#321: Innovation In Next-Generation Sequencing (NGS) Tools Is Nearing A “Cambrian Explosion," & More

Take-aways from the recent Advances in Genome Biology and Technology (AGBT) conference bolster our expectation that breakthroughs will transform the genomic sequencing industry. While Illumina (ILMN) should retain an important position in next-generation sequencing (NGS), its market share seems to be in the process of peaking because its short read sequencing-by-synthesis (SBS) platform cannot satisfy new customer segments, answer complex biological questions, or enable new applications. Based on our research, NGS companies including Singular Genomics (OMIC), Element Biosciences (Private), Ultima Genomics (Private), Pacific Biosciences (PACB), Oxford Nanopore Technologies (ONT.L), and the Beijing Genomics Institute (BGI) are introducing important new technologies and solutions that will transform the marketplace.

Illumina’s robust infrastructure and services––including NGS protocols, third-party tools, and troubleshooting––should continue to benefit its broad-based installed base but, in our view, will not be able to tackle all problems efficiently, economically or, in some cases, at all. Thanks to the emergence of excellent or “perfect” sequencing on other platforms that have hit cost and throughput parity for a growing list of NGS applications, the era of “good enough” seems to be ending.

Empowering both researchers and diagnostic companies, revitalized competition should improve NGS’s quality and cost-effectiveness. We will continue to share our research on the new sequencing technologies and their important, if not profound, use cases.

Last week’s UP Summit conference in Bentonville, Arkansas, featured notable aerial mobility startups with concept vehicles that have evolved final designs now in the regulatory approval process. Having completed approximately 300,000 commercial medical deliveries during the past five years, Zipline unveiled a detect-and-avoid system that relies almost entirely on audio and determines accurately the flight path, make, and model of nearby aircraft. Although its usefulness might be challenged as electric drones continue to minimize noise, we note that Zipline’s system is an inexpensive and lightweight solution that could enhance camera-based detection in the future.

The Up Summit featured significant progress in lowering the sound of drones. Previously, drones and air taxis seemed too noisy to gain broad-based adoption. Companies now seem to have solved that problem––as illustrated by a demo flight that half the Up Summit audience missed because the electric aircraft was almost inaudible. Now, the industry must focus on the new limiting factor, regulatory certification.

Mulling our take-aways from the Up Summit, we concluded that drones and electric air taxi companies are likely to thrive in markets with insufficient road infrastructure but could encounter stiff competition in geographies with good roads and delivery networks. Technology “leap-frogging” would rhyme with Up Summit Partner Walmart’s history. In the sixties, Founder Sam Walton traveled by air to select new store locations and then check on stores in the parts of rural America without well-developed road systems.

Following the unwinding of the Terra ecosystem and the potential collapse of crypto lending platform Celsius, Three Arrows Capital (3AC), one of crypto’s largest and most reputable funds, now appears to be insolvent.

Founded 10 years ago by former schoolmates Su Zhu and Kyle Davies, 3AC reportedly managed $10-18 billion at its peak in April 2021. 3AC’s holdings reached far and wide––from bitcoin and GBTC to layer-1 smart contract platforms like Ethereum and Solana to private lending companies like Finblox.

3AC’s struggle began with its LUNA position, which collapsed from $600 million to ~$0 in May. Shortly thereafter, 3AC apparently tried to recoup losses by adding leverage to its remaining positions and putting its collateral at significant risk in a further market sell-off.

This week, as the market sold off in response to Celsius’s decision to halt withdrawals, news surfaced that 3AC could not meet margin calls. As of Friday, several lenders and exchanges implicitly or explicitly confirmed that they had liquidated positions held by 3AC. Among the liquidators were FTX, Deribit, BitMEX, Genesis, and BlockFi. According to other reports, 3AC also managed––with the promise of an 8% APR––the treasuries of protocols in which they had invested. Now, the protocol teams seem to have lost access to their treasuries. Allegedly, Three Arrows also syphoned funds from other counterparties to meet its margin calls, putting those counterparties at risk.

The full ramifications of 3AC’s potential insolvency remain unclear. As of this writing, the company is operating while seeking an agreement that will give it time to work out a plan with creditors. If 3AC and counterparties do not reach an agreement that prevents irreversible damage, crypto markets are likely to face further contagion and selling pressure.