CLASSIC EPISODE: Gordon Sanghera and Oxford Nanopore

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0:41We look forward to seeing you there. And the winners of the Mastercard British Album of the Year are the boys from the Steel City, the Arctic Monkeys. Arctic Monkeys introduced themselves to the world with I Bet You Look Good on the Dance Floor in 2005. That same year, Gordon Sanghera co-founded Oxford Nanopore Technologies. An image of the Arctic Monkeys and the lyrics to that song are on the wall of Oxford Nanopore's offices on the outskirts of Oxford. It's a homage to the disruption the band caused in the music industry.

1:28I'm Graeme Ruddick and you're listening to Business Studies, a podcast that takes a second look at stories from the past. In this episode, we speak to Gordon Sanghera, the co-founder and chief executive of Oxford Nanopore. We speak to him about how he built one of the most exciting companies operating in the UK today, but also how more companies could follow its lead and how Oxford Nanopore has been inspired by the Arctic Monkeys, former Nottingham Forest manager Brian Clough and Renes Michels, the Dutch football manager who created Total Football.

2:09so oxonanapal is a company that reads genomes all living systems have a source code and that comprises four bases gtac and what we are developing is a new generation of dna sequences that is a a platform that can allow you to read the source code of anything so to put that in context if you look at a virus such as covid it's about 15 16 000 letters of gtac something like e coli bacterial pathogens come in at three to five million bases and these are on a continuous letter string. So there's three to five million GTAC, TT, AT, DC. Human 3.2 billion. And in that 3.2 billion, all of us, absolutely all of us, vary less than 1%.

3:13And then you have plant genomes that can run into tens of billions like the wheat genome. So today, when you look at sequencing, it's very much like computing in the 70s it's a mainframe moment what do i mean by that there are large centralized facilities the machines cost upwards of half a million three quarters of a million dollars and they're run by highly specialist biologists molecular biologists to prep the dna to extract it from the material of interest whether that be human animal plant environmental and then run these machines and like mainframe computing they're batch based so like a jumbo jet you've got to fill it completely to make it cost effective and then many many weeks days and weeks later results come out the other end of the pipe and that requires infrastructure supercomputer IT infrastructure and armies of what they call bioinformaticians.

4:17Molecular biologists at the front end, preparing DNA, bioinformaticians as mathematicians with biologics, understanding of genetics, decoding all of that. What we set out to do when we set Oxford Nanopore up 18 years ago was to create a new generation of DNA sequencing. You've spoken of a world where family members buy each other kits for Christmas, for birthdays, and it becomes widespread in every household. How far away is that? That already happens. I think there are multiple ways that sequencing will impact us. That particular example, you know, I'd like to trace my heritage. You know, I come from Punjabi farmers, but where did they come from?

5:05And you can kind of do that by talking to older relatives and go to the Punjab and talk to people who live there and glean some information. but being able to have a consumer product where you can look at your genealogy and you can trace it back. You know, I'd like to think all the way back to Genghis Khan in my case. I was joking. But, you know, that really adds a different and real flavor to the whole, you know, the whole way we will look at genetics. And, you know, other direct-to-consumer examples will be lifestyle. well, tailored sports, that already happens with elite athletes. But looking at your genetics and pairing the right sort of training for you if you're an elite athlete, but that will become more widespread.

5:56But more importantly right now, the immediate need is to ensure that as the next pandemic hits and the many, many multiple challenges we have in healthcare, whether that's cancer, diabetes, drug resistance in bacterial pathogens antimicrobial resistance the rise of the superbug all of these the ability to have a decentralized affordable accessible platform for dna information which doesn't exist today it's all in central labs that specialists will bring about the same revolution that we saw with the information age in the computer mainframe pc handheld there's more compute in your washing machine than there was to put a man on the moon you'd never have thought that's what you'd be doing with computers so as we access real-time dna rna information the use cases will be astronomical and people will do things with dna rna information that we can't even imagine today Oxford Nanopore was founded in 2005 by Gordon Sanghera, Professor Hagen Bailey and Spike Wilcox.

7:10It was a university spin-out based on the work of Professor Bailey at the University of Oxford. Sanghera was in his early 40s at the time and had had a successful career in the biotechnology industry with MediSense and then Abbott Laboratories, the US company which bought many cents. However, he wanted to start a new business and went looking for promising ideas at universities. Today, Oxford Nanopore is worth around£2 billion and is one of the most successful university spin-outs the UK has ever produced. I mean, I go and sit on various committees and steering groups still and people talk about how great we are and, you know, academically we do punch way above our weight but we don't seem to create you know tech giants like facebook and meta as it's called today and microsoft and all these others and you know medicine's went a long way to debunk that but then it still got acquired and there is no there is no reason other than the people who were doing it were american because the money came from America and if you do it over here there is apps and especially in Oxford there's no reason we can't create tech players like you know Stanford does or California I mean there's no reason at all other than somebody's just got to go out there and do it and and it wasn't just me Clive our CTO who you know had done a lot to build the Selexa platform which is the Illumina platform had the same view.

8:54Let's just do it and demonstrate you can. You know, the biotech industry in Silicon Valley, people didn't sort of spend years strategically saying we're going to do this. Some smart biologists started making synthetic drugs and Kleiner Perkins jumped on that. And away you go. And right now, particularly the last couple of years, this country and oxford in particular has demonstrated we can be a life sciences superpower you know as marino would say my team is in the moment we have vaccines we have genomics the genomics arctic midnight group that was set up by nick lowman here in the university of birmingham was sequencing across the globe and and what we've done with oxford nanopause platforms in low and middle income countries people are starting to sequence over 85 low and middle income countries were doing genomics for the first time ever because the platforms are affordable and accessible.

9:56And if you can run a PCR lab, you can do DNA sequencing. And that is game changing. And from the outset, we always said the exit was world domination. And I'm not being flippant here, as in we're not trying to build this up and sell it to somebody. We think we can create a whole new class of measurement, which we've done. And we think we can create a company that can absolutely dominate access to DNA, RNA information. And that will be as big as the information age was and the dawn of the personal computer. There is a lot of debate in the UK at present about how to grow the economy over the long term.

10:40Also how to improve productivity, how to build more promising startups and how to turn those promising startups into big businesses in the UK. University spin outs are part of this debate but there is also concern about whether that system is working particularly whether founders are getting a fair share of the business once their idea is spun out of the university. As someone who has built a university spin out and turned a promising startup into a big company in the UK. Gordon Sanghera is an ideal person to ask about this, and he has strong views. What's the key to making an idea from a university turn into a successful business?

11:24Because you are one of the most successful university spin-outs the UK has ever produced, and there's a lot of people trying to do similar things now. What does it take to make it work? I think there's an overemphasis, and I don't say this lightly, on what wonderful innovation we have. It's good. But what it takes to go from an idea, some patents, an SME with a handful of people, or even 20, 30, 50 people, to build a company that can actually, you know, stand against the world. the global competition out there in a competitive field is a whole different game and when I set this up with Hagen I said to him I will be state and you'll be church you have to let me be in complete control and run this business there's too many startups who are overly dominated by the founders.

12:36And there's too many startups that some founders think are just an extension of their research group. And ultimately, there is almost a separation from the founder and what the company does. There has to be. And so I think the company has to very quickly, through finance rounds, create its own identity. and create products, which is very different to a proof of concept. Obviously, it took us seven or eight years, and we spent multiple hundreds of millions of pounds to turn a fantastic innovation, but really a proof of concept, into products that can be used today in over 120 countries, routinely and simply, and bringing that access and democratization of DNA sequencing.

13:32that is not to be underestimated. It is wholly missed by everybody. And even in the latest, we're going to make life sciences a superpower, there needs to be more emphasis on medium and long-term and scale-up. It's too much focus on getting SMEs running. You're just moving the value proposition one step from universities to SMEs. You need to work out how to create, scale up and ultimately back those companies all the way through. There's a lot of attention on the spin out world at the moment in terms of founders potentially not having enough equity in the business. But what you're saying there, that's not actually the right issue to be concerned about.

14:16There's no reason why that necessarily has to hold back the new business. Completely. I think the whole equity argument around founders and universities is the wrong discussion. We should be starting with the answer. How do we make this technology we have here become a global player? And you've got to find the right sort of management to say this is what it's going to take. I think in academia in particular I don't think they properly understand you know they spin a company out and I don't want to not everybody's like this in academia right but some people and they say oh how much do you own? I own X percent it's an irrelevance you know you can own 50 % of a company valued at a million great or you can own half a percent of a company valued at 10 billion the equity argument is the wrong argument and if you find the right management you know they will ensure that there is an equitable distribution of equity does it need more people like you frankly people who've had a who've been in business and then want to go back and help ideas and startups i think there's plenty of people like me yes it does in the you know there are plenty of seasoned people who want to do what I did which was you know be in control and learn from what you've learned to take companies on and and I and I you know don't get me wrong I think the SME and the innovation pipeline is really healthy but not all of them are going to make it right there's a big gap to the other side of the desert and very few have been bold enough or stupid enough as some people say about us to even attempt it.

16:07Scaling up has come up as an issue again and again in this podcast that the UK has just not historically been good at turning promising ideas and startups into medium-sized businesses and then big businesses. You've obviously done it here and looking back over the last 18 years what are the key tests that you have to go through in order to make that happen? So I still think we're a work in progress in terms of scaling up you know we're some ways off where we want to get to. To some extent, the pandemic has catalyzed nanopore sequencing platforms into public health laboratories. That's been a real terrible, but it's been good for us to be able to raise awareness of low cost, affordable, accessible DNA sequencing.

16:53But even without that, there is a trick that we can do, which is very simple. As we, as companies particularly well not just particular I mean companies that are coming through and they're ready to cross the desert right they need the right supplies to get to the other side and UK PLC can step up to the plate and whether that's in defence or healthcare and they can really help there is a lot of talk about what a great resource the NHS is and what phenomenal data we have. But if nobody's actually going to allow anybody to access it or generate new data, which is what Manipor sequencing would give us, and create that global leadership, which then can be exported to the rest of the world, it's again just going to hit the same buffers.

17:52So I think in answer to your question more specifically, you've got to decide what you want to do when you start the company. Do you want to sell, market, distribute and become a global company? Or do you just want to get to proof of concept and send it on? Is it an incremental play? Is it truly disruptive? I think it really is about thinking about what the end game is. And to be honest with you, I didn't think of all the list of things I was going to do, I didn't want to spend the next 20 years of my life doing something that would take this long. But once you start on that journey, it very quickly evolves.

18:31And within a year, I realized this could be huge. And I basically went from a mentality of three to five years to I'm now longer than Alex Ferguson and Arsene Wenger in terms of the CEO from startup. Because that's not what you expect from, you know, people say, oh, yeah, he was really good for the early bit. She was really good for that. We need to move to this, to this. and I think you know if you find the right sort of investors and they back you all the way you can make it. Oxford Nanopore floated on the London Stock Exchange in the autumn of 2021. It was priced at around 3.5 billion pounds in the float but shares in the company surged on the first day of trading amid excitement about its prospects.

19:22However it's been more difficult since then, with shares in the company falling sharply in 2022, meaning Oxford Nanopore's value fell to just half the initial IPO value. Gordon Sanghera's desire to keep Oxford Nanopore UK owned means that it has anti-takeover shares that give him the power to veto a hostile takeover bid for the first three years after the float. Being a PLC, twice a year you're reporting in the UK. I mean, It'd be a real drain, quarterly reporting, as you have on NASDAQ. So that gives you a nice cadence. In between, you can get your head down and run the business. And quite rightly, we raised money in October 21.

20:09And so we're very well capitalized. And we have a path to profitability, which we've talked about. So we're in a great place. Now, to some degree, the limited anti-takeover share was about the four horsemen of the apocalypse, right? What if the share price collapsed for reasons that are way outside our control, like Putin invading Ukraine, like the Chinese, Taiwan, US tension, the global supply chain challenges? I mean, all those things have happened and they're external factors. And, you know, when I talk to employees, I say, you know, you've got to look at it on a bigger picture. We can't control the share price.

20:53All we can do right now is continue to make good on our year-on-year growth of greater than 30 % in our underlying business. And that's what we're doing. And at some point, you know, although another bank fell at the weekend, the recession will bottom out and will come out of the other side. and I think you know having raised money through the 2008 banking crisis there is a bit of a correction and the stronger companies that come out the other side of that. You listed in London over New York and at the time you said it was an opportunity to tackle urban myths about being in London and it was part of proving that you could do it here but at the last results you also pointed out it's not irreversible so is there a chance that you could move the listing to New York?

21:41So when we did the IPO, we did a really thorough analysis of London versus NASDAQ. And it was marginal. And the attraction of reporting twice a year and getting the right valuation when there was a normal market for life sciences, you know, we can definitely, I think, agree. There's a depressed market with Silicon Valley Bank collapsing and just generally this sector is struggling at the moment. But what I would say is nothing is ever off the table. There seems to be this binary thing that if you float in London, you can't go somewhere else in the future. And all I would say is we will do whatever we need to to grow the company to the next level.

22:32And right now, we're 15 months into an IPO and there's no appetite to do anything. You know, we want to get our heads down, we're well capitalised and focus on praying the business. You may have noticed that Gordon Sanghera has made a few footballing references through the interview so far. Until recently, he actually used to be the manager of a local Oxford amateur team called Mansfield Road and he played when he was younger. He says football played a powerful role in his life when he was growing up with his family in Swindon, and that there is a lot that businesses can learn from successful teams and coaches in sport.

23:18So Medicense became Abbott. Abbott's a large hierarchical, you know, corporate, based in Chicago where we used to go and have to get our money from them. And so when we set Oxonanaport up, I wanted to create a very flat, structured company. I didn't want silos. And we also really, really wanted people to move out of R &D into tech support, into sales and marketing. So kind of the football analogy is the great revolution of the Dutch, Rienus Michel's total football vision where any player can play in any other position. and we've always had that mentality. And it just challenges the norm, right?

24:09If you're selling a disruptive product, your marketing can be very, very, very different to just selling an incremental box. So when you're in disruptive innovation, everything, the way you sell, what you sell, we give the boxes away. The market sells a box for a million dollars. We almost do the opposite of what everybody else is doing. And for that, I think you can absolutely look at any sports and any great teams. They do something different. You know, Alph Ramsey got rid of wingbacks and, you know, wingers. And there's just, and you can draw on these changes and parallels. and you know people like Brian Clough I think if you're a leader of a start-up and disruptive innovation you have to believe even in the darkest hour you just have to keep believing and that's why I think I quote people like Brian Clough because he never veered from his vision and he took a very unfashionable second division side and beat everybody in the elite in Europe And that's why I like that analogy, because, you know, for whatever reason, tech companies out of the UK are seen as underdogs, second class, and even by our own country, the tall poppy syndrome, you know, and which is why I'm here today talking to you, because I think we have to stop this.

25:42and if we do and we start to become proud of the companies we create proud of the vaccines we delivered then I think it can change everything so yeah I'm totally inspired I don't football manage anymore and actually I've set up a foundation and I fund football teams particularly impoverished and I was funding women's football girls football long before it became fashionable I wanted to ask about the foundation because there's two things that you seem to have done at state school and sport, two things that clearly seem very important to you. Why were those the two things that you wanted to support?

26:20So I think I got five O levels and a C in chemistry and an E in maths. It was enough to get me into Cardiff University just. So I scraped my way to an education. But once I got there, I kind of realized if you, because it's a state school I went to, if you were given most of the curriculum and I did, I worked hard, but the school I was at just wasn't, didn't have that level of teaching anymore. And I prospered. And for me, I joined the local football team, which probably saved me from falling out into a rough crowd. and so you know I'm quite passionate about helping people to find somewhere to go to have you know that ability to not be on the streets and and you know it was it was important for me and you know living with my grandparents and my four aunts and my two brothers and my sister in a small three up three down getting away from all of that all kind of came through football was that the key to to how you're sitting here today because because you you went to state school you didn't go to oxford or cambridge you then did do a phd but you didn't work for investment bank either so when you look at sort of the founder ecosystem in the uk that makes you pretty rare so how did you do it oh i don't know actually i think with like having i managed to get into oxford as a postdoctoral researcher but that was really to join medicine because the academic was there but what I what I think you realize from okay I've got to my first year university I thought I'd failed miserably and then arrange marriage back and right and actually I got like 65 percent so I thought okay and then I got to my degree got a 2.1 and the prof said why don't you do a PhD and I thought delay a range match for three years sounds good to me keep playing football keep being a student won a prize from the Royal Society of Chemistry for my PhD work you then go to Oxford and you look around you think these guys are bright and the super bright ones you know I didn't ever think I wanted a career in academia but it just gives you a level of confidence and I think it's just you know at each level I just got more confident about my abilities and then MediSense was seven years rising to be head of R &D and then working in the states selling products to clinicians I think it's just a process you know I find I haven't forgotten who I was and where I came from think about that all the time and yeah I mean I I like the uniqueness the difference you know I I didn't go to Oxford I didn't you know go to school with quads and I didn't row and that's why it's football profile people need to understand I'm a very different person to a typical CEO just going back to sporting reference you mentioned before sort of Brian Clough but also the anti-establishment side of what he was doing is that how you see yourself as a CEO and how you like to manage and is that how the sort of spirit you try to instill into this company yeah and not just me Clive as well CTO if it plays out the way it should everybody will be doing their DNA sequencing at the desk you know at the bench side in real time.

30:04The model today is just like Kodak. You make something, you send it to the central lab, which could be a sequencing center in a university service provider. They sequence it, send it back to you. You can do expedited overnight or it takes a week or two. We will break all of that. So when some investors say, oh, well, we went to see, you know, big institutions like the Broad Institute, Sanger Center, and all these large experts, we're the antithesis of that. We will disrupt that. And, you know, the Kodak Color one is a perfect example. Instead of making something, sending it to a lab, getting it back, you'll do it in real time.

30:48And we're seeing that. And, And, you know, something that's really interesting, if you were being diagnosed for, say, breast cancer, and you could turn it around same day or next day, why wait? And so it changes everything. So in that respect, disruptive innovation, having grown up in a time when music was disruptive and the punk revolution changed everything, you didn't need a record deal. You didn't need the radio to plug your thing. I mean, we started in 2005 in May. And in October, Arctic Monkeys, I Bet You Look Good on the Dance Floor is number one. No record deal. Through MySpace and leaving CDs on the buses, on the top floor of buses in Sheffield, they went straight to number one.

31:43And that's what we are out to do. We're disrupting the way that people think they have to do sequencing. During the pandemic, somebody said, no, we need to get India to send samples to the UK so we can sequence them. And that all breaks. If you can just allow India to sequence, it really, there is a huge seismic shift. If you look today at sequencing superpowers and those with atomic weapons, it pretty much correlates. There are exciting opportunities ahead for Oxford Nanopore. Gordon Sanghera says its role in genomics could be similar to Apple in the IT and computer revolution of the 1970s, 80s and 90s.

32:31And that it's bringing a complex technology to the wider population and providing the tools for others to use it to create unique content. But it's now 18 years since Oxford Nanopore was founded. So has it been slower and harder than Gordon Sanghera expected, given the technological advances that Oxford Nanopore says it has made? Yeah, it has. I think you create, if you like, a colour TV, but it's quite grainy. You've got a great black and white image, you've got colour, and you just sort of think, well, obviously, I was watching the snooker last night, right? It's a no-brainer, you're going to shift.

33:14But that may be true and is true, I think, for a consumer product. When it's, you know, all the world's leading scientists are using these beautiful black and white images, the transition is a lot harder. And all these institutions have poured tens of millions over multiple years into these large infrastructures. so breaking those is a lot harder than I thought it was going to be probably the most surprising thing even though you could watch a snooker now and see the colours and some pioneers are prepared to do that early adopters do that you actually have to give them the black and white image and say oh I can do everything you want here it is it's cheaper faster quicker easier but oh look if we go through this door you get all this other stuff i found that surprising and challenging as to why people are like that but then i'm not the psychologist in the management team and they tell me that's normal i wish i'd known that three years ago because i think we might have tried to do something different

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