IBM (IBM - Get Report) and Quest Diagnostics (DGX - Get Report) on Tuesday unveiled a genomic sequencing service powered by IBM's Watson supercomputer, providing a read through for companies including Thermo Fisher Scientific (TMO - Get Report) and Agilent Technologies (A - Get Report) , according to an Evercore ISI analyst.
The service, called IBM Watson Genomics from Quest Diagnostics, combines the cloud computing power of IBM with the genomic sequencing capabilities of Quest. This marks the first time that Watson for Genomics has been made broadly available to patients and physicians nationwide.
The collaboration between IBM and Quest "is certainly interesting for the clinical sequencing market," wrote Evercore ISI analyst Ross Muken in a Tuesday note, pointing to the goal of bringing next-generation sequencing (NGS) to community oncologists.
"We believe that [Quest]'s large hospital and physician network can help to increase physician awareness of NGS and can potentially accelerate its adoption within community clinics, while the use of IBM Watson Genomics can help address a major NGS bottleneck of data analysis," Muken said. "However, we believe measurable benefits will likely take time to surface and look forward to these developments."
In his note, Muken also mentioned how the collaboration would impact companies such as San Diego-based genomic analysis products company Illumina (ILMN - Get Report) , Waltham, Mass.-based medical device maker Thermo Fisher, Venlo, Netherlands-based sample technologies company Qiagen (QGEN - Get Report) and Santa Clara, Calif.-based Agilent Technologies, which provides instruments, software and consumables for the laboratory workflow.
In addition to IBM and Quest, "we believe the collaboration is incrementally positive for [Illumina] and [Thermo Fisher]'s sequencing business in that it could reduce the time to realizing the clinical oncology TAM (total addressable market)" Muken wrote. "Additionally, the collaboration is positive for NGS consumables providers [Qiagen], [Thermo Fisher], and [Agilent ]."
Agilent spokeswoman Rekha Parthasarathy told TheStreet in an email that the news is "testimony to the growing adoption of NGS in clinical research and diagnostics, which is in line with how we see the market evolving."
Qiagen spokesman Thomas Theuringer, while not commenting on any specific deal or customer relationship, said that generally speaking, "we benefit from increasing numbers of sequencing runs that are being performed worldwide." He noted that Qiagen has a portfolio of universal consumable solutions that are compatible with all major sequencing machines.
A representative for Illumina declined to comment. A representative for Thermo Fisher did not immediately return a request for comment.
On Wednesday, Illumina shares were changing hands at $147.05, up 1.3%; Thermo Fisher were trading at $151.83, up 0.1%; Qiagen shares were at $26.01, down 0.7% and Agilent shares were at $45.88, up about 1%.
For IBM and Quest the collaboration expands Watson for Genomics' reach beyond the 20-plus academic cancer centers it has relationships with and comes after the companies were in discussions for quite some time, said Quest spokeswoman Wendy Bost.
"We're taking cutting-edge technology and data and democratizing it," she said.
Steve Harvey, a vice president at IBM Watson Health, said in an interview that a small percentage of advanced-stage cancer patients are undergoing genomic sequencing. He said that while there have been a lot of advances in precision medicine over the past decade, "few patients benefit, largely because most doctors lack access to gene sequencing and analysis services."
"We have a very large opportunity to transform cancer care by scaling this nationwide," Harvey said.
Watson for Genomics ingests around 10,000 scientific articles and 100 new clinical trials each month. Memorial Sloan Kettering Cancer Center will supplement Watson's data sources by providing its precision oncology knowledge base.
Madison, N.J.-based Quest serves half of the country's physicians and hospitals, providing genomic sequencing and thousands of other test services. The collaboration with Armonk, N.Y.-based IBM extends the genomic sequencing service to thousands of the country's community oncologists, who provide an estimated 70% of cancer care in the U.S., according to the announcement. The Broad Institute of MIT and Harvard will provide additional genome sequencing capabilities as part of the collaboration.
The treating oncologist or other physician will send a patient's solid tumor biopsy tissue to Quest, whose pathologists will prepare the tissue sample for genomic sequencing. Quest's scientists will sequence the treatment-associated genes utilizing sequencing technologies and feed the genetic file into Watson, which will then use the sequenced genetic data and compare the data against clinical, scientific and pharmacological databases to help identify potential treatment options.
The collaboration "gives us the ability to offer this service to any cancer patient that wants access to use Watson for Genomics technology in the U.S. through their treating oncologist," Harvey said.
The collaboration comes after IBM on Monday reported quarterly revenue of $19.2 billion and earnings per share from continuing operations of $3.29, surpassing consensus analyst estimates of $19 billion and $3.20. EPS benefited from a low tax rate of 12.5%, down from 18.2% a year ago.
IBM's cognitive solutions unit, of which Watson is a part, had revenue of $4.2 billion during the third quarter, up 4.5%.
Shares of Quest were trading at $83.22 on Wednesday, down 0.6% and IBM were trading at $151.24, up 0.4%.