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Oxford Nanopore, Illumina to Cut Ties

NEW YORK (GenomeWeb News) – Oxford Nanopore Technologies said today in its annual report that a commercialization agreement it had with Illumina will terminate on June 30, 2016.

The decision is the outcome of an arbitration demand that Illumina brought against Oxford Nanopore in 2011 over the terms of the agreement. The two firms dismissed the suit in April and agreed to amend the commercialization deal, according to Oxford's annual report.

Under the original commercialization deal, which was struck in 2009, Illumina would exclusively market, sell, distribute, and service products developed based on Oxford's so-called Base technology, a nanopore sequencing strategy that couples an exonuclease and a protein nanopore. In addition, Illumina invested £11.9 million ($18.5 million) in return for a minority stake in the company.

However, Oxford was also developing another nanopore sequencing technology, known as strand sequencing, in which DNA is read directly as it translocates through the pore. At last year's Advances in Genome Biology and Technology meeting in Marco Island, Fla., the company debuted its strand sequencing technology, the GridIon and MinIon, which it said it would commercialize without Illumina, as In Sequence reported at the time.

The commercialization agreement with Illumina did not cover its strand sequencing technology but did give Illumina negotiation rights if Oxford wanted to commercialize the technology with a third party or license the assets related to strand sequencing.

In 2011, a dispute arose between Illumina and Oxford concerning the agreement and Illumina filed an arbitration demand in the state of New York. In April, the companies agreed to dismiss the arbitration and agreed to an amendment to the commercialization deal, specifying that the agreement will "terminate" on June 30, 2016, and "that Oxford Nanopore is not obligated to expend any further time or resources to develop Base (exonuclease sequencing) technology," according to the UK firm's annual report.

Illumina will retain its rights of negotiation for Oxford's strand sequencing technology until December 31, 2016. However Oxford has "no current intention" of commercializing that technology with a third party that is not an affiliate of Oxford Nanopore, the company said.

A spokesperson for Oxford Nanopore declined to comment saying it is a legal matter. Illumina also declined to comment.

In a research note today, Ross Muken, an analyst from the ISI Group, said that he does not see the fracturing of the Illumina and Oxford's relationship as a major development for Illumina's stock "as most investors had heavily discounted the success rate of Oxford over the past nine months.

"We continue to view Oxford as an intriguing company with a compelling technology. However, the technical complications of nanopore-based sequencing make the commercial feasibility of the products highly uncertain," he added.

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