Although Illumina is paying a 70% premium, it’s less than half the share price at PacBio’s 2009 IPO, which raised $200 million on the promise of its long-read technology as a better, more accurate platform for sequencing DNA than the short-read method employed by Illumina.
As the story goes in the nine years since, Illumina became the $46 billion behemoth it is today, while PacBio stumbled and required a rescue effort by new leadership — eventually finding a niche for its technology among a select group of researchers whose workflow isn’t well suited to Illumina technology, such as high-quality genomes of small organisms like bacteria, or in diagnosing rare hereditary diseases with complex genomic signatures, allowing for rearrangements to be more easily revealed. Illumina’s CEO Francis deSouza admitted as much to Matthew Herper of Forbes: “The place where PacBio really differentiates itself is accuracy … [the] accuracy profile is really better than anything else in the [long-read] market.”
Illumina unveiled its NovaSeq platform last year that is designed to enable the cost of sequencing the human genome down to $100. The previous iteration, HiSeq X, enabled the $1,000 genome. It took over a decade and nearly $3 billion for scientists to sequence the first human genome back in 2003.
“Though the majority of the sequencing market centers around the short-read technology from Illumina – 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”, wrote Leerink’s Puneet Souda in a note on Friday, adding that Illumina will likely find a way to apply its low-cost model to cut the cost of long-read sequencing in the longer term.
The acquisition plugs an important gap in Illumina’s portfolio, expands the company’s overall market opportunity and positions them against competitive overhangs from UK-based Oxford Nanopore and others, Souda added. “The acquisition opens a door to new markets not realized yet as long-read technology follows a path of elasticity of demand and cost per Gb (Gigabase) reduction, with potential for an ‘integrated system’ down the road that could feature both technologies.”
Unlike the many bulky devices sold by Illumina and Pacific Bio, Oxford Nanopore’s technology is scalable, ranging from bench-top devices to USB sticks. Illumina originally invested in the UK-based company having joined a couple of funding rounds, but in 2016 the San Diego, California-based giant sued Oxford Nanopore for patent infringement.
Can't keep up with the genomics frenemies…
— Illumina invests in Oxford Nanopore
— Roche tries to buy Illumina
— Illumina sues Oxford Nanopore over IP; settles
— Pac Bio and Roche team up, then call it quits
— Illumina buys Oxford Nanopore competitor Pac Bio
— Christina Farr (@chrissyfarr) November 1, 2018
Meanwhile, the CTO of Oxford Nanopore, Clive Brown, is already adding fuel to the fire.
Oh dear, I read it more carefully. The technical rationale for this is already out of date, and 8M chip doesn’t even compete with a MinION never mind PromethION. By the time this deal closes this will be very apparent . https://t.co/zn2FchZp6j
— Clive G. Brown (@Clive_G_Brown) November 1, 2018
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