In June, Complete Genomics (GNOM), the struggling maker of the world’s most accurate gene-sequencing machine, put itself up for sale. Nothing happened initially. Analysts predicted the company would soon need to wind down operations.
Cut to December. A pair of genomics superpowers, China’s BGI and San Diego-based Illumina (ILMN), have suddenly made competing bids to buy Complete, and politicians and regulators want to weigh in on its future. The question is whether foreign ownership might create a national security threat to the U.S. “This budding research area has the opportunity to really advance the development of bioweapons,” says Michael Wessel, a member of the U.S.-China Economic and Security Review Commission, which reports to Congress. He’s concerned that Complete will “advance China’s capabilities in that area beyond what they already have.”
Founded in 2005, Complete has offices in a sedate office park across the street from Google (GOOG) in Mountain View, Calif. It makes a machine that can decode strands of DNA, but unlike most of its rivals offers a sequencing service instead of selling the machine to customers. In its most recent quarter, Complete posted revenue of $ 7.3 million and a net loss of $ 18 million.
Complete’s machines stand out for their ability to accurately sequence entire human genomes, instead of just portions of a person’s DNA. That’s much needed in clinical settings where physicians want to know for sure whether a patient has a particular illness. Complete also has been able to amass a large database of precise genomic information. Finding patterns among that data, comprising thousands of DNA sequences, could be useful in developing novel therapies.
The unique properties of Complete’s sequencers, which have been used for studies of cancer, aging, and disease traits, make them a good fit for BGI. Backed by loans from government-run banks, BGI has spent more than a decade creating a huge DNA database. Believed to be the world’s largest purchaser of sequencing machines, it’s been opening offices worldwide to offer services that complement its research. But BGI lacks the know-how to build its own sequencer, an area in which the U.S. remains far ahead of other countries.
In September, BGI offered $ 118 million to acquire Complete, and Complete’s board approved. Together the companies would have a database of 30,000 whole human genomes—about 10 times larger than that of their nearest competitor, says George Church, a professor of genetics at Harvard Medical School. With such a vast trove of data, BGI could gain a leg up in the race to create therapies and diagnostic tools using sequencing information. “I think this is a very big deal,” says Church, who advises dozens of companies in the industry including BGI, Illumina, and Complete.
The possibility of BGI and Complete uniting has not been lost on Illumina, the world’s biggest seller of sequencing machines, which counts BGI as a top customer. In November, Illumina offered a $ 123.5 million counterbid for Complete, which the company’s board rejected, saying regulators would not approve the deal because of Illumina’s market dominance. (Illumina claims its machines produce 90 percent of the world’s sequencing data.)
This in turn prompted Illumina Chief Executive Officer Jay Flatley to raise national security and privacy concerns about BGI’s bid in a letter to Complete’s board that the board later made public. An Illumina spokesperson declined to comment. In a statement, Complete CEO Cliff Reid said, “There’s no risk to U.S. national security raised by Complete Genomics merging with BGI.” Church and others have speculated that the real reason Illumina wants to keep BGI from acquiring sequencing machine technology is that it wants to avoid losing the company as a customer.
Both the Federal Trade Commission and the Committee on Foreign Investment in the U.S. (CFIUS), which weighs national security issues, are reviewing BGI’s bid and will make a recommendation that will likely determine if the deal goes through. Last year, Huawei Technologies, a Chinese maker of telecommunications equipment, abandoned its acquisition of hardware startup 3Leaf Systems, when CFIUS recommended rejecting the deal before it was reviewed by President Obama.
It’s hard to find a genomics expert who sees real national security concerns in a BGI-Complete deal. DNA sequencing machines are readily available, and Complete’s technology isn’t considered uniquely capable of some uniquely nefarious use. Several startups around the world are developing a new generation of sequencing machines that could soon make today’s obsolete. Church, though, says the Complete kerfuffle has provided U.S. regulators with “a good wake-up call” about the potential for this technology and the need for the U.S. to keep investing in its DNA sequencing lead. “Our politicians don’t follow technology as well as they should,” he says.
The bottom line: A BGI-Complete deal could lead to one entity owning 30,000 human genomes, 10 times more than its nearest competitor.
Businessweek.com — Top News
Title Post: Behind the Bidding War For a Gene Sequencing Firm
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