From the day in 1769 when James Watt patented his steam engine and kicked off the Industrial Revolution, technological advances have driven economic growth. It’s a process nowhere more evident than in computers: a $7,000 top-of-the-line PC you can buy today at any computer store is twice as powerful as a 1982-vintage mainframe that would have set you back $4 million new.

This exponential improvement in performance and price has had powerful and wide-ranging effects on the wealth-building and productive capabilities of the entire economy. Yet in one vast area of the economy — healthcare, which accounts for nearly an eighth of U.S. GDP — technological advances, although significant in recent years, have yet to achieve the kind of exponential growth now accepted as inevitable in computing.

In computing, this exponential growth began with the invention of semiconductor materials, the basis of computer chips. In healthcare, we may right now be witnessing a similar invention of semiconductor-style significance: the science of genomics. And if work being conducted by a group of scientists in the basement of the David Sarnoff Research Center turns out as hoped, a tiny Princeton startup called SEQ (pronounced SEEK) will find itself at the center of the genomics revolution.

At its simplest level, genomics (gee-NO-mix) is the science of gene discovery, but it also encompasses a variety of technologies used to determine the structure, function, and interaction of genes in biological systems — and beyond that, to form the basis of a new generation of life sciences research that many hope will lead to diagnostic and treatment breakthroughs for such diseases as cancer, diabetes, AIDS, and Alzheimer’s.

One of the most critical technologies in genomics is DNA sequencing, the means by which scientists read the genetic code. SEQ’s experimental DNA sequencing technology, called single molecule sequencing by fluorescence (SMSF), may constitute a discontinuous innovation — that’s techspeak for breakthrough — in the way genomics scientists determine the structure and function of the basic building blocks of life: our genes.

There’s a catch, of course: no one’s quite sure yet if SMSF works. But if it does, the technology will enable scientists to deconstruct genes down to their most basic constituent parts a thousand times faster than they can today, and reduce the cost of doing so by a similar factor.

"I don’t want to overstate how close we are to achieving that breakthrough; we have not yet sequenced our first strand of DNA," says Richard Horan, SEQ president and CEO. "It remains an ambitious project to realize reduction to practice. But if SMSF works, it’s hard to overstate how fundamental an impact such a technology might have."

@big letter = To understand the significance of this potential breakthrough one need only consider the excitement generated by the Human Genome Project.

An international, government-funded effort, the Human Genome Project seeks to map the DNA sequence of the more than 100,000 genes that make humans human. The idea behind the project is that by having a complete map of the human genome — all 100,000 or so genes — it will be possible to identify genetic mutations or defects that lead to disease by comparing the genes of people with diseases or a family history of a particular disease to the genes of healthy people. Then, having identified the gene or genes responsible for a disease, it is hoped

that researchers will be able to create drugs to correct the defect.

Mapping all 100,000 genes doesn’t sound like an insurmountable task to the layperson. And indeed, it now appears that the Human Genome Project is on schedule to complete its mission within seven years.

"But what the world is beginning to appreciate is the massive amount of follow-on, comparative DNA sequencing that will be required to come to grips with the complexity of the biology that underlies human disease," Horan says. "And it is not at all clear that current technologies are up to that task."

Genes are complex. Composed of DNA, they instruct cells to synthesize enzymes and proteins that determine the structure and function of the cells — making one a nerve cell, another a muscle cell, and so on — and governing how the cells act. Every cell in your body has between 10,000 and 40,000 genes governing its actions and interactions.

The DNA, or deoxyribonucleic acid, that makes up each gene is itself composed of constituent parts, called nucleotides, which are in turn made of a sugar, a phosphate group, and one of four molecules called bases: adenine (A), guanine (G), thymine (T), and cytosine (C). These bases bond in pairs — A with T or G with C — and combine in ladder-like strands coiled in a double helix. There are about 3 billion of these so-called base pairs in the human genome, and the

sequence of these base pairs along the strands of DNA is what the Human Genome Project seeks to determine.

Single Molecule Sequencing

The Human Genome project, launched in the late 1980s, has thus far sequenced only a small fraction of the genome. That’s because today’s most common method of determining the sequence of A, T, G, and C — and thereby the structure of genes — is extremely time consuming and expensive.

Known as Sanger Sequencing, this method was developed in the late 1970s and relies on chemistry to read the base pairs of A, C, T, and G in DNA, at a cost of about 50 cents per finished base pair. SEQ’s experimental SMSF technology, by contrast, is a physical method that has the potential to reduce costs to a fraction of a cent per base pair. And where Sanger Sequencing can churn out tens of thousands of base pairs per day thanks to recent developments in automation, SEQ scientists believe SMSF has the potential to read just as many base pairs in less than two minutes.

In the foreword to his recent book "Imagined Worlds," Freeman Dyson of the Institute for Advanced Study describes the significance of the move from chemistry to physics in DNA sequencing that SEQ’s technology may represent:

"In biology, the move from chemistry to physics has not yet happened," Dyson wrote. "But the tools of physics are rapidly improving, and will soon be directly applied to the job of sequencing. As soon as physical sequencing is possible at all, it will be cheaper and more rapid than chemical sequencing. I recommend this invention as a task for any ambitious young person who dreams of leading a scientific revolution." Here’s what that revolution might look like, assuming SEQ’s SMSF technology leads it:

Taking a single strand of DNA about 50,000 bases long — enough for about six genes — scientists attach one end of the strand to a microscopic plastic bead (accomplished through a chemical process). DNA likes to curl up like a tangled ball of string, and that’s what it does around the bead.

To make the A, C, T, and G components of DNA readable, the microscopic bead surrounded by the DNA strand is dragged — using "optical tweezers," a laser beam like the tractor beam on Star Trek — across a thin film of liquid on a CD-like disc. The DNA strand extends out behind the moving bead like a rope being towed behind a boat.

Next, the tidily aligned strand of DNA is exposed to a naturally occurring enzyme called a progressive exonuclease. In nature, this enzyme’s job is to find the free end of a strand of DNA, latch onto it, and progressively digest the DNA strand like a Pac-Man, chomping off one base at a time and spitting it out, and it does the same thing in the SMSF process, leaving a string of individual bases in its wake.

Up to this point, everything described has been shown to work. The remaining hurdle for SMSF is the final task: actually reading the row of bases chopped off the DNA strand by the progressive exonuclease. SEQ scientists hope to accomplish this using a developing technology called single molecule spectroscopy.

"This is in principle how it is to be done," SEQ CEO Rich Horan says. "The really hard part is reading the bases with spectroscopy. That’s the most difficult challenge we face."

@big letter = SEQ’s unique approach to DNA sequencing came from an MIT-trained scientist named Kevin Ulmer, described by Princeton biotech venture capitalist and SEQ chairman Bob Johnston — who provided the seed funding for SEQ — as a visionary.

"Kevin is a Renaissance person — he excels at conceptually seeing things and bringing together diverse technologies to solve really big problems," Johnston says.

Ulmer became interested in the emerging field of genomics during the mid-1980s debate about the Human Genome Project. At the same time, Ulmer was watching the development of other leading-edge technologies, such as optical trapping, DNA enzymology, and single molecule spectroscopy. Ulmer’s idea was that taken together these technologies might point the way to a breakthrough in DNA sequencing.

"Kevin was smart enough to look at these developments and see that in order for genomics to really work, there needed to be a lower-cost method of gene sequencing," Johnston says. "And he saw that single molecule sequencing might be the way."

Ulmer named his new company SEQ as a word play on the verb "seek" as well as on the first three letters of "sequence," the technology. "For four years — from 1987 to 1991 — I funded it out of pocket," says Ulmer, who lives in Cohasset, near Boston, with his wife and three children. Ulmer had doubled majored in biology and physics at Williams (graduating in three years in 1972) before earning his doctor’s degree from MIT.

Having previously worked with Johnston — whose more famous Princeton ventures have included I-Stat, Envirogen, and Cytogen — Ulmer asked Johnston to finance his idea. In 1991 Johnston did invest, initially on his own, and subsequently with additional capital provided primarily by Allen & Co. in New York, original backers of pharmaceutical giant Syntex, now part of Roche.

SEQ initiated operations as a virtual company, funding research at the laboratories of its key scientific advisors beginning in 1992. In 1995, after attracting additional capital from Bristol-Myers Squibb, SEQ brought its technology development in-house, setting up its laboratories at the David Sarnoff Research Center.

"It began as a serendipitous arrangement," Rich Horan says of SEQ’s arrangement with Sarnoff. "Normally a start-up would rent some space and build its labs from scratch. In this arrangement, we use Sarnoff space, and have access to their scientists and engineers, which is very important. Our technology is multidisciplinary, pushing up against the state-of-the-art in physics, chemistry, and biology. Sarnoff already has its infrastructure in place in these areas, especially in physics and chemistry."

Because of the challenges inherent in SEQ’s technology, progress came slowly at first. "Kevin was overly optimistic at the beginning and so were we about some of the technological problems we would face," Bob Johnston explains. "Like a lot of other visionaries, he can look into the future. But often that means you focus on the mountain three or four mountains away and don’t realize how tough it’s going to be to get through all the valleys from here to there."

Ulmer left the company in March but continues to hold an equity stake and has founded a new genome company in Cohasset. "In contrast to SEQ, this company uses existing genomics technologies. While I was spending 10 years developing new technology, my colleagues — who started five years after — developed genome companies that now dwarf SEQ. I learned something."

Management of SEQ is now led by Rich Horan, who for 10 years prior to joining SEQ full-time was vice president of Bob Johnston’s venture capital company, Cherry Valley Road-based Johnston Associates.

A former investment banker, Horan, 42, studied philosophy at Dartmouth before returning there for an MBA in finance. At Johnston Associates, he worked on a Johnston venture called Immunicon, a bioanalytical instruments company of which he remains chairman, and before that had worked in corporate finance in San Francisco.

In the last 18 months, SEQ has established considerable momentum, Horan says. Most significantly, the company has attracted a world-class team of scientists from Bell Labs recognized for their achievements in ultrasensitive detection technologies. These technologies underlie SEQ’s greatest challenge: using spectroscopy to detect and discriminate among the individual base molecules of A, C, T, and G that make up DNA.

The Technological Challenge

Spectroscopy is based on the phenomenon that molecules, when excited by a chemical reaction, an electrical charge, or a beam of energy, give off a characteristic frequency of light or electromagnetic radiation — fluorescence — that can be measured by specialized instruments. Commonly used today to determine the chemical composition of materials, the phenomenon was first identified by Niels Bohr in 1913.

But the spectroscopy in common use today doesn’t cut it when it comes to identifying the bases of DNA, because it can only identify bunches of molecules, not individual ones, and only detects molecules whose fluorescence is within the diffraction limit — or visible range — of light.

So SEQ faces two challenges if its scientists are to use spectroscopy to sequence the bases of DNA: detecting each base molecule individually, and detecting them outside the visible range of light, in the ultra-violet spectrum, which is where the natural fluorescence of the bases of DNA happens to lie.

This is where the Bell Labs team comes in. Led by PhD chemist Jay Trautman, 38, and including analytical chemist Tim Harris, 45, and physicist John Macklin, 40, the team collaborated at Bell Labs on several pioneering spectroscopy advances, including the identification of individual molecules.

A new field, single molecule spectroscopy has been in existence only since 1990. It is being pursued actively by only three research teams worldwide — at Los Alamos National Laboratories in New Mexico (where the atomic bomb was developed), at a consortium of academic labs funded by the German Government, and here in Princeton at SEQ.

Trautman and his team hope to illuminate with a laser the bases of DNA chopped off and made readable using the method described earlier, and then to detect the ultra-violet light that each molecule emits in response to the laser. Then, by differentiating between the different kinds of UV light each molecule emits, they hope to be able to differentiate between the A, C, T, and G molecules that make up DNA. If they can do that, they will have achieved the breakthrough hoped

for by Freeman Dyson, and will have made sequencing DNA an optical/physical process, rather than a chemical one.

Although single molecule spectroscopy has become a reality in recent years, thanks in part to Trautman and his colleagues, "no one has yet broken the UV barrier in single molecule spectroscopy," Rich Horan says. "In order for single molecule sequencing to become a commercial reality, we need to demonstrate the ability to do single molecule spectroscopy on the native bases of DNA." But even if Trautman and his team manage to scale this formidable technological mountain, SEQ will face still more mountains in its future, albeit more prosaic ones: financing and commercialization.

To date, the 12-employee company — most of whom hold Ph.D.s — has raised just $7.5 million to fund its operations. Principal shareholders include Bob Johnston, New York-based Allen & Co., and Bristol-Myers Squibb. (In addition, SEQ employees hold between 10 and 15 percent of the company themselves). Over the next two years, the company will probably need another $10 million, Horan says. Beyond that, much larger sums will be needed to fully capitalize on the SMSF technology — perhaps on the order of $100 million, according to Horan. That money would be used to develop a fully integrated commercial genomics business beginning with the large-scale implementation of the company’s sequencing technology.

In its initial years, the company would offer gene sequencing services to the pharmaceutical companies under multi-year, multi-million dollar collaborative contracts. Later, SEQ would generate enormous databases of genetic information applicable to a wide range of research disciplines, which it would then license to commercial, academic, and governmental research labs.

"SEQ plans to build an information business, a genetic information service business," Horan says. "It’s not going to be a product business like a Microsoft or an Intel. It’s more like a Bloomberg — as Bloomberg is to financial services, we hope to be to genomics."

And in the process, there could be the opportunity for a lot of people to make a lot of money — assuming, of course, SMSF can be made to work. (Editors’ note: The list of people currently considering an investment in SEQ turns out to include a member of the reporter’s family.)

"The pharmaceutical industry spends approximately $10 billion a year worldwide on discovery research, but at present less than two percent of that is spent on genomics," Horan notes. "But as drug-development strategies become increasingly based on genetics research, that percentage will increase. And if we can achieve a discontinuous innovation in one of the critical, leverageable technologies used in genetics research, making it exponentially faster and more economical, that percentage will increase even faster." At present, the genomics industry — which consists today of just a few companies — generates current revenues of about $250 million annually, Horan says.

"But seven to ten years from now the industry will generate as much as several billion in annual revenue," he continues. "And if our technology succeeds, we believe we will capture a leading position in the field. That’s the goal we have set for ourselves."

Says founder Kevin Ulmer: "SEQ is the only technology left standing that has a chance of dramatically reducing the cost of sequencing the genome."

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