Is the time finally right for companies trying to manage and store vast amounts of genomic data? The story of Wuxi NextCODE appears to make that case. The successor to an Icelandic genomics company that struggled through a bankruptcy, NextCODE was sold to China’s Wuxi Pharmatech for $65 million in 2015, and has now closed a massive $240 million Series B round that could eventually lay the groundwork for a future IPO.
NextCODE raised the original $75 million for the financing earlier this year, but upped it by another $165 million today by adding Sequoia Capital to a group that includes Temasek, Amgen’s (NASDAQ: AMGN) venture capital arm and a variety of others. It’s all part of a global expansion plan for NextCODE, which has offices in Cambridge, MA, China, and Iceland, but has aspirations for more—and fast.
“This is a market which is rapidly evolving and rapidly moving, so we have to be able to keep up with that,” says CEO Hannes Smarason. “And we have to have the resources at our instant disposal to do so.”
The fact that NextCODE can amass those resources is emblematic of the increasing need for, and practical uses of, storing large amounts of genomic information and sharing it widely. The struggle to get there is something Smarason has seen first hand.
Smarason was an executive at NextCODE’s predecessor, deCode Genetics, which famously amassed a library of medical and hereditary information from the people of Iceland. The company’s aim was to pair that data with modern DNA sequencing technologies as a way to identify genetic variations associated with health and disease. DeCode did this for years, but it was a long slog—it piled up over $300 million in debt, and filed for bankruptcy in 2008 during the financial crisis.
The deCode team thought its kind of work could be essential in the future of medicine, but it couldn’t get enough investors on board in 2008.
“Everyone was staying on the sidelines a bit and waiting for the impact to be fully realized,” Smarason says of efforts to court investors years ago.
Yet the tide began to turn soon thereafter. Two venture firms, Arch Venture Partners and Polaris Partners, bought deCode out of bankruptcy on the cheap in 2010—just $3 million in cash and $11 million in debt—and sold it to Amgen two years later for $415 million. Then in 2013, some former deCode executives, including Smarason, licensed the platform deCode had developed and formed NextCODE.
The new idea: apply the technology to patient care, first by using deCode’s database to help researchers identify disease risks from patients’ DNA samples, and eventually by helping physicians diagnose diseases faster. That mission, in turn, led the company to develop a browser-based system that allows genomic data to be shared instantly across the globe. And it attracted WuXi, which bought NextCODE for $65 million in 2015, just 15 months after the startup had raised a $15 million Series A round. NextCODE has since begun developing diagnostics in China, like disease carrier screening and wellness tests.
WuXi allows NextCODE to operate as a standalone subsidiary of which it is the majority owner. So two years after its acquisition, NextCODE has convinced a new set of backers to gamble again on its fortunes—but this time in a world Smarason says is much more open to its ideas. The cost of gene sequencing has plummeted. Large-scale genomic projects are popping up all over the world, from the Precision Medicine Initiatives in the U.S. and China, to the Cancer Moonshot, to Genome England and Genomics Medicine Ireland. Pharmaceutical companies are more broadly integrating genomics and genetics into their drug discovery work. And there are greater signs that a consumer market is emerging for personal genetic information. Those signs include progress made by firms like 23andMe—which in April won FDA approval of direct-to-consumer genetic tests, a first for the industry—and the launch of Helix, a sort of genetics-based app store spun out of Illumina (NASDAQ: ILMN).
“These things are all happening in parallel,” Smarason says.
And they’ve helped NextCODE bring in outside investors in its bid to scale up and diversify—albeit in an increasingly competitive environment, which is why Smarason wants to grow quickly. The company isn’t profitable yet, but Smarason—without disclosing specifics—says the company should reach that goal by 2018. It has doubled its revenue in each of the past five years, he says. An IPO could be in its future too, which wouldn’t be a first for WuXi—its contract drug research arm, WuXi Biologics, raised $510 million in a Hong Kong IPO in June.
“Now that we’ve taken on new investors,” Smarason says, “there’s no question that that is one of the avenues that we are contemplating. But I see us wanting to remain private for a bit longer.”