Illumina Gains on Report of $30 Billion Thermo Fisher Offer

  • Would mark Thermo Fisher’s second 2016 gene-sequencing deal
  • Illumina is industry’s largest player with 75% of market

Illumina Inc. rose as much as 8 percent to its highest level since December after a report that Thermo Fisher Scientific Inc. made a $30 billion offer for the rival maker of gene-sequencing equipment.

The all-stock offer doesn’t include a cash component, StreetInsider.com reported, citing an unnamed person with knowledge of the matter. San Diego-based Illumina rose 3 percent to $174.22 at 1:25 p.m. in New York. Waltham, Massachusetts-based Thermo Fisher fell 1.1 percent to $152.95.

In 2012, Illumina rejected acquisition attempts by Roche Holding AG, including one valued at $6.7 billion. Illumina’s annual revenue has more than doubled since 2011, reaching $2.22 billion in 2015. Its market capitalization has grown to $26 billion.

Illumina spokesman Eric Endicott declined to comment. A representatives for Thermo Fisher couldn’t be reached for comment.

Thermo Fisher has been on a buying spree for technology to decode DNA. The company bought Affymetrix Inc. earlier this year for $1.1 billion, adding to the portfolio it obtained with the purchase of Life Technologies Corp., which also sells sequencing machines, for $15.4 billion in 2014. 

With the proposed purchase, Thermo Fisher’s offerings in the gene-sequencing market may raise antitrust issues. Illumina is by far the largest player in sequencing, accounting for more than 75 percent of the industry, said Jonathan Palmer, a Bloomberg Intelligence analyst in New York. Others include Roche Holding AG, Pacific Biosciences of California Inc. and smaller, closely held companies such as Oxford Nanopore Technologies Ltd.

Industry Leader

“It’s more than a two-horse race, but Illumina is overwhelmingly dominant in the market,” Palmer said. “I would imagine if the deal went through, they would have to sell off something."

The genetics-based drug industry has exploded in the past few years, and Illumina, founded in 1998, has been at the center with innovation and deals. About 90 percent of all human genomes ever sequenced have been done on Illumina’s machines. 

“The thing I can’t understand is the financial implications of this,” Palmer said. “It would be such a big deal, and so dilutive. Illumina trades at a very high multiple and it’s not super profitable.”

Slowing Growth

Thermo Fisher might be aiming at buying now because recent questions about how much growth is expected in the market have led to weakness in Illumina shares. The company has been placing its own bets on new technologies like Grail, a startup developing a blood test to detect cancer, and Helix, a consumer-oriented gene-testing business focused on ancestry and health.

While Roche already pursued Illumina and has been discussed as a potential buyer of Pacific Biosciences, it’s not clear whether it or any other company would want the technology that Thermo Fisher acquired with the purchase of Life Technologies. Those products entered the testing market before next generation sequencing equipment began to take hold. Selling that technology in order to acquire Illumina might prove difficult, Palmer said.

“If Thermo Fisher is the biggest life-sciences company and touches every lab in the world, and they can’t make it work through bundling products, how would anyone else make it profitable?” Palmer asked. “Maybe they would shutter it, but I don’t know if antitrust officials would say that’s OK.” 

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