Investors sent shares in Pacific Biosciences of California (NASDAQ:PACB) soaring in premarket trade Friday after Illumina Inc (NASDAQ:ILMN), the company that makes the machines that sequence the vast majority of human genomes, stepped in to buy its smaller rival for $1.2 billion.
Pacific biosciences stock rocketed 67.4% to $7.55, while Illumina traded flat at $313.03 before the opening bell.
Illumina is best known for being a key player in driving down the cost of genome sequencing from $100 million in 2001 to less than $1,000 today. CNBC reported that "Pac Bio," as it's often called in the industry, fills a gap in Illumina's current technology stack.
“We are excited to announce the proposed merger with Illumina, which we believe will enable the combined company to provide SMRT Sequencing to a broader range of customers and at a much faster rate than we could have accomplished on our own,” said Pacific Biosciences CEO Mike Hunkapiller in a statement.
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It’s a match made in heaven as Pac Bio develops technology that sequences DNA, but it takes a different approach. Its sequencers look at much longer strands of DNA, known as "long reads," which are useful for things like determining whether both copies of a gene are broken, or just one in two different places which is critical to decoding disease.
In contrast, Illumina's "short read" technology reads small fragments of DNA and then puts them together in the right order.
For the third quarter ended September 2018, Pac Bio reported a loss of $0.19 per share on revenue of $18.2 million. The consensus estimate was a loss of $0.16 per share on revenue of $22.0 million. Revenue fell 22.9% compared to the same quarter a year ago.
“Some of our customers held back in purchasing products during the third quarter in anticipation of the new products we recently launched or have announced we are planning to launch early next year,” said Hunkapiller.
On the positive side, the CEO said the company was pleased with the “enthusiastic response” from its customers on the launch of our its new 3.0 chemistry and 6.0 software in October.
“We are also looking forward to the launch of our new 8M SMRT Cell and platform, with early access scheduled to begin during the first quarter of 2019,” said Hunkapiller.
Contact Uttara Choudhury at uttara@proactiveinvestors.com
Follow her on Twitter: @UttaraProactive