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Illumina to Acquire Verinata for up to $450M

NEW YORK (GenomeWeb News) - Illumina today said that it signed a definitive agreement to acquire Verinata Health for $350 million with additional potential milestone payments of up to $100 million through 2015.

The deal provides Illumina with Verinata’s Verifi non-invasive prenatal test for detecting trisomy 21, 18, and 13. The test analyzes cell-free fetal DNA using next-generation sequencing.

“Building on the recent acquisition of BlueGnome Ltd. and our expertise in next-generation sequencing, this announcement further establishes Illumina as a leader in reproductive health,” Illumina President and CEO Jay Flatley said in a statement.

Illumina said that Verifi is the first non-invasive prenatal test that includes the option of evaluating sex chromosome aneuploidies, such as Turner syndrome, Klinefelter syndrome, and Jacob syndrome.

The test will continue to be offered through Verinata’s CLIA-certified and CAP-accredited lab, which will act as a reference lab as it collects data that will be used in future regulatory filings, said Illumina.

Verinata’s test competes against similar offerings from Sequenom, which was first to the market with its MaterniT21 Plus test, and Ariosa Diagnostics, and faces impending competition from other potential entries into the market, which Illumina estimated is currently valued at around $600 million annually.

The deal follows recent recommendations from both the American College of Obstetrics and Gynecology and the Society of Maternal and Fetal Medicine that cell-free DNA prenatal testing be an option for women at increased risk of aneuploidy.

Peter Lawson, an analyst with Mizuho Securities USA, said that the deal should be $0.20 dilutive to Illumina's non-GAAP 2013 earnings per share before turning accretive in 2014. He added that he expects the prenatal testing market to double or triple in size over the next five years.

Ross Muken, senior managing director of ISI Group, said in a research note that the purchase price "implies confidence in medium-term ramp to $150 million in revenues" from Verinata, though he noted that "capital returns may prove challenging given investment required in building out [a] commercial organization and reasonable likelihood of pricing pressure via competition."