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Illumina Customers Weigh in on What's at Stake in a Potential Roche Acquisition


By Monica Heger

Following last week's news that Roche is looking to buy Illumina in a $5.7 billion hostile bid (see related story, this issue), a number of Illumina customers spoke to In Sequence about the short- and long-term impacts of a potential acquisition.

Given Illumina's broad range of users — from large genome centers to smaller research groups to molecular diagnostic companies — opinions on how an acquisition would impact customers were equally varied.

Jay Shendure, an associate professor of genome sciences at the University of Washington, thinks that a Roche acquisition would have a negative impact, particularly on Illumina's research and development, and told In Sequence that he "cannot see an upside" to an acquisition.

Meantime, Kevin Krenitsky, chief operating officer at Foundation Medicine — which is developing a targeted sequencing-based cancer diagnostic on the Illumina platform — thinks that Roche's expertise in the in vitro diagnostic arena could help "expand the clinical application of next-gen sequencing."

Stifle Innovation?

Shendure said a Roche acquisition would likely not have any affect on his group's immediate purchasing decisions, but thought that it could have a detrimental impact on the development of sequencing technology.

Illumina's success to date is the result of its ability to rapidly improve next-gen sequencing technology, he said. "Where sequencing was a few years ago and where it is now is completely different … and it's that innovation that I'm worried about."

As a pharmaceutical and diagnostic company, Roche would have "completely different priorities," he said, and would likely be more focused on moving the existing platform into clinical diagnostics rather than further improving the technology.

Illumina has been a leader of sequencing technology and its developments have "essentially propelled the field for the last five years," Shendure said. He said that he's concerned that a Roche acquisition would mean Illumina's "track record of improvements … would be shut down."

Both 454 and NimbleGen were acquired by Roche in 2007 and have since seen very little growth and development, he added.

James Hadfield, head of the genomics core facility at the Cambridge Research Institute, agreed with Shendure that Illumina "has one of the best track records in R&D spending," but was not as concerned that a Roche acquisition would hamper innovation.

"Roche has a lot to gain from [Illumina's R&D] and lots to lose if they don't keep investing," he said.

However, he said, the pace of research and development would likely be negatively impacted if Illumina's staff were to leave following an acquisition.

Additionally, while he agreed that aside from longer read lengths the 454 technology has not developed much since it was acquired by Roche, he said that was perhaps because "further improvements were really tough."

"There comes an end to developments for all technologies, and maybe 454 got there soon after Roche took over," he said.

Tim Hunkapiller, president and chief scientific officer at consulting firm Discovery Biosciences, said that while there is some concern about "stagnating innovation" with a Roche acquisition, the Illumina technology is "mature," so innovation may slow anyway, regardless of whether the company is acquired.

"The cost has so precipitously dropped that [price and throughput] aren't the driving issues anymore," he said.

However, he agreed with Shendure that Roche "doesn't care in the long run about research." The size of the research market pales in comparison to the clinical market and if Roche is successful in driving sequencing into the clinic, then "they'll simply pay less attention to the research world," he added.

Purchase Decisions

While Roche's ultimate goal may be to drive Illumina's sequencing platforms into the clinic, the acquisition is unlikely to have a short-term impact on buying patterns, said Hadfield, noting that if he needed another sequencer today, "my decision would not be affected by the news."

Shendure agreed that the potential acquisition would not impact purchasing decisions in the short term, but said it might in the longer term.

"I think people will make decisions based on what's available now and what makes the most sense now," he said. But, "in a two- to four-year horizon, in a field that's changing extremely rapidly, I think it will have an impact."

Hunkapiller said that new sequencers on the horizon — namely the upcoming Illumina HiSeq 2500 and Life Technologies Ion Proton — would have a bigger impact on purchase decisions than the threat of an acquisition. The impending availability of the new systems could influence whether a user upgrades a current instrument or switches platforms altogether, he said.

Already, early users of the MiSeq instrument have said that the recent announcements about the Proton, the 2500, and even planned upgrades for the MiSeq make them uncertain about what machine to invest in (see related story, this issue).

The possibility of an acquisition could even incentivize Illumina to try and sell more products in the short term to help drive up its market value to get a higher bid, added Foundation Medicine's Krenitsky. Some analysts have speculated that Roche would have to significantly increase its bid in order to win over Illumina shareholders (see related story, this issue).

"If you're Illumina, you're incentivized to sell as much product as possible, because they want to increase their revenues to show that they have great value," Krenitsky said.

Macquarie's Jon Grober agreed. In a research note issued this week, he speculated that in order to capture more of the benchtop sequencer market, Illumina might consider lowering the price of its MiSeq by as much as 36 percent, to $80,000.

Transition to the Clinical Market

Roche is one of the largest diagnostic companies in the world, and company officials have stressed that they are looking to acquire Illumina because they see a place for next-gen sequencing in the clinical market.

Hunkapiller noted that Roche also bought 454 for the clinical market, but at the time, "it wasn't ready." The company is "making that same bet again" in its attempt to acquire Illumina, "but this is probably a better bet," he said.

While sequencing has already made inroads into the clinic — a trend that shows no signs of letting up — Roche's interest "really validates the technology and the fact that this is where the future is truly headed," Krenitsky said.

Foundation Medicine's experience with its sequencing-based cancer diagnostic made the company realize that the US Food and Drug Administration is "clearly not ready" for next-gen sequencing-based diagnostics, said Krenitsky. He added that Roche's presence in the diagnostic market could help accelerate the creation of a regulatory structure around such tests. "It will take someone that can take something this complex — like a next-gen sequencing assay — and take it through the IVD process," he said.

Illumina has already said it intends to submit the MiSeq to the FDA for 510(k) accreditation, and Shendure said a Roche acquisition would not necessarily help speed the process.

"I don't think the barriers of getting into the clinic are necessarily ones that being owned by a big pharmaceutical company might solve," he said. "Nimbleness and flexibility are paramount to making a transition like that."

But Hunkapiller said that Roche's diagnostic background gives it considerable clout in that market, which Illumina currently doesn't have.

"Illumina doesn't have credibility in a diagnostic lab," he said. Roche, meanwhile, is one of the largest diagnostic companies, so if it says that sequencing is ready for diagnostics, that adds credence to the technology in the eyes of diagnostic laboratories and the FDA, he said.

The full impact of the proposed deal will likely not be known for quite some time, as the acquisition process is anticipated to last another several months. Illumina has said that it is weighing Roche's offer, and that it will provide further guidance after its board finishes reviewing the bid, which will likely be some time early next week (see related story, this issue).

Have topics you'd like to see covered by In Sequence? Contact the editor at mheger [at] genomeweb [.] com.