Termination of Illumina's $1.2B PacBio Acquisition Opens Opportunities in Long-Read Sequencing

VCBeat has learned that sequencing giant Illumina has announced the termination of its $1.2 billion acquisition of Pacific Biosciences (PacBio). According to statements released by both parties, they ultimately decided to terminate the agreement due to the 14-month regulatory approval process the transaction had undergone and the persistent uncertainty surrounding the final outcome. Under the terms of the agreement, Illumina will pay PacBio a termination fee of $98 million.

The secondary market reacted calmly to the news, with the stock prices of Illumina and PacBio barely affected, as if the inevitability of this development had long been anticipated.

Both companies’ senior executives expressed regret over the termination of the acquisition, while further emphasizing their continued commitment to advancing sequencing technology in pursuit of higher accuracy and throughput.

On November 1, 2018, Illumina announced that it wouldAcquire Pacific Biosciences in an all-cash transaction at a price of $8 per share. Based on relevant calculations, PacBio’s total market value in this transaction amounts to $1.2 billion.

From the moment Illumina announced its acquisition of PacBio, the deal faced skepticism from multiple parties. In January 2019, the UK’s Competition and Markets Authority (CMA) began investigating the compliance of Illumina’s planned acquisition of Pacific Biosciences, with a core focus on whether the transaction would create a monopoly. In its preliminary findings released in October 2019, the CMA stated that the acquisition would weaken competition in the UK’s next-generation sequencing market and hinted at blocking the deal. In response, Illumina submitted a proposal to the CMA, offering “permanent, royalty-free, irrevocable, and exclusive” licenses to Oxford Nanopore or any other interested nanopore sequencing technology company. However, this move was immediately challenged by another sequencing instrument developer, Oxford Nanopore.

In December 2019, the antitrust battle spread from the UK to the US, as the Federal Trade Commission formally accused Illumina of attempting to illegally maintain its monopoly in the US NGS market.

In fact, regardless of whether this acquisition succeeds, Illumina has already established a de facto monopoly in the industry. Relevant surveys indicate that Illumina captured 86% of the sequencing instrument market as early as 2016. In 2018, Illumina’s total revenue reached $3.333 billion, while the NGS business revenue of its closest competitor, Thermo Fisher Scientific, was only approximately $400 million.

Illumina Acquires PacBio, Primarily Targeting Its Long-Read Sequencing Solutions

Accurate long-read sequencing capabilities can further enhance Illumina’s sequencing solutions, facilitating the resolution of a range of complex genomic questions. While Illumina’s accurate and cost-effective short-read sequencing platforms already optimally meet the needs of most sequencing applications, accurate long-read technology will bolster its capabilities in specific use cases, such as de novo sequencing and sequencing of highly homologous genomic regions. Through the acquisition of Pacific Biosciences, Illumina will be able to offer integrated workflows and drive innovation by combining these two powerful technologies, thereby helping researchers accelerate their projects and enabling clinicians to implement new tests more cost-effectively.

However, all of this has now come to naught, meaning that Illumina will need to enhance its long-read sequencing capabilities through new channels.

Amid Illumina’s monopoly, market opportunities in its existing business segments may have vanished. However, the long-read sequencing sector, which the sequencing giant has yet to enter, could well represent the future opportunity for domestic sequencing instrument developers?