BGI-Shenzhen, a Chinese operator of genome-sequencing centers, agreed to acquire Complete Genomics Inc. (GNOM) for about $117.6 million to expand in the U.S. market for medical and research DNA testing.
BGI will pay $3.15 a share in cash, a premium of about 54 percent over the closing price on June 4, the last trading day before Complete Genomics’s announcement that it was exploring strategic alternatives, the companies said today in a statement. The board of Mountain View, California-based Complete Genomics unanimously recommended that stockholders accept BGI’s offer.
Genomes, the DNA instructions for making and operating cells, are helping doctors understand and sometimes treat cancer, inherited diseases, and other disorders. While BGI has focused on agricultural and human genetic research, Complete Genomics is preparing for greater use of DNA sequencing to prevent and treat human disease, the companies said.
“We look forward to growing the business to improve medical research and, when clinical services are provided, support better disease diagnosis with tools that can be used by doctors and hospitals to treat their patients,” said Wang Jun, chief executive officer of BGI, in the statement.
Complete Genomics’s sequencing technology gives results slower than that of Illumina Inc. (ILMN), BGI’s major supplier of sequencing machines, said George Church, who advises both Complete Genomics and BGI. However, studies have shown that the technology BGI is acquiring is more accurate than Illumina’s, and Complete Genomics has the potential give results in a time frame that will be useful to doctors, Church said.
“BGI doesn’t want to be second in quality,” Church said in a telephone interview.
The purchase may also reduce BGI’s dependence on Illumina and sequencer-maker Life Technology Corp., said Doug Schenkel, an analyst with Cowen and Co. in Boston.
“There’s been a belief out there that BGI would like to have a little leverage over other vendors,” he said in a telephone interview. “It gives them more of a presence in the services industry and gives them more access to this technology and makes it more of an in-house technology.”
Complete Genomics rose 13 percent to $3.02 at the close in New York.
Most medical genetic testing in the U.S. is overseen by the Centers for Medicare & Medicaid Services under the Clinical Laboratory Improvements Amendment. Complete Genomics has said it expects CLIA approval for a lab this year. The lab would compete with San Diego-based Illumina Inc., which provides clinical genome-analysis services.
Complete Genomics’s shares jumped 44 percent to $2.93 on July 11 after the company announced a new method of sequencing genomes that requires less material and improves accuracy. Under today’s agreement, the company will also receive $30 million in bridge financing for its operations, according to the statement.
BGI’s financial adviser on the deal is Citigroup Inc., and O’Melveny & Myers LLP is the Chinese company’s legal counsel. Complete Genomics is being advised by Jefferies & Co. and Latham & Watkins LLP.