FTC calls out Illumina as 'monopolist,' moves to block $1.2B acquisition of PacBio
When sequencing giant Illumina revealed that it’s acquiring smaller rival Pacific Biosciences for $1.2 billion last year, CEO Francis deSouza said the combination of their own short-read technology and the smaller rival’s long-read approach “will give consumers a more perfect view of the genome.”
Perhaps too perfect, the Federal Trade Commission suggests, for a single company to hawk.
The FTC’s five commissioners voted unanimously to challenge Illumina’s proposed takeover, setting an administrative trial for August 18, 2020, while moving to seek a temporary restraining order and preliminary injunction in federal court.
“When a monopolist buys a potential rival, it can harm competition,” Gail Levine, FTC Bureau of Competition deputy director, said in a statement. “These deals help monopolists maintain power. That’s why we’re challenging this acquisition.”
The challenge comes just a day after the FTC cleared Roche’s $4.3 billion buyout of gene therapy player Spark, after taking several months to conclude that their union won’t hurt competition in treating hemophilia A. The 10-month delay for a deal that was generally perceived as simple and straightforward struck biopharma players and investors as a worrying sign of the commission’s tightening standards — concerns that built on previous remarks by Democratic appointees and intensifying political rhetoric.
That worry may be rippling out to the sequencing industry. Illumina shares $ILMN are down 1.31% to $323.45 while PacBio is trading at $5 premarket, down 35% from the high immediately following the buyout announcement.
“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 provided to Endpoints News. “We believe that the acquisition will benefit the industry and customers, and the facts of our proposed transaction support this.”
Illumina originally expected to close its acquisition of PacBio in mid-2019. But the UK’s Competition and Markets Authority launched an investigation in April and proceeded to Phase 2 review in June.
Then in October, the CMA — which gave its blessing to the Roche/Spark deal hours before the FTC — decided the deal indeed raises anticompetitive concerns.
Here’s the case the US antitrust watchdog laid out in its complaint, which is roughly similar to its UK counterpart’s:
PacBio is one of three other companies that manufacture and sell next-generation sequencing systems to rival Illumina in the US; Its tech, which allows customers to read much longer pieces of DNA at a time, has improved and appears to be snatching customers from Illumina; and the acquisition would reduce the combined firm’s incentive to develop new products.
Furthermore, the CMA found that other competing technologies posed limited challenges in comparison — a claim that BGI, Oxford Nanopore and Thermo Fisher may well dispute.
In an attempt to persuade the CMA to give the green light, Illumina had offered to open sequencing-related IP to competitors. But with the FTC’s strongly worded letter, “there appears to be limited chance that the deal would go through,” SVB Leerink analyst Puneet Souda wrote.
The fallout here would, in fact, mean a loss of innovation, he argued.
“Though the majority of the sequencing market centers around the short-read technology from ILMN – which is both fast and economical, the long-read technology caters to more accuracy, refractory/repeat genomic regions, and structural genomics applications – at a slower speed and higher price tag,” he wrote. “ILMN could reduce the cost of long read over time, opening up new markets and applications for PACB’s technology.”