West Coast Editor
To launch its Sequencing-By-Synthesis molecular array platform by the end of this year and pay back a $3 million loan, Solexa Inc. has entered an agreement to privately sell $32.5 million in stock and warrants to institutional investors.
"It's possible this would be our last financing," said John West, CEO of Hayward, Calif.-based Solexa, noting that the company's formal guidance doesn't specify that, but the cash on hand is expected to take Solexa well into 2006, and revenues from the array system are likely by then.
The company's stock (NASDAQ:SLXA) closed Friday at $6.88, down 30 cents.
Solexa will sell about 8.1 million shares of common stock at $4 per share and issue warrants to buy about 4.1 million shares of common stock at an exercise price of $5 each. About 2.1 million shares of common stock and 1.1 million warrants will be issued in the closing, expected on or about today's date, with the balance issued on the same terms in a second closing, subject to stockholders' approval at the 2005 annual meeting.
All of Solexa's previous venture capital investors will be putting in a total of about $10.8 million at the second closing, and have agreed to vote in favor of the deal at the meeting. Those investors included funds affiliated with Abingworth Management Ltd., of London; Amadeus Capital Partners Ltd., also of London; Oxford Bioscience Partners, of Boston; and SV Life Sciences, with offices in Boston, London and San Francisco.
The transaction is led by ValueAct Capital, of Boston and San Francisco. Partner Mason Morfit has been appointed to Solexa's board of directors, bringing the membership to eight.
Then-Cambridge, UK-based Solexa Ltd. last made major news in September with word of its plan to merge with Lynx Therapeutics Inc., of Hayward, Calif. (where operations now are based) in a $56.4 million deal. At the time, the company closed a $14.4 million financing round. The loan to be repaid, from Santa Clara, Calif.-based Silicon Valley Bank, was taken out early in the year by Lynx for general working capital, and the firms completed their merger in March. (See BioWorld Today, Sept. 30, 2004.)
"It was basically a bridge loan, and [repaying it] is a pretty modest part of the overall financing," West said.
Solexa's Sequencing-By-Synthesis (SBS) platform is expected to support many types of genetic analysis, including DNA sequencing, gene expression, genotyping and micro-RNA analysis, the company said, pointing out that the technology can generate more than a billion bases of DNA sequence from a single experiment with a single sample preparation.
SBS represents a "pretty dramatic performance improvement," West said, and a second system is expected to follow "a little while after" the first. The firm's molecular array platform creates "a form of array, but the size of the spots are determined by the lengths of the molecules themselves - typically a tenth of a micron long - and that gives us a huge data density," he said.
West joined Solexa in August, coming from Applied Biosystems Group, of Foster City, Calif., where he ran the DNA platforms business.
"The challenge [for a platform-based firm] is to stay on the cutting edge of the technology," he said. "It's easy for people to become complacent and not innovate anymore."
Solexa's approach already is drawing notice.
"We see some big institutions being interested, like the cancer genome initiative," West told BioWorld Today. Officially known as the Human Cancer Genome Project, that government effort is expected to be larger than the Human Genome Project, mapping the sequence of thousands of tumor samples and costing about $1.4 billion over nine years.
"We have an almost perfect product for that," West said.