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Close to the Edge Episode 1: A Conversation with PacBio CEO Christian Henry
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Close to the Edge Episode 1: A Conversation with PacBio CEO Christian Henry
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KEVIN DAVIES: Hello, everyone, and a very warm welcome to Close to the Edge, a new series from GEN Edge where we invite chief executives and outstanding scientists and outstanding chief executives from groundbreaking biotech and pharma companies to discuss their science, their technology, and their business. I'm Kevin Davies, editor at large with GEN and the author of Editing Humanity, out now in paperback. I'm joined by my colleague and co-host, Alex Philippidis, a senior business editor with GEN. Howdy, Alex.
ALEX PHILIPPIDIS: Howdy, Kevin.
KEVIN DAVIES: Great to see you. GEN is, of course, the biotech publication that's been covering the industry now for the better part of 40 years. We have a really excellent series of guests lined up for Close to the Edge. And I'll tease and preview that series and future guests at the end of today's show. Close to the Edge is an offshoot of GEN Edge, which is our new premium subscription channel from GEN, providing in-depth exclusive news, interviews, and analysis of key trends and developments in the biotech industry coupled with a range of multimedia offerings such as this one.
KEVIN DAVIES: And more details of our free trial offer at www.genengnews.com/genedge. On today's inaugural episode, we are absolutely thrilled to welcome Christian Henry, the CEO of PacBio, one of the outstanding innovative companies in the genome sequencing arena. Christian, welcome to Close to the Edge. Thanks for joining us.
CHRISTIAN HENRY: Thank you. It's great to be here and especially on your inaugural episode.
KEVIN DAVIES: Indeed.
CHRISTIAN HENRY: So thank you.
KEVIN DAVIES: We look forward to the next 30, 40 minutes of having a really engaging conversation with you about many facets of your new role as a CEO and how PacBio and the genome sequencing industry more broadly is evolving. So we have a lot to discuss. We'll certainly take some audience questions, assuming we get some. We'll take those towards the end of the show. So please use the Q&A box and give us your questions for Christian and we'll work those in.
KEVIN DAVIES: So Christian, Alex and I will tag team with different blocks of questions. Firstly, I'd like to ask you just some personal questions about your backgrounds and really what the last nine months been like since taking over as CEO of PacBio. Have they lived up to your expectations?
CHRISTIAN HENRY: It's been very interesting coming on a new role like this, particularly in the midst of a pandemic where we've been virtual. And so I've been able to build a new team, drive the company on a new mission, and really move us forward all virtually, which has had its pros and cons. The commute's been a lot easier, but it really takes a certain kind of leadership and a commitment to kind of do that.
CHRISTIAN HENRY: And so I'm happy to talk about that more.
KEVIN DAVIES: We would love to get your thoughts on how to adapt to the post pandemic world as people now start to come back to the work and back to office spaces. I think we'll come to that at the end of the show. For folks who haven't been following the Christian Henry career path, can you just tell us a little bit about your background? You had a long stint at Illumina, which I'm sure has proven pivotal and most helpful in helping you adapt to your new role.
CHRISTIAN HENRY: Yeah, so my background is biochemistry. And then I didn't want to sit at a bench, so I went and got my MBA and started working in various biotech companies. And I landed at Illumina in 2005 when we were a very small array company competing against the [INAUDIBLE] metrics. And we were working on some pretty interesting technology there. In 2006, we saw a great opportunity to look at next generation sequencing.
CHRISTIAN HENRY: We felt that next generation sequencing was going to be a core capability and a core asset. And so in the spring of 2006, Jay Flatley, who was the CEO at the time and I was the CFO at the time, and John Stuelpnagel, who was also one of the founders and one of my mentors as well, we were sitting at Jay's house having margaritas. And Jay makes a great margarita.
CHRISTIAN HENRY: And we were talking about how sequencing was going to become really the next critical readout technology and exploring that opportunity. And so we developed a strategic plan. Our core business in arrays was doing well. And we developed a strategic plan to go after and acquire next generation sequencing company, which led to the acquisition of Solexa in the fall of 2006 and actually closed in January of 2007.
CHRISTIAN HENRY: And I was fortunate enough to lead that integration. And so as I led the integration, I helped build the business. And that really got me engaged in driving the sequencing business. And then over the next decade plus at Illumina, was fortunate enough to run many aspects of the company from the life sciences business to corporate development to R&D and all of our product development. And then ultimately, my last role was chief commercial officer.
CHRISTIAN HENRY: And I've always been very passionate about the technology, the science, but in particular the customers. And that's what gets you so excited to see how the technology is transforming the world. And so I did that. I then retired in January of 2017 and have been sitting on some different boards and ended up on the PacBio board.
CHRISTIAN HENRY: And that's what led me down the path when it was announced that Mike Hunkapiller was going to be moving on that the board encouraged me to apply. And here we are.
KEVIN DAVIES: Apart from the recipe for a good margarita, what else did you learn working so closely with Jay Flatley that you now bring into your new role as chief executive of PacBio?
CHRISTIAN HENRY: You know, Jay has been one of my if not the most influential mentor that I've ever had. And so I mean, we could spend an hour talking about all the things. But there are a few core aspects of what Jay brought to the table that I tried to learn from him. First is very strategic in thought and very execution focused. And so Jay brought the notion of having a very deep strategy and strong strategy but following that up with an intense focus on execution and the customer and building great teams.
CHRISTIAN HENRY: And I think moving into this role at PacBio, I sit and reflect on all the lessons that Jay taught me over the years. Because if I could be 1/10 of the leader he is, I think that I could be successful. And so I think the other thing that he was incredible with deeply caring about the employees and also not taking himself so seriously all the time. And so we had so much fun building the company through some very tough times too.
CHRISTIAN HENRY: It wasn't always up and to the right. But there were times when it was very challenging. And his optimism and his infectious enthusiasm and passion for the business really drove the culture. And I was so thankful to be part of that for so long.
KEVIN DAVIES: You're also stepping into big shoes at PacBio. You mentioned Mike Hunkapiller, another legend in the genomic sequencing world. I mean, I guess that's a little daunting, but you had a chance to work with him on the board. Are there any major differences in approach or style or culture? Or have you been really just trying to sort of seamlessly follow along the roads that he had been setting out over the past few years?
CHRISTIAN HENRY: Well, I think one of the things that Mike-- Mike is deeply curious, just like Jay was, deeply curious about the technology. But Mike is a pure technologist. He's a good businessman as well, but he is much happier in the laboratory than he is in the boardroom. And I think the difference, the thing that I bring to the table that's maybe slightly different than what Mike brought is that I'm much more focused on holistically the whole picture, the technology the customer usage of the technology, and the fact that we have to build a business around this.
CHRISTIAN HENRY: And it is fascinating to see the publications and how the technologies emerged and what-- quite frankly, no one ever thought PacBio could make a single molecule sequencing work. And Mike was instrumental in helping to make that work. And so his focus in the laboratory was absolutely spot on. But here we are in a new age where the technology works. It's very robust.
CHRISTIAN HENRY: It's improving all the time. And so it's my role to kind of keep pushing that technology and that frontier. But also how do we create a business that gets the technology out into the world, that makes it ubiquitous, that helps drive success for all of our stakeholders, employees, shareholders, but importantly customers and the world, quite frankly. Because what we're doing is changing the world.
KEVIN DAVIES: Well, we're going to drill into the business and the technology over the next 20 to 30 minutes. But before I hand over to Alex, Christian, where is PacBio today as a company and as a driver and leader of high throughput single molecule sequencing?
CHRISTIAN HENRY: So today we can clearly say that we're the leaders in high throughput long read DNA sequencing, DNA and RNA sequencing. Our technology, our HiFi chemistry that we call it, has really revolutionized the perception of how accurate and how complete genomes can look using our technology and long read DNA. And I think that's really going to be a hallmark for us going forward is that accuracy and that completeness.
CHRISTIAN HENRY: And what that's doing is it's giving us opportunities to get engaged in the clinical markets in a way that couldn't have even been conceived just a couple of years ago. In particular, we have collaborations with Invitae and Children's Mercy Hospital in Kansas City where we're looking at rare and undiagnosed diseases and helping clinical researchers really understand and improve the ability to understand what's going on because our genomes are so much more complete.
CHRISTIAN HENRY: We can look at large structural variation better than anyone else. We can look at small structural variations. We can look at-- with HiFi sequencing, our single molecule or single nucleotide variant detection is on par with anything that Illumina has, for example. And so you really get a more accurate, more complete genome. And as a result, researchers are finding-- they're seeing for the first time what they couldn't see before, which is helping solve these really critical cases and helping us to build a business.
CHRISTIAN HENRY: So that's actually really what's so exciting about where we are today. And tomorrow we'll be launching, over the future, launching new platforms that drive the cost down, that drive the throughput up so that we can create that ubiquity that I think will spur even more applications.
KEVIN DAVIES: I'm sure it will. Alex, over to you.
ALEX PHILIPPIDIS: Yeah, thanks Kevin. The merger between PacBio and Illumina was called off early last year. What was the view from PacBio's perspective? Do you simply shake it off, to quote Taylor Swift, or was this more of a blessing in disguise?
CHRISTIAN HENRY: Well, look, I think that PacBio was thinking this was going to be an excellent combination and Illumina's R&D might and their commercial might really could help propel the PacBio brand and long read sequencing. And so I think the company was quite disappointed when the merger didn't go through. However, you have to get off the mat. And it's not the number of times you fail.
CHRISTIAN HENRY: It's the number of times-- you just have to get off the mat one more time than you fail. And I think the company was very confident in HiFi technology. The Sequel II platform was really doing well in the market. And then the Sequel IIe was on the horizon. We knew that that product would be coming. And so I think the company did, to quote Taylor Swift, shake it off and set itself a course.
CHRISTIAN HENRY: About that time is when I started to get more deeply involved in the company and helping to think through a broader strategy. And so when I became CEO, I really set up a new platform of three fundamental strategic elements that we think can drive growth. And the first was really building a stronger commercial footprint and presence, and then the second building and accelerating our product development portfolio, looking at how do we create multiple products into the market so customers have choice when they want to do long range single molecule sequencing.
CHRISTIAN HENRY: And then the third is driving these collaborations to show how powerful our HiFi sequencing technology is in the market. And so we went through our phase of mourning, so to speak, set ourselves a new course, and started driving commercially. We built a new team in the fourth quarter and the first quarter, and so now we have a largely new senior leadership team. And the future looks extremely bright.
CHRISTIAN HENRY: We were fortunate enough to have a couple of very successful financings. So we're well capitalized now. And in fact, in February, SoftBank invested $900 million in the company. And so now we have the products, we have the team, and we have the future roadmap and the capital to execute in how I think we should execute.
ALEX PHILIPPIDIS: You mentioned three pillars for getting off the mat, so to speak. Given the demise of the Illumina deal, had it changed your thinking about a possible fourth pillar, which is growing PacBio through M&A? And how open is PacBio toward making the right deal?
CHRISTIAN HENRY: I think M&A is an important part of PacBio's future to be honest. And the reason why I say that is in life sciences, scale matters a lot. If you can reach more customers with a diverse product portfolio, you can serve their needs in lots of different ways. And one of my goals for PacBio is to really be thought of as the company with the most advanced solutions for biology.
CHRISTIAN HENRY: Our single molecule sequencing technology is the most advanced in the world. I'd love to see us look at opportunities to complement that with other technologies that are highly advanced that enable researchers and clinicians and translational researchers to look at I have a tough biology problem I want to solve. I know I can go to PacBio and get a suite of products, and I know I can work with a company that I trust that cares about me and my research.
CHRISTIAN HENRY: And so that's really what I'm trying then to build. So we're open to M&A. We are in the market looking at different things. This is an incredible time to be part of life sciences, because there is so much technology. And the biology, we're just starting to uncover so many mysteries in biology that I think will have long term positive impact on humanity. And it's just incredible to see.
ALEX PHILIPPIDIS: How much is PacBio's openness to these opportunities hinged or stemmed from the FTC signing off on AstraZeneca and Alexion on the other hand?
CHRISTIAN HENRY: Well, I mean, I definitely think we have to be thoughtful when we go into any deal, because all of our stakeholders have things at risk. And we have a core business that we need to keep executing on independent of any particular deal or project. And so we need to make sure that we are executing well, that we're thoughtful about all the different stakeholders, whether it's customers, employees, shareholders, or even regulators and other bodies.
CHRISTIAN HENRY: As we become more clinically focused, thinking through regulatory scrutiny is going to be extremely important. And so we're not shy. We're not going to shy off of any projects, but we're definitely going to be thoughtful about how we execute.
ALEX PHILIPPIDIS: Is PacBio's forte in long read sequencing, as has been widely acknowledged, still its major asset?
CHRISTIAN HENRY: Yes. Yeah, today I would say that is our core asset. That's our primary business. And that will continue to be our primary business even in the face of even significant acquisitions. And the reason for that is long read single molecule sequencing is a highly valuable, exquisite measurement tool that will continue to advance the state of the art of our understanding of biology. You know, you look at all of these different kinds of technologies, single molecule, single cell analysis and spatial genomics and different kinds of things.
CHRISTIAN HENRY: They all rely on DNA sequencing readouts. And if you can read at single molecule level with extremely high accuracy, that reading platform is the core asset in many of these different areas, and it will continue to be. And my belief is that long read technologies will gain even further traction against short read technologies even because of the quality of the data and the completeness of what you can see versus short read approaches.
CHRISTIAN HENRY: And so yeah, it will be our core asset. Even if we acquired other kinds of technologies, I suspect it will serve us for a long time to come.
ALEX PHILIPPIDIS: And we talked about Illumina earlier. Another major player in the long read space is Oxford Nanopore, which is planning to go public on the London markets at some point later this year. How do you view PacBio's competition with Oxford Nanopore?
CHRISTIAN HENRY: I think Oxford Nanopore is a fantastic competitor. They've developed, like we have, they've developed an amazing technology, and they've spent a very long time getting that technology to work. And in fact, I had the pleasure of partnering with Oxford Nanopore. People may or may not know this, but at Illumina we had a collaboration partnership with them for a while, and I was one of the leads on that project.
CHRISTIAN HENRY: So I got to know those people very well. And so they're very strong competitors. They have a great technology. I do believe that our technology has some fundamental advantages over theirs that keep us in a leadership position. But they're clearly a worthy competitor. And I think when you look at these markets, they're very large and they have huge opportunities. So having strong competitors is great for the market, because it forces all of us to get better and provide more and better solutions for our customers.
ALEX PHILIPPIDIS: How would you sum up that competitive advantage?
CHRISTIAN HENRY: I would say our principal competitive advantage is the accuracy of our systems. So our HiFi sequencing is more accurate. It's been shown through there was a series of precision FDA studies done showing that we came out on top, even ahead of the short read technologies as well, with respect to accuracy. I also think the consistency, [? end-to-end ?] performance on our platforms is generally better than what ONT has.
CHRISTIAN HENRY: I think ONT has very long reads, and that's definitely a benefit to their system. But at a fundamental level, our accuracy is really what pushes us and drives us forward to improve every day.
ALEX PHILIPPIDIS: And what's your read on other next gen sequencing competitors? I know BGI made some noise last year promoting a $100 genome.
CHRISTIAN HENRY: Yeah, I do think the market is going-- there's going to be over the next several years, there's going to be many more entrants into the market, because this is an extremely valuable market, number one. Two, the readout, as I said, is going to be central to biology. And so companies like BGI and MGI are going to-- MGI of course, they have a short read technology. So they don't compete with us in that respect. But they do have a technology that could drive very inexpensive genomes.
CHRISTIAN HENRY: But one of the things I think people need to understand is it's not a race to the bottom. It's a race to the highest quality and the best value of genome. And while I think it's important to be-- the more inexpensive, the more ubiquitous we will drive. But the value is really what creates it. Particularly as we drive into clinical markets where solving problems for the clinicians is really extremely valuable.
CHRISTIAN HENRY: And as we drive to a level of reimbursement down the road for whole genome sequencing, for example, the ability to demonstrate that you actually get value out of those genomes, that's what's going to matter more so than whether it's $100 or $200 that those differences are going to go away. Once you get below, say, well under $1,000, those differences don't matter as much, I don't believe, in the clinic.
ALEX PHILIPPIDIS: Kevin, over to you.
KEVIN DAVIES: Thank you, Alex. Christian, we want to peer under the hood a little bit and just talk in a little bit more detail about the technology and how it's evolved. I remember the launch of PacBio at AGBT and being invited as one of the first journalists to meet Steve Turner and seeing the first videos of single molecule sequencing on his laptop, stories that I told in my book, The $1,000 Genome. And it was mind blowingly cool technology.
KEVIN DAVIES: You followed up the launch of the original instrument with the aptly named Sequel II, I love that name, in 2019, I think it was. And then the IIe came out more recently. How has the actual architecture, the engineering, the chemistry, how has that evolved over the decade and what does the product pipeline look, as much as you can tell us, going forward?
CHRISTIAN HENRY: Yeah. So it's funny. I was probably in the room at AGBT with you when Steve got up and said we are going to be sequencing genomes in 15 minutes.
KEVIN DAVIES: That's right. The 15 minute genome. That's right.
CHRISTIAN HENRY: We probably haven't quite achieved that yet. [LAUGHS] And Steve, what's so great is Steve is still actively engaged in the company. I meet with him twice a week, and he's really helping pushing things forward. But to get to your questions about the technology, the fundamental principles of single molecule sequencing are still consistent.
CHRISTIAN HENRY: We use the 0 mode waveguide that we talked about where we look at, where we interrogate a strand of DNA with bases that have dyes using a laser to illuminate those and effectively take a movie in real time, hence the name SMRT sequencing, S-M-R-T, single molecule real time sequencing. And so we take these movies. What's changed is, of course, our polymerases, So the engines that actually do the sequencing, the quality and capabilities of our dyes, the ability to look at more ZMWs simultaneously.
CHRISTIAN HENRY: One of the biggest breakthroughs we had was when we went to the Sequel, we had a 1M one million ZMW chip. Sequel II had eight million ZMWs. And so we're looking at eight million movies simultaneously. And that's a huge breakthrough. And then with Sequel IIe, Sequel IIe actually takes the burden. So HiFi sequencing, in a nutshell, is really taking a circular loop of DNA, sequencing it with the same polymerase a number of different times, say 10 times, and then looking at each base, looking at those 10 times.
CHRISTIAN HENRY: That's how we get the exquisite accuracy that we have. And so what we've done is we've taken all of that compute load, put it onto the system, taking it off the burden of the customer. And so we can save them hundreds of thousands of dollars in compute costs by doing that. And so Sequel IIe really enables HiFi to penetrate into labs that it never could get into before. And then just a couple of weeks ago, we launched a new update to our chemistry with a new polymerase that's even more accurate, because that's the hallmark of what we do.
CHRISTIAN HENRY: But also we are lowering the input requirements on the front end with the sample input. We had a three fold reduction in sample input requirement, which allows us to access many more samples than we could before. And that gives the sequencer more utility. So that's kind of what we're trying to do is make the sequencer more useful, lower the cost, increase the throughput. If you look out into the future, you can expect to see us continue to expand the number of ZMWs, for example, look at different configurations of instruments that have perhaps multiple kinds of chips so we can reach different points in the market.
CHRISTIAN HENRY: And we will, of course, continue to improve on the polymerase, the dyes. The complexity of the chips as they get more put ZMWs on them becomes a very interesting challenge. And so new schemes of thinking about how you make sure the laser light gets to all of the different wells appropriately, the ZMWs, those are all innovations that we've been working on that are really in development right now so that we can get to these new products.
KEVIN DAVIES: Yeah. One of the original goals of the technology was the theoretical ability to be useful for sequencing or recognizing an assay methylation and other epigenetic markers. We talked about the forte that you have in just the sheer length of read of raw sequence. How is the technology progressing in terms of interrogating other facets of the genome architecture?
CHRISTIAN HENRY: Well, one of the things that's really exciting is epigenetics and looking at methylation. Matter of fact, Dr. Dennis Lo, Chinese University of Hong Kong, he published a paper earlier this year showing direct methylation sequencing using SMRT sequencing, using our platforms. And what's so fascinating and what's so great about it is that you no longer need a bisulfite treatment or some other mechanism that actually hurts or damages the DNA for sequencing.
CHRISTIAN HENRY: You can look at it directly. And this is really using algorithms, different algorithms and ways of looking at the basis. So it's really compute. So you're getting the "five base sequencing," quote unquote, when you do a run now. And we are looking at how do we implement that into so that everyone can look at the epigenetic status, the methyl status.
CHRISTIAN HENRY: I think that's a really important dynamic. Once again, it shows how we're focused on delivering the most complete view of the genome, not just what we do. We want to look completely at all of the modifications that we can. And our technology is enabling for that. And so we're going to leverage that.
KEVIN DAVIES: There was a while before you joined the company, Christian, where it was possible to see Illumina dominating, not a monopoly, but certainly having the vast majority of the business, which you helped build in your former life, of course. And sort of rather dismissing PacBio as, well, they got the long reads, which are really good for the de novo assembly of very complex genomes like plants, but they're always going to be kind of a fringe player.
KEVIN DAVIES: But now you're making great strides not just in ag biotech but in clinical genomics. I wonder if you could give us-- when you sit back with the board, how do you view the ecosystem? Where are your basic research, translational pharma, ag bio, clinical? Is it all of the above or are you really making a concerted effort to grow in one or more of those sectors?
CHRISTIAN HENRY: Well, this is a hotly debated topic inside the company, of course. And what's so interesting about the sequencer and the technology is that it is applicable broadly. However, we have to be a company that focuses, and we have to focus on using our core competencies in the most important markets. We will continue to be a leader in plant and animal genomics. That's not going away.
CHRISTIAN HENRY: We have this incredible project we're doing with Sanger and the Darwin Tree of Life. But we are turning our attention to clinical whole genome sequencing, because we think that we are uniquely situated and have a unique advantage over everyone else in the world. And this is so important. It could be so large. And so you're going to see us move more towards these human clinical applications to drive our business forward.
CHRISTIAN HENRY: That being said, I also think that as we drive our costs down further, getting more engaged in population scale sequencing programs is also going to be really critical. Because it's, once again, it's getting to see what you couldn't see before. And that will have two implications. One, we will learn more about the basic biology than we've ever known before. But two, we will also in new applications that we're not even thinking about will emerge.
CHRISTIAN HENRY: In fact, with Illumina in those early days, what made Illumina successful was, yes, the core technology was great. But our amazing customers created all these applications that then we were able to leverage and build a business around. The same thing is happening now with PacBio. The technology's just now at the point where it's at a cost point where we can get broad adoption.
CHRISTIAN HENRY: We're commercializing in such a way that many different customers can get access to the technology where they couldn't before. And so the combination of that, new applications will emerge that we're probably not even thinking about. One area that's really interesting is looking at sequencing isoforms and looking at RNA splice variation, critical to biology. With our technology, it gives you unique advantages over others.
CHRISTIAN HENRY: And that could be in a very important area going forward as well. So there's a lot to unpack there. But I would say clinically focused whole genome sequencing is an area that I think will be essential for us.
KEVIN DAVIES: Well, correct me if I'm wrong, but I think it sounds as if one of the hallmarks of your growing clinical presence is the collaboration that you've announced with Invitae. And you touched on this earlier. Where does that effort stand now? What brought the two teams together?
CHRISTIAN HENRY: Yeah, well, so when I joined the company, there was some talk before I joined the company with Invitae about collaborating a sort of way. But very shortly after I joined the company, I talked to Sean George, their CEO, who is just visionary and wants to build a really great company focused on helping people through genetic testing. And we had the same mindset of we'd love to see whole genome sequencing get implemented in a broad way in a clinical setting.
CHRISTIAN HENRY: We believe genomes are better than exosomes, and you can learn more. And so sharing the same vision, we kind of set down this path of let's create a new sequencer that allows you to sequence hundreds of thousands, if not a million samples a year in your laboratories at costs that are very competitive and reimbursable, because we will prove the value of the genome. We will learn more by having more information.
CHRISTIAN HENRY: and we will be able to work together our core competency of developing great sequencers, their core competency of having exquisite work, high volume, high throughput workflows. And so that's what the genesis of all this. We got a collaboration agreed to. We started in January, and now we're off and running. We've got two teams working on it together, and we're learning more about their workflow and really integrating it so that we make it simple and elegant.
CHRISTIAN HENRY: And we're using the technology that we've had in development for our other products to leverage on a scale that's unprecedented for a single molecule sequencing. And so it's a product that we've said it's going to take us a couple of years to get the product across the goal line, but I couldn't be happier to be partnered with them. They're great, like minded people.
CHRISTIAN HENRY: And so far we're off to a great start.
KEVIN DAVIES: Yeah, Sean George and Randy Scott, these guys have also deep roots in the sequencing space. So like minded, I can see why that's a good fit. For our audience, we'd love to get a couple of questions in while we have time. So please submit them in the Q&A box. Alex, over to you.
ALEX PHILIPPIDIS: Sure. Christian, you've articulated, or actually PacBio has articulated three strategic objectives for this year. One is expanding commercial reach, the other accelerating product development pipeline, and the other is driving market leadership in whole genome clinical sequencing. How does PacBio plan to achieve each of these objectives this year?
CHRISTIAN HENRY: Sure. So the first one is really a first core growth strategy of the short term, and that's expanding our commercial footprint. And the way we've gone about doing that is, one, we hired new commercial leadership. So Peter Fromen is our chief commercial officer. And he joined the company in January. We set a goal to more than double our sales force, expand our presence particularly in Europe, where we had very little presence.
CHRISTIAN HENRY: We're starting to really advance that. And by year end, we will have more than doubled our sales force. But not only the sales force. We've also developed capabilities, and this is already happening, where we developed a real commercial operations function. And why that's so critical is it enables the sales force to understand customer needs much faster, respond to customer requests, and then understand the analytics of the business in a much deeper way than we could before.
CHRISTIAN HENRY: So we built that capability. Then we also reorganized our marketing organization to be much more customer and product focused so that we could be the true glue. Marketing can be the glue between the R&D teams and the customer, really elucidating the customer requirements so that as we launch these new products, they will be what the customer needs. That takes me to the second strategy and where we're focused on accelerating product development.
CHRISTIAN HENRY: And we've done a couple of things there. First, we're in the process of reorganizing our R&D groups so that we have more emphasis on the research side and more emphasis on the product development side as well. So on the research side, it's projects and technologies that need fundamental development before they're ready to go into a product development program. And on the product development side, it's the folks that are really excellent at taking the technology and hardening it to get it to the customer.
CHRISTIAN HENRY: So we've done that. We're in the process of doing that. We talked about on our earnings call we're going to launch our first kitted product, which is a COVID surveillance product, later this year. So that's an important product, because we believe that viral surveillance and pathogen surveillance is going to be a public health norm going forward after the COVID pandemic.
CHRISTIAN HENRY: And our technology is ideally suited to get into those markets. And so we're starting with a COVID kit to develop our kitting core competencies. And we do think it'll be an important market as well. And so that's another area that we're accelerating. And then I've already talked a lot about how we're starting to develop multiple products, multiple platforms simultaneously, which the company ad never done.
CHRISTIAN HENRY: And finally, with respect to these collaborations, we are really focused on working with folks that can help prove the value of whole genome HiFi sequencing. And so Children's Mercy, they continue to do amazing things there, and we're so fortunate to be engaged with them. And I think that there's others in the market that have similar kinds of goals and we're working with those folks as well.
CHRISTIAN HENRY: And hopefully we'll announce more of those collaborations over the balance of the year. But that's going to be foundational for us, because once we get the products out to market, we want to make sure everyone understands how valuable they really are. Hopefully that helps with those three core aspects of what we're trying to do.
ALEX PHILIPPIDIS: Sure. And one more thought on trying to achieve market leadership in clinical sequencing, let alone greater clinical adoption of sequencing and other technologies. How much is reimbursement a hurdle or challenge for PacBio?
CHRISTIAN HENRY: Well, today it's not a challenge because we're not really there yet. But I do think it will be fundamental, and it will be essential. And the way you win in the reimbursement game is to show the value of what you bring. You make a clinical difference. And we believe our technology is doing exactly that, and that's why those collaborations are so important.
CHRISTIAN HENRY: So you still need to get the economics in a reasonable place. But it's our belief that in the long run, whole genome sequencing using PacBio technology will be thought of like an MRI, for example. It will be a core aspect of medical care and medical practice in the long run. Right now we're in this research phase and we're supporting translational researchers.
CHRISTIAN HENRY: But in the long run, that that's where we believe this will all go. Reimbursement will be an important part of the story. And as we develop these technologies further and get deeper into those markets, we hope to be able to start dialogues and build that knowledge and understanding with the reimbursement organizations so that we can make that happen.
ALEX PHILIPPIDIS: And looking ahead, how is PacBio adapting to COVID-19 and bringing everyone back to work? And will the office culture change as a result?
CHRISTIAN HENRY: Yeah, you know what? This has been, obviously, it's been a huge conversation. And in fact, my belief is that we will end up in a hybrid environment but with a focus of having an office centric culture. My belief is that companies that have an office centric culture will outperform those that don't, particularly in these highly technical businesses like ours where there's engineering, chem, lab bench biology going on, chemistry, et cetera.
CHRISTIAN HENRY: There's nothing like collaborating in person. And we believe that that's going to still be a hallmark. That being said, we've been very successful at building the company and growing our business while on Zoom and while on Teams. And so our expectation is that we will continue elements of that and be much more amenable to remote work and remote participation, if for nothing else other than we're able to recruit and hire the absolute best talent in the world.
CHRISTIAN HENRY: And it doesn't matter where they're sitting. They can contribute to our mission. And so we're trying to go for a hybrid. Right now we told our board that we expect to kind of go back to the office in September. So after Labor Day is kind of our current target. We are wrestling with whether we require vaccinations or not yet. We don't have a definitive viewpoint on that.
CHRISTIAN HENRY: We are obviously strongly encouraging vaccination, so much so that we are actually giving a financial incentive to anyone who uploads their vaccination card to a secure, private server. We're very concerned with privacy and we want to make sure that all employees have their wishes considered and thought through. But we are evaluating that.
CHRISTIAN HENRY: And what's interesting, we launched this at our company meeting last week. We already almost have half the workforce, the entire company actually, who has turned in their vaccination cards for the financial incentive. So I think we're off to a good, responsible start.
ALEX PHILIPPIDIS: OK, Kevin, over to you.
KEVIN DAVIES: That's great. Time for one quick audience question, Christian, which you may have already addressed. But Stephen Fry wants to know, what are your plans for clinical infectious diseases? Is there anything else you'd like to add to what you said before?
CHRISTIAN HENRY: Well, interestingly, so we did talk about developing surveillance capabilities and [? pan ?] pathogen. We are adding to our corporate marketing group specific expertise in infectious disease so that we can develop the right products for customers. And so we believe our technology has a very useful opportunity. And that's a good financial opportunity for us as well.
CHRISTIAN HENRY: We're starting with the COVID kitted product. But you can expect to see more out of us over the next couple of years as well.
KEVIN DAVIES: Fantastic. Well, I think that's all the time we have time for today. That brings Close to the Edge episode one to a close, you might say. Huge thanks to Christian Henry for joining us. Best of luck, Christian, to you and the PacBio team going forward. Alex and I are queuing up some really exciting guests to feature on Close to the Edge in the coming weeks. We're going to be speaking to the likes of George Yancopoulos and Aris Baras from Regeneron, Daphne Zohar, CEO of Pure Tech Health, Laurence Reid the CEO of Decibel Therapeutics, John Evans the CEO of Beam Therapeutics, the leading gene editing company, just to name a few more high powered guests.
KEVIN DAVIES: So this should been a really fun series, and we hope you'll join us for more of these. Let us know who else you'd like to see us feature in the weeks and months ahead. Close to the Edge is produced by [? Jamie ?] [? Cohen. ?] And for everyone at GEN and GEN Edge, I'm Kevin Davies. Goodbye for now. [MUSIC PLAYING]
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KEVIN DAVIES: Hello, everyone, and a very warm welcome to Close to the Edge, a new series from GEN Edge where we invite chief executives and outstanding scientists and outstanding chief executives from groundbreaking biotech and pharma companies to discuss their science, their technology, and their business. I'm Kevin Davies, editor at large with GEN and the author of Editing Humanity, out now in paperback. I'm joined by my colleague and co-host, Alex Philippidis, a senior business editor with GEN. Howdy, Alex.
ALEX PHILIPPIDIS: Howdy, Kevin.
KEVIN DAVIES: Great to see you. GEN is, of course, the biotech publication that's been covering the industry now for the better part of 40 years. We have a really excellent series of guests lined up for Close to the Edge. And I'll tease and preview that series and future guests at the end of today's show. Close to the Edge is an offshoot of GEN Edge, which is our new premium subscription channel from GEN, providing in-depth exclusive news, interviews, and analysis of key trends and developments in the biotech industry coupled with a range of multimedia offerings such as this one.
KEVIN DAVIES: And more details of our free trial offer at www.genengnews.com/genedge. On today's inaugural episode, we are absolutely thrilled to welcome Christian Henry, the CEO of PacBio, one of the outstanding innovative companies in the genome sequencing arena. Christian, welcome to Close to the Edge. Thanks for joining us.
CHRISTIAN HENRY: Thank you. It's great to be here and especially on your inaugural episode.
KEVIN DAVIES: Indeed.
CHRISTIAN HENRY: So thank you.
KEVIN DAVIES: We look forward to the next 30, 40 minutes of having a really engaging conversation with you about many facets of your new role as a CEO and how PacBio and the genome sequencing industry more broadly is evolving. So we have a lot to discuss. We'll certainly take some audience questions, assuming we get some. We'll take those towards the end of the show. So please use the Q&A box and give us your questions for Christian and we'll work those in.
KEVIN DAVIES: So Christian, Alex and I will tag team with different blocks of questions. Firstly, I'd like to ask you just some personal questions about your backgrounds and really what the last nine months been like since taking over as CEO of PacBio. Have they lived up to your expectations?
CHRISTIAN HENRY: It's been very interesting coming on a new role like this, particularly in the midst of a pandemic where we've been virtual. And so I've been able to build a new team, drive the company on a new mission, and really move us forward all virtually, which has had its pros and cons. The commute's been a lot easier, but it really takes a certain kind of leadership and a commitment to kind of do that.
CHRISTIAN HENRY: And so I'm happy to talk about that more.
KEVIN DAVIES: We would love to get your thoughts on how to adapt to the post pandemic world as people now start to come back to the work and back to office spaces. I think we'll come to that at the end of the show. For folks who haven't been following the Christian Henry career path, can you just tell us a little bit about your background? You had a long stint at Illumina, which I'm sure has proven pivotal and most helpful in helping you adapt to your new role.
CHRISTIAN HENRY: Yeah, so my background is biochemistry. And then I didn't want to sit at a bench, so I went and got my MBA and started working in various biotech companies. And I landed at Illumina in 2005 when we were a very small array company competing against the [INAUDIBLE] metrics. And we were working on some pretty interesting technology there. In 2006, we saw a great opportunity to look at next generation sequencing.
CHRISTIAN HENRY: We felt that next generation sequencing was going to be a core capability and a core asset. And so in the spring of 2006, Jay Flatley, who was the CEO at the time and I was the CFO at the time, and John Stuelpnagel, who was also one of the founders and one of my mentors as well, we were sitting at Jay's house having margaritas. And Jay makes a great margarita.
CHRISTIAN HENRY: And we were talking about how sequencing was going to become really the next critical readout technology and exploring that opportunity. And so we developed a strategic plan. Our core business in arrays was doing well. And we developed a strategic plan to go after and acquire next generation sequencing company, which led to the acquisition of Solexa in the fall of 2006 and actually closed in January of 2007.
CHRISTIAN HENRY: And I was fortunate enough to lead that integration. And so as I led the integration, I helped build the business. And that really got me engaged in driving the sequencing business. And then over the next decade plus at Illumina, was fortunate enough to run many aspects of the company from the life sciences business to corporate development to R&D and all of our product development. And then ultimately, my last role was chief commercial officer.
CHRISTIAN HENRY: And I've always been very passionate about the technology, the science, but in particular the customers. And that's what gets you so excited to see how the technology is transforming the world. And so I did that. I then retired in January of 2017 and have been sitting on some different boards and ended up on the PacBio board.
CHRISTIAN HENRY: And that's what led me down the path when it was announced that Mike Hunkapiller was going to be moving on that the board encouraged me to apply. And here we are.
KEVIN DAVIES: Apart from the recipe for a good margarita, what else did you learn working so closely with Jay Flatley that you now bring into your new role as chief executive of PacBio?
CHRISTIAN HENRY: You know, Jay has been one of my if not the most influential mentor that I've ever had. And so I mean, we could spend an hour talking about all the things. But there are a few core aspects of what Jay brought to the table that I tried to learn from him. First is very strategic in thought and very execution focused. And so Jay brought the notion of having a very deep strategy and strong strategy but following that up with an intense focus on execution and the customer and building great teams.
CHRISTIAN HENRY: And I think moving into this role at PacBio, I sit and reflect on all the lessons that Jay taught me over the years. Because if I could be 1/10 of the leader he is, I think that I could be successful. And so I think the other thing that he was incredible with deeply caring about the employees and also not taking himself so seriously all the time. And so we had so much fun building the company through some very tough times too.
CHRISTIAN HENRY: It wasn't always up and to the right. But there were times when it was very challenging. And his optimism and his infectious enthusiasm and passion for the business really drove the culture. And I was so thankful to be part of that for so long.
KEVIN DAVIES: You're also stepping into big shoes at PacBio. You mentioned Mike Hunkapiller, another legend in the genomic sequencing world. I mean, I guess that's a little daunting, but you had a chance to work with him on the board. Are there any major differences in approach or style or culture? Or have you been really just trying to sort of seamlessly follow along the roads that he had been setting out over the past few years?
CHRISTIAN HENRY: Well, I think one of the things that Mike-- Mike is deeply curious, just like Jay was, deeply curious about the technology. But Mike is a pure technologist. He's a good businessman as well, but he is much happier in the laboratory than he is in the boardroom. And I think the difference, the thing that I bring to the table that's maybe slightly different than what Mike brought is that I'm much more focused on holistically the whole picture, the technology the customer usage of the technology, and the fact that we have to build a business around this.
CHRISTIAN HENRY: And it is fascinating to see the publications and how the technologies emerged and what-- quite frankly, no one ever thought PacBio could make a single molecule sequencing work. And Mike was instrumental in helping to make that work. And so his focus in the laboratory was absolutely spot on. But here we are in a new age where the technology works. It's very robust.
CHRISTIAN HENRY: It's improving all the time. And so it's my role to kind of keep pushing that technology and that frontier. But also how do we create a business that gets the technology out into the world, that makes it ubiquitous, that helps drive success for all of our stakeholders, employees, shareholders, but importantly customers and the world, quite frankly. Because what we're doing is changing the world.
KEVIN DAVIES: Well, we're going to drill into the business and the technology over the next 20 to 30 minutes. But before I hand over to Alex, Christian, where is PacBio today as a company and as a driver and leader of high throughput single molecule sequencing?
CHRISTIAN HENRY: So today we can clearly say that we're the leaders in high throughput long read DNA sequencing, DNA and RNA sequencing. Our technology, our HiFi chemistry that we call it, has really revolutionized the perception of how accurate and how complete genomes can look using our technology and long read DNA. And I think that's really going to be a hallmark for us going forward is that accuracy and that completeness.
CHRISTIAN HENRY: And what that's doing is it's giving us opportunities to get engaged in the clinical markets in a way that couldn't have even been conceived just a couple of years ago. In particular, we have collaborations with Invitae and Children's Mercy Hospital in Kansas City where we're looking at rare and undiagnosed diseases and helping clinical researchers really understand and improve the ability to understand what's going on because our genomes are so much more complete.
CHRISTIAN HENRY: We can look at large structural variation better than anyone else. We can look at small structural variations. We can look at-- with HiFi sequencing, our single molecule or single nucleotide variant detection is on par with anything that Illumina has, for example. And so you really get a more accurate, more complete genome. And as a result, researchers are finding-- they're seeing for the first time what they couldn't see before, which is helping solve these really critical cases and helping us to build a business.
CHRISTIAN HENRY: So that's actually really what's so exciting about where we are today. And tomorrow we'll be launching, over the future, launching new platforms that drive the cost down, that drive the throughput up so that we can create that ubiquity that I think will spur even more applications.
KEVIN DAVIES: I'm sure it will. Alex, over to you.
ALEX PHILIPPIDIS: Yeah, thanks Kevin. The merger between PacBio and Illumina was called off early last year. What was the view from PacBio's perspective? Do you simply shake it off, to quote Taylor Swift, or was this more of a blessing in disguise?
CHRISTIAN HENRY: Well, look, I think that PacBio was thinking this was going to be an excellent combination and Illumina's R&D might and their commercial might really could help propel the PacBio brand and long read sequencing. And so I think the company was quite disappointed when the merger didn't go through. However, you have to get off the mat. And it's not the number of times you fail.
CHRISTIAN HENRY: It's the number of times-- you just have to get off the mat one more time than you fail. And I think the company was very confident in HiFi technology. The Sequel II platform was really doing well in the market. And then the Sequel IIe was on the horizon. We knew that that product would be coming. And so I think the company did, to quote Taylor Swift, shake it off and set itself a course.
CHRISTIAN HENRY: About that time is when I started to get more deeply involved in the company and helping to think through a broader strategy. And so when I became CEO, I really set up a new platform of three fundamental strategic elements that we think can drive growth. And the first was really building a stronger commercial footprint and presence, and then the second building and accelerating our product development portfolio, looking at how do we create multiple products into the market so customers have choice when they want to do long range single molecule sequencing.
CHRISTIAN HENRY: And then the third is driving these collaborations to show how powerful our HiFi sequencing technology is in the market. And so we went through our phase of mourning, so to speak, set ourselves a new course, and started driving commercially. We built a new team in the fourth quarter and the first quarter, and so now we have a largely new senior leadership team. And the future looks extremely bright.
CHRISTIAN HENRY: We were fortunate enough to have a couple of very successful financings. So we're well capitalized now. And in fact, in February, SoftBank invested $900 million in the company. And so now we have the products, we have the team, and we have the future roadmap and the capital to execute in how I think we should execute.
ALEX PHILIPPIDIS: You mentioned three pillars for getting off the mat, so to speak. Given the demise of the Illumina deal, had it changed your thinking about a possible fourth pillar, which is growing PacBio through M&A? And how open is PacBio toward making the right deal?
CHRISTIAN HENRY: I think M&A is an important part of PacBio's future to be honest. And the reason why I say that is in life sciences, scale matters a lot. If you can reach more customers with a diverse product portfolio, you can serve their needs in lots of different ways. And one of my goals for PacBio is to really be thought of as the company with the most advanced solutions for biology.
CHRISTIAN HENRY: Our single molecule sequencing technology is the most advanced in the world. I'd love to see us look at opportunities to complement that with other technologies that are highly advanced that enable researchers and clinicians and translational researchers to look at I have a tough biology problem I want to solve. I know I can go to PacBio and get a suite of products, and I know I can work with a company that I trust that cares about me and my research.
CHRISTIAN HENRY: And so that's really what I'm trying then to build. So we're open to M&A. We are in the market looking at different things. This is an incredible time to be part of life sciences, because there is so much technology. And the biology, we're just starting to uncover so many mysteries in biology that I think will have long term positive impact on humanity. And it's just incredible to see.
ALEX PHILIPPIDIS: How much is PacBio's openness to these opportunities hinged or stemmed from the FTC signing off on AstraZeneca and Alexion on the other hand?
CHRISTIAN HENRY: Well, I mean, I definitely think we have to be thoughtful when we go into any deal, because all of our stakeholders have things at risk. And we have a core business that we need to keep executing on independent of any particular deal or project. And so we need to make sure that we are executing well, that we're thoughtful about all the different stakeholders, whether it's customers, employees, shareholders, or even regulators and other bodies.
CHRISTIAN HENRY: As we become more clinically focused, thinking through regulatory scrutiny is going to be extremely important. And so we're not shy. We're not going to shy off of any projects, but we're definitely going to be thoughtful about how we execute.
ALEX PHILIPPIDIS: Is PacBio's forte in long read sequencing, as has been widely acknowledged, still its major asset?
CHRISTIAN HENRY: Yes. Yeah, today I would say that is our core asset. That's our primary business. And that will continue to be our primary business even in the face of even significant acquisitions. And the reason for that is long read single molecule sequencing is a highly valuable, exquisite measurement tool that will continue to advance the state of the art of our understanding of biology. You know, you look at all of these different kinds of technologies, single molecule, single cell analysis and spatial genomics and different kinds of things.
CHRISTIAN HENRY: They all rely on DNA sequencing readouts. And if you can read at single molecule level with extremely high accuracy, that reading platform is the core asset in many of these different areas, and it will continue to be. And my belief is that long read technologies will gain even further traction against short read technologies even because of the quality of the data and the completeness of what you can see versus short read approaches.
CHRISTIAN HENRY: And so yeah, it will be our core asset. Even if we acquired other kinds of technologies, I suspect it will serve us for a long time to come.
ALEX PHILIPPIDIS: And we talked about Illumina earlier. Another major player in the long read space is Oxford Nanopore, which is planning to go public on the London markets at some point later this year. How do you view PacBio's competition with Oxford Nanopore?
CHRISTIAN HENRY: I think Oxford Nanopore is a fantastic competitor. They've developed, like we have, they've developed an amazing technology, and they've spent a very long time getting that technology to work. And in fact, I had the pleasure of partnering with Oxford Nanopore. People may or may not know this, but at Illumina we had a collaboration partnership with them for a while, and I was one of the leads on that project.
CHRISTIAN HENRY: So I got to know those people very well. And so they're very strong competitors. They have a great technology. I do believe that our technology has some fundamental advantages over theirs that keep us in a leadership position. But they're clearly a worthy competitor. And I think when you look at these markets, they're very large and they have huge opportunities. So having strong competitors is great for the market, because it forces all of us to get better and provide more and better solutions for our customers.
ALEX PHILIPPIDIS: How would you sum up that competitive advantage?
CHRISTIAN HENRY: I would say our principal competitive advantage is the accuracy of our systems. So our HiFi sequencing is more accurate. It's been shown through there was a series of precision FDA studies done showing that we came out on top, even ahead of the short read technologies as well, with respect to accuracy. I also think the consistency, [? end-to-end ?] performance on our platforms is generally better than what ONT has.
CHRISTIAN HENRY: I think ONT has very long reads, and that's definitely a benefit to their system. But at a fundamental level, our accuracy is really what pushes us and drives us forward to improve every day.
ALEX PHILIPPIDIS: And what's your read on other next gen sequencing competitors? I know BGI made some noise last year promoting a $100 genome.
CHRISTIAN HENRY: Yeah, I do think the market is going-- there's going to be over the next several years, there's going to be many more entrants into the market, because this is an extremely valuable market, number one. Two, the readout, as I said, is going to be central to biology. And so companies like BGI and MGI are going to-- MGI of course, they have a short read technology. So they don't compete with us in that respect. But they do have a technology that could drive very inexpensive genomes.
CHRISTIAN HENRY: But one of the things I think people need to understand is it's not a race to the bottom. It's a race to the highest quality and the best value of genome. And while I think it's important to be-- the more inexpensive, the more ubiquitous we will drive. But the value is really what creates it. Particularly as we drive into clinical markets where solving problems for the clinicians is really extremely valuable.
CHRISTIAN HENRY: And as we drive to a level of reimbursement down the road for whole genome sequencing, for example, the ability to demonstrate that you actually get value out of those genomes, that's what's going to matter more so than whether it's $100 or $200 that those differences are going to go away. Once you get below, say, well under $1,000, those differences don't matter as much, I don't believe, in the clinic.
ALEX PHILIPPIDIS: Kevin, over to you.
KEVIN DAVIES: Thank you, Alex. Christian, we want to peer under the hood a little bit and just talk in a little bit more detail about the technology and how it's evolved. I remember the launch of PacBio at AGBT and being invited as one of the first journalists to meet Steve Turner and seeing the first videos of single molecule sequencing on his laptop, stories that I told in my book, The $1,000 Genome. And it was mind blowingly cool technology.
KEVIN DAVIES: You followed up the launch of the original instrument with the aptly named Sequel II, I love that name, in 2019, I think it was. And then the IIe came out more recently. How has the actual architecture, the engineering, the chemistry, how has that evolved over the decade and what does the product pipeline look, as much as you can tell us, going forward?
CHRISTIAN HENRY: Yeah. So it's funny. I was probably in the room at AGBT with you when Steve got up and said we are going to be sequencing genomes in 15 minutes.
KEVIN DAVIES: That's right. The 15 minute genome. That's right.
CHRISTIAN HENRY: We probably haven't quite achieved that yet. [LAUGHS] And Steve, what's so great is Steve is still actively engaged in the company. I meet with him twice a week, and he's really helping pushing things forward. But to get to your questions about the technology, the fundamental principles of single molecule sequencing are still consistent.
CHRISTIAN HENRY: We use the 0 mode waveguide that we talked about where we look at, where we interrogate a strand of DNA with bases that have dyes using a laser to illuminate those and effectively take a movie in real time, hence the name SMRT sequencing, S-M-R-T, single molecule real time sequencing. And so we take these movies. What's changed is, of course, our polymerases, So the engines that actually do the sequencing, the quality and capabilities of our dyes, the ability to look at more ZMWs simultaneously.
CHRISTIAN HENRY: One of the biggest breakthroughs we had was when we went to the Sequel, we had a 1M one million ZMW chip. Sequel II had eight million ZMWs. And so we're looking at eight million movies simultaneously. And that's a huge breakthrough. And then with Sequel IIe, Sequel IIe actually takes the burden. So HiFi sequencing, in a nutshell, is really taking a circular loop of DNA, sequencing it with the same polymerase a number of different times, say 10 times, and then looking at each base, looking at those 10 times.
CHRISTIAN HENRY: That's how we get the exquisite accuracy that we have. And so what we've done is we've taken all of that compute load, put it onto the system, taking it off the burden of the customer. And so we can save them hundreds of thousands of dollars in compute costs by doing that. And so Sequel IIe really enables HiFi to penetrate into labs that it never could get into before. And then just a couple of weeks ago, we launched a new update to our chemistry with a new polymerase that's even more accurate, because that's the hallmark of what we do.
CHRISTIAN HENRY: But also we are lowering the input requirements on the front end with the sample input. We had a three fold reduction in sample input requirement, which allows us to access many more samples than we could before. And that gives the sequencer more utility. So that's kind of what we're trying to do is make the sequencer more useful, lower the cost, increase the throughput. If you look out into the future, you can expect to see us continue to expand the number of ZMWs, for example, look at different configurations of instruments that have perhaps multiple kinds of chips so we can reach different points in the market.
CHRISTIAN HENRY: And we will, of course, continue to improve on the polymerase, the dyes. The complexity of the chips as they get more put ZMWs on them becomes a very interesting challenge. And so new schemes of thinking about how you make sure the laser light gets to all of the different wells appropriately, the ZMWs, those are all innovations that we've been working on that are really in development right now so that we can get to these new products.
KEVIN DAVIES: Yeah. One of the original goals of the technology was the theoretical ability to be useful for sequencing or recognizing an assay methylation and other epigenetic markers. We talked about the forte that you have in just the sheer length of read of raw sequence. How is the technology progressing in terms of interrogating other facets of the genome architecture?
CHRISTIAN HENRY: Well, one of the things that's really exciting is epigenetics and looking at methylation. Matter of fact, Dr. Dennis Lo, Chinese University of Hong Kong, he published a paper earlier this year showing direct methylation sequencing using SMRT sequencing, using our platforms. And what's so fascinating and what's so great about it is that you no longer need a bisulfite treatment or some other mechanism that actually hurts or damages the DNA for sequencing.
CHRISTIAN HENRY: You can look at it directly. And this is really using algorithms, different algorithms and ways of looking at the basis. So it's really compute. So you're getting the "five base sequencing," quote unquote, when you do a run now. And we are looking at how do we implement that into so that everyone can look at the epigenetic status, the methyl status.
CHRISTIAN HENRY: I think that's a really important dynamic. Once again, it shows how we're focused on delivering the most complete view of the genome, not just what we do. We want to look completely at all of the modifications that we can. And our technology is enabling for that. And so we're going to leverage that.
KEVIN DAVIES: There was a while before you joined the company, Christian, where it was possible to see Illumina dominating, not a monopoly, but certainly having the vast majority of the business, which you helped build in your former life, of course. And sort of rather dismissing PacBio as, well, they got the long reads, which are really good for the de novo assembly of very complex genomes like plants, but they're always going to be kind of a fringe player.
KEVIN DAVIES: But now you're making great strides not just in ag biotech but in clinical genomics. I wonder if you could give us-- when you sit back with the board, how do you view the ecosystem? Where are your basic research, translational pharma, ag bio, clinical? Is it all of the above or are you really making a concerted effort to grow in one or more of those sectors?
CHRISTIAN HENRY: Well, this is a hotly debated topic inside the company, of course. And what's so interesting about the sequencer and the technology is that it is applicable broadly. However, we have to be a company that focuses, and we have to focus on using our core competencies in the most important markets. We will continue to be a leader in plant and animal genomics. That's not going away.
CHRISTIAN HENRY: We have this incredible project we're doing with Sanger and the Darwin Tree of Life. But we are turning our attention to clinical whole genome sequencing, because we think that we are uniquely situated and have a unique advantage over everyone else in the world. And this is so important. It could be so large. And so you're going to see us move more towards these human clinical applications to drive our business forward.
CHRISTIAN HENRY: That being said, I also think that as we drive our costs down further, getting more engaged in population scale sequencing programs is also going to be really critical. Because it's, once again, it's getting to see what you couldn't see before. And that will have two implications. One, we will learn more about the basic biology than we've ever known before. But two, we will also in new applications that we're not even thinking about will emerge.
CHRISTIAN HENRY: In fact, with Illumina in those early days, what made Illumina successful was, yes, the core technology was great. But our amazing customers created all these applications that then we were able to leverage and build a business around. The same thing is happening now with PacBio. The technology's just now at the point where it's at a cost point where we can get broad adoption.
CHRISTIAN HENRY: We're commercializing in such a way that many different customers can get access to the technology where they couldn't before. And so the combination of that, new applications will emerge that we're probably not even thinking about. One area that's really interesting is looking at sequencing isoforms and looking at RNA splice variation, critical to biology. With our technology, it gives you unique advantages over others.
CHRISTIAN HENRY: And that could be in a very important area going forward as well. So there's a lot to unpack there. But I would say clinically focused whole genome sequencing is an area that I think will be essential for us.
KEVIN DAVIES: Well, correct me if I'm wrong, but I think it sounds as if one of the hallmarks of your growing clinical presence is the collaboration that you've announced with Invitae. And you touched on this earlier. Where does that effort stand now? What brought the two teams together?
CHRISTIAN HENRY: Yeah, well, so when I joined the company, there was some talk before I joined the company with Invitae about collaborating a sort of way. But very shortly after I joined the company, I talked to Sean George, their CEO, who is just visionary and wants to build a really great company focused on helping people through genetic testing. And we had the same mindset of we'd love to see whole genome sequencing get implemented in a broad way in a clinical setting.
CHRISTIAN HENRY: We believe genomes are better than exosomes, and you can learn more. And so sharing the same vision, we kind of set down this path of let's create a new sequencer that allows you to sequence hundreds of thousands, if not a million samples a year in your laboratories at costs that are very competitive and reimbursable, because we will prove the value of the genome. We will learn more by having more information.
CHRISTIAN HENRY: and we will be able to work together our core competency of developing great sequencers, their core competency of having exquisite work, high volume, high throughput workflows. And so that's what the genesis of all this. We got a collaboration agreed to. We started in January, and now we're off and running. We've got two teams working on it together, and we're learning more about their workflow and really integrating it so that we make it simple and elegant.
CHRISTIAN HENRY: And we're using the technology that we've had in development for our other products to leverage on a scale that's unprecedented for a single molecule sequencing. And so it's a product that we've said it's going to take us a couple of years to get the product across the goal line, but I couldn't be happier to be partnered with them. They're great, like minded people.
CHRISTIAN HENRY: And so far we're off to a great start.
KEVIN DAVIES: Yeah, Sean George and Randy Scott, these guys have also deep roots in the sequencing space. So like minded, I can see why that's a good fit. For our audience, we'd love to get a couple of questions in while we have time. So please submit them in the Q&A box. Alex, over to you.
ALEX PHILIPPIDIS: Sure. Christian, you've articulated, or actually PacBio has articulated three strategic objectives for this year. One is expanding commercial reach, the other accelerating product development pipeline, and the other is driving market leadership in whole genome clinical sequencing. How does PacBio plan to achieve each of these objectives this year?
CHRISTIAN HENRY: Sure. So the first one is really a first core growth strategy of the short term, and that's expanding our commercial footprint. And the way we've gone about doing that is, one, we hired new commercial leadership. So Peter Fromen is our chief commercial officer. And he joined the company in January. We set a goal to more than double our sales force, expand our presence particularly in Europe, where we had very little presence.
CHRISTIAN HENRY: We're starting to really advance that. And by year end, we will have more than doubled our sales force. But not only the sales force. We've also developed capabilities, and this is already happening, where we developed a real commercial operations function. And why that's so critical is it enables the sales force to understand customer needs much faster, respond to customer requests, and then understand the analytics of the business in a much deeper way than we could before.
CHRISTIAN HENRY: So we built that capability. Then we also reorganized our marketing organization to be much more customer and product focused so that we could be the true glue. Marketing can be the glue between the R&D teams and the customer, really elucidating the customer requirements so that as we launch these new products, they will be what the customer needs. That takes me to the second strategy and where we're focused on accelerating product development.
CHRISTIAN HENRY: And we've done a couple of things there. First, we're in the process of reorganizing our R&D groups so that we have more emphasis on the research side and more emphasis on the product development side as well. So on the research side, it's projects and technologies that need fundamental development before they're ready to go into a product development program. And on the product development side, it's the folks that are really excellent at taking the technology and hardening it to get it to the customer.
CHRISTIAN HENRY: So we've done that. We're in the process of doing that. We talked about on our earnings call we're going to launch our first kitted product, which is a COVID surveillance product, later this year. So that's an important product, because we believe that viral surveillance and pathogen surveillance is going to be a public health norm going forward after the COVID pandemic.
CHRISTIAN HENRY: And our technology is ideally suited to get into those markets. And so we're starting with a COVID kit to develop our kitting core competencies. And we do think it'll be an important market as well. And so that's another area that we're accelerating. And then I've already talked a lot about how we're starting to develop multiple products, multiple platforms simultaneously, which the company ad never done.
CHRISTIAN HENRY: And finally, with respect to these collaborations, we are really focused on working with folks that can help prove the value of whole genome HiFi sequencing. And so Children's Mercy, they continue to do amazing things there, and we're so fortunate to be engaged with them. And I think that there's others in the market that have similar kinds of goals and we're working with those folks as well.
CHRISTIAN HENRY: And hopefully we'll announce more of those collaborations over the balance of the year. But that's going to be foundational for us, because once we get the products out to market, we want to make sure everyone understands how valuable they really are. Hopefully that helps with those three core aspects of what we're trying to do.
ALEX PHILIPPIDIS: Sure. And one more thought on trying to achieve market leadership in clinical sequencing, let alone greater clinical adoption of sequencing and other technologies. How much is reimbursement a hurdle or challenge for PacBio?
CHRISTIAN HENRY: Well, today it's not a challenge because we're not really there yet. But I do think it will be fundamental, and it will be essential. And the way you win in the reimbursement game is to show the value of what you bring. You make a clinical difference. And we believe our technology is doing exactly that, and that's why those collaborations are so important.
CHRISTIAN HENRY: So you still need to get the economics in a reasonable place. But it's our belief that in the long run, whole genome sequencing using PacBio technology will be thought of like an MRI, for example. It will be a core aspect of medical care and medical practice in the long run. Right now we're in this research phase and we're supporting translational researchers.
CHRISTIAN HENRY: But in the long run, that that's where we believe this will all go. Reimbursement will be an important part of the story. And as we develop these technologies further and get deeper into those markets, we hope to be able to start dialogues and build that knowledge and understanding with the reimbursement organizations so that we can make that happen.
ALEX PHILIPPIDIS: And looking ahead, how is PacBio adapting to COVID-19 and bringing everyone back to work? And will the office culture change as a result?
CHRISTIAN HENRY: Yeah, you know what? This has been, obviously, it's been a huge conversation. And in fact, my belief is that we will end up in a hybrid environment but with a focus of having an office centric culture. My belief is that companies that have an office centric culture will outperform those that don't, particularly in these highly technical businesses like ours where there's engineering, chem, lab bench biology going on, chemistry, et cetera.
CHRISTIAN HENRY: There's nothing like collaborating in person. And we believe that that's going to still be a hallmark. That being said, we've been very successful at building the company and growing our business while on Zoom and while on Teams. And so our expectation is that we will continue elements of that and be much more amenable to remote work and remote participation, if for nothing else other than we're able to recruit and hire the absolute best talent in the world.
CHRISTIAN HENRY: And it doesn't matter where they're sitting. They can contribute to our mission. And so we're trying to go for a hybrid. Right now we told our board that we expect to kind of go back to the office in September. So after Labor Day is kind of our current target. We are wrestling with whether we require vaccinations or not yet. We don't have a definitive viewpoint on that.
CHRISTIAN HENRY: We are obviously strongly encouraging vaccination, so much so that we are actually giving a financial incentive to anyone who uploads their vaccination card to a secure, private server. We're very concerned with privacy and we want to make sure that all employees have their wishes considered and thought through. But we are evaluating that.
CHRISTIAN HENRY: And what's interesting, we launched this at our company meeting last week. We already almost have half the workforce, the entire company actually, who has turned in their vaccination cards for the financial incentive. So I think we're off to a good, responsible start.
ALEX PHILIPPIDIS: OK, Kevin, over to you.
KEVIN DAVIES: That's great. Time for one quick audience question, Christian, which you may have already addressed. But Stephen Fry wants to know, what are your plans for clinical infectious diseases? Is there anything else you'd like to add to what you said before?
CHRISTIAN HENRY: Well, interestingly, so we did talk about developing surveillance capabilities and [? pan ?] pathogen. We are adding to our corporate marketing group specific expertise in infectious disease so that we can develop the right products for customers. And so we believe our technology has a very useful opportunity. And that's a good financial opportunity for us as well.
CHRISTIAN HENRY: We're starting with the COVID kitted product. But you can expect to see more out of us over the next couple of years as well.
KEVIN DAVIES: Fantastic. Well, I think that's all the time we have time for today. That brings Close to the Edge episode one to a close, you might say. Huge thanks to Christian Henry for joining us. Best of luck, Christian, to you and the PacBio team going forward. Alex and I are queuing up some really exciting guests to feature on Close to the Edge in the coming weeks. We're going to be speaking to the likes of George Yancopoulos and Aris Baras from Regeneron, Daphne Zohar, CEO of Pure Tech Health, Laurence Reid the CEO of Decibel Therapeutics, John Evans the CEO of Beam Therapeutics, the leading gene editing company, just to name a few more high powered guests.
KEVIN DAVIES: So this should been a really fun series, and we hope you'll join us for more of these. Let us know who else you'd like to see us feature in the weeks and months ahead. Close to the Edge is produced by [? Jamie ?] [? Cohen. ?] And for everyone at GEN and GEN Edge, I'm Kevin Davies. Goodbye for now. [MUSIC PLAYING]
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