February 17, 2012, 6:33 PM EST

By Kristen Hallam

(Updates with Life, Illumina shares in fifth paragraph.)

Feb. 17 (Bloomberg) -- Oxford Nanopore Technologies Ltd. is entering the gene-sequencing race with a new portable device that will allow people to analyze DNA on the go.

The product, called MinION, is about the size of a USB memory stick, the closely held Oxford, England-based company said today. MinION will be ready for sale in the second half of the year at a cost of less than $900. It’s a smaller version of the GridION device that Oxford Nanopore is developing.

Oxford Nanopore is relying on the two products to spur demand for machines that can decode the building blocks of life, helping to identify new targets for medicines and illuminate crop science. The company is jumping into a market led by Life Technologies Corp. and Illumina Inc., which last month said they’ve built products that can sequence a genome in a day. GridION is designed so that computing equipment can be clustered to sequence an entire human genome in as little as 15 minutes.

“The USB stick is an absolute game-changer,” Oxford Nanopore Chief Executive Officer Gordon Sanghera in a telephone interview. “It’s plug-and-play, on-the-go DNA sequencing.”

Life Technologies fell 4.3 percent to $47.66 at 1:15 p.m. in Nasdaq Stock Market trading after dropping as much as 7 percent, the biggest intraday decline since Oct. 7. Illumina dropped 2.9 percent to $52.39 after falling as much as 4.5 percent.

Tiny Hole

The company presented data on the two products today at the Advances in Genome Biology and Technology conference in Florida. The devices use a novel technique known as strand sequencing, in which an entire string of DNA is guided by an enzyme and passes intact through a tiny hole in a cell membrane one-billionth of a meter wide, like a child sucking spaghetti through his mouth.

The strand-sequencing technique relies on an engineered protein or nanopore that creates the hole. As DNA bases, or chemical building blocks, pass through the hole, an electronic chip measures changes in electrical current in the membrane and produces data that, when decoded, identifies the sequence of bases that make up a genome.

That’s different from current techniques, in which 200 or 300 continuous bases of DNA are analyzed, Sanghera said. Oxford Nanopore’s machines can read strands of tens of thousands of bases with an accuracy comparable to technology already on the market, he said.

Space Age

“That is some kind of fantastical, space-age thing,” Sanghera said.

The MinION device can only be used once and can’t decode an entire human genome, according to Oxford Nanopore. Users don’t have to amplify DNA to be able to read it, and the sensitivity is about the same as the larger GridION device, Sanghera said.

“This will result in broader adoption of DNA sequencing,” he said. “This allows non-specialist scientists to extract DNA information back in the field. You just need a laptop and software.”

The GridION system, which is about the size of a videocassette recorder, is designed so that researchers who need quick results can add units of cartridges called nodes that speed processing. Using 20 high-end nodes would allow the entire genome to be sequenced in as little as 15 minutes, Oxford Nanopore said.

‘Pregnant Woman’

“Our competitors are like a pregnant woman,” said Zoe McDougall, a company spokeswoman. “It takes nine months to make a baby, and you can’t put nine women on it and get a baby in a month. With our system, you can put nine women on it and make a baby in a month.”

Not all customers want or need such speed, Sanghera said.

“You give flexibility back to the researcher in how they do their experiments,” he said.

Pricing will be “competitive” and will vary, similar to mobile-phone packages tailored to customers’ needs for talk time and data, said Clive Brown, Oxford Nanopore’s chief technology officer.

“There’s no fixed run time on this machine,” Brown said in an interview. “You need pricing elasticity. They all pay same cost per base, but it’s how it’s divided. That’s completely new.”

Life Technologies, based in Carlsbad, California, on Jan. 10 said it is taking orders for its benchtop Ion Proton Sequencer. The machine, available for $149,000, is designed to provide a full transcript of a person’s DNA in a day for $1,000. Illumina, of San Diego, said its HiSeq 2500 will be available in the second half of the year. It didn’t reveal the price.

Potential Buyers

Illumina is the target of a $5.7 billion hostile bid by Roche Holding AG of Basel, Switzerland. Illumina’s board unanimously rejected the offer, calling it “grossly inadequate.” Roche is a sponsor of the conference where Oxford Nanopore presented the data on its machines.

Illumina owns 15 percent of Oxford Nanopore and has a partnership with the U.K. company for a technology called exonuclease sequencing, in which the DNA building blocks are separated by an enzyme and pass individually through a nanopore.

While potential buyers have approached Oxford Nanopore, the company hasn’t pursued any offers, Sanghera said.

“Over the last year, we’ve had various companies express interest in us,” Sanghera said. “We remain focused on our strategy, which is to get this technology to our customers.”

Shareholders

Oxford Nanopore’s shareholders include IP Group Plc, which owns 21.5 percent, hedge-fund manager Lansdowne Partners LP and Invesco Perpetual, the U.K. group of mutual funds. The company also has individual shareholders, including company managers, and employees have stock options.

Oxford Nanopore is valued at about $1 billion, said Charles Weston, a London-based analyst at Numis Securities, which advises IP Group, in a note to investors Feb. 1. Weston based the figures on Oxford Nanopore gaining 25 percent of a market that could grow to $6 billion within five years.

“To get a truly accurate assessment of our valuation, we need to understand what markets we can penetrate,” Sanghera said. “We are not displeased with $1 billion; we feel it could be a lot bigger than that.”

Oxford Nanopore, spun out of University of Oxford in 2005, uses sequencing technologies that were initially based on the research of founder and board member Hagan Bayley, a chemistry professor at the university. The company has built on that science through collaborations with researchers at Harvard University, the University of California Santa Cruz and Boston University, among others, and with internal research, said McDougall, the company spokeswoman.

Early Access

Oxford Nanopore will give early access to a few laboratories to try out the two devices, allowing them to provide feedback and develop applications before the company starts selling the products later this year, Sanghera said.

“The biggest challenge is managing expectations and delivering on the next phase,” Sanghera said. “It feels like you’ve been in a band, and you’ve been doing gigs in grotty little venues, and then you wake up and you’re number one.”

--With assistance from Andrea Gerlin in London. Editors: Phil Serafino, Thomas Mulier

To contact the reporter on this story: Kristen Hallam in London at khallam@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

Read more:
Oxford Nanopore Plans Portable Gene-Sequencing Device This Year

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