In Conversation with Christian Henry, CEO, PacBio

PacBio's CEO Christian Henry
Christian Henry, CEO, PacBio

It’s fair to say long-read sequencing company PacBio has been through some trials in the past few years, not the least of which was the scuttled merger it had planned with short-read sequencing behemoth Illumina. But since that time, the company has revamped its leadership team including bringing on a new CEO, Christian Henry. Under his leadership, it has focused its efforts on taking what was known as the most accurate—if expensive—long-read sequencing technology to increase throughput, make it less expensive, and, ultimately, develop channels to bring long-reads into the clinical setting. Henry recently took time to chat with Clinical OMICs Editor in Chief Chris Anderson about the company’s bumps in the road and its plans for the future.


Chris Anderson, Editor in Chief, Clinical OMICs: Tell me about your background and how you came to PacBio.

Christian Henry, CEO, PacBio: I’ve been in life sciences a very long time. I’m a biochemist by training, biochemistry and MBA. I worked at Affymetrix back in the late 90s into the early 2000s. And then, I started at Illumina in 2005 as a chief financial officer. When we acquired Solexa in 2006, I ran the integration for Solexa into Illumina, and behind it was driven by myself, Jay Flatley our CEO, and John Stuelpnagel ,who was one of the founders and COO at the time.

So the three of us thought about the strategy of how to push next-generation sequencing—and at the time, our array business was starting to blossom. But we saw the future as being sequencing and so I spent 12 years there in a number of different roles. I was the CFO for a long time and then I became chief commercial officer. In my time at Illumina, I was fortunate enough to run every function in the company, except legal, HR, and a research group. So broad experience in sequencing and in life sciences, both from a public company investor side, but also from building the business. Then I retired in 2017. We took the kids out of school, put all our stuff in storage, bought a big boat and went sailing around the Caribbean for a few years.


How did you become involved with PacBio?

Henry: I was on the board of Pac bio in 2018—I joined that board before the Illumina acquisition attempt. We went through that process and the acquisition didn’t happen. It then became very clear to the board that we needed a change in leadership to get the company to the next level.

What brought me to PacBio is the technology is extremely compelling, but is underappreciated. I thought I could drive the technology forward and drive a new vision of becoming a customer-centric organization, whereas historically the company had been very technology centric. I had a straightforward strategy that I thought can be successful and that was expanding into the clinic, expanding the commercial organization, and driving the product development portfolio. Because as I was getting ready to join, new generations of products were beginning their development cycle. You are going to see the benefits of those over the next couple of years. They are super compelling, because one of the most important applications for the technologies is whole-genome sequencing, particularly in a clinical setting.

The third leg of the strategy was to prove why long reads are so powerful, and so much more powerful than short reads. I came back to the company and was able to convince some investors that now is the time to invest in PacBio. We’ve done better than I expected. We raised a billion and a half dollars, which changes the way you think about the company and its prospects and its capability. We built a new team, and this team all sees the power of long-read sequencing and the power of building an inspired genomics company. Most of them, I’m proud to say, have followed me from Illumina and have deep, deep experience.


When the planned merger with Illumina fell apart, it’s safe to say that PacBio was at a crossroads.

Henry:  Yes. The company had about $100 million in cash after that and we definitely needed a new vision for where we could go. The stock was trading at $2 and $3 a share—the market cap was very low. We announced that I was going to join the company, and I had built very long-standing relationships with key investors over my time with Illumina. The first thing was they were willing to make a bet on me. What I told them, first and foremost, was the technology that we had in product development will drive down the price of long-read sequencing—so much so that it will be competitive with short-read sequencing and provide more complete answers. Second, the company had virtually no commercial footprint and therefore, while we develop these new products, we could start growing if we built a commercial organization and started to change the focus. And finally I let investors know that I believed we could build a team that would be able to professionally manage the company and get us to achieve not only revenue growth, but become ultimately cashflow positive, and build a sustainable, durable company.


Even then, though, the company was developing evidence of the value its technology could bring for clinical applications, right?

Henry: At that time, the company, with its HiFi chemistry, had demonstrated it was the most accurate sequencing technology available. And with that, we started collaborations with folks like Children’s Mercy Kansas City, where you’re starting to see an increase in diagnostic yield associated with long-read sequencing versus short-read approaches. So I was able to leverage that to point to early signs that in the clinic, over the long run, whole-genome sequencing is going to become fundamental. If you believe that, then you see that our technology is going to help drive that revolution.


Let’s talk about moving PacBio’s technology into the clinic. How will the company make the transition and also get to a price point that can compete with short-read sequencing?

Henry: Well, we do need new sequencing platforms. We have a semiconductor-based technology where we sequence single molecules at the bottom of wells. The more wells that you can put into a chip and the closer you can pack them together, you get more throughput out of your system per unit time. That is the center of the improvements.

If you look historically, the first Sequel system had a 1M chip, so one million zero mode waveguides or ZMWs. The Sequel II has eight million zero mode waveguides. So that was an apex increase. We haven’t publicly disclosed what the next sensor is, but you can imagine it’s significantly more powerful than what we have today. So the core of the cost reduction will come from that sensor and then how we configure the sensors. In other words, could we put multiple sensors in a machine so not only do you get the benefit of increased density, but perhaps you get multiple units of that density in one run.

All of a sudden, you not only drive the cost way down, but also have the ability to do many more samples per year, per instrument. Because one of the knocks on the current products is that they’re not scalable enough for routine clinical use—they are still great in the research setting and even in the translational setting. Our next generation of products will propel us to get to costs that are competitive.

Also, I think we are uniquely positioned to enable whole-genome sequencing in clinical applications and fundamentally enable that move from exomes to whole genomes. Because the short-read technologies don’t do that well on whole genomes. As a result, the cost benefit of going to whole genome versus the exome so far hasn’t panned out and the market for whole genome in the clinic hasn’t really blossomed yet.

That’s how we’re going to push forward: with faster instruments that operate less expensively per unit time. We will leverage the learnings from that into a clinical tool for whole-genome analysis, particularly in areas of any germline application: rare and undiagnosed disease, blood cancers, neurological diseases…


So that covers coming advances in your technology, what are you plans for proving utility in the clinic?

Henry: We have to partner broadly with leading institutions on demonstrating the value of long reads versus short reads in clinical applications. One core strategy is to partner with the best of the best: Invitae for super high throughput, scaled clinical work; Children’s Mercy and Rady Children’s Hospital for rare and undiagnosed disease in the pediatric setting, because that’s obviously a compelling value proposition. And we need to partner with them to build the long-read databases, to help them catch up to the short-read databases. We don’t have all the data on the value of long reads yet and the reason why we don’t have that data is because the throughput of the sequencers hasn’t been enough to build the databases of structural variation and then the informatic pipelines. Our strategy is to build the technology, make sure we partner with the leaders in very specific areas, to create those proof statements, and to build a compendium of data.

We also have to present the company PacBio as not only being a great technical partner, but also a strong economic partner. That is why having a strong balance sheet and a bigger presence is so important—it builds the customers’ trust that we are going to be there for the long run as true partners.


Once you show clinical utility, the next step is showing payers the health economic benefits, correct?

Henry: That’s exactly right. It is—first and foremost—showing the utility is greater than any other technology available. Then showing that by having this technology and doing the tests, that the outcomes are better in every respect. But Rome wasn’t built in a day. You need to have longitudinal analyses, and you pick important disease areas first. Rare and undiagnosed disease is an obvious choice, because the benefits are pretty darn compelling. Each indication builds on the previous indications to show utility. The good news is the short reads space has created the path and now we can be the fast follower, to go through with our technology, and demonstrate the advantages of long reads over short reads.


We’ve talked about PacBio’s core technology in long reads, but the company now has a short-read story to tell via is acquisition earlier this year of Omniome. How does that fit in with the overall strategy?

Henry: The advantage of Omniome and the advantage to short reads is they will always have a very strong place in the market. There are areas that are going to be massive markets—looking at residual disease in cancer. You need to monitor patients to see if their cancer comes back. That’s a recurring revenue stream that short-read sequencing will be valuable for and it will be a multi-, multi-billion dollar opportunity. As Illumina talks about their Grail acquisition, the notion of cancer screening of healthy patients, that could be a significant market over time, that short reads will have a natural advantage over long reads.

The reason we got into the short-read side is because now we can take the technologies that solve each problem best and present it to customers. We become a solutions company not just here’s a technology and let’s try to fit it into your problem.

The reason why Omniome itself is so compelling is that the accuracy of the Omniome sequencing technology is significantly better than SBS chemistry that’s prevailing in the market today. In fact, the empirical evidence we have demonstrates that it’s up to 15-fold more accurate than the SBS technology. The implications of that, of course, is when you’re looking for needles in a haystack, you want to sequence deep enough in the sample to get variance down to, say, 1%. With the current SBS technology that would require roughly 3,500x coverage. So you oversample. On the Omniome chemistry, it’s 250x. So that massive difference enables you to drive costs significantly down. But if you want to choose, you can take the technology and sequence deeper to find rare variants—perhaps cancer residual disease earlier and still do it in the economic framework. Now the clinician will have choices they didn’t have before.


There is a smaller acquisition by the company, sample prep provider Circulomics, that also shows a bit about PacBio’s path going forward. Can you tell us how that fits?

Henry: If you just step back and think about PacBio’s historical context, it has been very focused on the sequencer—looking at single molecule sequencing—and less focused on the entirety of the workflow. It has relied on its customers, quite frankly, to develop their own workflows. My belief is that in order for us to become ubiquitous and really drive the platform on the long read side, we need to simplify and own the entire workflow. The acquisition of Circulomics is the first step. What Circulomics does is they have a technology that technology is used to extract DNA very gently from samples. The reason that’s important as we want nice, beautiful long fragments of DNA as the input for our sequencing process. The more carefully the DNA is extracted has a direct correlation to how well the sequencer works and the results the customer gets. That’s why it was the first smallish acquisition we did,  because that part is so critical. They also have expertise in the rest of the upfront workflow. You’ll see us continue to make acquisitions that simplify the sample prep process for our customers. As we talked about earlier, our technology needs to be very robust, it needs to be very easy to use in order to drive hundreds of thousands of samples in a large clinical laboratory. Large clinical labs aren’t concerned about research, they want to do the same thing thousands, to hundreds of thousands, to millions of times. We have to make it as easy as possible. And that’s a departure from the historical paradigm of the company.

Another area we’re looking at is on the informatics side. You can think about informatics in multiple ways. The first part is the hardcore algorithms to take the signals and turn them into accurate bases and base calls—a lot of that work will be done in house. But companies like Google with their Deep Variant product can really help us, so we’re working with them. Then you get into the secondary and tertiary analysis tools. What we want to do is make it as easy for customers as possible to do interpretation using our datasets, so that they can get the insights they’re looking for. What I’d really like to do is get the long- and short-read technologies integrated into one bioinformatics pipeline, because that’s where you start to get the true power of long and short reads together.


It sounds like developing the right software tools is an important part of your strategy.

Henry: In the long run, this is really all about software. It’s just like other industries, right? Software eats the world, ultimately. We’re investing a lot in the company now in developing the right algorithms and evaluating the informatics pipelines, so that we can make it easy for customers to understand the biology and then make decisions based on that. I think that’s going to be a differentiator for us over the next five years.

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