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U.S. Moves to Block DNA-Sequencing Deal on Competition Fears

U.S. Moves to Block DNA-Sequencing Merger on Competition Fears

(Bloomberg) -- U.S. antitrust enforcers moved to block the merger of two DNA-sequencing firms -- Illumina Inc. and Pacific Biosciences of California Inc. -- saying the deal would harm competition.

The Federal Trade Commission filed a complaint in the agency’s administrative court to stop the $1.2 billion merger, according to a statement Tuesday.

The FTC said in the statement that with the deal Illumina is trying to illegally maintain its monopoly in the U.S. market for next-generation DNA sequencing systems “by extinguishing PacBio as a nascent competitive threat.”

“When a monopolist buys a potential rival, it can harm competition,” said FTC Bureau of Competition Deputy Director Gail Levine. “These deals help monopolists maintain power. That’s why we’re challenging this acquisition.”

DNA-sequencing equipment is becoming a backbone of drug-company research efforts, hospital care and consumer services, and Illumina has grown rapidly along with increasing demand for its machines.

The move by the FTC comes after antitrust regulators in the U.K. raised competition concerns in October about the tie-up. Illumina proposed remedies to address those concerns.

“We strongly disagree with the FTC’s decision and will continue to work through the regulatory approval process as we consider next steps,” said Illumina spokesman Eric Endicott. “We believe that the acquisition will benefit the industry and customers, and the facts of our proposed transaction support this.”

The deal would have been a major coup for Illumina, allowing it to further dominate a business where it already far outpaces the competition and stake a claim in a new and growing market for sequencing.

A recent analysis by Morningstar Inc. estimated that the company controls more that 70% of the market for sequencing the human genome. Illumina’s DNA-sequencing machines range from bench-top devices to high-end sequencers that can cost as much as $1 million each, and are used in drug discovery, medicine, biological research and consumer testing.

The purchase of Pacific Biosciences would have given the company a foothold in a different but growing category of DNA sequencing. Illumina’s machines use what’s known as short-read technology, in which the devices read many tiny fragments of DNA and then piece them together. Pacific Biosciences, instead uses long-read technology, which can decode extensive stretches of DNA with a high degree of accuracy.

Long-read sequencing is more expensive, but the approach can work in instances where short-read sequencing cannot, such as when a specific genetic sequence repeats many times, making it hard to piece back together. At the time the deal was announced, Illumina said it could help lower the cost of long-read sequencing from $12,000 to $1,000.

U.K.-based Oxford Nanopore Technologies Ltd., a closely held company that makes a portable sequencing machine, is Pacific Biosciences’ most notable long-read competitor.

To contact the reporters on this story: David McLaughlin in Washington at dmclaughlin9@bloomberg.net;Kristen V. Brown in San Francisco at kbrown340@bloomberg.net

To contact the editors responsible for this story: Sara Forden at sforden@bloomberg.net;Timothy Annett at tannett@bloomberg.net

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