Dear Day One Investor,
The Human Genome Project (HGP) was an ambitious project from the start.
Its publicly funded research was led by the National Institutes of Health (NIH) with the goal of sequencing a whole human genome.
This was seemingly an impossible task in 1990 when the HGP was established. There were no false expectations at the time. It was well understood that the process would be both time consuming and very expensive.
The U.S. government’s expectations were that it would take 15 years and about $3 billion to achieve such an incredible task. The expectation was to spend about $200 million a year for the duration of the project. On this point, the government forecast turned out to be remarkably accurate.
One of the key scientists on the HGP was Craig Venter. His background was in biochemistry, pharmacology, and genomics. He was a natural fit for the HGP and employed at the time by the NIH.
Not surprisingly, the initial progress at the HGP was very slow. And Venter had some innovative ideas about novel techniques to sequence a human genome much faster and for a fraction of the cost compared to the methods being used by the NIH.
The leadership at the NIH disagreed with Venter’s ideas for gene sequencing, which ultimately led to Venter leaving the NIH and setting up Celera Genomics, which eventually led to an IPO in 2008.
But well before the Celera IPO, there was a far more interesting series of events that were highly embarrassing for the NIH.
In addition to Celera Genomics, Venter also established The Institute for Genomic Research in 1992.
This is where Venter was able to apply – what was thought to be – his radical approach to gene sequencing, which was a point of contention at the NIH. Venter and his team believed that “shotgun sequencing” was the key to faster and cheaper sequencing of the human genome.
The idea is actually quite simple: Break up a genome into many small fragments and then sequence each fragment from both ends. Scientists would then use florescent chemical labels which are attached to the smaller genetic sequences – this is the chain termination method.
After this was completed, the task was to reassemble all the pieces into a whole genome map. This was possible because of the ability to match up overlapping DNA fragment sequences.
This approach became even more controversial by 1996, when Venter and his team published a paper suggesting that their approach could be completed faster and much cheaper than the NIH-led Human Genome Project (HGP).
Based on the research that Venter and his team developed at The Institute for Genomic Research, his private company, Celera Genomics, began to sequence a whole human genome in 1999 using a derivative of the shotgun sequencing known as compartmentalized shotgun sequencing (CSA).
CSA was an improvement over the earlier approach, as it enabled even better quality sequencing data of the whole human genome.
The results were stunning.
Celera Genomics completed the first draft sequence of a whole human genome in just 9 months, and it cost only $100 million. Celera published its first draft in 2001. It was an absolutely remarkable achievement.
A small, private company led by a scientific rebel like Venter beat the National Institutes of Health and a legion of scientists at the Human Genome Project for a fraction of the cost. The NIH spent a jaw dropping $2.7 billion to do the same thing, a lot less efficiently.
It took 9 months and 3.7% of the cost of the NIH.
Venter reminds me of Elon Musk, only for genetics and genomics. Fraction of the cost. Fraction of the time. And by doing so, Venter opened up remarkable possibilities for the future of genetics, genetic therapies, improved healthcare, and human longevity.
It was a grand challenge in life sciences accomplished. And it left the scientific community with a major question…
What to do next?
After all, if it costs $100 million to sequence a human genome, personalized genetic sequencing would be impossible. It just wouldn’t scale.
And without affordable sequencing, there would be no way to generate clinically actionable insights from genetic sequencing. There just wouldn’t be enough data available.
Back in 2001, it looked like it would be decades before sequencing costs would drop to any kind of reasonable level. But something special happened around the 2008 timeframe, as we can see in the graph below.
Semiconductor technology became far more powerful, and large-scale computing systems became more affordable. And the industry technology used to sequence a human genome also improved, largely led by Illumina (ILMN).
These factors resulted in the decline in the cost of sequencing a human genome that was significantly faster than Moore’s law. And the years from 2008 through 2016 saw the largest drop in costs from around $10 million down to a mere $1,000.
Of course, Venter was directly involved in this trend, and he knew what it all meant. If genomes could be sequenced for $1,000 or less, large scale genetic sequencing would be possible, and the industry would be empowered to mine the human genome to better understand the direct relationship between our genome and our physical condition.
This is the key to personalized medicine. If we can understand what genetic mutations mean, we have the possibility of proactively addressing those mutations before they cause disease or death. Better yet, there is the potential to understand what medicines might be toxic or ineffective to one patient and highly beneficial to another.
Venter, along with support from Celgene, Illumina, Peter Diamandis, and Daniel Kraft, established Human Longevity (HLI) in 2014. The goal was to create a business model that could both help patients and also collect data so that the genetic sequencing of any individual could become clinically actionable… assuming that there was something wrong with a patient.
This was accomplished by using the most advanced sequencing technology from Illumina and collecting high resolution genetic sequences of patients, and also assessing each patient’s phenotype – their actual condition and physiological properties.
Combining the two would lead to breakthroughs in understanding of the impact of certain genetic mutations on the human condition, and ultimately clinically actionable insights. Human Longevity set up its business, in a way, as a concierge medical clinic with an annual subscription initially at $25,000.
It was expensive to offer such customized and personalized services inclusive of genetic sequencing and analysis. But it was an exciting endeavor because of what it meant for the future.
I first reached out to Human Longevity in 2015, as I was researching the latest developments in genetic sequencing. And I later visited their facilities to better understand both the business and the approach. I immediately knew that it was the future of healthcare, but I also understood that it would take several years for Human Longevity to collect both genetic sequencing data – combined with the patient phenotype – in order to build a powerful database to enable the company in its mission.
I went through the process myself. It was there that I discovered that I had prostate cancer. I went there thinking I was perfectly healthy, perhaps a few pounds overweight, but with no health conditions to report.
While the news came as quite a shock, it was empowering. We caught it very early, which enabled me to make several adjustments in my life to work towards curing myself. It has been an invaluable, and potentially lifesaving, experience to me.
I wrote about my experiences visiting Human Longevity in The Bleeding Edge at Brownstone Research, which resulted in several of my subscribers visiting Human Longevity as well for a genetic screening and clinical evaluation. Many wrote in to share with me their great experiences through the process, and several shared that they discovered something life threatening and likely wouldn’t be around today had they not acted and visited, after learning about this process from my research and writing.
I’m sharing this only to show how valuable the technology and the process are for this kind of screening. It is the future of medicine. And the technological platform and data that Human Longevity has built and collected over the years is arguably the most valuable data set for whole human genome genetic sequences that exists today.
That’s because not only is the sequencing extremely high-quality (a genome is typically sequenced 30 times over to eliminate any gaps in the sequencing), it is also linked to phenotypic data from each patient. This is where data matters. Enabling the connection between phenotype and genetic makeup.
And this is where our investment opportunity presents itself…
Human Longevity recently decided to focus its energies on expanding its longevity care clinics, designed to help patients with early detection of pre-symptomatic disease and treat the root causes of the disease, rather than focusing on the symptoms.
It’s the way healthcare should be. Health care rather than sick care. And it’s the future of healthcare, predictive, and preventative medicine.
And with technologies like artificial intelligence and genetic editing, the industry is empowered to a far greater degree than ever before to help address the root cause of disease.
And the new strategic direction for Human Longevity resulted in spinning out its genomic technology engine, its technology platform, that it developed over the last decade.
By my estimations, Human Longevity has already spent more than $100 million on this technology platform. It wasn’t its core business, but at the time, it had no choice. Nothing like it existed, so it had to build it in order to support its longevity care business model.
That’s what has created an incredible investment opportunity for us. A new company was created, Simplify Genomics, to house the genomic technology engine and create a much larger business that will support not only Human Longevity, but the entire healthcare industry.
Simplify Genomics was given an exclusive worldwide license on the genomic technology engine, as well as an exclusive license for the patents associated with the technology platform. I don’t know how else to say this, but Simplify Genomics is now sitting on a gold mine.
I’ve been researching genetics, genomics, and genetic editing now for 15 years. In fact, the very first time I had my DNA sequenced was back in 2011. But there has been a major problem in the industry. Outside of some very well-known genetic mutations, the genetic reports that are produced after sequencing are not clinically actionable.
This is the problem that Simplify Genomics solves. Thanks to the last decade of work by Human Longevity, Simplify Genomics now has billions of genomic datapoints, more than 50,000 whole human genomes, and phenotypic data associated with those genomes.
This remarkable collection of data, supported with AI, is what enables Simplify Genomics to have a remarkable database of more than 2,100 gene-disease associations, which enable it to produce clinically actionable reports.
The CEO of Simplify Genomics, Travis Lacey, deeply understands where the value is in the industry. The actual sequencing of a genome has already become commoditized. As we saw in the earlier chart, costs to sequence a genome have dropped well below $1,000. In fact, today, those costs tend to be in the $200-300 range.
And with Illumina’s latest generation NovaSeq X sequencing machines, the cost will rapidly drop to just $100. This is why it is smart for Simplify Genomics to simply outsource the sequencing. It avoids the capital expense of the Illumina machines and that business is a low margin business.
Simplify Genomics will focus on the high-margin, high-business growth opportunities in taking that raw data and producing valuable, clinically actionable reports for healthcare providers.
There are three broad categories of actionability that Simplify Genomics can create with its genomic technology engine:
Simplify Genomics’ business model is easy to understand. It charges a fee for taking in raw data from a healthcare services provider and producing a clinically actionable report for each patient.
This is already a great business for Simplify Genomics, as it has a built-in customer with Human Longevity and is already serving other service providers. Simplify Genomics’ revenue for this year will likely end up around $1.6-1.8 million.
And it is already in advanced discussions with a major healthcare service provider that will combine Simplify Genomics genetic reporting with its whole body MRI imaging services. I’m confident that this deal will go through – a multi-million dollar deal for Simplify Genomics in 2025.
This is such a hot space right now in healthcare. The reason is that the costs for sequencing have dropped so much that it is affordable to sequence any patient’s genome. The goal is to find out if there are any underlying genetic conditions that may be causing known symptoms, or some that will cause future symptoms.
Simplify Genomics has an incredible competitive advantage. Without Simplify Genomics’ genomic technology engine, it is very difficult to scale a business. As a result, potential competitors are years behind.
Simplify Genomics has already benefited from a decade of hard work and more than $100 million in investment. And it has now applied automation and AI to streamline the process, enabling it to scale quickly into a large business.
The company’s go-to-market strategy is focused on longevity centers like Human Longevity and Princeton Longevity, as examples. It also targets healthcare clinics that conduct full-body MRI scans.
This is something that is beneficial to anyone, I highly recommend it. It’s also a great business target, as those providers can supplement their own revenue streams with added-on, whole genome sequencing and clinically actionable reports.
The other major category is working with concierge medicine practices. A good example of that is MDVIP, which has built a national network of more than 1,100 primary care physicians.
Concierge medicine is focused on personalized medicine and preventative care for its patients. That’s why Simplify Genomics is such a perfect fit. It provides those concierge physicians with clinically actionable data that can be used to proactively care for their patients.
As I mentioned earlier, this is the future of healthcare.
This radical change in healthcare started at the high-end led by Human Longevity and has since migrated down to concierge medicine, which has scaled to nationwide businesses at more affordable price points. The concierge medicine industry has already grown to $6.7 billion last year with more than 12,000 concierge physicians to tap into. It is forecast to grow to more than $15 billion by 2032.
This is a fantastic tailwind for Simplify Genomics, which will drive its revenues to a range of $4-5 million next year, more than $10 million in 2026, and I expect revenues will be well above $20 million by 2027. Better yet, I think that Simplify Genomics can get to cash flow breakeven before the end of next year.
But I believe those to be conservative assumptions. The size of the addressable market is more than $1 billion, and if Simplify Genomics locks in some major deals with large healthcare service providers and develops an efficient business development process, then crossing $100 million in annual revenues is very achievable within the next several years. And with the costs of sequencing dropping to $100 and Simplify Genomics service offering less than $1,000 at scale, insurance companies will start to cover this kind of genetic screening.
Believe me, it’s not because the insurance companies are magnanimous. It’s all about saving money. This kind of screening is so effective in reducing the chance of a misdiagnosis, or spending hundreds of thousands on treating symptoms rather than the root cause. Insurance companies will save so much money when physicians are empowered with Simplify Genomics clinical reports.
And that’s not everything.
There’s an even larger business opportunity for Simplify Genomics, related to monetizing its genomic technology engine and all of the data it has collected and associated with genetic variants from the fields of genomics, transcriptomics, proteomics, metabolomics, metaomics, and lipidomics. These are known as the “omics.”
What Simplify Genomics has done is aggregate all of this intelligence and make it searchable through a normal user interface like we’d use on the internet.
The easiest way to explain it is that it is like a version of Google, but just for genetics and related clinical information.
For example, a physician can provide their patients’ genomes and ask questions like:
This is such an incredibly powerful and useful search engine, with so much value to both physicians as well as researchers. It is easy to use, requires no technical skills, and super-fast – responses are typically less than a second. It’s like having everything at your fingertips available in a split second.
And it just needs to be monetized. A resource like this is immensely useful in the industry and it is already popular with Simplify Genomics customers. There is so much potential to build this out further, and then monetize through enterprise licensing fees or other subscription-based models. I feel like it’s hard to overstate how valuable this search engine could become.
Which is exactly why we want a stake in it.
We’re investing at a pre-money valuation cap of just $18 million, in the form of a securities agreement for future equity (SAFE). This is an investment that eventually converts to equity at a valuation of $18 million or less, upon change of control (acquisition), an initial public offering (IPO), or upon a future funding round.
[NOTE: A pre-money valuation “cap” simply means that in the very unlikely event that the next funding round happened at a valuation less than $18 million, it means that our investment would convert at that lower valuation. Put another way, it guarantees that our conversion, and thus our investment, will happen at a $18 million valuation or less.]
To date, Simplify Genomics has only raised $1.8 million in its pre-seed round to establish the company. In exchange for the exclusive license agreement for the genomics technology engine from Human Longevity to Simplify Genomics, Human Longevity received a 12% ownership in Simplify Genomics.
Human Longevity’s ownership interest in Simplify Genomics is highly beneficial, as Human Longevity has a vested interest in Simplify Genomics success.
Human Longevity actually just completed a $40 million raise of its own to expand its own operations, which will directly benefit Simplify Genomics through more genetic testing and reporting.
Also of interest is that the President of Human Longevity, David Karow, is an investor. In addition to Karow, Toby and Anita Cosgrove are also investors in Simplify Genomics. Toby Cosgrove was the CEO and President of the Cleveland Clinic for 20 years, and Anita Cosgrove was a former SVP at Human Longevity, in addition to having an executive role at 23andMe and still very much active in the precision medicine space.
As for valuation, at an $18 million pre-money valuation, that represents a forward enterprise value to sales multiple (EV/Sales) of 4.5, based on a forecasted $4 million in revenue for 2025. This is a fair valuation for a company at this stage, and in the current market that we have now in genetics and biotechnology.
As for competition or comparables, there are a lot of companies out there that do what I consider to be “light and fluffy” genetic sequencing and reporting that have little value. They simply don’t have the data assets that Simplify Genomics has, and they don’t have the search engine either.
If I had to pick one company as a competitor, it would probably be Invitae, a company that I know very well, as I covered it years ago in Exponential Tech Investor when it was in high growth mode back in 2018-2020. During that period, Invitae traded anywhere between a 5-28 EV/Sales. It was a different market back then, with low interest rates and institutional capital prioritizing revenue growth over free cash flow.
At the moment, we have high interest rates and institutional capital focused on free cash flow generation, especially when it comes to small capitalization stocks. But Invitae is still a good reference point. Over the next couple of years, interest rates will drop by at least 200 basis points, inflation will be brought under control, and institutional capital will return to high growth genetics and biotechnology companies. Valuation multiples will expand when that happens.
Earlier this year, Labcorp (LH) acquired most of Invitae’s assets for $239 million. This is something that I correctly predicted would happen to Invitae. Labcorp is a $25 billion giant in the clinical lab testing industry. It’s also a potential future acquirer of Simplify Genomics.
I do see an acquisition as the most likely exit for investors. Simplify Genomics’ business will be too attractive and valuable to ignore. In addition to Labcorp, Exact Sciences, Quest, Tempus World, and perhaps even someone like Pacific Biosciences, are all possible acquirers.
One of the most important corporate strategies for Simplify Genomics is the plan to get to cash flow breakeven as quickly as possible. As I mentioned earlier, this is an achievable plan, given that the company already has a seven-figure business, is growing quickly, and can control its gross margins for its product.
This puts Simplify Genomics in the driver’s seat. In fact, this seed round may be the only structured funding round that it needs. This gives the company great flexibility and control over its destiny. And that also means that it will be our only opportunity to invest.
If an acquisition happened around the price of Invitae’s acquisition, we’d be looking at about a 13X return on investment. And if Simplify Genomics can remain independent long enough and make it to a $1 billion valuation, we’d be looking at a 55X return on investment. The addressable market for Simplify Genomics is more than $1 billion in revenues, so the valuation potential is even higher. And I see no reason why Simplify Genomics wouldn’t be the leader in its space.
This investment is open to all investors, accredited and non-accredited, and is open to both U.S. and international investors. In the U.S., ACH transfers are the easiest, but credit cards are also OK. And for international investors, both wire transfers and credit cards are fine for making the investment.
If any subscribers have issues reserving their investment, please reach out directly to the following email address: vip@wefunder.com. Alternatively, subscribers can speak with a Wefunder representative at +1-415-209-5986.
Also, please note that investors domiciled in the Canadian provinces of Alberta, Ontario, and Quebec will not be able to participate in this offering. That’s because of restrictive regulations around private investments specific to those provinces. This is something that’s completely outside the purview of Simplify Genomics and Wefunder.
Please remember that we should always keep our position sizes rational for these early stage private deals.
The absolute worst thing a private investor can do is to go “too heavy” on one early stage private investment. The smartest angel investors I know always balance their portfolios with rational investment sizes over a larger number of companies. This is the very best way to diversify risk in a highly risky asset class.
So let’s make sure we are allocating our capital wisely to each position.
My guidance for Simplify Genomics is for subscribers to invest no more than 20-25% of what they normally put into a small-cap tech stock.
For instance, if we normally invest $10,000 into a small-cap stock like the ones I recommend in Exponential Tech Investor, then we should invest no more than $2,000-2,500 in Simplify Genomics.
If we’d normally invest $1,000 in a small-cap technology stock, our position size would be around $200-250.
This speaks to something I’ve said before – every recommendation I’ll make in Day One Investor is different. We are going to be strategic with our capital allocation plans.
That said, we should never invest any more than we are willing to lose in a single, early stage private investment. No matter how much diligence we perform or how well I know the industry, company, and technology, there are simply too many unknown variables outside of our control when investing at such an early stage.
That’s why our goal is to build a large portfolio of exciting, high-growth companies with fantastic founders and incredible growth potential over a wide range of industries.
These investments will take place over a number of years. And we want these companies to stay private, thrive, receive additional funding, and eventually grow into multibillion-dollar companies. All it takes is one unicorn ($1 billion valuation or more) to drive outsized returns in a portfolio.
Action to Take: Invest in Simplify Genomics at Wefunder.
Please go to the following URL to reserve your place in Simplify Genomics’ Reg CF offering as soon as possible.
https://wefunder.com/simplify.genomics
This investment opportunity will fill up fast, likely within 48 hours of publishing my research. So please don’t wait. Investing in private deals isn’t the same as investing in a publicly traded company.
High-quality deals simply don’t last long, and once the $5 million allocation is taken, there is nothing left.
These recommendations are the kind of companies that can easily raise capital from venture capital firms. In that way, we are “competing” with the VCs for deals. And because these companies have so much growth potential, the investments will fill up quickly.
Regards,
Jeff Brown
Editor, Day One Investor
|
Risk Management Due to the
nature of this investment, there will be no stop loss. I always encourage
readers to use rational position sizing. That means we should
only invest an amount that is appropriate given our portfolio size and
tolerance for risk. Each investor
is responsible for determining what a proper position size is given their
individual circumstances. And remember, I never recommend anybody go
“all in” on any one investment. Investing in
private offerings is different from investing in public equities. Upon making
an investment, we will not be able to exit our position. Private
investments can remain illiquid for extended periods of time. That means
investors should only invest capital that they can afford to be without as
our investment thesis plays out. On a similar note, investors should never
invest any more than they are willing to lose on any single private
investment. If you have
questions regarding this investment, please contact the team at Wefunder. The
customer service representatives of Brownridge Research will be unable to
answer your questions regarding this investment, as we do not have any
business connection with Simplify Genomics. Finally, the
role of Brownridge Research is that of a publisher of investment research. We
are not associated with Wefunder in any way. And we never receive financial
compensation for any recommendations we make. As an analyst, I provide
general recommendations and guidance only for the benefit of my subscribers. |
Brownridge Research, established in 2023, is the private company of Jeff Brown. Brownstone Research is not responsible for its content.
