FTC Moves to Block Illumina Acquisition of PacBio, Citing Monopoly

December 18, 2019 - On Tuesday, the Federal Trade Commission (FTC) took legal action to block Illumina Inc.’s acquisition of Pacific Biosciences of California (PacBio) as part of an administrative complaint alleging that the combined companies would hold a monopoly over the next-generation sequencing systems in the United States.

“NGS is a rapidly expanding technology used in genetic research and clinical testing. Illumina is the world’s leading supplier of NGS products,” the Commission explained in a public statement.

“Illumina’s systems employ short-read sequencing technology, which has been the predominant NGS technology in the United States for the last decade. PacBio is one of three other companies that manufactures and sells NGS systems in the U.S. market, according to the complaint. PacBio’s platforms employ long-read sequencing technology, an important tool that PacBio pioneered and that has improved significantly over time.”

The head of the FTC Bureau of Competition, Director Gail Levine, stated in plain terms that Illumina’s proposed acquisition was a means to “maintain power.”

The federal agency’s complaint indicates that recent “significant technology advancements” by PacBio have lured customers away from Illumina to the former, with expectations that “PacBio is poised to take increasing sequencing volume from Illumina in the future.”

Additionally, FTC alleges that the combined companies would have no little to no incentive for innovation. “According to the complaint, PacBio and Illumina drive each other’s innovation, and the acquisition would eliminate that incentive,” the Commission stated.

The federal agency voted unanimously in favor of issuing the administrative complaint and authorizing staff to pursue a temporary restraining order and preliminary injunction.

“We strongly disagree with the FTC’s decision and will continue to work through the regulatory approval process as we consider next steps,” an Illumina spokesperson told The Wall Street Journal. “We believe that the acquisition will benefit the industry and customers.”

Illumina and PacBio announced the acquisition last November, Reuters reported.

“PacBio’s unmatched accuracy mirrors that of Illumina’s in short-read sequencing,” said Illumina President & CEO Francis deSouza. “Combining the two technologies positions us to reach more applications and accelerate the pace of genomic discovery.”

PacBio leadership also celebrated the move.

“Illumina continues to democratize the use of sequencing at an unprecedented rate. Through this combination, thousands of researchers will now have direct access to this technology,” said CEO Michael Hunkapiller, PhD. “Illumina and Pacific Biosciences have shared values and a commitment to innovation. Our complementary sequencing technology, once integrated, will offer customers a new standard of insight and understanding, opening new frontiers of genomic utility.”

That mirroring and complementary nature of the two businesses was enough to attract the interest of federal regulators.

An administrative trial is now set for next August.

The NGS market is expected to surpass $16 billion over the next five years. Other notable players in the space include Thermo Fisher Scientific, BGI, Oxford Nanopore Technologies, Roche, Qiagen, and Agilent Technologies. According to its 2018 annual report, Illumina generated $3.33 billion in revenue, a 20-percent increase over 2017. PacBio, meanwhile, experienced a 16-percent decrease in revenue over that time, down to $78.6 million.

The FTC challenge comes on the heels of another investigation of a life sciences merger that came to a close on Monday. Following a ten-month review of Roche Holding AG’s proposed acquisition of Spark Therapeutics, Inc., the federal agency found now competitive disadvantage to the market. The Commission voted unanimously to end its investigation.