Illumina Makes Genetic Acquisitions

Illumina is moving on. The genetic analysis firm, no longer the target of a takeover by Roche, is acquiring two other California-based companies: diagnostics provider Verinata Health and sequencing-technology firm Moleculo.

Last year, Illumina rejected a $6.8 billion takeover bid from Roche, the Swiss drug and diagnostics giant, and said it would expand on its own instead. The deal for Verinata, the larger of the two purchases, continues a push by research tool firms into clinical diagnostic markets.

To buy Verinata, Illumina will pay $350 million up front and up to another $100 million in milestone payments through 2015. Verinata sells a noninvasive prenatal test, called Verifi, that uses maternal blood to test for several fetal chromosomal abnormalities. Illumina expects the market for such tests to exceed $600 million this year.

Verinata was founded in 2002 and has a “comprehensive intellectual property portfolio,” Illumina says. In 2011, Verinata signed a three-year agreement to use Illumina’s sequencing instruments in commercializing the Verifi test. The two companies also collaborated to receive regulatory approval for the testing service, which Verinata launched in May 2012 and conducts at its Redwood City, Calif., clinical lab.

Meanwhile, technology from two-year-old Moleculo increases Illumina’s genome-sequencing capabilities through longer sequence read lengths at high levels of accuracy. Both Verinata and Moleculo have connections to the lab of sequencing pioneer and serial entrepreneur Stephen R. Quake, a professor of bioengineering at Stanford University.

Illumina expanded in the chromosomal testing area when it acquired BlueGnome in September 2012. Its decision to buy further into prenatal diagnostics is a “bold move,” says Mizuho Securities USA stock analyst Peter Lawson. By being a provider in the fast-growing molecular diagnostics area, he adds, Illumina will transition some of its business away from the competitive and high-risk life sciences tools market.

Two days after Illumina announced the Verinata deal, instrumentation and lab services company Perkin­Elmer said it would be a partner for the sale and marketing of the Verifi test in the U.S.