Instrument Makers as Discipline Builders

Affymetrix, the microarray industry, and the birth of transcriptomics

Ashveen PEERBAYE - INSEAD - Feb 07, 2006

1. In the beginning…

n  Basic idea behind microarrays : test for the presence of DNA sequences in an unknown sample by using “probes” of known DNA strands (hybridization)

n  Edwin Southern (1975, Oxford University, UK)

n  Oxford Gene Technology Limited (1995) –  Southern Array Patents (1997)

1. In the beginning…

n Pharmacology at the end of 1980s: – Combinatorial chemistry and high-

throughput screening: generating and screening large libraries of molecules to find potential drug candidates

n Affymax Research Institute (Palo Alto, Cal.) founded in 1988 by Alejandro Zaffaroni, leader in combinatorial chemistry

2. Stephen Fodor gets into the picture…

•  BS in Chemistry (1978)

•  MS in Biochemistry/Biophysics (1982)

•  PhD in Biophysics (Princeton, 1985)

•  Postdoc (Berkeley)

•  “There was no way I was going to work in industry”

•  Joins Affymax in 1989

2. Stephen Fodor gets into the picture… n  Initial attempts : applying semiconductor

technology (photolithography, miniaturization, parallel processing) to chemistry in order to synthesize peptides (proteins) – Failure. “Career suicide” ?

3. Birth of the microarray industry n  The shift to DNA probes (1991) n  “Technology push” : applying

photolithography to synthetic chemistry n  “Market pull” :

–  Advances in genomics and the Human Genome Project (1983-2003)

–  Huge promises and opportunities (genome sequencing, gene identification, genetic diagnosis, drug discovery…)

3. Birth of the microarray industry n  1992 : Affymetrix, a spin-off of Affymax

–  Mission : Drive gene chip technology forward n  A company without a product… n …but with brilliant scientists, “star”

directors… –  Scientific team (Fodor, Read, Stryer, Pirrung,

Lipshutz) in an entrepreneurial/academic environment

–  Board of directors : Paul Berg (Nobel laureate), Vernon Loucks (Baxter CEO), John Young (Hewlett-Packard CEO)

3. Birth of the microarray industry n …and substantial funding

Private funding 21 M$ (1st round) 39 M$ (2nd round)

Government funding 30 M$

IPO (1996) 90 M$

3. Birth of the microarray industry

n  1994: First commercial DNA microarray prototype

n  1996: First GeneChip system sold

n  GeneChip system = chip + scanner + bioinformatics software

3. Birth of the microarray industry n  1994: Commercial microarray

scanner, manufactured by Molecular Dynamics for Affymetrix

n  1997 : Microarray scanner, manufactured by Hewlett-Packard for Affymetrix

n  2003 : Affymetrix GeneChip Scanner 3000

4. Pricing strategies and their consequences n  Initial setup: cheap GeneChip system,

revenues expected from downstream royalties (from drug development) –  But… cash flow problem

n  A new model: The “razor blade” (1995) n  Mixed customers’ reactions (pharmaceutical

companies / researchers)

4. Pricing strategies and their consequences n  The birth of an alternative technology

–  Pat Brown, Stanford University, 1995-96 –  Incyte Genomics

n  How did Affymetrix eventually overcome the threat, and retain its monopoly ?

4. Reclaiming the monopoly

n  1. Intellectual Property Management –  Litigations and their settlement

•  Hyseq vs. Affymetrix (1997) •  Affymetrix vs. Incyte •  Oxford vs. Affymetrix

–  IP portfolio •  105 patents (end 2000) ==> more than 200 (end 2005)

4. Reclaiming the monopoly

n  2. Maintaining ties with the academic community –  Research environment and activity –  Marketing through references –  Targeting researchers as early adopters –  Managing the tension between being a biotech

toolmaker, and a forefront scientific team

4. Reclaiming the monopoly

n  3. Strategic partnerships –  Academic –  Industrial (pharmaceutical)

4. Reclaiming the monopoly

n  4. Setting a standard –  The comparability problem.

n  Made possible by cost plunge, and advances in genomics (through HGP)

5. Reaping the benefits

•  1999: 100 000 GeneChips sold

•  2001: Affymetrix is leading supplier (top pharmaceutical companies, biotech firms and academic institutions)

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PUBMED AFFYMETRIX

Year Micron size

Genetic probes/chip

N° of GeneChip systems

worldwide 1994 100 16 000 1 1997 50 65 000 >50 1998 24 256 000 >100 2000 20 400 000 >400 2002 18 500 000 >740 2005 2.5 million >1200