PacBio engineers $800M buyout of sequencing rival Omniome as analysts fret over FTC action
As Illumina runs into another regulatory roadblock to expansion, one of its almost-subsidiaries is charging ahead with a new buyout.
Pacific Biosciences, often referred to as PacBio, is aiming to swallow rival Omniome in an $800 million stock and cash deal, the companies announced Tuesday morning. PacBio will fork over $600 million upfront consisting of $300 million cash and 9.4 million shares, and is on the hook for another $200 million in cash and stock should certain milestones be achieved.
The buyout is expected to close by the end of September, the companies added. Tuesday’s news sent PacBio shares $PACB up about 3% in pre-market trading, but the stock trended down about 2% after the opening bell.
In conjunction with the deal, PacBio is selling off more than 11 million shares to raise $300 million in a PIPE financing round. Investors included Casdin Capital, SoftBank’s SB Northstar fund and T. Rowe Price.
For PacBio, a player in long-read genetic sequencing technology, the appeal centered around a better sequencing tech that can expand into the short-read space and speed up sequencing times. With the potential for higher accuracy with Omniome’s platform, PacBio believes it can position itself as one of the only companies able to do both types of sequencing.
“Scientists and clinical researchers rely on accurate short reads and accurate long reads to conduct their science and answer their specific questions,” PacBio COO Mark Van Oene said in a statement. “PacBio is committed to delivering the most advanced combination of sequencing solutions to enable the complete genomics landscape.”
The company faced questions from analysts in a Tuesday morning investor call, however, over whether this ability will prove to be a true differentiating factor, particularly given the FTC is now suing to block Illumina’s $8 billion buyout of Grail. CEO Christian Henry defended the move, saying Omniome’s sequencing capabilities were “an order of magnitude” better than competitors and that alone could be enough to differentiate.
Illumina’s deal came up again later in questioning, with some analysts wondering whether or not the scrutiny garnered in that case has PacBio concerned the FTC will take similar steps here. Henry again brushed off the matter, saying that while he agrees the Grail deal has a lot of folks on edge, he doesn’t foresee any significant holdups for the Omniome deal.
PacBio has been involved in the FTC’s crosshairs in the past, even before new chair Lina Khan came in with big plans to shake up the agency. When Illumina sought to buy out PacBio for $1.2 billion in late 2018, regulators accused the sequencing giant of being a “monopolist” and the two sides tore up their merger agreement less than a month later.
FTC’s five commissioners voted unanimously to challenge the 2018 deal.
It remains to be seen if the FTC will move against the Omniome transaction. Though the FTC is suing to block the Grail buyout and has vowed to take a tougher stance on pharma M&A, the agency waved through AstraZeneca’s $39 billion acquisition of Alexion earlier this year. That merger is expected to go through this week after the EU and UK regulators signed off this month.
Khan was not involved in the AstraZeneca deal, as she was only confirmed to the agency’s top post in early July.
Social: via Pacific Biosciences website