In order to expand its footprint in the prenatal testing
), a major developer of life science tools for large-scale
genetic analysis, recently entered into a definitive agreement to
acquire Verinata Health, Inc., a privately held company dedicated
to non-invasive tests for the early identification of fetal
chromosomal abnormalities. Under the terms of the agreement,
Illumina will purchase the latter for $350 million along with an
additional $100 million in milestone payments through 2015.
Illumina expects to finance the transaction primarily with its
cash in hand.
Illumina is optimistic about the deal, which when completed
will grant the company the access to Verinata's verifi prenatal
test, the largest among the non-invasive prenatal tests ("NIPT")
available at present for high-risk pregnancies. Compared with
other testing options, this verifi prenatal test works more
efficiently with advanced technology to provide accurate
aneuploidy detection, with the ability to look across the entire
This is expected to help Illumina cater to the huge
addressable NIPT market, which is estimated to be over $600
million in 2013, with projected domestic market growth of 1.5
million to 2 million tests per annum in the next five years. The
company, with the occurrence of 500,000 high-risk pregnancies
annually in the U.S. and an estimated 4 million pregnancies in
total, is very much hopeful about its future growth in this
niche. Also, based on the recent combined view of American
College of Obstetrics and Gynecology (ACOG) and Society of
Maternal and Fetal Medicine (SMFM) that recommended cell-free DNA
prenatal testing as a first or second trimester option for women
at increased risk of aneuploidy, Illumina expects higher adoption
of NIPT going forward.
Although, Illumina expects this transaction to dilute its
fiscal 2013 adjusted earnings by 20 cents per share, it will turn
accretive from the beginning of 2014. Illumina expects to provide
its fiscal 2013 guidance, including the impact of this
transaction during the fourth quarter and fiscal year 2012
Notably, in September 2011, Illumina had entered into a
multi-year supply agreement with Verinata, which the latter used
to purchase Illumina's sequencing instruments and consumables for
use in the commercialization of non-invasive prenatal testing for
the detection of multiple aneuploidies.
The ongoing difficulties in obtaining research funding in the
backdrop of continuing economic uncertainty have not been enough
to deter Illumina from working on several growth avenues to
improve its performance going forward. The company continues to
demonstrate its strength in the genotyping market with its high
margin next generation sequencing (NGS) platform. Over the past
few quarters, it has made several acquisitions and entered into
partnerships to tap this growing market.
Earlier in September 2012, the company acquired UK based
BlueGnome Ltd., a provider of Cytogenetics and In Vitro
Fertilization (IVF) screening solutions for genetic abnormalities
associated with developmental delay, cancer and infertility. In
the same month, the company entered into a strategic alliance
with Partners HealthCare, a healthcare system developed by the
Brigham and Women's Hospital, and Massachusetts General Hospital
in order to develop improved infrastructure and networking tools
for the interpretation and reporting of genetic sequencing
The company also entered into a partnership with Siemens
Healthcare Diagnostics to use the MiSeq platform for Siemens'
molecular HIV tests. Furthermore, the company expanded its Genome
Network with the inclusion of the British Columbia Cancer Agency
to its existing list. Illumina experiences tough competition from
Thermo Fisher Scientific
), among others.
Currently, Illumina retains a Zacks #3 Rank (short-term Hold).
Over the long term, we have a 'Neutral' recommendation on the
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