Illumina Buys Pacbio, What Are the Implications?

Illumina Buys Pacbio, What Are the Implications?

Yesterday after the markets closed, Illumina acquired Pacbio for about $1.2 billions. We will discuss various implications of this change in the sequencing world.

Marriage Made in Heaven?

Overall, the synergies for both companies appear great. Illumina has clean short reads, fully functional cloud platform, a big marketing team with worldwide reach and highly capable management. Pacbio brings in excellent long read technology that Illumina cannot reproduce otherwise, but an ineffective marketing team and no cloud platform. So, the merger will benefit both businesses. Given that Illumina has no histor of screwing up acquisitions (unlike that Swiss company), there is less risk of Pacbio technology getting “lost in translation”.

Two related points -

(ii) Unified Marketing Message

After the merger, the joint company will talk about “long and short read” instead of long noisy reads versus short clean reads. That simplified marketing message is absolutely needed in the further adoption of Pacbio technology as well as creative use of Illumina sequencing. I think many interesting experiments can be done by mixing and matching two sequencing methods, but the users are lost with long versus short arguments. Moreover, such mix and match will reduce the volume of generated data, which is great for bioinformatics.

(iii) No Serious Competitor Left

In the landscape of sequencing technology-providers, it does not appear like this combined company has any serious competitor left. I think Illumina can increase the market size substantially by coming up with many synergistic applications, and that will be beneficial for both the company and its customers. however, there is the risk of it trying to exploit the competitive advantage by raising prices, and that will not be good news for the users.

Possibly Easier Bioinformatics

This acquisition will make the life of bioinformaticians easier, because they do not need to battle with long noisy versus short clean read arguments. Here are how things work in the world of biology. The biologists go to their respective core facilities for suggestions on experiments, and the personnel in those core facilities get trained by the businesses selling instruments. Therefore, when it comes to bioinformatics, the scientists doing data analysis often get stuck with decisions made by others. There are certainly exceptions, especially in case of genome sequencing, but Pacbio has less application outside that area. That is surely going to change after this acquisition starting with RNAseq (more adoption of Isoseq?)

Bad for Oxford Nanopore Investors

I do not think this is a happy day for Oxford Nanopre investors. (i) Pacbio acquisition establishes a definite price-point for businesses in the similar space, and therefor Oxford Nanopore investors cannot arbitrarily raise the valuation. (ii) Not being able to raise valuation means the company will have less access to free money. (iii) The competitive landscape changes substantially. At present, ONT users often use ONT+Illumina sequencing and contrast with Pacbio, thinking that Pacbio is its main competitor. Now the company and its users have to argue why the technology is better than the Illumina+Pacbio, which is a harder case to make.

One interesting option for ONT is to go Complete Genomics route and sell the company to BGI. ONT’s long reads will establish synergy with BGI’s own short-read sequencer BGISEQ-500 and marketing reach. I wonder whether BGI is ready to digest ONT at its current valuation.

Pacbio IPO Investors Lost Money

Speaking of investors, those who bought Pacbio stock at its IPO in 2007 lost money after this acquisition. This is despite Pacbio accomplishing almost everything it planned to do, but with less than perfect execution. Moral of the story - even if a company looks great, buying IPO is a crapshoot.

Written by M. //