Illumina is now competing with its clients
Illumina has spent the last two decades building a multibillion-dollar business by agnostically selling sequencing technology to anyone who wants it. Now, with the pending acquisition of the cancer testing company Grail, one of biotech’s most popular vendors is going to be competing with its clients.
The deal, announced Monday, will see Illumina trade $8 billion in cash and stock for Grail, which works in the crowded space of developing blood tests that can detect cancer in its early stages. Beyond the controversial purchase price, which sent Illumina’s shares down about 9%, the transaction represents an ideological shift for the company, which has said in the past that it had no desire to compete with customers.
But it was an inevitable pivot, Cowen analyst Doug Schenkel wrote in a note to clients. Dozens of companies have created billions of dollars in value by relying heavily on Illumina’s technology. Eventually, Illumina’s growth was going to rely on capturing the value created by its sequencers, according to Schenkel, not just selling them.
The deal, announced Monday, will see Illumina trade $8 billion in cash and stock for Grail, which works in the crowded space of developing blood tests that can detect cancer in its early stages. Beyond the controversial purchase price, which sent Illumina’s shares down about 9%, the transaction represents an ideological shift for the company, which has said in the past that it had no desire to compete with customers.
But it was an inevitable pivot, Cowen analyst Doug Schenkel wrote in a note to clients. Dozens of companies have created billions of dollars in value by relying heavily on Illumina’s technology. Eventually, Illumina’s growth was going to rely on capturing the value created by its sequencers, according to Schenkel, not just selling them.
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