CAMBRIDGE, Mass. ( TheStreet) -- A new generation of human genome technology analysis is represented by the Helicos Genetic Analysis System, a new machine from Helicos BioSciences ( HLCS) of Cambridge, Mass.

The machine is the first commercially available, whole-molecule human genome sequencing system. The applications of this system range from diagnostic genome sequencing for individual patients to biotechnology research of a complexity not feasible until now. "The frontiers to be opened will involve uses of the human genome not even imagined today," said Steve Lombardi, Helicos president, in an interview.

The machine works by splitting the double helix of DNA into single strands and breaking the strands into small fragments that, on average, are 32 DNA units in length. Light emitted when a new helix is formed on these fragments characterizes the sequence in the original DNA. The light is computer analyzed and compared with human genome sequences already on file. This is done for billions of these small fragments and the differences in the test sequences from those most common in the general population identify what makes a certain individual unique.

In its literature, Helicos states: "Helicos' proprietary True Single Molecule Sequencing (tSMS) technology allows direct measurement of billions of strands of DNA enabling scientists to perform experiments and ask questions never before possible. Helicos believes the tSMS sequencing by synthesis approach will represent the first comprehensive and universal solution for single molecule genetic analysis, dramatically lowering the cost of individual analyses."

The technology was developed by Stephen R. Quake of Stanford University. The New York Times reported earlier this week that the professor used the technology to become the seventh individual in history to have his personal genome sequenced. The process took three people four weeks to perform at a cost of $50,000.

Quake said, "There are four commercial technologies, nothing is static and all the platforms are improving by a factor of two each year." He added, "We are about to see the floodgates opened and many human genomes sequenced."

Quake said in the Times article that the much-discussed goal of the $1,000 genome could be attained in two or three years. That is the cost, experts have long predicted, at which genome sequencing could start to become a routine part of medical practice.

Depending on how widely the machine is used, the market for it is estimated possibly ranging from $1 billion to $5 billion a year. "The use in patient diagnosis will probably be a second wave of applications. Initially the use will be in biotechnology development, research and other non-patient oriented areas," Lombardi said.

The Helicos president said there are more than 10,000 DNA sequencers in use, with a capital cost ranging from $60,000 to $300,000 each. This is a capital investment in place for an outdated technology probably between $1 and $2 billion. Replacement of these pieces of equipment, plus an emergence of untold additional genome analysis applications, easily aslso could amount to more than $1 billion a year in sales for this market, in addition to the yet-to-be developed patient diagnostic applications.

The following table shows comparisons of the four competitors in the total genome sequencing space: Helicos, Illumina ( ILMN), Life Technologies ( LIFE) and Roche.

Human Genome Heavyweights
Competitors in Total Genome Sequencing
Company Name
Ticker
Market Cap ($B)
Earnings (ttm/share)
Total Cash ($B)
Total Debt ($B)
Helicos Biosciences Corp.
HLCS
$0.08
($1.24)
$0.014
$0.007
Illumina
ILMN
$4.51
$0.52
$0.74
$0.28
Life Technology Corp.
LIFE
$8.11
($0.10)
$0.49
$3.46
Roche/454 Lifesciences
RHHBY.pk
$52.60
$5.86
$18.00
$48.10

Tiny Helicos is by far the smallest of the four, but has the lead in commercially available, full genome analysis systems. According to Lombardi, Helicos has delivered seven machines to date, the most recent earlier this month to an undisclosed biotechnology company in the Northeast. Lombardi declined to provide any information at this time on the order pipeline or backlog, citing upcoming Securities and Exchange Commission reporting activities.

A small company such as Helicos, with a technology advantage, must be considered a potential takeover target unless one of the competitors can leapfrog into the lead. In addition to the competitors previously mentioned, a number of other companies, such as Baxter ( BAX) or Abbott ( ABT), have business activities to which Helicos might make a good fit. Some are listed in the following table.

Potential Acquirers
Bigger Companies That Could Mesh With Helicos
Company Name
Ticker
Market Cap ($B)
Earnings (ttm/share)
Total Cash ($B)
Total Debt ($B)
Beckman Coutler
BEC
$4.53
$2.93
$0.67
$1.32
Agilent
A
$8.45
$1.02
$1.41
$2.15
Becton, Dickinson and Co.
BDX
$16.19
$4.82
$0.73
$1.15
Thermo Fisher Scientific
TMO
$18.78
$2.04
$1.43
$2.04
Covidian PLC
COV
$20.00
$2.49
$1.22
$3.01
Baxter International
BAX
$33.49
$3.43
$1.80
$3.83
Abbott Laboratories
ABT
$68.26
$3.43
$5.70
$15.71

Keep an eye on Helicos. Not only is there a possible good investment here, but how DNA analysis, genetic research and patient diagnosis are done may undergo major changes in the near future.

-- Written by John Lounsbury in Clayton, N.C..

At the time of publication, Lounsbury had no positions but intends to establish positions for personal, family and client accounts after this article is published.

John B. Lounsbury is a financial planner and investment adviser, providing comprehensive financial planning and investment advisory services to a select group of families on a fee-only basis. He worked for 34 years with IBM, and spent 25 years in R&D management and corporate staff positions. He also was a Series 6, 7, 63 licensed representative with a major insurance company brokerage for nine years.

Specific interests include political and economic history and investment strategy analysis. He holds degrees from the University of Vermont, Columbia University and the Illinois Institute of Technology, where he studied chemistry, physics and mathematics. He is a contributor to Seeking Alpha and his own blog, PiedmontHudson.

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