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A hand-held small volume DNA sequencing device made by Oxford Nanopore Technologies. Photo: Handout

China focused UK-based maker of affordable DNA sequencing kits eyes Hong Kong listing

Oxford Nanopore Technologies, spun-out from Oxford University, is aiming to take on US-based rival Illumina in the US$3 billion a year market by focusing on China, which accounts for 80 per cent of the world’s projects sequencing new genomes of animals and plants

IPO

Oxford Nanopore Technologies, an affordable DNA sequencing devices supplier seeking to break the stranglehold of US rival Illumina in China, is considering a dual London-Hong Kong listing in the next 18 months, according to its chief executive.

The Oxford-based company, spun-out from Oxford University in 2005, is seeking to grab a slice of theUS$3 billion a year global market, in which Illumina has a 90 per share market share, by offering “starter pack” sequencers at US$1,000 to a much more sophisticated device valued at US$160,000, said Gordon Sanghera.

Prices of Illumina’s machines range from US$20,000 to US$10 million.

“Our goal it to give every single biologist the ability to analyse DNA, to check what they are doing in real time at their desks,” said Sanghera, who earlier played a key role in bringing to diabetics a finger-stick blood glucose testing device developed by Medisense, another Oxford spin-out acquired by US health care major Abbott.

“Our model is to completely disrupt [the current pricing model] by offering the devices for free and only charge for the consumables.”

Gordon Sanghera, CEO of DNA sequencing devices maker Oxford Nanopore Technologies, says his company only plans to charge for the consumables used in the company’s devices. Photo: Handout

He said Nanopore had met Hong Kong Exchange and Clearing officials to understand more about the opportunity to list in the city under revised listing rules. It is also targeting a London listing late next year or early 2020.

The rules, which took effect in April, have allowed biotechnology firms without profit or even revenue track record to list, as competition among global bourses for new listings heats up.

Our goal it to give every single biologist the ability to analyse DNA, to check what they are doing in real time at their desks
Gordon Sanghera, CEO, Oxford Nanopore Technologies

A key reason Nanopore is evaluating a potential dual listing is because it expects China to soon become its largest market, Sanghera said.

With a current headcount of 390 – of which only seven are in China, it plans to add 100 staff in the next 12 months. Some key management staff – including a China general manager – will be based in Hong Kong.

The company in March this year raised £100 million (US$132 million) from various investors including CCB International – the investment banking arm of China Construction Bank, and Singapore’s sovereign wealth fund manager GIC.

It has so far raised£451 million since its inception.

According to key shareholder and London-listed tech investor IP Group, this latest fundraising round valued its 18.3 per cent stake in Nanopore at £274.1 million, 11.3 per cent higher than the previous round in 2016, and the entire company at £1.5 billion.

Nanopore last year recorded sales of £13.8 million, a threefold rise from 2016, and is again aiming to triple sales this year, Sanghera said. New orders amounted to £24.5 million last year and net loss came to £56.5 million.

Currently, North America makes up around 40 per cent of its sales, followed by 30 per cent from Europe and 10 to 15 per cent from China.

But Sanghera expects China to become its largest market in the next six to 12 months, citing affordability and “disruptive properties” of its devices.

DNA offers a source code of instructions for use by cells in all living things. Faster sequencing technologies have greatly accelerated biological and medical research and discovery, and has potential applications in agriculture, food, water and consumer sectors.

With some 5,500 staff, San Diego-based Illumina last year made a net profit of US$726 million on US$2.75 billion of revenue.

Its shares have gained 112 per cent in the past two years and trade at 60 times its earnings per share, valuing the company at US$43 billion.

A high throughput DNA sequencing machine from Oxford Nanopore. Photo: Handout

Although Nanopore will build a new “high-volume, hi-tech” manufacturing facility in Oxford, Sanghera said it will also do “some degree of” manufacturing in China, since this would allow faster regulatory approval for entry of its products in the market, but it is not in discussions on a joint venture.

“There are many commercial ways to ensure shared profit between China and us,” he said, adding the technical barriers for potential copiers of its products are “very challenging”.

Wang Depeng, founder and CEO of Wuhan-based NextOmics Biosciences and Beijing-based Grandomics Biosciences, said his firms are the first service providers in China to use Nanopore’s devices for DNA sequencing.

About 80 per cent of the world’s projects sequencing new genomes of animals and plants are conducted in China for clients at home and abroad, as the Chinese DNA sequencing industry is highly cost competitive, Wang said.

He said Nanopore’s devices can provide results from sample preparation to data analysis in one to two hours, much faster than three days or more for Illumina’s machines, but they carry much higher error rates.

His firms have been able to compensate this disadvantage by developing their own software and algorithms, he said, adding they plan to spend over US$10 million to buy up to 20 high-capacity sequencing kits from Nanopore, subject to satisfaction with samples.

An Illumina spokeswoman said it had launched earlier this year an “inexpensive, fast and easy-to-use system” that also provides high accuracy.


 

This article appeared in the South China Morning Post print edition as: DNA kit maker eyes dual listing
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