NEW YORK – Illumina has expanded its offer to open sequencing-related intellectual property held by itself and Pacific Biosciences to competitors in order to persuade the UK's Competition and Markets Authority to allow its planned $1.2 billion acquisition of PacBio to go forward.
Illumina's submission of the revised remedies proposal to the CMA on Nov. 19 (posted on the CMA website today) came on the same day as a CMA submission by Oxford Nanopore Technologies responding to Illumina's original proposal, which the UK-based nanopore firm called "wholly inadequate" to remedy the anticompetitive effects of a merger.
The original proposal, which Illumina submitted on Nov. 7, had offered a "perpetual, royalty-free, irrevocable, sole license" of certain PacBio patents to either Oxford Nanopore Technologies or to any interested third party for use in the nanopore sequencing field.
Under the amended proposal, Illumina now offers "a perpetual, royalty-free, irrevocable license to any of Illumina and PacBio's pre-closing patents and patent applications to any interested third party undertaking for use in the field of single-molecule, native long-read sequencing systems and associated sequencing chemistries." The offer would also extend to relevant IP filed within 12 months of the closing date of the merger, and it would include any in-licensed patents held by Illumina or PacBio as of the closing date.
According to Illumina, this proposal "would be a fully effective, reasonable, and proportionate undertaking to remedy the [substantial lessening of competition] provisionally identified by the CMA."
In October, the CMA had proposed to block the acquisition in order to preserve competition in the sequencing market in the UK and abroad, though it had asked Illumina, PacBio, and others to propose alternative remedies.
In its latest proposal, Illumina maintained that making its patents available to others removes "one of the most significant barriers to entry identified by the CMA," namely IP.
It also said that among the potential licensees are several large companies — including Roche, Agilent Technologies, and NanoString Technologies — that have "significant commercial capabilities," allowing them to compete with a merged Illumina-PacBio entity, which was one of the concerns of the CMA.
Another issue the CMA voiced was that potential licensees would not have the competitive benefits of existing short-read sequencing technology. However, Illumina said, those potential licensees include companies that are either offering or developing short-read technologies — such as BGI, Thermo Fisher Scientific, Agilent Technologies, or Omniome — which they could leverage in conjunction with long-read technologies.
Illumina also reiterated potential benefits of a merger with PacBio for customers, including wider distribution, enhanced quality, and improvements of PacBio's products, and the availability of coordinated solutions, including bioinformatics, for Illumina and PacBio products.
Oxford Nanopore, in its response to Illumina's original remedy proposal, argued that even if the companies made certain IP available, a merger would still result in their market dominance. ONT's response, dated Nov. 19, has not been released on the CMA's website but is available on the company's website.
"Notwithstanding the proposal, the merger would still result in a situation where Illumina/PacBio combined would have a market share in the UK of 90 percent + and worldwide 80 percent +," ONT wrote. "The merger would not only eliminate the competition Illumina is facing from PacBio but would enhance the ability to foreclose ONT and other parties from the market, including through aggressive commercial bundling and pricing practices."
In addition, Oxford Nanopore called Illumina's original offer "egregiously misleading" because it includes certain PacBio patents that were revoked earlier this year by the European Patent Office, while excluding other "substantially relevant" patent and patent applications from PacBio, as well as any patents or patent applications from Illumina. This latter concern is now addressed by Illumina's expanded proposal.
Even though PacBio and Illumina don’t offer nanopore sequencing products at the moment, Oxford Nanopore argued, "both are actively seeking patents in this space with the apparent intent of blocking access to the sequencing market."
"Neither appears to have plans to launch a nanopore product," Oxford Nanopore claimed, and "there does not appear to be anyone at PacBio who has ever done nanopore sequencing."
Oxford Nanopore also accused Illumina and PacBio of seeking to "publicly discredit" it by suggesting that PacBio's IP could improve Oxford Nanopore's alleged "accuracy problems." Instead, ONT wrote, it has developed "new, alternative methods for high-accuracy sequencing" that don't require PacBio's IP.
Finally, Illumina's suggestion that a license to PacBio's IP could prevent an injunction that would bar Oxford Nanopore from selling its products in the US is "an exaggeration," ONT wrote, as such an injunction would be an "unlikely event" even if PacBio was to successfully assert its IP.
However, ONT wrote, the licenses originally proposed by Illumina would not be broad enough "to protect ONT from further vexatious claims and serial litigation by the parties in the US and elsewhere."
It is unclear whether Illumina's revised proposal will assuage Oxford Nanopore's IP-related concerns, and the company declined to comment for this article.
While Illumina's latest proposal appears to offer licenses to a wider swath of its IP portfolio, its use is restricted to "single-molecule, native long-read sequencing systems and associated sequencing chemistries." For example, it is not immediately clear whether the licenses would cover nanopore sequencing of short DNA fragments, or of non-native DNA, such as PCR products.
PacBio reiterated that the revised remedies proposal was submitted to the CMA by Illumina, not by itself.