Further thoughts on Singular
After my recent post on Singular a few people suggested that Illumina could drop their prices to push Singular out of the market. This is of course true. The Singular approach is similar to Illumina’s and they likely have a similar COGS.
This could result in a race to the bottom with both Illumina and Singular having to reduce their margins. Given that Illumina have much deeper pockets, they could potentially push Singular out of the market.
To support this, some commenters suggested that Illumina did this with Complete Genomics. I may address this in another post. But below, I’m going to look into a few arguments for and against Singular.
In Singular’s Favor - Desire for Competition
Users are crying out for competition. There has been no realistic competition to Illumina in the NGS space since, well since there was an NGS space. This means that Illumina has been able to set pricing and terms pretty freely. Most large users don’t like this, and being able to “dual source” their sequencing would be a significant advantage to them, even without any cost benefit over Illumina.
This is likely particularly concerning for sequencing-based early stage cancer diagnostic companies. I doubt they like the idea of Illumina buying GRAIL and then having to purchase Illumina sequencing to drive their own detection platforms.
In fact, I suspect these two points are related. Because Illumina sees their dominance in sequencing ending they are looking to acquire downstream applications (like GRAIL).
In Singular’s Favor - Strategic Acquisition
There are several large companies who have regularly played in sequencing and acquired sequencing companies. In particular, Roche, Thermo, Agilent, Qiagen, and Bio-rad. These companies offer other life science consumables, tools, kits and services. Let’s briefly review these companies and their sequencing platform acqusitions:
Roche acquired 454, which failed in the marketplace, then Genia and Stratos. They also attempted to acquire Illumina in 2012. They clearly want a sequencing play and likely see it as of strategic importance. Roche recently signed a non-exclusive agreement with Illumina to develop IVD tests for the NextSeq 550 Dx. But I’m sure they’d much rather be using their own instruments.
Thermo, have Ion Torrent. Ion Torrent has never had a large market share. I suspect it’s currently under 10%. For me, there is no clear technological advantage of this approach, throughput is limited, and the COGS is likely significantly higher than Illumina. Again, Thermo sell a number of sequencing kits and consumables, including kits for Illumina systems.
Agilent acquired LaserGen in 2018. They sell a number of sequencing adjacent life science tools and a sequencing platform would complement these well.
Qiagen acquired Intelligent Bio-systems. Illumina sued Qiagen, and they dropped the product line. Recently Qiagen signed a deal to develop IVD tests for the NextSeq 550Dx. But again, it seems like they’d likely rather have their own platform.
Bio-rad acquired GnuBio in 2014. A sequencing approach would likely complement their instrument and consumables offerings well.
These companies, and others have strategic interest in either owning their own sequencing platform, or there being more competition in sequencing. So, I could see them either acquiring a “Singular-like” company or making a strategic investment in such a company.
Against Singular - New Players
I suspect the biggest threat to Singular is other players who might be entering the market. Singular are clearly not the only ones to have noticed that Illumina’s IP is expiring and we will likely see other companies appearing acting on this.
In particular, MGI are currently blocked from selling instruments in the US based on IP that expires in 2024. How will Singular compete with these players? Well, one advantage Singular has against the MGI is that they can be acquired. MGI doesn’t look like an entity that can be acquired, which makes them unavailable as a strategic acquisition to the companies mentioned above.
I suspect we will see other players though. However, I think there’s likely enough strategic interest to support multiple new sequencing companies, and Singular is slightly ahead of the game.
Against Singular - Pressure from Illumina
It’s fair to say that Illumina could just reduce pricing to compete with Singular. Illumina margins are huge. It’s been suggested that Singular will aim for a specific niche, and that Illumina can reduce pricing just for that niche.
This would be a poor strategy on Singular’s part in my few. Sequencing is a platform, and while Singular are aiming at the low to mid-range they appear to be making their platform compatible with existing workflows. So it would I hope be a drop in replacement for a MiSeq or NextSeq series instruments.
This means Illumina would have to reduce pricing across the MiSeq/NextSeq range. And at some point they start competing with themselves on NovaSeq pricing. So… I don’t see this as a viable strategy.
Alternatively, if we assume that Illumina as some error rate advantage (they’ve been engineering polymerases and other reagents for >10 years after all). Then why not keep your prices (and margins) higher than Singular’s and compete on quality. You push Singular to keep their margins low, and retain higher margins on the low/mid range. You can also likely still offer competitive cost-per-base on the NovaSeq class instruments.
In this scenario Illumina lose some market share, and Singular (and potentially others) gain market share in low/mid range instruments.
Aside from this the other threat is litigation. Singular’s approach does appear to be quire similar to Illumina’s. And while I suspect the required IP has expired, perhaps there are still potential issues…
Conclusion
A few things could happen to kill off Singular, they could just run out of money, or other new players could push them out of the market, or the whole thing could turn out to be vaporware anyway…
But I don’t see Illumina out competing them as the most significant threat. Of course, if this perception prevents them from raising further capital it could cause them issues.
Disclaimer: As always, you should be aware that I have equity in sequencing companies (based on prior employment) and am current working on a novel sequencing approach.