When Pacific Biosciences agreed to an acquisition by Illumina nearly three years ago, the acquisition was touted as a pairing of companies with complementary DNA sequencing technologies. The antitrust authorities saw otherwise and caused the companies to abandon the deal. PacBio now has another contract that is supposed to cover the spectrum of DNA sequencing, but this time as a buyer. The sequencing company is paying $ 600 million to buy the Omniome.
PacBio, based in Menlo Park, California, specializes in the analysis of long stretches of DNA. These so-called long reads are more prone to errors. PacBio has developed long-read technology that analyzes the same DNA fragment repeatedly to overcome the random errors that can occur with each pass. Long-read analysis has applications in infectious diseases, plant and animal health, life science research, and genetic screening.
Analysis of short stretches of DNA or short reads is used in early-stage cancer screening, cancer relapse monitoring, and therapy selection. Short reads are the type of sequencing offered by Omniome and Illumina, both based in San Diego. Omniome is developing a proprietary DNA sequencing platform that is said to provide greater accuracy for its short reads compared to traditional sequencing technologies. Greater accuracy will be a differentiator in oncology applications; What drives value is the result, not the amount of data generated, PacBio said in an investor presentation.
In a corporate video, PacBio CEO Christian Henry said that combining long-read technology with Omniome’s short-read platform will enable his company to address more potential applications such as oncology, pathogen detection and non-invasive prenatal screening.
“Ultimately, with two of the most advanced sequencing technologies we will enable us to offer our customers the right solution for their application, whether the application requires short or long reads,” he said. “This will give customers more choice, greater flexibility, and dramatically expand our market opportunities.”
The transaction is a combination of cash and stocks: 9.4 million shares of publicly traded PacBio plus $ 300 million in cash. Omniome shareholders could receive an additional $ 200 million in cash and shares tied to unspecified milestones being achieved. The takeover is of course still subject to the same regulatory approvals that PacBio’s collaboration with Illumina required but was unable to win.
Although Illumina abandoned its proposed acquisition of PacBio, it hasn’t abandoned M&A. The company reached an agreement last year to acquire cancer detection startup Grail. But in March the Federal Trade Commission officially filed a lawsuit denouncing the $ 7.1 billion acquisition as anti-competitive. A trial is scheduled to begin at the end of August.
The Omniome acquisition has been approved by the boards of both companies. The approval of PacBio shareholders is not required. The deal is expected to close in the current quarter. If so, PacBio will keep its headquarters in the Bay Area and also keep Omniome’s San Diego location.
In connection with the Omniome acquisition, PacBio has reached an agreement to raise approximately $ 300 million through the private sale of its shares to certain investors. These parties include current investors in the company such as Casdin Capital SB Northstar LP, a fund managed by SB Management Limited, a subsidiary of SoftBank Group Corp., and funds and accounts advised by T. Rowe Price Associates.
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