Complete Genomics Sold to BGI-Shenzhen for $117.6M

9/17/12Follow @xconomy

Complete Genomics has been looking for a life raft the past few months as its cash ran low. Today it got what it was looking for from BGI-Shenzhen, the Chinese genome sequencing operation.

Mountain View, CA-based Complete Genomics (NASDAQ: GNOM) said today it agreed to be acquired by BGI for $3.15 a share, or about $117.6 million. As part of the deal, Complete will also get $30 million in bridge financing to keep operations going after the agreement is signed, as is expected in early 2013. The sale price represents a 54 percent premium over Complete’s share price on June 4, when it made a mass layoff and said it had hired an investment bank to consider strategic alternatives that could include a sale of the company.

Once the deal is done, Complete Genomics is expected to continue operating as a separate company with its headquarters in Mountain View, the company said in a statement. The companies didn’t say in today’s statement how many people they expect the California operation to employ after the close of the deal.

Complete has been one of the high-profile stories of the past few years in genomics, partly because it came out with a bold business model based on sequencing genomes as a service, rather than selling instruments to scientists. The company declared it would achieve so much efficiency with this model that it would someday be the first to sequence 1 million genomes. But entrenched competitors like San Diego-based Illumina (NASDAQ:ILMN) and Carlsbad, CA-based Life Technologies (NASDAQ: LIFE), have worked hard to fend off challengers like Complete and PacBio (NASDAQ: PACB) in the race to sequence whole genomes for $1,000 or less. And while scientists are excited about the research that’s now enabled by fast/cheap sequencing, many who might want to buy the Complete service or instruments from the other companies have seen their purchasing power weaken because of tightening in federal research budgets.

This deal could have far-reaching implications for the rest of the sequencing industry, as BGI has been an aggressive player in the emerging industry and a major customer of Illumina products. BGI has built up so much sequencing instrument capacity that it has been offering sequencing services to external researchers, and it will gain additional service capability, and a new genome sequencing technology platform, through its purchase of Complete.

“The deal will pressure the sequencing instrument manufacturers Illumina and Life Technologies as BGI strengthens its service-only offering and reduces dependency on Illumina/Life Technologies,” said Peter Lawson, an analyst with Mizuho Securities, in a note to clients today. “Illumina is the largest supplier and Life Technology’s Ion Torrent/Proton technology is a potential platform of choice for BGI. With the acquisition we could see a portion of sequencing work move from existing and future external platforms onto Complete Genomics technology.”

Complete Genomics, founded in 2005, ended up burning through more than $250 million in its quest without becoming profitable, according to its most recent quarterly report with the Securities and Exchange Commission. The company went public in November 2010 at $9 a share.

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  • http://twitter.com/Nanostring Nanostring Founder

    “He [Chad Waite] proudly pointed out that his Harvard Business School connection to CEO Clifford Reid gave him the inside track on this investment”

    http://www.xconomy.com/san-diego/2008/10/07/ovp-enterprise-partners-see-big-opportunity-in-5000-human-genome-sequencing/?single_page=true

    In return Waite , who sits on the $GNOM Compensation Committee, repaid Reid with juicy CEO salary and bonuses, even though all of his bombastic promises for number of genomes went-up in smoke… Now, seven years after the initial investment, OVP investors get less than half of their money back (thsee incelude the public service employees of Oregon and Washington).

    Truly disgusting story of crony capitalism. The lesson as always: Chad Waite is an idiot.

  • BlueSEQ

    This was a pretty unexpected move by BGI. We keep a close eye on the sequencing market at BlueSEQ.com, but this one caught even us by surprise. It will be interesting to see if BGI can give CG enough time and money to become profitable. People seem to like CG’s data, but it isn’t even close to being a profitable business model yet.