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Will hospitals take sequencing in-house?

October 24, 2012 Leave a comment

As entrepreneurs explore business models, this is an upfront question to consider. When sequencing instruments, cost, and analysis burden decreases dramatically, will the hospitals want to internalize all of the sequencing testings? In different parts of the world, the answer can be quite different, and a company’s business model must conform to the market it’s trying to address. It depends on quite a few factors. For hospitals, the end users (physicians) most often care more about getting good data. This makes the outsourcing model very attractive, considering all the equipment cost, maintenance, depreciation, staffing & training, labor, other overheads, etc. that are associated with taking sequencing in house. Besides, there will always be the analysis burden that may never be completely automated (or in another trendier word, the analysis will always have a personalized part). There is also a potential capacity issue (although it’s more related to research projects involving many retrospective samples). The other big factor is in the potential need of fast turn-around, where delivery to service provider and wait for result may become intolerable. Currently, all service providers have long turn-around time. In this arena, models like what the current 3rd party diagnostic companies do (LabCorp, Quest, and numerous others) may serve as a good starting point for business analysis, but it’ll be dangerous to extrapolate too much: what works for LabCorp in the current landscape may not be suitable, since WGS is a monster that has no analog before.

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