San Diego’s scientific technology giant, Illumina, has thrown in the towel on its planned $1.2 billion acquisition of competitor Pacific Biosciences.
The deal, announced more than a year ago, would have given Illumina a tool to dive deeper into complex DNA-related questions about health and life, giving the company a competitive edge in its field. But it was too competitive, regulators said.
Both the Federal Trade Commission and the United Kingdom’s antitrust group asserted the merger would tip Illumina into monopoly territory.
Illumina makes an instrument called a DNA sequencer, which assigns a code to genetic material and then “reads out” the pattern for researchers to study. These machines are most often used by scientists to determine the genetic roots of human diseases, to better understand pathogens, or to probe genetics of crops and livestock. Its technology has also powered popular DNA-testing services such as Ancestry and 23andMe.
Illumina, a $47 billion public company, is already a mammoth in the DNA sequencing space. PacBio, based in Menlo Park, Calif., is one of just a few competitors.
The rival company specializes in something called a “long read,” which is the ability to sequence a lengthy stretch of DNA. In disease research, these long reads can be helpful in seeing big-picture patterns in genetic material.
Illumina, on the other hand, specializes in fast and short reads. Historically, short reads have been more accurate. But they can miss these high-level patterns.
Combining these two specialties would have made Illumina a powerhouse in genomic technology.
“We believe this proposed combination would have broadened access to Pacific Biosciences’ sequencing technology, significantly expanded and accelerated innovation, and ultimately increased the clinical utility and impact of sequencing,” said Francis deSouza, Illumina’s president and CEO, in a prepared statement released late Thursday.
But last month, the FTC challenged Illumina’s proposed purchase of PacBio, claiming the deal would allow Illumina to unlawfully maintain a monopoly in the field by taking out a nascent competitor.
“Considering the lengthy regulatory approval process the transaction has already been subject to and continued uncertainty of the ultimate outcome, the parties decided that terminating the agreement is in the best interest of their respective shareholders and employees,” Illumina and PacBio stated in a press release.
The statement announcing termination of the deal was described as a “mutual agreement” by the companies. However, Illumina will have to pay a $98 million penalty to PacBio for the collapse, as the two companies had previously agreed on the termination fee should the acquisition fall through.
Despite the news, shareholders have barely reacted to the dissolution of the deal. At the market’s close on Friday, Illumina’s stock (Nasdaq: ILMN) had only dropped 1.3 percent to $322.73 a share.
“While it is disappointing that the deal will not go through, we see limited to no impact to Illumina,” wrote biotech analyst Puneet Souda, a managing director at SVB Leerink, in a note sent to the Union-Tribune Thursday. “Combining the short-read and long-read sequencing data would have been a positive for the industry and the sequencing end-market as a whole, as it would have unleashed applications not accessible today or given access to regions of genomes that are refractory to either technologies. We believe the long-term growth trajectory for Illumina remains intact, even without PacBio.”
Souda added that he thinks Illumina holds the potential to pursue other avenues for long-read sequencing technology, including building the capability internally.
