The $8 per share deal will allow Illumina to tap into the long-read sequencing market, while also heading off competition from other firms, analyst writes.
One of the largest companies involved in next-generation sequencing technology is buying a rival that manufactures genomic analysis systems.
San Diego-based Illumina will acquire Menlo Park, California-based Pacific Biosciences for $1.2 billion, or $8 per share, the two companies said Thursday. Shares of PacBio opened Friday morning at 67.4 percent above their Thursday closing price. The price per share that Illumina is paying represents a 71 percent premium over PacBio’s share price, and an equity research report from Leerink noted that the total $1.2 billion is about 10 times the acquired firm’s year-end 2019 consensus revenue.
The acquisition, which both companies’ boards have approved but remains subject to PacBio shareholders’ approval, will combine their respective short- and long-read sequencing technologies and enable a “more perfect” view of a genome. Illumina’s products include its NextSeq and iSeq systems, while PacBio’s include Sequel SMRT. The companies expect the market for long-read sequencing to grow to $2.5 billion by 2022.
“PacBio’s unmatched accuracy mirrors that of Illumina’s in short-read sequencing,” Illumina CEO Francis deSouza said in a statement. “Combining the two technologies positions us to reach more applications, accerate the pace of genomic discovery and bolster our innovation engine, which has been a hallmark of Illumina since our inception.”
In addition to plugging the gap in Illumina’s portfolio, expanding its opportunities in the long-read market, it removes competitive overhangs from Oxford Nanopore Technologies, BGI and others, the Leerink report read. Long-read technology follows a path of elasticity of demand and cost-per-gigabase reduction, with the potential for an integrated system down the road, thereby opening the door for as yet unrealized markets, the report found.
It comes months after Swiss drugmaker Roche spent $2.4 billion to acquire the remaining shares of another NGS-focused diagnostics firm, Foundation Medicine, that it didn’t already own.
Short-read sequencing is usually cheaper and allows for more sequencing to be done in parallel, while long-read sequencing captures more genomic information. PacBio’s long reads complement Illumina’s short reads because they allow customers to fill in regions that are repeats of bases found in Illumina’s technology, the Leerink analysts wrote.