A start-up backed by the Garvan Institute of Medical Research that had hoped to make genome mapping a reality for the masses has been forced to let go roughly half of its staff and is scrambling to raise capital from outside investors to keep the organisation afloat.
The highly regarded medical research organisation has been led through a review and restructure by new management that has hit hard for wholly owned subsidiary Genome.One, which was once touted as the future of genomic science.
The institute has made 38 people redundant, with the majority of those coming from Genome.One‘s 65 staff, on account of a restructure designed by new executive director Professor Chris Goodnow and chief operating officer Kate Gunn, and backed by the Garvan board.
Genome.One was set up in 2016 as the country’s first clinical whole genome sequencing service. Genome sequencing identifies and maps all of a person’s genes and is increasingly being used to identify future health problems. Your genome is your complete set of genetic material, encoded in about two metres of DNA.
Genome.One sits inside the Kinghorn Centre for Clinical Genomics, named for the philanthropy of RAMS Home Loans founder John Kinghorn. Garvan, which is jointly funded by government and private donations, is backed by a long list of wealthy families and entrepreneurs, including Daniel Petre, Bill Ferris and Len Ainsworth.
“I doubt think they would be interested in making another commercial investment in a new entity,” said one source.
Genome.One and Garvan are no longer offering clinical reporting for genetic disease diagnosis or personal health genomics. The service was priced at $6400 (excluding GST), with no Medicare rebate.
Although it has been predicted that one day whole genome sequencing will be routine and babies will have it done at birth, getting there has proved complicated and costly.
However Garvan now plans to spin out Genome.One’s software-based intellectual property into a new company. Garvan said it would remain a minority shareholder after reaching an in-principle agreement with outside investors, believed to be professionals with some existing healthcare and information technology investments.
Several industry sources said the business model was under pressure given a lack of scale.
“This business model is hard to pull off. Simply the coverage of the test they do and price point they have, doesn’t work. The way you make money in genomics is to have scale,” said one industry source. “Margins on this are so small that unless you have got scale there is no money.”
The landscape is also getting more competitive with the world’s largest genomic organisation, China-based BGI, opening its regional headquarters in Australia in 2016.
The NSW government cut its support to Garvan in 2016-17 to $16.3 million from $18.3 million the year prior. Donations and bequests also fell to $27 million, from $34 million, pushing the group into the red for the year with a loss of $9.5 million compared with a profit of more than $10 million in 2016, according to its 2017 annual report.
Two sources said Garvan had spent about $16 million in the establishment and running of Genome.One. Garvan declined to comment on the future.
Despite its troubles, Genome.One in late June reached an agreement to partner with Clearbridge Health to bring genome sequencing and analysis to patients in Singapore and Hong Kong.
One source said there has been a major pivot away from the business of sequencing and diagnostics to software and the interpretation of genetic data.
“The reality is they stopped doing genetic testing which is their bread butter,” the source said. “They now are concentrating on informatics, which is the interpretation of the data coming from the sequencing. It’s a major change in direction.”
Another source said the spin-out focusing on software is more sustainable, as they company will not have to deal with high costs like consumables, equipment and specialist labour.
“They are some of the smartest brains in Australia, so I wish them luck,” he said.
A Garvan spokesperson said the lessons, knowledge and achievements that Garvan has gained through the Genome.One venture to date are “invaluable”, and the changes underway will place Garvan in a stronger position to lead research in genome-guided precision health.
A detailed plan for the Genome.One’s structure and strategic priorities will be formalised by August 31.