In a bid to bolster its portfolio of third-generation sequencing technologies, Illumina said this week that it has made an $18 million equity investment that is part of a strategic alliance in Oxford Nanopore Technologies, a UK startup that has been working towards a label-free nanopore-based sequencing method.
Illumina made the investment to help the company develop its so-called Base technology, which couples an exonuclease and a protein nanopore for sequencing. Illumina plans to invest more in the company after its reaches a specific, undisclosed technical milestone. In addition, Oxford Nanopore has received another £2.1 million ($3.1 million) from previous investors.
Once the Base technology is commercialized, Illumina will exclusively market, sell, distribute, and service Base products for DNA sequencing into the research and diagnostic markets worldwide. Both companies said they will share profits.
Illumina's move comes about six months after the company said it was acquiring Avantome, a privately held company that had been developing a new low-cost, long-read sequencing technology, for $25 million in cash and up to $35 million in contingent payments (see In Sequence 7/29/2008).
While Avantome will target “very rapid sequencing and long, Sanger-range read lengths,” Oxford Nanopore"s technology “holds tremendous promise to be one of the first technologies to reach the sub-$1,000 genome and will become the cheapest and fastest way to sequence DNA,” said Illumina President and CEO Jay Flatley during a talk at the JP Morgan Healthcare Conference in San Francisco this week.
During a question and answer session following his presentation, he noted that the Avantome technology is expected to be commercialized first, while there is no timeline yet for the launch of Oxford Nanopore"s technology, which is still in early development.
In his talk, Flatley pointed out that key advantages of the technology, which is based on work by University of Oxford professor Hagan Bayley (see In Sequence 7/1/2008), are that it requires little sample preparation and no optical readout.
“It is purely electrical detection and [is] very scalable across a very wide range of throughputs and applications,” he said.
A video presentation during Flatley"s talk illustrated that individual bases are cleaved off by an exonuclease and pass through a modified protein nanopore, where each type of base blocks the ion current across a lipid bilayer to a different degree, allowing them to be identified.
Each pore may process up to 50 bases per second, and “by using an array chip that operates many hundreds or thousands of microwells in parallel, it"s possible to scale up the basic sequencing process dramatically,” according to the presentation.
Flatley also noted that Oxford Nanopore has “a dominant IP portfolio in both biological and solid-state nanopores.” Last summer, the company licensed nanopore-related IP from Harvard University and from the University of California Santa Cruz (see In Sequence 8/12/2008 and 8/19/2008).
However, the agreement with Illumina covers exonuclease-based nanopore sequencing but not strand-based sequencing, another, more long-term sequencing technology that Oxford Nanopore is pursuing in which DNA is read directly as it translocates through a nanopore.
Last month, the company said that it is exploring several avenues for nanopore sequencing as part of an EU-funded research consortium that includes Philips Research (see In Sequence 12/9/2008).
Under the deal with Illumina, Oxford Nanopore will be responsible for developing and manufacturing the exonuclease nanopore sequencing platform, while Illumina has the distribution rights “in all fields for biological nanopore-based systems,” according to Flatley. “This field includes diagnostics.”
According to Zoe McDougall, Oxford Nanopore"s communications and marketing director, Illumina represented a good match for the firm. “Illumina has an excellent reputation, an excellent track record with their existing technology,” she told In Sequence this week. “Not only do they have the existing operations now, but they also have the vision where they are looking at a much broader market, not only within sequencing, but also within broader applications in diagnostics, for example.”
The firms are not disclosing details of how the deal came about, but McDougall acknowledged that there had been contacts between Oxford and Illumina as well as Solexa, which developed Illumina"s current Genome Analyzer technology, for some time.
Last June, for example, Oxford Nanopore hired two former Solexa employees: John Milton, a former senior director of research at Solexa, who is now Oxford"s diector of nanopore chemistry; and Clive Brown, previously director of computational biology and IT at Solexa, and now director of bioinformatics and IT at Oxford Nanopore. In addition, Jay Flatley knows Oxford Nanopore"s non-executive director, Riccardo Pigliucci, “very well,” she said. Pigliucci is currently a managing partner of Connecticut-based management and technology-consulting partnership Aldwych Associates. In the past, he was president and COO of Perkin-Elmer, which later became Applera.
Besides gaining a partner for commercialization, Illumina's investment also suits the company well. “Although we are quite well funded ... it"s very good for us to have a secure position, financially, to be developing our technology,” McDougall said.
Oxford Nanopore was founded as Oxford NanoLabs in 2005 with £500,000 in seed funding from IP Group, a university technology-commercialization company. The company raised £7.5 million in 2006 and £10 million last March from non-VC institutional and private investors.
Neither party is disclosing the technical milestone that will trigger Illumina"s follow-on investment, but McDougall said that this milestone “will confirm the belief in the product, and it will also mark an uplift in value for us as a company.”
Presumably, Oxford Nanopore will have to demonstrate that it can determine the sequence of a DNA molecule and not miss too many bases that are clipped off by the exonuclease but fail to enter the nanopore. So far, the company and its collaborators have only shown that the protein pore can recognize individual bases, but not a series of bases released from a single DNA strand.
Though the size of the follow-on equity investment by Illumina is undisclosed, the company will remain a minor stakeholder, according to McDougall. “We will retain a standalone business,” she said.
Asked during the question and answer session whether Illumina is considering buying Oxford Nanopore, Flatley said that this would depend on certain milestones, how close the relationship becomes, and whether the firm makes itself available as an acquisition candidate. IP Group, which provided seed funding but did not contribute to the current funding round, currently holds a 29-percent stake in Oxford Nanopore.
Ed Winnick, reporting from the JP Morgan Healthcare Conference in San Francisco, contributed information from the Q&A session to this article.