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Illumina Bets $600M Solexa Buy Will Help Uncover SNPs; Could Have Dx Role, Too

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In an unexpected move, Illumina this week added next-generation sequencing to its  platform portfolio by inking a deal to acquire next-generation sequencing shop Solexa for $600 million in stock.
 
The agreement, which comes six months after Applied Biosystems acquired Agencourt Personal Genomics from Beckman Coulter for approximately $120 million in cash, helps validate the notion that next-gen sequencing and arrays can play complementary roles (see BAN 6/13/2006).
 
Specifically, Illumina is betting that Solexa’s platform will uncover SNPs and other biomarkers that can help its nascent molecular diagnostics business gain traction.
 
According to Illumina CEO Jay Flatley, Solexa will be integrated into Illumina as a new sequencing business unit headed by Solexa CEO John West, who will become senior vice president and general manager of the unit.
 
Solexa’s headquarters in Hayward, Calif., and R&D office in Cambridge, UK, will remain intact, and Flatley said that Illumina may continue to use the Solexa brand name for its Genome Analysis System.
 
The deal is expected to close in the first three months of 2007.
 
Flatley told BioArray News this week that the company has been interested in Solexa’s next-generation sequencing technology “for some time,” and the roots of the acquisition can be traced to a June collaboration discussion between the two companies.
 
“As we had those discussions it became very obvious quickly that there were lots of ways that the companies could cooperate, that the technologies were highly complementary, that we had a great cultural fit, and all that resulted in the [acquisition] announcement,” Flatley said. 
 
An Illumina spokesperson told BioArray News in May that Illumina viewed sequencing as a complementary discipline. "Where sequencing begins to make sense is in non-whole-genome requirements once a genomic region or gene of interest is implicated via whole-genome genotyping or more focused methods," the spokesperson said. "For big disease-association studies, this could be in the last stage of a three- or four-phase study design," he added (see BAN 6/13/2006).
 
Solexa’s sequence-by-synthesis technology uses fluorescently labeled modified nucleotides to sequence millions of fragments of DNA or cDNA in parallel a single base at a time.
 
Flatley said the platform “is targeted for sequencing and expression and so it adds a highly complementary capability to our existing application base,” Flatley said. “With sequencing, you discover the content, you understand the structure of the genome, and you discover things like SNPs and put them on a chip and do very high-throughput and fixed content genotyping,” he added. “So it’s a discovery engine, if you will.”
 
Flatley also said that the Solexa technology could come into play as Illumina looks to enter the diagnostics space with its bead-based BeadXpress system later this year (see BAN 7/25/2006).
 
“We also think that in the diagnostics market, sequencing can be a very powerful tool for understanding cancers that are high in variance or low copy numbers of cells in a larger cell population,” he said.
 
Complementary
 
Solexa, which had been based in the UK, established a presence in the US in March 2005 after it acquired Lynx, a company that had commercialized its own massively-paralleled sequencing technology but had struggled to maintain interest from the investment community (see BAN 3/9/2005).
 
Since that time, Solexa has put the finishing touches on its sequencing system and this year began deploying the Genome Analysis System to larger genome centers in the US, like the GenomeSequencingCenter at the Washington University School of Medicine, while phasing out its legacy MPSS product line. Solexa’s West told BioArray News this week that the company has yet to recognize revenue from SGAS installations. Its receipts had come primarily from sales of its legacy MPSS technology.
 
This week Solexa said third-quarter revenue declined 33 percent to $569,000 from $844,000 in the third quarter of 2005 as it replaces MPSS with SGAS.
 
Flatley said that Solexa’s position in the early stage of its commercial roll-out made the company an attractive target for Illumina. “They are at the right stage of commercialization with instruments out in early access, which demonstrates that the system in fact works and that they are sort of at the cusp of large-scale commercialization,” he said.
 
“That was important to us because if you are beyond that then you have a much larger infrastructure that is harder to digest and integrate. If it was earlier then there would be a huge risk for the technology itself,” Flatley said. “So from Illumina’s perspective the timing was perfect for Solexa.”
 

“They are at the right stage of commercialization with instruments out in early access, which demonstrates that the system in fact works and that they are sort of at the cusp of large-scale commercialization.”

In terms of Solexa’s customers, Flatley said that it would not be difficult for Illumina’s sales and support teams to add support for Solexa’s instrument because “Solexa’s early access program includes most of the large genome centers and most of those centers are already our existing customers.”
 
“What this transaction allows us, because of the breadth of our sales force and tech support, is we can go outside of the genome centers faster than Solexa might have been able to do on their own,” Flatley said.
 
Flatley also noted that the Solexa and Illumina have “a great cultural fit” in that their organizations and approach to the market are modeled similarly.
 
A Smart Move for an Array Company?
 
Illumina’s jump into the sequencing space follows ABI, which six months ago bought Agencourt Personal Genomics from Beckman Coulter. An ABI official told BioArray News at the time that the firm saw opportunities for its sequencing business not only in sequencing but in expression as well (see BAN 6/13/2006).
 
Specifically, that official, Kevin Corcoran, vice president and general manager of ABI's genetic analysis business, said ABI believes "there is a lot of opportunity on the gene expression side" for the APG tech.
 
"In some particular markets — agriculture being one — there may be challenges in getting a microarray ever developed. These systems are open systems — you don't have to have sequenced a genome so that you could therefore build a microarray," Corcoran said. ABI currently offers human, mouse, and rat arrays for use with its Expression Analysis System.
 
Another company that may be toying with sequencing technology is Affymetrix. In June, the company received US Patent No. 7,056,666, “Analysis of surface immobilized polymers utilizing microfluorescence detection."
 
The patent describes the means for simultaneous parallel sequence analysis of a large number of biological polymer macromolecules using fluorescent labels in repetitive chemistry to determine terminal monomers on solid phase immobilized polymers.
 
Although the patent describes technology that is similar to Solexa’s, Affymetrix has not made any public announcement concerning an interest in the sequencing market.

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