Illumina is already the biggest player when to comes to DNA sequencing equipment, and an agreement to purchase smaller rival Pacific Biosciences for $1.2 billion tightens its grasp on the market.
It has agreed to pay $8 per share for its smaller rival, a 71% premium on PacBio’s share price just ahead of the deal announcement, in order to take ownership of the smaller companies long-read sequencing technology which uses a different approach to its own short-read platforms.
In a nutshell, Illumina’s platforms involve breaking DNA into short sequences that are read and then reassembled like a jigsaw puzzle, a fast and efficient approach that has helped it reduce the cost of genetic studies dramatically over the last few years.
It can also be valuable to sequence longer sections of DNA, as this turns a sample into a puzzle with fewer pieces that can precisely identify specific isoforms and can overcome problems, such as repeat sequences which make it harder to stitch the pieces together. This has been a much costlier approach, however, and it has also struggled to meet the accuracy of short-read technology.
Bringing the two platforms together takes Illumina “closer to delivering a perfect view of the genome: one that is accurate, complete, fast and economical,” said Illumina’s president and CEO Francis deSouza said on a conference call.
The biggest driver for the deal was PacBio’s new product pipeline, and particularly a technology that promises to reduce the time it takes to sequence longer DNA strands. “They’ve been able to dramatically improve the output … and accuracy of their sequencer,” said deSouza, adding that PacBio has a new-generation chip coming next year that will make its long-read technology “more broadly accessible than it has ever been.”
In clinical diagnostics—the other big use of sequencing alongside research—long-read technology means it is possible to identify structural variants in genes that improves the scope and accuracy of information generated by tests, for example those used to detect rare genetic diseases.
DeSouza said Illumina reckons the total opportunity for long‐read applications was around $660 million in 2017 and could grow to about $2.5 billion in 2022. Analysts at Leerink say the deal “plugs an important gap” in its product range, while Piper Jaffray says it “could be a home run” and help maximize the impact of PacBio’s new chip technology.
The takeover, which is expected to be complete next year, is still subject to approval by the two companies’ shareholders as well as regulatory approvals. Illumina’s dominance in the market—with sales of $2.75 billion last year versus PacBio’s $94 million—led to questions on the call about potential antitrust issues, but deSouza said he thinks the lack of overlap between the two firm’s short- and long-read platforms means that will not be an issue.
Ilumina’s move comes shortly after Amgen took a minority stake in U.K.-based genetic sequencing upstart Oxford Nanopore Technologies (ONT), which is building a reputation for its range of whole-genome sequencers based on protein nanopores.
While ONT’s first generation of pocket-sized devices were no major threat to Illumina’s business, a recent shift into benchtop devices with higher throughput have started to encroach on its territory. Illumina had been working with ONT, but that relationship ended up in a dispute over patents that ended up in the courts.
By Phil Taylor
Source: Fierce Biotech
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