Dive Brief:

• Pacific Biosciences has struck a deal to buy Omniome for $600 million upfront to expand into short-read sequencing technology. 

• The takeover will give PacBio control of a DNA sequencing platform better suited for applications such as early-stage cancer screening and noninvasive prenatal testing than its existing long-read system. PacBio plans to add Omniome's platform to its clinical whole-genome sequencing alliance with Invitae. 

• News of the proposed takeover comes 18 months after Illumina scrapped plans to acquire PacBio in the face of regulatory pushback. Like the Omniome takeover, Illumina's acquisition would have combined long-read and short-read technology.

Dive Insight:

PacBio has achieved five consecutive quarters of growth since Illumina withdrew its takeover offer. Preliminary second quarter sales came in at $30.5 million, up 78% over the prior year. PacBio raised $900 million from Japanese conglomerate Softbank Group in February, giving it more than $1 billion to invest to support further growth. 

Now, PacBio has disclosed a key part of its growth strategy. PacBio is set to pay $600 million, evenly split between cash and stock, and commit up to $200 million in milestones to buy Omniome. The San Diego-based company claims to have bettered the accuracy of existing short-read sequencers, a field dominated by Illumina, by focusing on the binding event. In doing so, Omniome aims to enable clinical sequencing in regions of the genome prone to sequencing errors.

PacBio framed the accuracy of the Omniome platform as a key driver of the deal. The acquisition is intended to give PacBio access to the early-stage cancer screening and cancer recurrence monitoring markets. A lower limit of detection could enable the detection of malignancies that other sequencers miss and differentiate Omniome. 

As PacBio sees it, while short-read costs have tumbled and throughput has soared as Illumina has transformed the sequencing industry, accuracy has stagnated.

PacBio looks set to have the support of Invitae as it works toward that goal. Having teamed up in January to develop an ultra-high-throughput clinical whole-genome sequencing platform, PacBio and Invitae now plan to add the Omniome technology. The collaborators will work to use the technology to advance cancer diagnostics and pathogen detection.

Buying Omniome will put PacBio on turf dominated for years by Illumina, which has developed a stranglehold on the short-read sequencing market. With Omniome, PacBio may be aiming to loosen Illumina's grip on the market by gaining an edge in applications that prioritize accuracy. 

Illumina also wanted to combine PacBio's long-read technology with short-read capabilities but ran into resistance from the Federal Trade Commission and other regulators, who argued the merger would reduce competition. With FTC challenging Illumina's planned takeover of Grail, and generally being more active in healthcare antitrust matters, PacBio faced questioning from analysts about the prospects of the Omniome deal.

"We obviously did consider FTC risk and exposure carefully," PacBio CEO Christian Henry told investors on a conference call. "We believe that ... having a short read sequencing technology that is well capitalized with an experienced management team can drive more competition into the market. We're hopeful that it will be a straightforward process, but ... all of these things are fraught with some risk and so we're prepared to manage it."