NEW YORK – Regulators in the UK have proposed blocking Illumina's $1.2 billion acquisition of Pacific Biosciences in an effort to preserve competition in the sequencing market in that country, as well as globally.
In documents released today, the UK Competition and Markets Authority (CMA) said that it has "provisionally concluded" that Illumina's proposed acquisition would "result in a substantial lessening of competition in the market for next generation sequencing systems in the UK."
"At this stage, the only structural remedy that CMA has identified as being likely to be effective would be prohibition of the proposed merger," CMA said. CMA also evalutated other remedies that might alleviate its concerns, including forcing the firms to divest or license intellectual property, and asked Illumina, PacBio, and the public to propose alternative remedies.
"The CMA will also consider whether a combination of measures is required to achieve a comprehensive solution – for example whether any behavioural remedies would be required in a supporting role to safeguard the effectiveness of any structural remedies," the report said.
In morning trading on the Nasdaq, shares of PacBio fell 10 percent to $4.70, while shares of Illumina were unchanged at $312.39.
San Diego-based Illumina announced in November 2018 that it would acquire PacBio for $8 per share, with the deal expected to close by mid-2019. The UK CMA announced an investigation into the deal in April, but at the time Illumina maintained that the acquisition schedule would not be affected. However, in June, Illumina pushed back the expected close of the deal to the fourth quarter, upon news that CMA was moving the investigation to a second phase. The US Federal Trade Commission has also looked into the deal.
The documents released today provide CMA's summary of its provisional findings from Phase 2, including findings that the deal "may be expected to result in a substantial lessening of competition due to horizontal competition concerns in the market for the supply of next-generation sequencing systems in the UK." CMA noted that for its purposes, it considered NGS systems to include both long- and short-read sequencing systems.
CMA invited interested parties to "make representations on these provisional findings" by Nov. 14.
Later today, Illumina will be hosting a conference call to discuss its third quarter financial results.