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Spending a day on the Oxford campus is a particular expertise that opens your eyes to the chances of youth. As you sip your shandy and watch the scholars scurry by, you begin to understand that whereas some lecturers dedicate their total lives to benefiting humanity, others of us can barely handle to maintain our substance abuse issues in test. We fall into the latter class, so we favor to let different individuals do the heavy lifting after which leverage their laborious work to avoid wasting time. Fortuitously, the intense people on the College of Cambridge have put collectively a primer on long-read sequencing which we’ll distill right down to get you on top of things shortly.
Brief-Learn vs. Lengthy-Learn Sequencing
All these machines bought by Illumina (ILMN), the dominant chief in next-generation sequencing (NGS), make the most of short-read sequencing (SRS) which is what it says on the tin.
Illumina sequencing primarily sequences small fragments of DNA, producing learn lengths of 50-300 base pairs (bp) that are then assembled into a complete genome sequence utilizing bioinformatics pipelines and reference genomes.
College of Cambridge, PHG Basis
The draw back is that it’s time and labor-intensive to begin piecing every thing along with questionable accuracy in sure conditions. Then, there’s long-read sequencing (LRS) which examines a single molecule of DNA to provide reads of 10,000-30,000 base pairs in size. LRS can sequence components of the genome that can’t simply be sequenced by short-read sequencing. It additionally permits one to take all these strands and assemble a complete genome with much less ambiguity. In the event you needed to think about the evolution of NGS know-how in twenty years’ time, SRS can be Betamax and LRS can be VHS. As traders, we really feel our NGS publicity, which comes from holding shares in Illumina, should be propped up by some LRS publicity. That’s as a result of the final time we checked, Illumina wasn’t doing jack in LRS following their failed acquisition of Pacific Biosciences in January 2020. In line with consultants on the College of Cambridge, there are solely two shares we should be for long-read sequencing publicity.
The 2 dominant producers of ‘true’ long-read sequencing applied sciences are Pacific Biosciences (PacBio) and Oxford Nanopore Applied sciences (Nanopore)
College of Cambridge, PHG Basis
Common readers already know this as a result of we’ve coated each corporations earlier than. Let’s have a look at what every has been as much as beginning throughout the pond.
Oxford Nanopore (ONT.L)
Our final article on Oxford Nanopore (ONT.L) – Oxford Nanopore Inventory: The Web of Dwelling Issues – centered on separating their COVID revenues from Life Science Research Tools (LSRT) revenues which characterize the long-read sequencing publicity we so need. Whereas revenues from their pandemic pivot have dropped dramatically, there’s one other concern we see surrounding the work they’re doing with the United Arab Emirates Genome Program (EGP) which constituted 23% of 2021 revenues.
Whereas COVID revenues are on the decline, the Emirates has now turn into the corporate’s largest buyer as they generate a great deal of consumables revenues whereas attempting to check a million individuals. The corporate breaks this out for us of their annual report which – whereas complicated the reader by mixing USD and GBP – does impart some insights:
- EGP revenues have gotten a considerable a part of LSRT revenues
- The typical buyer spend for S2 clients is rising fairly slowly – for S3 clients, it’s on the decline
One would count on Oxford Nanopore’s largest clients to be spending extra over time, not much less, so that is considerably of a priority. We additionally see some buyer focus threat arising from what they’re doing within the Emirates.
Again in 2019, the United Arab Emirates started working with BGI and Oxford Nanopore Applied sciences on maybe the biggest scale personalised medication mission underway anyplace. The tip objective is to gather samples from all the Emirati inhabitants – about a million individuals – however as a voluntary program. A mission of this scale raises some fascinating moral questions. For instance, what would possibly occur ought to some youngsters not have DNA that matches their father? In a rustic the place adultery is punishable by stoning, has anybody sat down and actually thought this by means of?
Anyhow, this heavy reliance on a single buyer is a threat, although income development is predicted to proceed with Oxford Nanopore rising steering for LSRT revenues going into 2022/2023, however with out offering colour on how a lot may be attributed to the EGP program. Since it is a U.Okay. firm, the following replace will probably be in mid-2022.
Pacific Biosciences Inventory (PACB)
The opposite firm providing “true” long-read sequencing is Pacific Biosciences (PACB), a favourite of Ark Make investments. Final February, we revealed a bit titled Why is Pacific Biosciences Inventory Dropping? by which we expressed issues with how a lot hype surrounded the inventory. On the time, the inventory wasn’t dropping, however we absolutely anticipated that it will.
Any time somebody calls a inventory “red-hot,” that’s trigger for concern. On this case, that’s in all probability an understatement, as a result of this red-hot inventory seems prefer it simply would possibly burn some arms. Extremely, Pacific Biosciences (PACB) inventory is up +875% in simply six months on what seems to be some favorable press releases and many hypothesis about future potential.
Credit score: Nanalyze
And burn arms it did. Since we revealed that piece final February, the worth of the corporate has plunged greater than 80%. That’s after they managed to complete 2021 with a file $130.52 million in revenues. As seen within the under chart, quarterly revenues have damaged out in 2021 and present constant development over the previous 4 quarters (the pink bars):
Keep in mind that this inventory is affected by the ARK impact, so there could also be some worth to be discovered now that valuations have settled again right down to earth. We’ll come again round and take a more in-depth have a look at the corporate Illumina failed to accumulate in a follow-up article. Talking of Illumina, maybe the most important information this yr for long-read sequencing was the announcement that Illumina has thrown their hat into the ring with their very own providing – Infinity.
Illumina (ILMN)
At this yr’s JP Morgan Healthcare Convention, Illumina introduced plans to debut their very own long-read sequencing know-how, Infinity, which will probably be made accessible for early entry in Q2-2022. From the horse’s mouth:
Lastly, deSouza introduced new patented applied sciences for a extremely correct and cost-effective lengthy learn workflow, codenamed Infinity, that can ship contiguous information as much as 10Kb in size to deal with the ultimate edge circumstances of the genome. Infinity allows 10x better throughput with 90% much less DNA enter than legacy lengthy reads, may be absolutely automated, and is seamlessly appropriate with sequencing by synthesis (SBS) chemistry, enabling it to be quickly utilized throughout Illumina’s 20,000 instrument put in base.
Illumina press launch Jan 10, 2022
A weblog piece by computational biologist Keith Robison talks concerning the artificial strategy utilized by Illumina which can have come from an Australian agency referred to as Longas that was creating long-read know-how. The CSO of Longas on the time, Aaron Darling, gave a presentation in 2019 titled “Introducing Morphoseq: excessive accuracy lengthy reads from brief learn platforms.” That was across the time his firm emerged out of stealth mode, and now he’s a Director of Software program improvement at Illumina. You’ll be able to draw your individual conclusions, however maybe there was a quiet acquisition and Longas is now a part of Illumina. Lengthy story brief, the consultants simply don’t know sufficient about Infinity but to begin drawing comparisons or speculating on what use circumstances may or couldn’t be addressed utilizing Illumina’s artificial strategy.
We’re MBAs, not computational biologists, so our curiosity surrounds the enterprise case. If Illumina can allow the 20,000 platforms they’ve deployed with long-read know-how that works for a majority of use circumstances, then that’s enough. We talked a few potential Plan B following their failed acquisition of Pacific Biosciences and this seems to be it. As one would count on, Pacific Biosciences doesn’t suppose the Illumina information will have an effect on them one bit. That’s as a result of Illumina is doing “artificial” lengthy reads which – Pacific Biosciences claims – aren’t succesful as a result of they nonetheless depend on short-read sequencing.
ILMN vs. PACB vs. ONT.L vs. BNGO
Given Illumina’s dominance in NGS instruments and consumables, it’s a given that you just’d wish to maintain that inventory over all of the others we’ve mentioned at present. With a market cap of $54.5 billion, Illumina is in our measurement candy spot and 7 instances the dimensions of the opposite three corporations mixed. They clearly have the assets, foresight, and set up base in place to deploy long-read sequencing capabilities at their discretion – supplied the artificial stuff works. With 20,000 platforms deployed throughout 8,000 clients across the globe, Illumina has their hand within the pocketbook of any life sciences firm that’s price its salt. Assuming you personal Illumina and wish to hedge your holding with a long-read sequencing inventory, you’ve got a number of corporations to select from. Right here’s how they evaluate utilizing our easy valuation ratio:
Firm Identify | Market Cap | Annualized Revenues | Ratio |
Illumina | 54.500 | 4.8 | 11 |
Pacific Biosciences | 2.110 | 0.144 | 15 |
Oxford Nanopore | 4.390 | 0.166 (2021 LSRT) | 26 |
Primarily based on valuation, Pacific Biosciences can be the best choice, whereas the extra richly priced Oxford Nanopore permits you some international foreign money publicity and diversification advantages given it’s traded on a international trade. Taking a look at this from a technical perspective, an awesome article by Consider breaks down these choices a bit within the under desk.
The identical article has the Pacbio CEO speaking about how he believes his agency isn’t competing with Oxford Nanopore for a similar clients:
“We’re way more centered on the medical aspect – large-scale plug and play sequencing – they usually’re way more centered on what they name the explorer group.”
Pacific Biosciences CEO, interview with Consider
Buyers holding shares in Illumina in all probability don’t have a lot to fret about because the market chief has the assets and wherewithal to ensure they don’t get left behind. The under chart places the dimensions of those corporations in perspective.
We’ve additionally included Bionano Genomics (BNGO) within the above chart as a result of that identify got here up when shares of the corporate soared +2,176% in lower than 60 days as a result of an ARK Make investments analyst made a touch upon Twitter.
Since then, the hype has subsided, and shares have dropped 77%. Whereas BNGO is now beginning to usher in some constantly rising income streams (together with constantly rising prices), the corporate doesn’t get any point out from the consultants. There may very well be any variety of causes for that, however we’re all out of time now. Maybe we’ll have a look at the corporate in a follow-up piece.
Conclusion
Lengthy-read sequencing appears to be the following large step for the genomics group and there are two “true” long-read gamers – Oxford Nanopore and Pacific Biosciences. Then there’s Illumina with their newly debuted artificial methodology. (We’ll set Bionano Genomics apart as a result of they’re a smaller agency and don’t appear to be acknowledged by the consultants for no matter cause.) Buyers in Illumina ought to have some religion the agency has a grasp plan to compete with Pacific Biosciences on long-read sequencing, or no less than seize a majority of the potential use circumstances utilizing their artificial strategy. Subsequent up, a more in-depth have a look at how Pacific Biosciences managed to begin reaching some constant income development in 2021.
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