Illumina Pacbio: Provisional Findings Report
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Anticipated acquisition by Illumina, Inc. of Pacific Biosciences of California, Inc. Provisional findings report 24 October 2019 © Crown copyright 2019 You may reuse this information (not including logos) free of charge in any format or medium, under the terms of the Open Government Licence. To view this licence, visit www.nationalarchives.gov.uk/doc/open-government- licence/ or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: [email protected]. The Competition and Markets Authority has excluded from this published version of the provisional findings report information which the inquiry group considers should be excluded having regard to the three considerations set out in section 244 of the Enterprise Act 2002 (specified information: considerations relevant to disclosure). The omissions are indicated by []. Some numbers have been replaced by a range. These are shown in square brackets. Contents Page Provisional Findings ................................................................................................... 4 1. The reference ....................................................................................................... 4 2. The industry .......................................................................................................... 4 Introduction to DNA sequencing ........................................................................... 4 Applications of DNA sequencing ........................................................................... 6 History of DNA sequencing ................................................................................... 8 Other suppliers of DNA sequencing .............................................................. 13 Beijing Genomics Institute (BGI) .................................................................... 14 Oxford Nanopore Technologies (ONT) .......................................................... 15 Thermo Fisher Scientific (Thermo Fisher) ..................................................... 16 QIAGEN N.V. (QIAGEN) ............................................................................... 17 Spend on DNA sequencing ................................................................................. 18 3. The Parties ......................................................................................................... 19 Illumina ............................................................................................................... 19 Overview of structure and operations ............................................................ 19 Financials ...................................................................................................... 20 PacBio ................................................................................................................ 24 Overview of structure and operations ............................................................ 24 Financials ...................................................................................................... 25 4. The Proposed Merger ......................................................................................... 28 Introduction ......................................................................................................... 28 Timeline of discussions ....................................................................................... 28 Rationale ............................................................................................................. 29 5. Relevant merger situation ................................................................................... 30 Enterprises ceasing to be distinct ....................................................................... 30 Jurisdiction test ................................................................................................... 31 Provisional conclusion on the relevant merger situation ..................................... 32 6. Counterfactual..................................................................................................... 32 Introduction and legal framework ........................................................................ 32 Views of the Parties ............................................................................................ 33 PacBio’s views ............................................................................................... 34 Illumina’s views .............................................................................................. 37 Third party views ................................................................................................. 38 CMA assessment ................................................................................................ 38 Market context ............................................................................................... 38 Assessment of failing firm arguments ............................................................ 39 Considerations which would not exist in the counterfactual ........................... 45 Provisional conclusions ................................................................................. 46 7. Market definition.................................................................................................. 46 Introduction and overview ................................................................................... 46 Product market definition .................................................................................... 48 Sequencing systems ..................................................................................... 48 Short read and long read sequencing ............................................................ 50 Non-NGS methods of ascertaining genetic information ................................. 59 Sequencing services ..................................................................................... 63 Conclusion on product frame of reference ..................................................... 66 Geographic market definition .............................................................................. 66 The Parties’ views ......................................................................................... 66 1 Evidence from third Parties ........................................................................... 67 Our assessment ............................................................................................ 67 8. Competitive effects of the merger ....................................................................... 68 Introduction ......................................................................................................... 68 Theory of Harm ................................................................................................... 68 Nature of competition .......................................................................................... 69 NGS Systems customers .............................................................................. 69 Competition beyond the ‘use case’ level ....................................................... 70 Dimensions of competition ............................................................................ 80 Price setting ................................................................................................... 82 Conclusion on nature of competition ............................................................. 84 Evidence of competition between the Parties and with competitors.................... 85 The Parties’ views ......................................................................................... 85 Market shares ................................................................................................ 98 Overview of internal documents evidence ................................................... 100 Illumina’s internal documents ...................................................................... 101 PacBio’s internal documents ....................................................................... 116 Evidence from customers ............................................................................ 125 Evidence from competitors .......................................................................... 135 Sales and sales forecasts ............................................................................ 140 Our assessment of the competitive effects of the Proposed Merger ................. 142 The structure of the market is highly concentrated ...................................... 143 Current competition between the Parties ..................................................... 144 Future competition between the Parties ...................................................... 146 Potential competition from Illumina in long read .......................................... 149 Constraint from other competitors ............................................................... 150 Provisional conclusion ...................................................................................... 153 Overall provisional finding ................................................................................. 156 9. Countervailing factors ....................................................................................... 156 Barriers to entry and expansion ........................................................................ 157 Introduction .................................................................................................