FTC Thwarts $1.2B Illumina-Pacific Biosciences Takeover

California-based manufacturers of next-generation DNA sequencing (NGS) technology platforms Illumina and Pacific Biosciences of California (PacBio) recently decided to terminate their $1.2-billion merger agreement over regulatory approval hurdles and continued uncertainty. 

The Illumina-PacBio merger, which was announced in November 2018, failed after an administrative complaint that the Federal Trade Commission filed last December. Citing monopolization and competition harm, the complaint was approved in a unanimous vote. FTC staff were also authorized to seek a temporary restraining order and a preliminary injunction.

The companies had touted the agreement as being a “commitment to innovation,” with PacBio President and CEO Michael Hunkapiller, saying that the integrated NGS sequencing technology will offer “a new standard of insight and understanding, opening new frontiers of genomic utility.”

With Illumina having the largest market share and PacBio being a close second, FTC argued the companies had to prove that the merger would not harm current and future competition. It argued that the companies “currently compete with each other in the highly concentrated NGS market.” This competition “has been increasing over time and will increase substantially in the future.” But the companies failed to demonstrate that the merger would create efficiencies, too.

Illumina is to pay PacBio a $98 million termination fee as per their 2018 contractual agreement. 

The decision to terminate the merge was made “considering the lengthy regulatory approval process the transaction has already been subject to and continued uncertainty of the ultimate outcome,” the companies said. But both companies indicated an interest in future M&A deals. 

Illumina President and CEO Francis deSouza said, “Moving forward, we will continue to look for ways to increase the impact and benefit of sequencing technologies for researchers, clinicians, and most importantly, patients.” 

Hunkapiller added, “we are confident in the future of Pacific Biosciences as we continue to pursue improved sequencing accuracy and throughput that can be utilized in an ever-expanding number of applications.” Both expressed disappointment, too.

Last year,  market research firms found the two companies among several others percolating the US market for NGS technology. At least three market research firms reported Massachusetts-based Thermo Fischer Scientific and PerkinElmer as two other competitors. 

FTC issued a statement in reaction to the terminated merger. “This deal threatened to let a monopolist extinguish nascent competition in a growing health care market: next-generation DNA sequencing,” said FTC Bureau of Competition Deputy Director Gail Levine. The terminated merger will allow customers to benefit from less-expensive NGS DNA technologies, Levine said.