reams of computer data it generates.

The technology is good for more than unlocking genetic links to human diseases. It is also being used to improve the food on our plate, and to attempt to drive down the cost of getting it there.

For instance, a consortium of scientists commissioned by the cattle industry has been using the technology to study the genetic differences in cattle.

There are about 100 million cattle in the United States that contribute about $71 billion to the economy, said Taylor, of the University of Missouri and part of the consortium.

"We are working with those animals to see how we might make them produce beef and milk more efficiently, or increase the quality of that product," Taylor said.

Some companies have already used Illumina's technology to create products for the public.

A Mountain View, Calif.,-based company, 23 and Me, sells a kit for $999 that pulls a person's DNA off a cotton swap and sequences it. The company sends customers a report listing the genetic markers that can be linked to a specific disease.

The problem with such tests, Topol said, is what to do with that information. For instance, scientists are still trying to figure out the role that lifestyle and the environment play in whether someone with genetic markers for a disease actually gets it, he said.

Meanwhile, scientists are still discovering genetic markers for disease. Currently there is only one known marker for heart attack, but there could be more, Topol said.

But Flatley countered that "the genetic data is being unraveled so quickly, it's only a matter of time until we know what to do with it."

Illumina's technology will increasingly be used for drug development, Topol said. Companies are already developing drugs that shut off the genes shown to cause disease. Genetic analysis will also help identify which people will respond to a particular drug, Topol said.

Eventually it may become routine to test babies, or a potential spouse, he said. "We are just at the very beginning and just starting to see how important this is."
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