Helicos BioSciences last week disclosed how much of the proceeds from its planned initial public offering would go towards R&D; marketing, sales, and service; and manufacturing of its upcoming HeliScope sequencing system.
The company also said it believes the net proceeds from the offering, together with its existing resources, will be enough to meet its cash needs through the end of 2008.
In terms of the cost of sequencing, Helicos said that reagents and supplies to generate sequence information on the first version of its HeliScope system, in large-scale studies, will cost at least 100 times less than what the largest genome sequencing centers charge per 1,000 bases using Sanger sequencing. The company is working on improvements to bring costs down another 100-fold.
The disclosures come from an updated filing Helicos made last week with the US Securities and Exchange Commission for its IPO. Helicos filed its initial application at the end of February. (see In Sequence 6/3/2007).
Though the amended document does not include the number of shares to be offered, or the offering price, it said that Helicos plans to spend approximately $20 million of the IPO proceeds on R&D for its single-molecule the sequencing technology and its HeliScope system.
The company would also use approximately $10 million to recruit a marketing, sales, and service team, and to market the launch of its system; and another $10 million to manufacture the sequencer.
The remainder would add to the company’s working capital and go toward “other general corporate purposes.”
Competing on Cost
In terms of its competition, Helicos in the updated filing singled out Illumina’s Genetic Analyzer as an instrument “against which we expect our HeliScope system will directly compete.”
Helicos also made some concrete predictions about the cost of sequencing on its new platform. In large-scale studies, the initial HeliScope will generate data at more than 100-fold lower cost for supplies and reagents than what the largest genome sequencing centers charge using Sanger sequencing — $1 per 1,000 bases, according to the company. Planned improvements could take that cost down another 100-fold “without requiring major modifications to the instrument,” according to the filing.
The filing also implies that the first version of the system could potentially compete in cost with microarrays for gene-expression studies: The HeliScope, when used for gene-expression analysis, will generate data “at a comparable cost per sample,” and at a lower cost for large-scale studies, “in comparison with current technologies.”
With regard to whole-gene or whole-genome genotyping, the first version of the HeliScope will still be more expensive than current methods for genotype analysis, but if the company lowers the cost per base by another factor of 100 as planned, “we believe that for high-volume analyses our cost per genotype will be lower than current technologies.”
Helicos also disclosed the status of its instrument development. In the first quarter of this year, “we completed assembly of and began testing a prototype of the commercial HeliScope system,” according to the filing, which includes all the components of the commercial unit, except for the outer cover.
Each component in the prototype that is “key to performing genetic analysis at the rate expected at commercial launch has been tested and shown to meet the performance specifications for our first commercial application,” the company said in the filing.
However, more work remains to be done: “Prior to commercial launch, we must show that they operate successfully together to attain the functionality we will require for the launch. That work is ongoing and we expect it to be completed in time to ship our first commercial unit before the end of this year.”
In addition to testing the prototype, Helicos said it is currently performing sequencing reactions on nine development-stage instruments, which include “early versions of the components that will comprise the instrument portion of our planned commercial HeliScope system.”
The HeliScope comprises an instrument, consumable reagents, and disposable flow cells. It has a high-speed mechanical stage on which two flow cells containing the DNA sample are mounted. The system alternates between the two flow cells, running a sequencing reaction on one while imaging the other, similar to ABI’s upcoming SOLiD system.
After loading the reagents, the instrument runs all sequencing reactions automatically. After each base is added, the mechanical stage moves the flow cells under a microscope, and a laser illuminates the fluorescent tags. A camera images the flow cells, and a computer assembles and analyzes the images to determine the DNA sequence.
The consumables comprise a proprietary formulation of a DNA polymerase, fluorescently tagged nucleotides, and imaging reagents. Helicos said the tagged nucleotides, which it calls “Virtual Terminators,” allow it to add only one base at a time to each DNA strand. The company discussed this technology at a meeting in February (see In Sequence 2/13/2007), and was granted a related US patent, No. US Patent 7,169,560, at the end of January.
The company said its imaging reagents, also proprietary, improve the stability of the fluorescent tags and increase their brightness. Prior to the next reaction cycle, the tags are removed from the incorporated nucleotide.
Each flow cell has an active area of 16 square centimeters and contains 25 separate channels, allowing researchers to sequence 25 samples in parallel. This design feature is reminiscent of Solexa’s flow cells, which have eight channels each.
The company said it is currently recruiting manufacturing personnel and is buying “tooling” for the launch of the HeliScope. It also said it has already placed purchase orders with manufacturers for components and subassemblies of the systems it plans to ship later this year.
Helicos said it plans to manufacture proprietary reagents for the system internally initially, but may outsource at least parts of that in the future.
The HeliScope, when used for gene-expression analysis, will generate data “at a comparable cost per sample,” and at a lower cost for large-scale studies, “in comparison with current technologies.”
The company also reiterated that it plans to hire a specialized sales, marketing, and service team of approximately 20 people to launch its HeliScope system and intends to expand this organization in North America, Europe, and parts of Asia.
Helicos also outlined future plans on how to improve the performance of its instrument beyond that of the first commercial version. The filing said the company is working on increasing the stability of sample DNA bound to the flow cell surface further so that more strands remain attached at the end of a run.
It is also working on ways to increase the density of the DNA strands attached to the flow cell surface, based on technology invented by Stephen Quake and licensed from Caltech earlier this year. This technology, the company believes, will enable it to increase the binding density fourfold, from the current 100 million strands/cm2 to up to 400 million/cm2 in the future.
It also aims to increase the efficiency and accuracy with which new bases are added to a growing DNA strand.
In addition, it is working on increasing the speed at which images from the system are analyzed in order to keep up with the other changes.
The company is also working on “other improvements,” including reducing the amount of reagents used and the time needed for acquiring images, and enhancing the performance of the system’s mechanical components.
Together, these improvements have the potential to increase the system’s throughput to up to 1 billion bases per hour, from 25 million to 90 million bases per hour of the first commercial version, according to the filing.
The company also offered more details about its technology licensing agreements and patents, calling its IP position “an important element of our business strategy.”
Currently, Helicos holds 10 issued patents, which expire between 2017 and 2024, and 83 pending patent applications, according to the filing. These include US patent and applications as well as foreign counterparts of these.
The patents cover Helicos’ overall sequencing method, which it calls “true single molecule sequencing,” or tSMS; components of its HeliScope instrument, including the laser illumination subassembly, flow cells, and methods for its use; methods for focusing lasers and imaging flow cell surfaces; the use of combinations of laser optical paths; the company’s “Virtual Terminator” and other nucleotides; various aspects of sample preparation; algorithms for data analysis; and reagent formulations for imaging and sequencing.
An important part of the Helicos patent estate comes from the group of Stephen Quake, a company co-founder, who used to be at the California Institute of Technology and is now at Stanford University. In November 2003, Helicos exclusively licensed a number of patents and patent applications, as well as additional technology outside the scope of the licensed patents, all “relating to sequencing methods,” from Caltech, according to the filing. Up until the end of December 2006, Helicos paid a total of $43,000 under the Caltech license agreement.
In March of this year, Helicos licensed an additional patent application from Caltech in exchange for a $50,000 payment.
Helicos also licensed other patents relevant to its technology, according to the SEC filing. In June of 2004, the company semi-exclusively licensed a patent “relating to sequencing methods” from Roche Diagnostics. Through the end of 2006, Helicos paid Roche a total of $266,000 under the agreement.
In March 2005, Helicos exclusively licensed certain patents and patent applications from Arizona Technology Enterprises, which licensed these from Arizona State University and the University of Alberta. Through the end of December 2006, Helicos paid AZTE a total of $629,000.
Last June, Helicos also acquired “certain US and foreign patents and patent applications” from an undisclosed party, paying an upfront fee of $350,000. It also committed to paying an additional $250,000 “once technological feasibility has been established,” and another $400,000 “upon the first commercial sale of product.” In addition, Helicos will pay royalties based on net sales.
A Helicos spokeswoman said the company could not provide further comment on the filing due to quiet period regulations from the SEC. She said Helicos is currently waiting for the SEC to respond to the amended filing.