By Kevin Davies
November 5, 2012 | In an analyst research note issued last week, Charles Weston, director of equity research at Numis Securities Ltd in London, spotlighted a legal proceeding between Oxford Nanopore Technologies and Illumina, an early investor in the company.
In 2011, Illumina filed an arbitration demand concerning the terms of its January 2009 commercialization agreement with the British next-generation sequencing company. The filing was disclosed in Oxford Nanopore’s latest annual financial report, but drew scant attention until the Numis advisory, dated October 30, 2012.
Oxford Nanopore (ONT) caused a sensation last February when it presented details of its sequencing platform and hardware, including the MinION thumb-drive device. Based on the stock price of IP Group, a UK intellectual property commercialization firm that was an early investor in ONT, Weston says ONT’s valuation is approaching $2 billion, even though the company has yet to commercially launch its sequencing platform. To put that in perspective, that’s roughly one third of the sum that Roche offered in an unsuccessful bid for Illumina earlier this year.
Among the company’s other investors is Illumina, which has a 15 percent stake in ONT as well as a sales and marketing partnership signed in 2009 for an earlier iteration of ONT’s sequencing technology. The idea behind this exonuclease sequencing technology is to cleave a DNA template into individual bases and read the identity of each base in succession as it alters the electrical current flowing across the pore.
But as announced during ONT’s February 2012 presentation, ONT has shifted gears and is currently developing a DNA strand technology in which an intact single-strand DNA template threads through the pore. This concept was not part of the 2009 Illumina deal—indeed it is unclear whether the approach had even been conceived at that point.
According to information in Oxford Nanopore's annual report, Weston notes, in 2011 Illumina filed an “arbitration demand” in the state of New York concerning the terms of its commercialization agreement with ONT. The ONT annual report states:
“While the results of these proceedings are uncertain, management has received third party legal advice on the matter and we do not believe the ultimate resolution of the arbitration proceedings is likely to have a material adverse effect on our financial position or results of operation. Accordingly no provision has been made in relation to this dispute.”
An Illumina spokesperson told Bio-IT World it was not Illumina's policy to comment on ongoing legal matters. An ONT spokesperson also declined to comment.
Going to San Francisco
While ONT has not commented publicly on its estimated commercial launch date, which had been slated for the end of 2012, the company will be among the exhibitors at the annual American Society of Human Genetics (ASHG) conference, which kicks off tomorrow in San Francisco. A note on Twitter said that ONT would have “the latest GridION and MinION systems on display.”
Weston concludes that “this [arbitration with Illumina] somewhat tempers the potential for interesting news flow around the [ASHG] conference”—although there are no scheduled presentations or posters at the meeting from ONT researchers.
Nevertheless, the Numis note expected ONT “to focus on the potential clinical applications for its platform technology at the conference, rather than necessarily discussing the DNA sequencing application specifically… If a single-molecule detection system could satisfy cost, workflow and reliability requirements, it could start to penetrate and drive the molecular diagnostics market, which has been forecast to reach $14 billion by 2014.”