Wednesday, November 15, 2006

Illumina Buys Solexa

Tool companies are popular among life-science VCs for their simplicity of exit: build a start-up around a truly novel technology, one of the existing major players will have to buy out the company before one of its competitors does. Thus, there are few worries about having to commercialize technology: far more important to develop it well.

That's essentially the story of Solexa, which sold out to Illumina for $600 million in stock. The only twist is that it sold to Illumina--one of the rare new-ish companies which has been able to make a big splash in the research market and thus provide another bidder, along with the more established companies like Applied Bio, Invitrogen, and Amersham. Look for Solexa's rival, Helicos, to go next. The Solexa deal is also very good news for both SV Life Sciences and Oxford Biosciences, representing the second recent major exit for each firm.

The news was especially welcome for Oxford, which had struggled to raise its current fund based on their equivocal track record from their more recent funds, which had -- building on Oxford's history -- focused on discovery opportunities. But when Oxford was making its investments, discovery was decidedly out of favor in the pharmaceutical industry. It seems to be coming back, however.

First Merck bought Sirna for $1.1 billion--a company with no real therapeutic proof-of-principle to its RNAi programs. And now Illumina has more than justified Oxford's investment in Solexa.

One should note as well that this is Oxford's second exit involving a public company: Solexa had reverse-merged into the failing public-company Lynx in 2004, both for its US listing and its technology. Sirna had been a failing public company, called Ribozyme, when Oxford, Venrock and several other firms invested in it.

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