(Updates with analyst comments in sixth, eighth paragraphs, CEO comment in 10th, 11th, 12th.)
By Andrea Gerlin
Feb. 1 (Bloomberg) -- Oxford Nanopore Technologies Ltd., the U.K. company developing a novel gene-sequencing technology, plans to market DNA strand-sequencing products directly to customers this year.
Oxford Nanopore will present data on strand sequencing at the Advances in Genome Biology and Technology conference in Florida on Feb. 17, the closely held Oxford, England-based company said today in a statement. IP Group Plc, which owns 21.5 percent of Oxford Nanopore, rose to its highest price since 2008 in London trading.
The announcement signals that Oxford Nanopore’s more immediate plans are to sell systems that don’t rely on exonuclease sequencing, for which it has a deal with Illumina Inc., the San Diego-based maker of gene-sequencing machines that Roche Holding AG is trying to buy.
“With strand you’re reading the DNA directly,” Chief Technology Officer Clive Brown, who is presenting Oxford Nanopore’s data on Feb. 17, said in an interview. “You get more information of more biological utility coming out.”
Illumina owns 15 percent of Oxford Nanopore. Its other shareholders include Lansdowne Partners and Invesco Perpetual, the U.K. group of mutual funds.
$1 Billion Value
Oxford Nanopore is valued at about $1 billion, and IP Group’s holding could add 38 pence a share to its stock, said Charles Weston, a London-based analyst at Numis Securities, which advises IP Group, in a note to investors. He based the figures on Oxford Nanopore gaining 25 percent of a market that could grow to $6 billion within five years.
Weston raised his rating on London-based IP Group to “add” from “hold.” IP Group climbed 14 percent to close at 101 pence, the biggest increase since Aug. 26, 2009. That gives the company a market value of 369.4 million pounds ($586 million).
“It’s obviously a fantastic validation for IP Group, but it now becomes a very large part of their portfolio,” Weston said in an interview.
Oxford Nanopore is entering the race to develop a next-generation machine able to decode the building blocks of life in a single day, Weston said. Among the challenges it faces are competition from much larger companies, the lack of a sales force and that its technology hasn’t subjected to the scrutiny of potential users, he said.
The company has raised 74 million pounds since it was founded and will need more funding before marketing its products, Chief Executive Officer Gordon Sanghera said in an interview yesterday. Financing could come from an initial public offering or additional private funding, he said.
“My feeling is we will do another private round,” Sanghera said. “We probably have a shareholder base that says stay put and wait until we have a burgeoning customer base.”
In addition to its major shareholders, Oxford Nanopore has individual shareholders, including company managers, and employees have stock options, according to the company.
Roche on Jan. 25 offered to buy Illumina, which has a majority of the market share for new gene-sequencing equipment, for $5.7 billion in a hostile takeover bid. That came after Illumina said its new HiSeq 2500 machine will be available in the second half of the year.
Illumina’s competitor, Carlsbad, California-based Life Technologies Corp., also said last month it is taking orders for a $149,000 benchtop machine called the Ion Proton Sequencer, which is designed to fully transcribe a person’s DNA in a day, rather than weeks or months, for about $1,000.
Oxford Nanopore, spun out of University of Oxford in 2005, uses different sequencing technologies that were initially based on the research of founder and board member Hagan Bayley, a chemistry professor at the university. The company has built on that science through collaborations with researchers at Harvard University, the University of California Santa Cruz and Boston University, among others, and with internal research, said Zoe McDougall, a spokeswoman.
The techniques rely on an engineered protein or nanopore that creates a tiny hole in a cell membrane one-billionth of a meter wide. As DNA bases or building blocks pass through the hole, an electronic chip measures changes in electrical current in the membrane and produces data that, when decoded, identifies the sequence of bases that make up a genome.
In strand sequencing, an entire string of DNA is guided by an enzyme and passes intact through the hole. In exonuclease sequencing, the DNA building blocks are separated by an enzyme and pass individually through the hole.
Strand sequencing provides more genetic information more cheaply, Oxford Nanopore’s Brown said. The technique can read long and complicated DNA structures more easily and with less sample preparation, he said. It also requires less computer software and smaller computers, Brown said.