Mentioned Companies: FB, LUX, ONT, OVTZ, PACB, TSLA

#240: Long Read Sequencing Sheds Light on ‘Dark Genes’, & More

September 21, 2020
Written by: ARK Invest

1. Long Read Sequencing Sheds Light on ‘Dark Genes’

Surprisingly, after 17 years the whole human genome has not been sequenced completely. Since they sequenced the first whole human genome in 2003, scientists have struggled to identify small gaps scattered among the 23 pairs of chromosomes.

These dark genes have limited our understanding of genetics, evolution, and human disease.

Dark genes contain long, highly repetitive stretches of DNA that short-read sequencers cannot interpret. Many errors take place during sample preparation, making it difficult or impossible to overcome with software tools.

Last week, researchers published a complete sequence of chromosome eight (8)—the first non-sex chromosome to be sequenced completely. The team identified the 2.3% of chromosome 8’s missing – or dark – genes with a combination of long-read instruments from Oxford Nanopore Technologies (ONT) and Pacific Biosciences (PACB). Unlike short-read platforms, the more expensive long-read platforms can sequence ‘hard-to-read’ areas of the genome.

Among other discoveries, the researchers found a 644,000-base pair (bp) region in a gene cluster – DEFB1 –seemingly implicated in cystic fibrosis (CF). Apparently, DEFB1 encodes proteins that equip the immune system to fight off bacterial infections in airways, suggesting that mutations in DEFB1 could influence the severity of CF. While geneticists typically have diagnosed CF by identifying mutations in the CFTR gene, other genetic factors such as mutations in DEFB1 will help them diagnose the course of the disease more accurately.

In our view, diagnostic testing companies must invest aggressively in long read sequencers and other tools, or they will fall victim to disruptive innovation.


2. Facebook Connect Gave us a Roadmap for the Future of AR/VR

Facebook’s seventh annual AR/VR (Augmented Reality/Virtual Reality) conference, Facebook Connect, gave us a glimpse into the future, a future in which the mobile phone will lose its role as the world’s primary computing platform. Instead, VR Goggles and AR glasses will dominate computing.

Oculus Quest 2 – VR Goggles
In 2019, Facebook’s first hit VR product was Oculus Quest, an all-in-one headset priced at only $399. As Mark Zuckerberg noted in his keynote presentation last week, Oculus Quest sold as fast as Facebook and its partners could produce it, a boon for VR game developers. He noted that each of 35 titles generated more than $1 million in revenue, outpacing the number of titles doing the same in all other years combined. With Quest 2, Facebook introduced a slew of upgrades and dropped the price by 25% to $299. The lower price point and better performance could help solve the chicken (users) and egg (applications) problem that has plagued the VR industry for years.

Project Aria – AR Glasses
Well behind its progress in VR, Facebook’s AR strategy finally is taking shape. Next year, in collaboration with Luxottica, ‘Project Aria’ plans to release Ray-Ban branded smart glasses which should serve as a steppingstone to AR glasses.

This year Facebook Connect seems to have signaled an important turning point in the evolution of the AR/VR space.


3. The Long-Term Stock Exchange (LTSE) Hopes to Revolutionize Capital Markets

Last week, the Long Term Stock Exchange (LTSE) launched with the goal of encouraging and rewarding companies and their shareholders for taking long-term investment time horizons. Founded by Eric Ries, the Exchange will require listing companies to adopt five policies  and will offer software to help them collaborate with their investors.

The five policy requirements include 1) long-term and diverse stakeholders, 2) strategies based on years to decades, not quarters, 3) alignment of executive and board compensation with long-term results, 4) board involvement in long-term planning and 5) engagement with long-term shareholders.

Given ARK’s five-year investment horizon and focus on technologically enabled disruptive innovation over the long-term, the LTSE’s vision is refreshing, though we do wonder if it will have to pivot its business model. Will revenue generated from software, as opposed to transaction and other fee-based income, be sufficient for a sustainable business? That said, the LTSE appears to be on the right side of history and, in our view, could prevail if the companies listing on its exchange outperform over the long term.


4. Will Tesla Announce that It Is Keeping Pace with Wright’s Law on Battery Day?

According to Wright’s Law, every cumulative doubling of units produced will drive the cost of battery cells down by 18%. In anticipation of Battery Day this week, we are wondering whether Tesla will announce breakthroughs that will sustain Wright’s Law or that will change the slope of the curve, accelerating the cost decline of its battery pack systems?

Rarely does the slope of the curve associated with Wright’s Law change, so Tesla’s announcements on Battery Day probably will keep it on pace with the 18% cost decline for every cumulative doubling…though anything is possible with Elon Musk.  ARK’s research suggests that its battery technology is three to four years ahead of the competition already, so we believe Tesla’s soon-to-be announced breakthroughs should extend its lead as the market for electric vehicles moves into an exponential growth trajectory.


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