Sequoia-backed genomics startup, others face who-pays hurdle

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In recent years, young software and bioinformatics outfits have emerged to deliver on part of the promise of making puzzling genomic data useful in patient treatment. Marquee venture investors have backed the efforts, and genomics vets have stepped up to lead the startups. Yet despite some technological and initial financing feats under their belts, the companies need to answer some key questions. For example, who pays?

During an interview with mendelspod.com, Bio-IT World Editor-in-Chief Kevin Davies highlighted the excitement in the growing genomic interpretation sector and the use of analytics to uncover the genetic causes of mysterious illnesses. As one of the top chroniclers of the bioinformatics game, Davies knows the ins and outs of bio software companies as well as anyone, and his comments signal some challenges ahead for the ventures.

He had a sobering message about the commercial challenges facing the genomic interpretation crowd. "None of these companies are going to survive too long if they don't figure out reimbursement," Davies said, "and that may be a challenge for the industry as a whole rather than with individual companies."

Seeking new treatments for the sickest patients, medical experts have hunted for answers from the genomics field. While sequencing someone's DNA has become fast and cheap, the data from sequencing machines requires intensive analysis and interpretation to lead to any worthwhile understanding about what the info means about the health of the person. Enter the recent field of analytics outfits such as SV Bio, Personalis, Omicia and others with new computational methods of extracting actual knowledge from the genome, in some cases aiding doctors in making diagnoses that could lead to improved treatments and patient outcomes.

Venture firms and industry veterans have enthusiastically bet on some of these startups. For instance, Foster City, CA-based SV Bio (or Silicon Valley Biosystems) found early backing from legendary VC firm Sequoia Capital and aims to partner with clinicians to aid diagnoses. And Personalis CEO John West, who sold a sequencing outfit called Solexa to Illumina ($ILMN) for $600 million in 2007, is among many genomics veterans who have joined or founded new analytics groups.

Earlier genomics companies have managed to find ways to make money from the healthcare system, but many of them burned out after failing to find a commercial foothold. As Davies pointed out, Genomic Health ($GHDX) found its way after successfully navigating reimbursement for its genetic testing business in oncology.  

Davies spoke about this field ahead of his annual Bio-IT World Expo beginning April 9 in Boston, where many of the latest bioinformatics teams will be in attendance. I'll be there covering the show and plan to seek some answers about how interpretation startups plan to make money, because cool technology is never enough in healthcare.

- listen to the full Davies interview here

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