Oxford Nanopore was spun out of University of Oxford in 2005 in order to transform nanopore sensing from a conceptual science into a platform technology accessible to a broad customer base. Twelve years on, the company has fulfilled its initial goal and it’s now aiming to democratise molecular analysis by making it possible for anyone, no matter where they are, to analyse any living thing.
The company has developed a highly disruptive, next generation nanopore platform technology, which enables the analysis of biological molecules, such as DNA. Its portable DNA sequencer – the MinION – can be acquired at a fraction of the cost of existing technologies and it runs in real-time, allowing the analysis of sequenced data immediately, rather than waiting for days. Oxford Nanopore joined the Woodford Patient Capital Trust portfolio in July 2015 but we’ve known the business and its management for much longer – Neil’s first investment in the company was in April 2011 and it has been a constituent of the Woodford Equity Income Fund since August 2014.
Over the years, Oxford Nanopore has made tremendous progress in developing its technology, at the heart of which is a manufactured nanopore protein – a tiny tube only a few nanometres in diameter. To put into context just how small a nanopore protein is, 1 millimetre equals 1 million nanometres. Thousands of these nanopore proteins are inserted into a synthetic membrane, contained in a consumable item called a flow cell. An ionic current is passed through these tiny tubes so that biological molecules that enter the tube pass through the nanopores or near to their aperture, causing distinctive disruptions in the currents. These disruptions can be measured and analysed to identify the molecules.
The company has built a diverse range of products that harness the power of its nanopore technology to deliver real-time, low cost molecular analysis. Its first commercially available product, the MinION, is a pocket-size DNA sequencer designed for users who need a simple and fast device that can generate real-time data without being confined to a laboratory environment. The MinION has already been successfully used to sequence the human genome (a huge feat in itself), perform surveillance of the Ebola and Zika viruses, to research cancer genetics and to understand the biological composition of complex environments such as seawater and ice.
A key and differentiating feature of the MinION is its long reads which enables the easier and more complete analysis of genetic data. For example, if you are sequencing the human genome, it can be thought of as a jigsaw with 6 billion data units. Current sequencing techniques can only produce ‘reads’ (‘jigsaw pieces’) from 150 to ~10,000 data units at a time. This results in a very small jigsaw pieces, from which a complete picture needs to be assembled. Oxford Nanopore’s MinION can read tens or hundreds of thousands of data units in one ‘read’, resulting in very large jigsaw pieces from which the complete genome can be assembled. This offers clear advantages in analysing not only the human genome but any organism.
Oxford Nanopore is currently releasing PromethION, a desktop-scale, on-demand-DNA sequencer that was designed to satisfy the needs of customers who wish to produce larger data sets, or analyse large numbers of samples. Based on the same core technology as the MinION, it benefits from the long reads feature and real time data generation except on a scale that is designed to compete with the most powerful machines currently on the market.
The company managed to simplify the very complex and time-consuming process of preparing biological samples before they are sequenced. Its latest kits enable users to prepare a sample in 5-10 minutes, compared to hours or days with traditional technologies. Also, Oxford Nanopore is now launching an automated preparation device called VolTRAX, allowing clients without laboratory-related skills to prepare DNA samples. Additionally, the company has also set up a wholly owned spin-out company called Metrichor, that provides complete data analysis solutions.
We believe the commercial opportunity that lies ahead for Oxford Nanopore’s ingenious platform technology is truly extraordinary. While the current client-base for sequencing technology is primarily academic, with some corporates using it for R&D purposes, this next generation of technology takes sequencing to a much wider potential audience of ‘applied markets’. There is a significant opportunity for Oxford Nanopore’s devices to more routinely access important biological information in a broad range of industries, for an array of different purposes, such as identifying contamination or pathogens in food or water supply chains. These applications include healthcare, agriculture, defence and surveillance, environmental monitoring and forensics – many of these are potentially billion dollar markets in their own right.
Oxford Nanopore’s commercial model is very straightforward. Using just a debit or credit card, interested clients can sign up on the company’s website to receive the MinION starter pack. This starts at $1,000, a small fraction of the current price of hundreds of thousands of dollars for any other DNA sequencing technology on the market, and includes the MinION device, and a range of support services and kits. Remote training is also provided to ensure that all clients make the most out of their nanopore sequencing technology. Users of its nanopore technology continue to purchase consumables, such as the cell flow in large volumes and at discounted prices.
The driving force behind Oxford Nanopore’s success is a dedicated and talented management team with a breadth of experience in developing, manufacturing and commercialising disruptive technologies including DNA sequencing. We hold the company’s management in very high regard and are confident that they will continue to create substantial shareholder value by efficiently executing their strategic vision and further growing the business.
As with many disruptors, the company’s journey hasn’t always been smooth. In 2012-13, Oxford Nanopore had technical challenges around the membrane that held its nanopores. As a result, it had to invest extra time and capital in developing an alternative solution, delaying its introduction to market for more than a year. Ultimately, however, all the effort and investment has paid off. When you identify a company with strong leadership, a clear strategic vision and a powerful technology with large commercial potential, it is important to take a long-term view and support the business on its journey towards reaching maturity.
Oxford Nanopore has come a long way – it is a great example of how it can take a long time to develop and commercialise genuine innovation. Oxford Nanopore is now starting its serious commercial journey, and we believe it is on the cusp of some major breakthroughs that can revolutionise the DNA sequencing industry and beyond, as its technology continues to be applied across multiple industries. We are very excited about Oxford Nanopore’s future growth prospects and highly confident that it will create substantial further shareholder value in the years ahead.