Complete Genomics, a struggling DNA sequencing company in Silicon Valley, said on Monday that it had agreed to be acquired for $117.6 million by BGI-Shenzhen, a Chinese company that operates the world's largest sequencing operation.
The price of $3.15 a share represents an 18 percent premium to Complete Genomics' closing price on Friday and a 54 percent premium to the closing price on June 4, the day before the company announced that it would fire 55 employees to save cash and that it had hired an adviser to explore strategic alternatives.
The deal, which will be carried out by a tender offer, is the latest sign of consolidation in the rapidly changing and fiercely competitive market for DNA sequencing. The price of determining the DNA blueprint of a person is tumbling and sequencing is starting to be used for medical diagnosis, not just for basic research.
In 2010, Life Technologies acquired Ion Torrent, and earlier this year, Illumina, the leading manu facturer of sequencing machines, successfully fought off a $6.2 billion hostile bid from Roche.
Complete Genomics, based in Mountain View, Calif., pioneered a new model, offering sequencing as a service instead of selling sequencing machines to laboratories that would do the work themselves.
While Complete Genomics gained a good reputation and charged low prices of around $5,000 per human genome for large orders, it never was able to make money at that price.
The company lost $39.1 million, or $1.16 per share, in the first half of 2012. Revenue was $12.6 million, about even with the first half of 2011, owing in part to problems Complete experienced in scaling up its operations. The stock is well below the $9 price of its initial public offering in November 2010 and the company said in regulatory filings that it might not be able to continue as a going concern.
The acquisition “represents the best outcome for our stockholders, offering them liquidit y and a premium value,'' Clifford Reid, the chief executive of Complete Genomics, said in a statement on Monday.
BGI-Shenzhen is descended from an organization started in 1999 as the Beijing Genomics Institute to play China's part in the international Human Genome Project.
It is believed to be the world's largest genome sequencing operation and a symbol of China's ambitions to play a major role in genomics, and in biotechnology in general. BGI shocked the industry in 2010 when it placed a record order for 128 of Illumina's high-end HiSeq 2000 sequencing machines at a cost undoubtedly reaching tens of millions of dollars.
While Complete Genomics specializes in human genomes, BGI has sequenced not only human genomes but those of the giant panda and asparagus, not to mention numerous pathogens. It has entered into collaborations with numerous companies, universities and nonprofit organizations in the United States, including Merck; the University of California , Davis; Children's Hospital of Philadelphia; and Autism Speaks.
Wang Jun, the chief executive of BGI-Shenzhen said that Complete Genomics, which would continue to operate as a separate entity, would “fit well with our research and business requirements.''
BGI apparently has a for-profit and nonprofit part, but the entity that will buy Complete Genomics is the for-profit part, according to a person close to BGI.
This person said BGI was not a Chinese government entity. It has apparently been helped in the past by the government, however, including a $1.5 billion agreement with the China Development Bank to finance the company's expansion. In its regulatory filings, Complete Genomics has listed BGI as a competitor that “may be funded by the government of China.''
The deal will need antitrust clearance as well as clearance from a national security review by the Committee on Foreign Investment in the United States. It also requires approval from cert ain governmental authorities in China.
Spokesmen for both Complete Genomics and BGI said they could not provide information beyond what was in the news release.
Citigroup and the law firm O'Melveny & Myers advised BGI. Complete Genomics was advised by Jefferies & Company and the law firm Latham & Watkins.
