SAN DIEGO & MENLO PARK, Calif.—Illumina Inc. is going to face the coming new year with new growth, having announced an agreement under which it will acquire Pacific Biosciences for $8 per share in an all-cash transaction. Both companies’ boards of directors have approved the deal, which has a total enterprise value of roughly $1.2 billion on a fully diluted basis.
That price represents a 71-percent premium over PacBio’s 30-day trading volume weighted average share price as of Oct. 31, the day before the transaction was made public. The acquisition is expected to close by mid-2019, pending shareholder approval on the part of Pacific Biosciences, regulatory approval and other customary closing conditions.
As noted by Francis deSouza, president and CEO of Illumina, this is the company’s largest acquisition since it absorbed Solexa in 2007.
“In the decade since our acquisition of Solexa, Illumina’s short read SBS‐based technology has transformed the landscape of genomics with the delivery of large-scale and increasingly economical sequencing,” deSouza commented in a conference call. “Illumina’s SBS technologies have played an integral role in helping researchers push the frontiers of genomics across a breadth of applications including whole-genome sequencing, NIPT, liquid biopsy, rare and undiagnosed genetic disease and immune oncology. With the innovation headroom SBS has, we expect Illumina’s SBS technologies to remain the platform of choice for the majority of sequencing applications moving forward, as our combination of scalability, accuracy and affordability will remain unmatched.”
Illumina leads the market in sequencing solutions, and this deal will bolster its offerings by adding PacBio’s long-read sequencing offerings. Illumina offers short-read sequencers, which can answer most sequencing needs, and with long-read solutions as well, the company will also be able to support customers in applications such as “de-novo sequencing and sequencing of highly homologous regions of genomes,” Illumina reports.
“Accurate long reads can range across longer portions of a genome, helping to resolve ambiguity in assembly, and thereby providing a more comprehensive view of these classes of variants,” deSouza explained in a conference call regarding the deal. “For that reason, accurate long‐reads have been adopted for applications where access to complex regions is more important than cost or scalability, for example in de-novo assembly and pharmacogenomics. Historically, the challenge for long‐read technologies has been accuracy and cost. However, Pacific Biosciences’ recent technology breakthroughs have demonstrated an unparalleled level of accuracy for native long reads, which—when coupled by the impending release of the company’s 8M Smart Cell—will substantially improve the utility and affordability of this technology. These innovations drive our enthusiasm for bringing our companies’ technologies together now.”
“Illumina continues to democratize the use of sequencing at an unprecedented rate. Through this combination, thousands of researchers will now have direct access to this technology,” remarked Dr. Michael Hunkapiller, CEO of Pacific Biosciences. “Illumina and Pacific Biosciences have shared values and a commitment to innovation. Our complementary sequencing technology, once integrated, will offer customers a new standard of insight and understanding, opening new frontiers of genomic utility.”
“I am extremely proud of the work that the PacBio team has accomplished as a standalone company, and I believe that—as part of Illumina—we can continue to innovate our SMRT Sequencing capabilities and reach more customers and address more applications substantially faster than we could do as a standalone enterprise,” he added in the companies’ conference call.
The industry seems to mirror that optimism on the whole. Stocks rose 5 percent on news of the transaction, and Zacks Investment Research noted that it was “upbeat” about the deal. Motley Fool’s Jim Crumly noted that potential of the deal depended on upcoming advancements from Pacific Biosciences, saying “The payoff for Illumina will be if PacBio can bring the cost of operating its sequencers down to a threshold that opens up major new markets, and company executives believe they are close to that point. PacBio will be testing a new chip early next year that has 8 million zero-mode waveguides, eight times the number of its current Sequel system.
“The company believes a new model of Sequel with the chip, which could launch in the second quarter of 2019, will put the cost of sequencing the human genome in the ballpark of Illumina’s SBS products, about $1,000 per genome, or one-seventh of what Sequel costs today. Hitting that pivotal price point would open up markets for Sequel where the capabilities of the technology would bring important advantages, but where costs have been a barrier up to now.”