CMA challenges major genetic sequencing merger

Published: 25-Oct-2019

The CMA has provisionally concluded that Illumina’s acquisition of Pacific Biosciences of California would result in a ‘substantial lessening of competition’

The CMA has provisionally found competition concerns as part of its in-depth investigation of the anticipated acquisition of Pacific Biosciences of California (PacBio) by Illumina, launched earlier this year. The two companies both provide systems for genetic analysis to companies worldwide and the CMA is concerned that the merger would result in a loss of innovation in the UK DNA sequencing market.

Illumina and Pacific PacBio signed an agreement in November last year for Illumina to acquire Pacific Biosciences at a total enterprise value of approximately US$1.2 billion.

In the announcement, Illumina said it expected to close the transaction in mid-2019. Then in April this year, the CMA announced the launch of its investigation.

The Proposed Merger may be expected to result in a 'substantial lessening of competition'

The CMA's reasoning in its provision conclusion said that it considered that the Merged Entity would likely have the ability to improve on PacBio's commercial operations, and to speed up the development of PacBio's technology through higher levels of investment and existing know-how. However, the evidence available provides little support that the Merged Entity would have the incentive to implement all of these changes as described (eg whether increasing aggregate research and development in the manner submitted would be the most profitable strategy).

The agency, therefore, came to the provisional conclusion that there is no compelling evidence that the Proposed Merger would result in rivalry-enhancing efficiencies that would be timely, likely, and sufficient to outweigh the SLC we have provisionally identified.

The provisional decision

Taking into account these findings the CMA provisionally decided that the anticipated acquisition by Illumina of PacBio will result in the creation of a relevant merger situation.

"We have [also] provisionally concluded that the Proposed Merger may be expected to result in a 'substantial lessening of competition' (SLC) in relation to the supply of next-generation sequencing (NGS) systems for sale in the UK," stated the provisional findings document provided by the CMA.

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