NEW YORK (GenomeWeb News) – Life Technologies announced after the close of the market Tuesday that it will acquire sequencing technologies startup Ion Torrent Systems for $375 million in cash and stock.
The total value of the deal could rise by another $350 million if certain technical and time-based milestones are met through 2012.
Ion Torrent has developed the Personal Genome Machine, a benchtop instrument that is currently being used by early-access customers and will be launched later this year at an entry cost of less than $100,000. The system will be "optimal for mid-scale sequencing projects, such as targeted and microbial sequencing," Life Technologies said in a statement.
A Life Technologies spokesperson explained that "mid-scale" for human studies would mean targeted resequencing across hundreds to thousands of samples — as opposed to whole-genome or whole-exome sequencing with hundreds to thousands of samples.
Ion Torrent unveiled its chip-based sequencer earlier this year at the Advances in Genome Biology and Technology conference in Marco Island, Fla. The system uses the firm's PostLight sequencing technology and measures the release of hydrogen ions as nucleotides get incorporated by DNA polymerase. Unlike other existing second-generation sequencers, it does not require lasers, cameras, or labels.
Life Technologies believes that subsequent systems based on the technology will benefit from semiconductor fabrication technologies that can expand throughput at an accelerated pace, which would lower the cost to sequence a genome.
"We believe Ion Torrent's technology will represent a profound change for the life sciences industry, as fundamental as the one we saw with the introduction of qPCR," Life Technologies Chairman and CEO Greg Lucier said in a statement. "This technology will usher in a new era in science, one in which DNA sequencing can be done easier, faster and more cost effectively than ever before."
John Sullivan, director of equity research at investment bank Leerink Swann, said in a research note issued this morning that Life Technologies is paying "a full price, given the commercial risks, but Ion Torrent's technology looks differentiated.
"We're unconvinced that the follow-on optical detection technologies nearing the market are additive enough to threaten sequencing leader Illumina," he wrote. However, Sullivan said that the technology is "uniquely well suited to drive new applications in large-scale sequencing."
Ion Torrent is among a new wave of startups aiming to capitalize on advances in sequencing technologies. Two others, Pacific Biosciences and Complete Genomics, have recently filed for initial public offerings in the US to help support their commercial launches.
Guilford, Conn.-based Ion Torrent was founded by Jonathan Rothberg, who also serves as the firm's CEO. He also was a founder of RainDance Technologies and 454 Life Sciences, a sequencing technologies firm acquired by Roche in May 2007.
Life Tech said that Rothberg will continue to lead the Ion Torrent team, and the firm will retain Ion Torrent's operations in Connecticut and South San Francisco, Calif., where it has established R&D centers of excellence.
Life Tech said that it would finance the deal through its existing cash, its available lines of credit, and stock. The firm did not provide a breakdown for the cash versus stock. However, it noted that its board of directors has approved an additional share repurchase program — in addition to the $350 million program already authorized — in order to repurchase its shares associated with the stock portion of the deal. It also said that the impact on its total share count is expected to be neutral.
The transaction is expected to be dilutive by $.02 for Life Tech's earnings per share in 2010, and neutral to earnings in 2011. It is expected to be accretive in 2012 and beyond.
Life Tech said that its EPS guidance for FY 2010 remains unchanged at $3.35 to $3.50.
The firms expect to close the transaction in the fourth quarter of this year.
in early Wednesday trade on the Nasdaq, shares of Life Technologies were down 2 percent at $44.21.