For cynics who say that Silicon Valley has become too mired in
photo-sharing apps and addictive games, take a 15-minute drive to South
San Francisco.
In a non-descript lab is a company that may be paving the way for the
Valley’s next wave of disruptive startups, which marry software with
data from the human genome.
Counsyl is doing
genetic tests that look for more than 400 mutations and at least 100
genetic disorders for parents who are planning children. At $599 total,
or $99 with insurance, their tests cost a fraction of standard ones,
which often only look for a single condition like cystic fibrosis, and
run anywhere from $100 to $500. A full panel of tests for Ashkenazi
Jews, a minority famously at risk for various genetic conditions, can run about $4,000 to $5,000 from companies like Quest Diagnostics.
Founded six years ago, Counsyl has grown to handle carrier screening for 2.5 percent of all births in the U.S.
To ramp up, Counsyl has quietly taken in roughly $65 million in
funding from firms like Founders Fund, Felicis Ventures, India’s Manipal
Group, Google’s senior vice president of corporate development David
Drummond, WTI, Rosemont Seneca, and Google research scientist Jeff Dean.
“We want to make the genome practically useful,” said CEO Ramji
Srinivasan. “People don’t necessarily care about genomics. At some
point, the novelty of this data will wear off. The diagnostic utility
has to be extremely obvious: can it change someone’s behavior? Can it
make them make a different decision?”
The company is coming of age at a time when the costs of full-genome sequencing are falling faster than even Moore’s Law would have predicted.
Full genome sequencing — not the kind of testing where you’re handling
only select snippets of DNA — runs at around $8,000 now, down from $100
million in 2001. Capitalizing on this, Counsyl has products for both SNP
tests and a more comprehensive sequencing test that is about $999 for
10,000 genetic mutations.
It’s helped women like Jen Baumgartel, a nurse in a Nashville,
Tennessee in vitro fertilization clinic, choose IVF over conceiving
naturally. Through a Counsyl test, she found out both her and her
husband were carriers for Smith-Lemli-Opitz syndrome, which put their potential children at risk of heart problems, developmental delays and cleft palate.
They had a one-in-four chance of passing the condition on, and both
Baumgartel and her husband carried the genes for the severest form of
the disease.
“I was hoping I would get an easy pregnancy,” Baumgartel said. “You
never really think about how to avoid passing something onto your child,
but suddenly we had this really harsh reality that this is what we
would have to do.”
They ended up spending around $12,000 on in-vitro fertilization and
now have a healthy nine-month-old baby girl named Kinley Jo (pictured at
the top).
Costs Falling Faster Than Moore’s Law
Unlike the consumer software world where costs of starting a company
have fallen precipitously over the last five to ten years,
bioinformatics may only be at the beginning of seeing a similar drop.
“The Counsyl team are brilliant technologists,” said David Lee of SV
Angel, who is investing in the company and has deep interest in health
informatics as a cancer survivor. “They understood the trend of biology
and software converging earlier and deeper than anyone we had met.”
While other founders tapped into the big social networking and mobile
app trends of the last five years, Srinivasan instead went for
higher-hanging fruit.
Before the market peaked in 2007, he was working on equity research
for Morgan Stanley alongside famed analyst and now Kleiner Perkins
partner Mary Meeker. Like many entrepreneurs who come to the Valley from
the banking and consulting worlds, he was looking for tangible work
with more meaning. From across the country, he saw how old classmates
from Stanford were building companies.
“These guys were changing the world and I was moving around pieces of
paper,” he said. “My brother told me that the genome was the next
Internet. I decided to leave my earthly belongings and go live on a
futon.”
Srinivasan’s brother Balaji,
who is one of the company’s other co-founders, is press shy and
declined to comment for this article. When Counsyl was founded, he had
just finished a Ph.D. at Stanford in electrical engineering and was
teaching and doing research around computational biology. The pair had
never worked on a company together before.
“My brother told me that the genome was the next Internet. I decided to leave my earthly belongings and go live on a futon.”
Srinivasan said the way founders approach problems in the Valley is
almost like an inverted Maslow’s pyramid. Products that are about
self-expression like social networking apps get the most attention from
young founders, while businesses that are about more basic needs like
health or financial security are under-addressed. Founders get
intimidated by the regulatory risks and by the deep subject matter
knowledge that you might need to attack the health, financial or legal
industries.
“Bright people in Silicon Valley aren’t necessary focusing on health because the speed of iteration seems slower,” he said.
Yet Counsyl has managed to deal with the steeper capital costs of
doing biotech startup and captured a meaningful share of the carrier
screening market. While they don’t say the number of tests they do per
month, they do admit that they’re handling 2.5 percent of all births in
the U.S. The CDC reports 4 million U.S. births per year, so one could infer that they’re doing at least 100,000 tests annually.
The tests themselves are easy to administer. Couples get the testing
kits from their doctors, send in either a blood or saliva sample, mail
it to Counsyl’s lab and then get results back in two or three weeks.
Results come in a couple color-coded pages that show a couple’s
numerical risks for having children with any of more than 100 recessive
genetic diseases.
Improving Each Step of the Testing Process
Counsyl’s price advantages over competitors are not really about any
single transformative change to genetic testing. It’s more about
correcting inefficiencies at every step of the way.
“He’s like the Jeff Bezos of bioinformatics,” said Felicis Ventures’
Aydin Senkut, who said the firm put its largest single check ever into
the company last year. “He’s good at wringing inefficiencies out, which
is very much like the Amazon model.”
Counsyl built image processing software that cut down on common testing errors by a thousand-fold.
They creating billing infrastructure when it was too complicated to deal with the 700 insurers that pay for Counsyl tests.
They created an iPad app for doctors so it would be easier to order tests and fit Counsyl in with their daily workflow.
They refashioned a robot arm that’s normally used to spray paint
Toyota Prius cars to handle trays of samples without requiring human
intervention.
They created their own wetware and had to re-engineer some chemicals
from scratch when they realized they couldn’t rely on third-party labs
to handle their samples properly.
“If you hold the vial at the wrong angle, it will melt the reagent,”
Srinivasan said. “We got to this moment where we realized we had to do
it ourselves. We attempted for years not to build a lab, but once we
decided to do it, it took a few months.”
They found a space, started ripping out its carpets. Srinivasan
bought a Home Depot book on plumbing. It was costly and tedious, but it
yielded unexpected benefits.
“It turned out to be the best thing for us,” Srinivasan said. “Now we
control the full stack just like Steve Jobs tried to do with Apple. He
said the ideal computer starts out at the beach with the sand and ends
with a running machine that you can touch. If we never had to
re-engineer everything, we would have never been able to do what we’re
able to do.”
Once they went forward with the lab and could see a path toward
scaling easily, other investors stepped in. Founders Fund, which has
backed companies like Tesla, SpaceX and Facebook, came in during 2011.
They are “a classic Founders Fund company,” said partner Brian
Singerman. “Pragmatic, but a bit crazy — good crazy — at the same time.
The team is top tier and out of the box in both science and business
execution.”
Now that the hardware and wetware sides of the business are more
manageable, Counsyl can focus on its true opportunity: interpretation
and curation of genomic data.
“The interpretation is the expensive part of the problem,” Srinivasan
said. “It looks like a software problem, talks like a software problem
and acts like a software problem.”
As the wealth of data grows, Counsyl is building a scalable and
repeatable system for interpreting DNA readings. If one were to take all
of the published research papers associated with all of the mutations
that Counsyl tests for, it would take five work years to read them all.
So Counsyl is creating rule sets for how to understand what different
mutations mean. Deletions or insertions into a person’s DNA can be
quite serious, but there are also minor mutations that might not affect
amino acids produced from the DNA.
Already, Counsyl is processing a half-a-terabyte of data per day. If
the company did full genome sequencing for all the customers they
currently handle, they would be doing 5 terabytes per day. (For a
somewhat random apple-and-oranges comparison, Facebook said last fall it was handling 500 terabytes per day for its billion users. Basically, even just a few thousand genome sequencing tests can produce a lot of data.)
Why Carrier Screening
On the consumer-facing side of the business, Counsyl’s near-term
progress will be about expanding deeply into the carrier screening
market. Eventually, they want to build a mainstream brand with lots of
applications.
“Philosophically, we want to build a consumer brand. We want people
to associate us with understanding the genome the way people think about
Kleenex with tissues,” Srinivasan said.
From that point of view, carrier screening is an ideal starting
point. Parents are strongly motivated to do their best for their future
children. Not only that, timing really matters for pregnancies and
childbearing. If customers end up having a good experience with Counsyl
products early on, they’ll develop a trust or affinity for the brand,
which will help later down the line with future services.
This is unlike other genetic testing services, which focus on
predicting diseases a person can contract in old age. The issue with
that market is that people have a tendency to push off or procrastinate
on testing for potential bad news.
“The conversation with the doctor needs to be very targeted and
focused. There can’t really be a question of — are you testing me? Are
you testing my prospective kids?” Srinivasan said. “We don’t want to
muddy the message from the doctor. The interaction has to be simple and
we want the test to be squarely about prospective children.”
The other issue with testing for conditions in old age is that there is an inverse relationship between how predictable and how actionable
these diseases are. With the most predictable genetic conditions, there
might not be much that a person can do to change their fate. But
conditions that are more behaviorally or lifestyle-influenced like heart
disease are not all that accurately forecast by genetic tests.
Counsyl also tries to be conscientious about the murky ethical issues
that sometimes arise with genetic testing. There are some fascinating
questions here for prospective parents. For example, would a couple make
a different reproductive decision if they found out that they were
carriers for a lifelong condition like cystic fibrosis versus a BRCA
mutation that could lead to breast cancer in mid-life?
“We’re big believers in reproductive autonomy,” Srinivasan said. “We
didn’t invent the idea of carrier screening. We’re just making it
cheaper to find this information out. It goes back to the question: is
it better to know or withhold information?”
Post a Comment
Thanks for reading my blog.
Note: only a member of this blog may post a comment.