UK's CMA says Illumina-Pacific Biosciences deal could hurt competition

FILE PHOTO: The offices of gene sequencing company Illumina Inc are shown in San Diego, California January 11, 2016. REUTERS/Mike Blake/File Photo

(Reuters) - Britain’s competition watchdog said on Tuesday the planned $1.2 billion merger between gene sequencing company Illumina Inc and smaller rival Pacific Biosciences of California Inc may be a threat to competition in the country.

The Competition and Markets Authority (CMA), expressing concerns about the deal’s impact on the supply of specialist DNA sequencing systems in the UK, said the companies have until next week to respond to questions that it has raised.

Illumina is a major player in the nascent gene sequencing space, while Pacific Biosciences earlier this year launched a new Sequel II System designed to deliver faster and cheaper gene sequencing over its existing model.

The CMA’s initial or first phase investigation showed that the merger could remove potentially the most significant competitive threat to Illumina, as Pacific Biosciences’ new instrument is well positioned to offer a stiff competition to Illumina in the future.

The proposed merger, which was announced last year, would be referred for an in-depth second phase investigation by independent CMA panel members if the companies fail to address the watchdog’s concerns, the CMA said.

The gene sequencing companies are working in cooperation with the competition watchdog and expects the proposed deal to be referred for the second phase review, Illumina said in a separate filing. The deal is now expected to close in the fourth quarter of 2019, it said.

Shares of Pacific Biosciences fell 7% in premarket trading, while Illumina’s shares were more or less flat.

Reporting by Yadarisa Shabong in Bengaluru; Editing by Shinjini Ganguli and James Emmanuel