Looking for a prenatal payoff
Illumina agrees to acquire Verinata Health for $350 million upfront plus $100 million in potential milestones
SAN DIEGO—For Illumina Inc., reproductive health represents"a very exciting market opportunity for us for both our array and sequencingproducts, with segments that go all the way from carrier screening on the onehand to developmental delay in young children on the other"—that sentimentarising out of recent statements by President and CEO Jay Flatley. To that end,the company recently signed a definitive agreement to acquire Redwood City,Calif.-based Verinata Health Inc., a provider of non-invasive tests for theearly identification of fetal chromosomal abnormalities, for $350 millionupfront plus as much as another $100 million in milestone payments through2015.
Upon completion of the acquisition, Illumina will possessaccess to Verinata's verifi prenatal test, which it calls "the broadestnon-invasive prenatal test (NIPT) available today for high-risk pregnancies,"as well as gain "the most comprehensive intellectual property portfolio in thenon-invasive prenatal test industry."
Describing non-invasive prenatal testing as one of the mostrapidly growing areas utilizing next-generation sequencing, Illumina sees theagreement with Verinata as demonstrating its commitment to developinginnovative diagnostic solutions and providing its partners with the mostadvanced technologies for improved patient care and, as Flatley noted in thenews release about the deal, it builds "on the recent acquisition of BlueGnomeLtd. and our expertise in next-generation sequencing [and] further establishesIllumina as a leader in reproductive health."
Available through a physician, the verifi test analyzescell-free fetal DNA naturally found in a pregnant woman's blood to look formissing or extra copies of chromosomes, or aneuploidies. Specifically, the testdetects Down Syndrome (trisomy 21 or T21), Edwards syndrome (trisomy 18 or T18)and Patau syndrome (trisomy 13 or T13). Reportedly, it is the firstnon-invasive prenatal test that offers the option to include evaluation of sexchromosome aneuploidies, such as Turner syndrome (Monosomy X), Triple X (XXX),Klinefelter syndrome (XXY) and Jacobs syndrome (XYY), which are the most commonfetal sex chromosome abnormalities.
"We entered this market initially four or five years agowith our cytogenetics arrays. And now in conjunction with BlueGnome we'reworking on future generations of these cytogenetic chips," Flatley said at a JPMorgan Global Healthcare Conference in January as he discussed the Verinataacquisition deal. "We plan an FDA submission of these arrays with our iScan.That's been delayed for about a quarter so rather than Q4 it looks like that'sgoing to happen now in the first quarter."
But Flatley doesn't see Verinata's prenatal testing as theend of the line for reproductive diagnostics, also saying at the JP Morganconference, "We think there are two other future segments in reproductivehealth. One is in fertility factors and many of these we believe will havegenetic underpinnings and sequencing will be applicable—and in the long run,probably the biggest market opportunity here in newborn screening, which wethink over time will transition to sequencing from today's tests that are basedon mass spec and hormone testing."
The JP Morgan conference, however, also served as a venuefor some degree of tension, as Sequenom Chairman and CEO Harry Hixson expressedconfusion over Illumina's decision to acquire Verinata, according to variousmedia reports, since it would make Illumina the owner of Sequenom's competitor inthe non-invasive fetal aneuploidy testing space. Reportedly, though, Hixsonadded in his comments that Flatley assured him that their companies'relationship would not be affected by the acquisition.
According to Illumina, compared to other testing options,the verifi prenatal test from Verinata provides more definitive informationthan risk score-based tests (traditional protein serum screens), whichcalculate probabilities, and does not carry the risk of complications that aninvasive procedure, such as an amniocentesis, can have.
As Illumina puts it, "The robust technology behind theverifi test leverages the power of massively parallel next-generationsequencing with a highly optimized algorithm to provide accurate aneuploidydetection, with the ability to look across the entire genome."
"Together, Illumina and Verinata are well-suited to drivethe adoption of the non-invasive prenatal testing market. With approximately500,000 high-risk pregnancies annually in the United States and an estimated fourmillion pregnancies in total, there is a clear need for such tests," said Dr.Jeffrey Bird, executive chairman and CEO of Verinata Health. "Given the recentAmerican College of Obstetrics and Gynecology and Society of Maternal and FetalMedicine joint opinion that recommended cell-free DNA prenatal testing as afirst or second trimester option for women at increased risk of aneuploidy, webelieve more physicians will be adopting NIPT."
The verifi test will continue to be offered throughVerinata's CLIA-certified and CAP-accredited laboratory, which will continue toact as a reference laboratory to gather some of the necessary clinical data forfuture regulatory submissions.
The transaction is expected to be approximately 20 centsdilutive to Illumina's non-GAAP earnings per share in 2013 before turningaccretive in 2014 and beyond.
Zacks Investment Research, in issuing a research note aboutthe acquisition, points out that Illumina "continues to demonstrate itsstrength in the genotyping market with its high-margin next-generationsequencing platform" despite ongoing difficulties in obtaining research fundingat many companies and institutions that would use Illumina's products.Relatively undeterred by this hiccup in the economies of research efforts andseeking growth all the same, Illumina has, Zacks notes "made severalacquisitions and entered into partnerships to tap this growing [genotyping]market."
In terms of acquisitions, Zacks pointed to the same oneIllumina did itself in announcing the Verinata deal: the purchase of BlueGnome.As far as other deals, Zacks notes: "In the same month [as the BlueGnomeacquisition], the company entered into a strategic alliance with PartnersHealthCare, a healthcare system developed by the Brigham and Women's Hospital,and Massachusetts General Hospital in order to develop improved infrastructureand networking tools for the interpretation and reporting of genetic sequencingdata. The company also entered into a partnership with Siemens HealthcareDiagnostics to use the MiSeq platform for Siemens' molecular HIV tests.Furthermore, the company expanded its Genome Network with the inclusion of theBritish Columbia Cancer Agency to its existing list."
Illumina acquiressequencing startup Moleculo
SAN FRANCISCO—At the JP Morgan Healthcare Conference inJanuary, Illumina Inc. announced its acquisition of Moleculo Inc., a sequencingstartup company based here.
According to Illumina, Moleculo's technology will help thecompany produce reads of lengths up to 10 kb with high accuracy, with a lowerror rate of Q50 or better)). The ability to produce long reads will help newapplications like "phased resequencing of human genomes, and rapid de-novo sequencing of complex plant andanimal genomes," said Illumina.
Moleculo is a product of Stanford University sequencingpioneer Stephen Quake.
Financial terms of the acquisition were not disclosed.