The Federal Trade Commission has challenged Illumina’s planned $1.2 billion acquisition of smaller next-generation DNA sequencing (NGS) rival Pacific Biosciences of California. The antitrust regulator says it has ordered an administrative trial on the combination for August 2020 and will seek a restraining order in federal court if necessary to prevent the deal from going through until then.
DNA sequencing is used for prenatal testing, to diagnose disease, and to enable ancestry research services offered by companies like 23andMe. Illumina is by far the leading provider of NGS instruments and systems.
“When a monopolist buys a potential rival, it can harm competition,” said Gail Levine, the FTC’s deputy competition director, in an agency announcement. “These deals help monopolists maintain power. That’s why we’re challenging this acquisition.”
Illumina issued a statement saying it “strongly” disagreed with FTC’s decision and that it “will continue to work through the regulatory approval process as we consider next steps. We believe that the acquisition will benefit the industry and customers, and the facts of our proposed transaction support this.”
The deal, announced in November 2018, would unite Illumina, the leader in short-read DNA sequencing technology, and PacBio, the long-read sequencing leader. The companies have annual sales of about $2.8 billion and $79 million, respectively.
At the time, Illumina CEO Francis deSouza said that combining the two technologies “positions us to reach more applications, accelerate the pace of genomic discovery, and bolster our innovation engine.”
But the FTC is calling the combination “illegal because it may substantially lessen competition in the US NGS market by eliminating current competition and preventing future competition between Illumina and PacBio.”
Long-read sequencing is traditionally more expensive and not as accurate as short-read technology. But because of advances PacBio has made in accuracy, throughput, and costs, it is “a closer alternative to Illumina than ever before,” the FTC said. As a result, “customers have already switched some sequencing volume from Illumina to PacBio … and PacBio is poised to take increasing sequencing volume from Illumina in the future,” the FTC added.
The FTC isn’t the only regulator to question the merger. In late October, the UK’s antitrust regulator, the Competition and Markets Authority (CMA), issued provisional findings skeptical of the deal. “Competition is one of the main factors that drive innovation and [CMA] is concerned that the loss of PacBio as an independent competitor will lead to a reduction in overall levels of innovation in the market,” it said.
CMA plans to issue its decision on the merger on Feb. 5. Sam Samad, Illumina’s chief financial officer, was asked a question about CMA’s opposition at the Piper Jaffray Annual Healthcare Conference earlier this month. He responded that Illumina has already proposed “remedies that would allow the merger to go ahead.” Chief among them, he said, is a proposal to offer licenses to PacBio and Illumina long-read patents “that would be available to any third-party if they so choose to develop and commercialize single-molecule long-read systems.
But the FTC’s opposition further complicates Illumina’s plans. Illumina’s agreement with PacBio, already extended once before, expires on March 31. The FTC’s administrative hearing is set for August. Illumina did not respond to a question about whether it would try to extend its agreement with PacBio beyond March.