Illumina spent much of the last year trying to avoid being swallowed up by a bigger corporate fish, and now it has taken a gulp of its own out of the fast-growing market for prenatal genetic tests.
The San Diego-based genetic instrument maker (NASDAQ: ILMN) said tonight it has agreed to pay $350 million upfront, plus up to $100 million in milestone payments through 2015, to acquire Redwood City, CA-based Verinata Health. Verinata’s claim to fame is as the developer of a prenatal test which can spot Down syndrome and related chromosomal abnormalities by analyzing small amounts of the mother’s blood. The announcement came on the eve of the biotech industry’s biggest annual event, the JP Morgan Healthcare Conference in San Francisco.
Illumina, the market leading maker of genome-sequencing instruments used by scientists, has been seeking to branch into more diagnostic applications of its technology for years. It spent part of the past year fending off a hostile takeover bid from Switzerland-based Roche, which said it believed it could more effectively leverage Illumina’s technology in those emerging markets. But even after Roche tried a second time in recent weeks to buy Illumina, the toolmaker insisted it will be better off on its own. Verinata is the second diagnostics company Illumina has acquired in the past six months, following the acquisition of U.K.-based BlueGnome.
“This agreement with Verinata demonstrates Illumina’s commitment to developing innovative diagnostic solutions and providing our partners with the most advanced technologies for improved patient care,” said Illumina CEO Jay Flatley in a company statement. “Building on the recent acquisition of BlueGnome and our expertise in next-generation sequencing, this announcement further establishes Illumina as a leader in reproductive health.”
Verinata, formerly known as Living Microsystems and Artemis Health, took a big step forward in February when it began selling its first commercial test, called Verifi. The company spent more than $100 million, and a decade of work, before delivering the non-invasive test that identifies fetuses with chromosomal abnormalities. Verinata, as I described in this feature story in February, uses Illumina instruments and its own proprietary algorithm to analyze maternal blood for signs of Down syndrome, Edwards syndrome, and Patau syndrome. The price for the new genetic test was initially set at $1,200.
Before the blood test and others like it came along, doctors looking to confirm those abnormalities could only choose between invasive procedures like amniocentesis and procedure called CVS, which carry a small risk of miscarriage.
By acquiring Verinata, Illumina is entering a fast-moving and competitive market. There are more than 4 million live births each year in the U.S., and more than 500,000 are considered “high-risk” pregnancies, Verinata has said. That large market is part of what encouraged new products from not just Verinata, but also from San Diego-based Sequenom (NASDAQ: SQNM), San Jose, CA-based Ariosa Diagnostics and San Carlos, CA-based Natera.
In the acquisition announcement, Illumina noted that the American College of Obstetrics and Gynecology (ACOG) and Society of Maternal and Fetal Medicine (SMFM) issued guidelines which encouraged members to use prenatal DNA testing in pregnant women considered at high-risk. Based on that opinion from influential physician groups, Illumina said it believes the addressable market for non-invasive prenatal testing will grow to $600 million in 2013. Within the next five years, Illumina said it expects this sort of testing to become much more routine, with 1.5 million to 2 million of the tests performed annually.
I’m here at the JP Morgan conference this week, and planning to meet with Illumina CEO Jay Flatley on Tuesday. If you have any questions you’d like me to pose to him about this acquisition or other matters, please leave a comment below or send me an email.