The Federal Trade Commission is challenging DNA sequencing giant Illumina’s proposed $1.2 billion purchase of rival Pacific Biosciences, alleging the acquisition would eliminate “a nascent competitive threat” to Illumina’s monopoly in deciphering genetic material.
“When a monopolist buys a potential rival, it can harm competition,” the deputy director of the FTC’s Bureau of Competition, Gail Levine, said Tuesday in a statement. “These deals help monopolists maintain power. That’s why we’re challenging this acquisition.”
Illumina has become dominant in the field of next-generation DNA sequencing by building machines that sequenced DNA more cheaply and rapidly than several competitors, many of which have gone out of business. Since Illumina entered the sequencing market in 2007 with the acquisition of a company called Solexa, the cost of sequencing a human genome has dropped from more than $200,000 to as little as $1,000, a rate of improvement that has outpaced Moore’s law, the increase in speed that guides the improvement of microprocessors. Since that acquisition, Illumina’s share price has increased 1,500%.
Pacific Biosciences, or PacBio, was one of several companies that emerged a decade ago and attempted to challenge Illumina and failed. But PacBio has survived because its technology, which did not live up to its early projections of speed and efficiency, can do something Illumina can’t. Illumina’s DNA sequencers work by reading out tiny fragments of DNA code and re-assembling them. PacBio’s technology, though less accurate, can read out much bigger pieces, called “long reads” by scientists. Using the two technologies together can produce more accurate genetic information.
Illumina, which has a market capitalization of $48 billion, has said that it sees potential to grow faster by combining the two companies, and argues that the two technologies are complementary, not competing.
“We strongly disagree with the FTC’s decision and will continue to work through the regulatory approval process as we consider next steps,” Illumina spokesman Eric Endicott said in a statement. “We believe that the acquisition will benefit the industry and customers, and the facts of our proposed transaction support this.”
For many investors, it already looked as if the the PacBio deal was in trouble. In October, the United Kingdom’s Competition and Markets Authority concluded that the deal may result in a lessening of competition, and also blocked the merger. At the time, analysts at the investment bank Cowen wrote: “We believe the deal is now highly unlikely to be completed.”
It has been a comparatively tough year for Illumina. Aside from the drama surrounding the PacBio acquisition, the largest in its history, it posted a rare disappointing quarter in July. Its shares are up 9% over the course of 2019.