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Our most recent recommended stock addition is Illumina, the San Diego-based company that makes genetic sequencing machines. These are used to map out a person's DNA from a blood or saliva sample. In the process, patients (including unborn children) can determine their heritage, and the likelihood of contracting certain health conditions. There are also ongoing research projects to develop personalised genetic therapies, using the sequencing information gathered by these complex instruments. Read our original stock buy note here.
Late last week Illumina announced that they will buy rival company Pacific Biosciences (PacBio) for $1.2 billion. For the record, Illumina's machines work by reading many tiny fragments of DNA and assembling them. This is known as "short-read" technology. PacBio's sequencers can look at a single molecule of DNA and decode long stretches of it with high accuracy. That sounds good and is perfect for certain applications, but the cost of each read is much higher. Currently, it costs about $12,000 to sequence a single human genome with PacBio machines. Illumina has driven that cost down from $10 million a decade ago to less than $1,000 now, and hopes to get that to $100 in time.
PacBio's long-read machines sell for $350,000 and Illumina's instruments cost up to $1 million each. There is competition in the long-read market, most notably from Oxford Nanopore, which has created a smaller and portable technology. Amgen recently took a stake in that company, and we wrote about that here.
Our expert contacts in this industry suggest that Illumina technology will hold 85-90% of the market for sequencing, and that the bulk of the work will be concentrated at huge facilities servicing everyone's needs. The PacBio systems add a significant string to their bow. Illumina expects the long-read market to grow from $600 million today to $2.5 billion in 2021.
Deals like these also have secondary benefits. Illumina will be bringing on board some very talented scientists that currently work for PacBio. More on the deal here.