An Update on Long-Read Sequencing Stocks

Spending a day on the Oxford campus is a particular expertise that opens your eyes to the probabilities of youth. As you sip your shandy and watch the scholars scurry by, you begin to notice that whereas some lecturers dedicate their whole 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 desire to let different folks do the heavy lifting after which leverage their arduous work to save lots of time. Thankfully, the intense of us on the College of Cambridge have put collectively a primer on long-read sequencing which we’ll distill all the way down to get you on top of things rapidly.

Quick-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 an entire 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 all the things 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 elements 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 whole genome with much less ambiguity. In the event you needed to think about the evolution of NGS expertise in twenty years’ time, SRS can be Betamax and LRS can be VHS. As buyers, 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 accordance 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 take 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 – targeted on separating their COVID revenues from Life Science Research Tools (LSRT) revenues which characterize the long-read sequencing publicity we so want. 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 out to be the corporate’s largest buyer as they generate a great deal of consumables revenues whereas making an attempt to check a million folks. 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 prospects is rising fairly slowly – for S3 prospects, it’s on the decline

One would anticipate Oxford Nanopore’s largest prospects to be spending extra over time, not much less, so that is considerably of a priority. We additionally see some buyer focus danger 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 drugs mission underway anyplace. The tip aim is to gather samples from all the Emirati inhabitants – about a million folks – however as a voluntary program. A mission of this scale raises some fascinating moral questions. For instance, what may occur ought to some kids 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 via?

In any case, this heavy reliance on a single buyer is a danger, though income progress is predicted to proceed with Oxford Nanopore growing steering for LSRT revenues going into 2022/2023, however with out offering shade on how a lot may be attributed to the EGP program. Since this can be a U.Ok. firm, the subsequent replace shall 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? wherein we expressed considerations with how a lot hype surrounded the inventory. On the time, the inventory wasn’t dropping, however we totally anticipated that it might.

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 appears prefer it simply may burn some fingers. Extremely, Pacific Biosciences (PACB) inventory is up +875% in simply six months on what seems to be some favorable press releases and plenty of hypothesis about future potential.

Credit score: Nanalyze

And burn fingers 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 document $130.52 million in revenues. As seen within the under chart, quarterly revenues have damaged out in 2021 and present constant progress 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 all the way down to earth. We’ll come again round and take a more in-depth take a look at the corporate Illumina failed to amass in a follow-up article. Talking of Illumina, maybe the largest 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 expertise, Infinity, which shall be made obtainable 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 may ship contiguous knowledge as much as 10Kb in size to handle the ultimate edge instances of the genome. Infinity permits 10x higher throughput with 90% much less DNA enter than legacy lengthy reads, may be totally 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 method utilized by Illumina which can have come from an Australian agency referred to as Longas that was creating long-read expertise. The CSO of Longas on the time, Aaron Darling, gave a presentation in 2019 titled “Introducing Morphoseq: excessive accuracy lengthy reads from quick 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 quick, the consultants simply don’t know sufficient about Infinity but to begin drawing comparisons or speculating on what use instances might or couldn’t be addressed utilizing Illumina’s artificial method.

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 expertise that works for a majority of use instances, then that’s adequate. We talked a couple of attainable Plan B following their failed acquisition of Pacific Biosciences and this seems to be it. As one would anticipate, Pacific Biosciences doesn’t assume 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 in the present day. With a market cap of $54.5 billion, Illumina is in our dimension candy spot and 7 occasions the scale 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 prospects 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 will have a number of corporations to select from. Right here’s how they evaluate utilizing our easy valuation ratio:

Based mostly on valuation, Pacific Biosciences can be the most suitable choice, whereas the extra richly priced Oxford Nanopore permits you some overseas foreign money publicity and diversification advantages given it’s traded on a overseas alternate. Taking a look at this from a technical perspective, an amazing 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 prospects:

“We’re far more targeted on the medical aspect – large-scale plug and play sequencing – they usually’re far more targeted on what they name the explorer neighborhood.”

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 verify they don’t get left behind. The under chart places the scale 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 herald some constantly rising income streams (together with constantly rising prices), the corporate doesn’t get any point out from the consultants. There could possibly be any variety of causes for that, however we’re all out of time now. Maybe we’ll take a look at the corporate in a follow-up piece.

Conclusion

Lengthy-read sequencing appears to be the subsequent massive step for the genomics neighborhood 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 motive.) Buyers in Illumina ought to have some religion the agency has a grasp plan to compete with Pacific Biosciences on long-read sequencing, or at the least seize a majority of the attainable use instances utilizing their artificial method. Subsequent up, a more in-depth take a look at how Pacific Biosciences managed to begin attaining some constant income progress in 2021.

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