Illumina Stock Slips on Pacific Biosciences Deal Termination

Shares of Illumina ILMN dipped 1.4% following the company’s decision to terminate the acquisition of Pacific Biosciences. Going by this latest announcement, both companies agreed to end their merger deal, initiated in November 2018.

This all-cash pact with a total enterprise value of $1.2 billion was expected to get completed by mid-2019.

Per Illumina, the prolonged procedure of gaining regulatory approvals that the transaction was already subject to, sparked uncertainty related to the ultimate outcome of the integration. This prompted the involved parties to mutually terminate the deal. Going by their management, this strategic move is in the best interest of their respective shareholders and employees.

In accordance with the merger agreement, Illumina will pay Pacific Biosciences a termination fee of $98 million.

What Will Illumina Lose?

This buyout would have complemented Illumina’s sequencing solutions. Currently, this entity’s short-read platform addresses most sequencing applications. The addition of Pacific Biosciences' long-read platform would have helped the company better deal with select applications, such as de novo sequencing and sequencing of highly homologous regions of genomes.

Furthermore, Pacific Biosciences recently announced a number of enhancements to its flagship DNA-sequencing platform, the Sequel System. The features include a new version (6.0) of its software, new consumable reagents (3.0) and the latest SMRT Cell (1M v3). Along with its infrastructure, these additions would have helped expand the clinical insights and biological discoveries of Illumina.

Favorable Trends Drive Genomics Market

In this regard, genomics received a warm response from the MedTech investment space. Per MarketsandMarkets, the global Genomics market, which was worth $13.45 billion in 2016, is expected to reach $23.88 billion by 2022 at a CAGR of 10.2%.

The global Genomics market benefited from a slew of solid developments in sequencing, microarray, Polymerase Chain Reaction (PCR), Nucleic acid extraction and Purification techniques.

Moreover, per Illumina, the long-read sequencing market that Pacific Biosciences caters to) is projected to touch $2.5 billion by 2022.

Price Performance

Over the past year, Amedisys’ shares have outperformed its industry. The stock has improved 8% compared with the industry’s 4.4% rise.

Zacks Rank & Key Picks

Illumina carries a Zacks Rank #3 (Hold). A few better-ranked stocks from the broader medical space are Haemonetics Corporation HAE, West Pharmaceutical Services WST and Omnicell OMCL. While Haemonetics sports a Zacks Rank #1 (Strong Buy) the other two carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank  stocks here.

Haemonetics has a projected long-term earnings growth rate of 13.5%.

West Pharmaceutical Services has an expected long-term earnings growth rate of 14%.

Omnicell has a long-term earnings growth rate of 12.5%.

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