IN TWO COUNTRIES, regulators concerned about a possible monopoly of technologies and instruments used in human gene sequencing apparently were a major reason why the $1.2 billion acquisition of Pacific Biosciences by Illumina Corporation will not happen.
The two companies announced the termination of the transaction just weeks after the Federal Trade Commission (FTC) ruled the deal was anti-competitive and Oxford Nanopore Technologies complained to regulators in the United Kingdom that the deal would allow the combined company to dominate the market in the UK and worldwide.
“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,” the two companies announced on Jan. 2. Instead, Illumina will pay PacBio a termination fee of $98 million, as required by the preliminary agreement.
When the deal was proposed on Nov. 1, 2018, Illumina said it planned to combine the two companies’ sequencing technologies, as The Dark Report explained. (See “Illumina to Pay $1.2 Billion to Acquire Pacific Biosciences,” TDR, Dec. 3, 2018.)
Illumina’s instruments are based on sequencing by synthesis, or short-read technology, in which machines analyze small fragments of DNA, allowing Illumina to drop the cost of sequencing an individual’s DNA to about $1,000.
PacBio, however, pioneered the use of long-read technology to decode extended stretches of DNA with high accuracy. The drawback to PacBio’s approach is the high cost ($12,000) to sequence a single human genome. After announcing the end of the deal, Illumina said it would seek to develop its own long-read technology.
A big blow to the deal came on Dec. 17 when the FTC announced it was seeking to block the merger by filing an administrative complaint. In the complaint, the FTC claimed Illumina aimed to unlawfully maintain a monopoly for NGS systems in the U.S. market by acquiring a competitor. Also, the proposed deal was illegal because it could reduce competition for DNA sequencing, the FTC charged.
The commission asked its legal staff to seek a temporary restraining order and a preliminary injunction in federal court, if necessary, to maintain the market status quo. In other words, Illumina was looking at a potentially protracted legal fight.
Because of ongoing improvements in its technology, PacBio had become a close alternative to Illumina, the FTC wrote. Given that the two companies drive each other’s innovative expertise, the merger would eliminate that incentive, the agency added.
The UK’s Competition and Markets Authority extended its inquiry into the proposed acquisition after Oxford Nanopore complained that the combined company would have a market share of more than 90% in the UK and more than 80% worldwide, enhancing Illumina’s ability to foreclose other companies from the market.