After completing $121 million in Series C financing last year, Sema4 pondered how much more capital it would need—and the best way to raise it—in order to offer more of the holistic precision medicine solutions on which it had begun to gain traction from health systems.
Sema4 harnesses 21st century technologies like AI and machine learning to glean healthcare insights from genomic and clinical data. But the self-described “patient-centered health intelligence company” likens its mission to its near-namesake that originated two centuries earlier—the maritime flag signaling system known as semaphore.
Earlier this year, Sema4 signaled its intent to grow into a juggernaut of precision medicine by going public. The company raised about $500 million through a business combination completed with CM Life Sciences, a Special Purpose Acquisition Company (SPAC) sponsored by affiliates of noted life sciences investor Eli Casdin’s Casdin Capital ($3.3 billion assets under management) and Corvex Management, a hedge fund manager and investment advisor with $2.5 billion assets under management founded by CM’s former chairman Keith A. Meister.
“We looked at the lift that’s required, some of the gaps that we wanted to fill, and what would it take to fill those, both organically and inorganically. We decided given the momentum needed that we had to leverage the public markets,” Eric Schadt, Sema4’s founder and CEO, told Clinical OMICs.
“We were a little early, deciding to go out a little earlier than maybe it would have been best for a traditional IPO, so we needed to do a lot of work to be able to operate as a public company,” Schadt added.
Sema4 was formed in October 2015 as Mount Sinai Genomics, and began operations when it spun out of the Icahn School of Medicine at Mount Sinai in 2017.
35 petabytes and growing
Since the spinout, Sema4 has grown its headcount to more than 1,000 people and its data to more than 35 petabytes, growing by 1.2 petabytes per month, and maintaining a database that includes more than 11.7 million de-identified individual clinical records, many with genomic profiles integrated.
Sema4’s analytics platform, Centrellis, incorporates large, structured data sets from providers, health systems, and payers. Sema4 uses the data to develop predictive causal models of disease and wellness that identify optimal therapeutic interventions.
Also among Sema4’s products are Sema4 Signal precision oncology solutions designed to identify, treat, and monitor cancer, including a 2,200-gene pan-cancer panel; and an 18,500-gene test combining whole-exome sequencing (WES) with whole transcriptome sequencing; reproductive and prenatal testing analyses that include a carrier screen for more than 283 inherited conditions. The company also offers testing, service, and support solutions for women’s health; as well as COVID-19 testing solutions.
Sema4 provides diagnostic testing, research, and related data aggregation reporting services through collaboration service agreements. The company also partners with biopharmas: Since last year, Sema4 applied genomic testing and data analytics in collaboration with Johnson & Johnson’s Janssen Research & Development to better identify patients diagnosed with cancer who may be candidates for clinical trials.
“Once you have mastery of the disease predictors and connectivity to patients and physicians, you’re ability to identify the most appropriate patients for clinical trials and recruiting them into those studies is greatly enhanced. Those large scales of data also enable real world evidence type studies,” Schadt said. “One of the ways we will diversify our revenue off just the genomic testing solutions will be through those kinds of channels.”
Also since last year, Sema4 opened a second clinical lab; appointed Isaac Ro, a Wall Street analyst turned life-sciences executive, as chief financial officer; and launched collaborations with three large healthcare systems, AdventHealth of Orlando, Avera Health of Sioux Falls, SD, and NorthShore University HealthSystem, which serves Chicagoland and is based in Evanston, IL.
‘Jigsaw puzzle’
In April, with NorthShore, Sema4 launched a system-wide genomics program designed to help clinicians prevent, detect, and treat diseases in patients at early stages through predictive analytics. More than 1,000 primary care physicians and approximately 300,000 NorthShore patients will have access to Sema4’s offerings through the program, which applies genomics solutions for hereditary cancer, cardiovascular diseases, pharmacogenomics, and rare diseases.
“I use an analogy: [Genetic] Risk is like a jigsaw puzzle. You have a lot of pieces that make up someone’s risk for a given condition. Sometimes a big component is genetic. Sometimes it’s a smaller component, and you need the other facets to know what is the best decision for the care of that patient,” said Peter Hulick, M.D., division head of medical genetics and medical director of the Mark R. Neaman Center for Personalized Medicine at NorthShore. “That’s what this Sema4 partnership is. How do we use all the information available to us to drive the best insight, to drive the best care for the patient? Not just reacting to someone who’s acutely ill, but how do we put them on a course to avoid disease in the first place?”
The Sema4 partnership builds on years of efforts in personalized medicine stretching back to the establishment of the Neaman Center in 2015. Those efforts include the deployment via electronic health record (EHR) of a structured family history tool completed by more than 100,000 patients to date, and the DNA-10K population screening initiative, through which more than 10,000 patients have completed genetic testing using Color’s extended panel tests.
About 24,000 patients have completed NorthShore’s current version of the genetic wellness assessment (GWA 4.0), launched in April. Because of the partnership with Sema4, the tool is available at $99.
“As you look to the future, and all that data people generate through Fitbit or other devices and different biometric platforms, how can you bring that all together to help someone understand, are they going in a healthy direction or not, and how do you get them back on that healthy direction?” Hulick asked. “Part of that is we don’t necessarily know what key data point is going to be that critical fork in the road. That’s where [Sema4’s] expertise and our partnership comes together to improve patient care.”
After first launching the program at its four legacy hospitals (Evanston, Glenbrook, Highland Park, and Skokie) NorthShore expanded it to patients of Swedish Hospital. To further broaden access to care, NorthShore subsidizes genetic testing costs for Swedish Hospital patients unable to pay for testing through a gift from the Swedish Hospital Foundation.
It’s too soon to say if those needing the subsidy constitute a majority of Swedish’s patients, Hulick said. “Our hope is that we will continue to drive the price down lower so it’s reasonable no matter what one’s background, but this is part of our learnings.”
Amol Jadhav, an industry consultant with Frost & Sullivan, told Clinical OMICs that Sema4 and peer companies—which he said included Natera, Invitae, and Guardant Health—have delivered both state-of-the-art genomic testing solutions to improve standard-of-care and clinical reporting across conditions, through collaborations with healthcare providers and biopharmas intended to yield holistic models of disease and wellness for precision medicine.
Most of these aspects cannot be completely done end-to-end in-house by the healthcare providers. Also the cost of development versus scale of execution needed could also limit most small and medium providers,” Jadhav said.
Two challenges
He cautioned, however, that Sema4 faces two challenges as it pursues growth over the next few years.
“In order to provide holistic precision medicine solutions Sema4 needs to fill the gaps within their offerings,” Jadhav said, notably in liquid biopsy testing, which Sema4’s peer companies have emphasized. “This will require either strategic, learning-based partnerships or even acquisition to accelerate the uptake of their solutions.”
Schadt acknowledged Sema4’s need to establish a beachhead in blood-based cancer testing.
“One of the key gaps we have on the somatic profiling side is that we have this whole exome transcriptome product for tumor profiling, but we have nothing in the liquid biopsy arena, in particular MRD [minimal residue disease] and surveillance type testing. Those are key areas of active internal explorations, as well as external canvassing.”
Jadhav also cautioned that because Sema4’s genomic analysis services are performed by third-party laboratories and service providers, “this brings ambiguity over turnaround time for results, making them reliant and a challenge as they continue to scale.”
Sema4 has worked to bolster internal lab capabilities. In December 2020, the company moved from Mount Sinai its second clinical lab and expanded it within a 70,000-square-foot converted chocolate factory 1.5 miles southwest of its Stamford, CT, headquarters. The company’s other clinical lab is in Branford, CT, a production sequencing lab that expanded last year to meet growing demand, adding capabilities that included COVID-19 testing.
“There are several players already contributing towards clinical decision support tools, clinical trial patient matching, real-world evidence. Sema4 intends to provide all of these beyond the diagnostics business and pharma drug discovery engagements,” Jadhav noted. “To achieve this goal while withstanding the competition Sema4 will have to acquire or partner with specialized firms, in addition employing technical resources could be a priority.”
‘Selective’ acquisitions
In a regulatory filing, Sema4 said going public via the SPAC would enable “selective” acquisitions. One such example, Schadt said, would be commoditized activity associated with Centrellis, such as pulling in higher scales of structured data mapped into models and harmonized. “Having a partner with others who have dedicated a lot of energy and resources behind that—whether that’s a partnership or an acquisition are the kinds of things that we’re thinking about.”
Sema4 finished the first half of 2021 with a net loss of $236.355 million—more than four times the $59.042 million net loss of January-June 2020—despite a 45% year-over-year jump in revenue, to $111.216 million from $76.757 million, almost entirely reflecting rising diagnostic test revenue.
Diagnostic tests accounted for 88% of Sema4’s total revenue in Q2, which saw the company’s net loss rise 41.5% to $45.362 million from $32.052 million a year earlier, on revenue that rose 56% year-over-year, to $46.865 million from $30.102 million.
The revenue jump reverses last year’s nearly 9% topline decline. Sema4’s 2020 revenue fell to $179.3 million from about $196.2 million, a drop Schadt said was “definitely all driven by COVID,” since the pandemic shut down most physician practices that offered reproductive health testing.
“There was a period where they were not open for business. But those volumes have largely come back, and we’re growing those volumes now at a good clip,” Schadt said.
Sema4 has set its revenue sights much higher over the next two years. The company has committed to nearly tripling its revenue to ~$500 million by 2023—though the company has cautioned that: “our long-term goal for 2023 revenue should not be looked upon as ‘guidance’ of any sort.”
