When Illumina (ILMN) announced its acquisition of Fluent BioSciences, it did not say how much it shelled out for the privately held single-cell technology developer in a deal that catapulted the longtime leader in next-generation sequencing into the faster-growing multiomics space.
A close reading of Illumina’s press release suggests that the company snapped up Fluent for less than $120 million.
As noted on LinkedIn by Alex Dickinson, a former Illumina senior vice president who is now chair of Ryght.AI, and by several other market watchers on X (formerly Twitter), the Illumina-Fluent press release contained no wording about a waiting period under the Hart-Scott-Rodino (HSR) Act, during which companies planning to merge submit information about their transactions to the U.S. Federal Trade Commission (FTC) and U.S. Department of Justice before the deals get done.
The agencies assess whether an acquisition poses a potential anticompetitive challenge to other companies under the HSR, which sets a dollar threshold for antitrust reviews. In February, the threshold was raised from $111.4 million to $119.5 million.
The apparently small value of the deal might explain why Illumina shares didn’t leap upon news of the Fluent transaction. Indeed, they dipped 1% in after-hours trading the day the deal was announced, from the Tuesday closing price of $106.68 to $105.24 at 7:50 p.m. But the shares bounced back 7.5% to $113.17 on Wednesday after Citigroup analyst Patrick Donnelly upgraded his firm’s rating on Illumina shares for reasons not related to Fluent or the acquisition.
Donnelly and Citi upgraded Illumina shares from “Neutral” to “Buy,” while maintaining Citi’s 12-month price target on Illumina shares at $140. They cited Illumina’s spinoff of cancer blood test developer Grail, completed last month as directed by the European Commission and the FTC, through a one-time cash payment of $932.3 million, funded through a senior unsecured term loan credit facility of up to $750 million along with some of Illumina’s cash and cash equivalents, which stood at $1.108 billion as of March 31, up 6% from $1.048 billion as of December 31, 2023.
Potential upside
“We see potential core margin upside heading into next year at a reasonable valuation,” Donnelly wrote in a report assessing Illumina and 12 other key companies in life sciences tools and technologies. “We believe if the business is able to grow 4–5% in 2025, we see a scenario where OPMs [operating profit margins] could expand >150 bp [basis points, equal to 1.5%] using the low base of 2024 OPMs, mostly driven by [cutbacks in] R&D (though SG&A [selling, general and administrative] should play a role).”
Donnelly said a source of future growth for Illumina will be customers using its NovaSeq X sequencing system, which was unveiled in 2022 and began commercial shipping last year, to validate new assays for their new projects: “This increased consumable volume growth should, along with more disciplined pricing, help not only the topline but also on a margin basis.
The Citi analyst also said Illumina could improve its margins by cutting its R&D spending, which accounts for 8% of revenues on average: “We do think ILMN is overspending vs competitors without seeing clear evidence of ROI. We see potential for several hundred bps of improvement when looking at this ratio.”
Donnelly was only one of two analysts to weigh in Wednesday on Illumina. Mason Carrico of Stephens & Co. maintained his firm’s “Overweight” rating and $170 price target on Illumina.
Investors, however, stretched their Illumina buying surge into Thursday, when shares rose another 4%, to an even $118.
Headquartered in the Boston suburb of Watertown, MA, Fluent was launched in 2018 to commercialize the pre-templated instant partition sequencing (PIPseq) technology developed in the lab of Adam Abate, PhD, at the University of California, San Francisco. Abate co-founded Fluent with Sepehr Kiani, PhD, the company’s chief business development officer.
Broadening accessibility
Fluent’s single-cell analysis technology is designed to eliminate the need for complex, expensive instrumentation and microfluidic consumables—an approach the company says makes single-cell analysis accessible for a broader set of customers, and catalyzes new experiments that are enabled by the ability to perform assays at the point of sample collection.
The company launched its first kit in July 2022. In May, Fluent released the fifth and latest version of its PIPseq technology, PIPseq™ V, which was created to detect cell types often missed by current methods, as well as process from 100 up to one million cells. That reflects Fluent’s vision of moving into clinical applications in the future. Kiani told GEN earlier this year: “Fluent is going to own the clinic. It’s the only thing with the elegance to go into the clinic.”
“The addition of Fluent BioSciences to Illumina will provide significant and new capabilities to our customers in a key growth area and advances our multiomics growth strategy,” Steven Barnard, Illumina’s CTO, said in the companies’ statement announcing the acquisition. “Single-cell research opens doors to new areas of discovery, and Fluent’s innovative, accessible, and flexible single-cell method will accelerate our ability to deliver full multiomics solutions for our customers.”
Fluent was launched in 2018 with financing from Illumina’s venture arm Illumina Ventures, along with other investors that have included Civilization Ventures, Co-win Ventures, Mass Challenge, Samsara Biocapital, and VC23. The company had raised $23.5 million before Illumina announced the acquisition, according to PitchBook.
During the current federal fiscal year, the NIH’s National Institute of General Medical Sciences awarded $1,146,224 to Fluent toward “commercialization of methods and reagents for high-throughput single cell analysis.”
“We will expand the capabilities of PIPseq single cell analysis to provide simple, scalable, and cost-effective solutions for high cell input applications including deep tissue profiling, multiplexed drug testing, and pooled CRISPR screening,” Fluent stated in explaining the project.
Deal, competition drive downgrade
The sharpest analyst commentary on the Illumina-Fluent deal came from Justin Bowers of Deutsche Bank. Bowers cited the deal in downgrading the shares of Fluent rival 10x Genomics (TXG) from “Buy” to “Hold,” contending that the deal reflected growing competition for 10x in the single cell field it has dominated to date. Bowers also slashed his firm’s price target on 10x shares by 55%, from $55 to $25.
“Increasing competition is eroding the inelastic demand that 10x Genomics’ market-leading single-cell platform once enjoyed. We believe that Chromium growth will remain under pressure in the near term, and sustain greater volume declines and/or pricing pressure than current management expectations, and thus perpetuate 10x Genomics’ margin degradation,” Bowers wrote in a research note.
“Illumina’s acquisition of private single cell peer Fluent only heightens the competitive threat, as suitor attempts to exploit new addressable markets following the GRAIL divestiture,” Bowers continued, adding: “Since Illumina’s NGS instruments are part of the workflow to sequence the single-cell libraries prepared upstream on Chromium and other single-cell kits, Deutsche anticipates ‘end-to-end’ and ‘bundling’ go to market strategies with Illumina’s new vertical offering.”
Chromium instruments and consumables accounted for $91.777 million or 65% of 10x’s $141.006 million in first-quarter revenue, down 18% from $112.722 million of the company’s $134.285 million in total revenue a year earlier.
Addressing analysts on 10x’s quarterly earnings call on April 30, co-founder and CEO Serge Saxonov, PhD, said the drop reflected lower-than-expected quarter-end orders for Chromium as “a significant number of customers” trying out the company’s new GEM-X technology architecture launched during the quarter, the first major overhaul to Chromium architecture since 2019. GEM-X products include the Chromium GEM-X Single Cell Gene Expression v4, designed to yield substantially higher performance at a lower price.
“Despite the near-term sales impact, we believe GEM-X will invigorate Chromium growth over the long term and ultimately enable wider single-cell adoption,” Saxonov said.
Looking beyond chromium
He also said 10x’s focus was growing all three of its technology platforms—not just Chromium, but its Visium Spatial Gene Expression platform, which saw a new-and-improved HD version launched during Q1; and Xenium In Situ single-cell spatial imaging platform as well, which saw several new features introduced, including the 5,000-plex Xenium Prime 5K Pan-Tissue and Pathways gene expression panel.
“While we’re working to deliver on the vast opportunity ahead in Chromium, our strategy has always been focused on the strength of the entire portfolio and on providing the full breadth of our capabilities to customers,” Saxonov added.
Investors this week appeared to side with 10x. After its shares fell 14% from $18.25 to $15.71 Wednesday on the downgrade, they climbed back 9% to $16.99 Thursday and $17.19 Friday as of 3:19 p.m.
Bowers cited recent discussions with “several single cell core labs and other industry participants.” Those industry leaders, he wrote, acknowledged 10x as both the leader in single cell and spatial technology, citing “ease-of-use, field service, and technical support. Other positives include sustained spatial momentum, successful early adoption of Visum HD, excitement around Xenium’s 5,000 plex panel, and future launches planned in 2024.”
That view reinforces some positive recognition that 10x received last month when a preprint posted in bioRxiv found the company’s Chromium Fixed RNA Profiling kit to deliver “superior analytical performance” among 10 systems compared by researchers from Genentech, a Member of the Roche (ROG.SW) Group—though Fluent’s PIP Seq T20 3’ Single Cell RNA kit v4 and the Gexscope Single-Cell RNA Library kit by Singleron Technologies were both found to be the most cost-efficient single-cell systems among the 10. The 10 included two other 10x products, Chromium Single Cell 3’ reagent kit v3.1 (10x 3’), and the Chromium Single Cell 5’ reagent kit v2 (10x 5’).
A second analyst following 10x, Matthew Sykes of Goldman Sachs, lowered the firm’s price target 38% from $26 to $16, and maintained its “Sell” rating on the stock.
Proteomics M&A as TMO-Olink closes
10x notwithstanding, Illumina is likely not done making deals that go beyond NGS, market watcher “DeepValue” predicted on X.
“With the FluentBio acquisition ILMN is clearly increasing its breadth in the multiomics market,” DeepValue observed. “They have a proteomics partnership with Somalogic (part of $LAB). I expect them to make an acquisition in this space as well. Expect proteomics M&A to heat up.”
Illumina has partnered with Somalogic since 2022 on bringing the SomaScan® Proteomics Assay onto Illumina’s current and future high throughput NGS platforms. While the total value of the companies’ co-development agreement has not been disclosed, Illumina agreed to pay SomaLogic a non-refundable, non-creditable technology access fee equal to $30 million, according to a redacted copy of the agreement disclosed in a regulatory filing.
A key factor behind the optimism over proteomics M&A is the completion Wednesday of the year’s largest deal to date in the space: Thermo Fisher Scientific (TMO) completed its acquisition of Olink Holding for approximately $3.1 billion, net of $96 million of acquired cash. Investors responded by sending Thermo Fisher shares up 2% since then, from $531.86 to $536.87 Wednesday, then to $542.69 Thursday. The uptick was an apparent sigh of relief after months of scrutiny from regulators in Germany, Iceland, and most recently the U.K., whose Competition and Markets Authority cleared the deal on July 8.
Thermo Fisher is adding privately held, Swedish-based Olink, which offers proteomics-focused products and services, to its Life Sciences Solutions segment. Life Sciences Solutions generated $2.245 billion in first-quarter revenue, accounting for nearly a quarter (22%) of Thermo Fisher’s total $10.345 billion in Q1 revenue.
The global proteomics market was valued at $36.8 billion in 2023—and is expected to all but double to $72.9 billion by 2028, according to MarketsandMarkets research.
Leaders and laggards
- Amylyx Pharmaceuticals (AMLX) shares climbed 25% from $1.65 to $2.07 Wednesday after the company said it completed the acquisition of avexitide, a first-in-class glucagon-like peptide-1 (GLP-1) receptor antagonist, from Eiger BioPharmaceuticals (EIGRQ) for $35.1 million plus determined cure costs and assumed liabilities. Avexitide has the FDA’s Breakthrough Therapy designation for post-bariatric hypoglycemia (PBH) and congenital hyperinsulinism. Amylyx said a Phase III program for avexitide in PBH is expected to begin in the first quarter of 2025, with a data readout anticipated in 2026. Amylyx assumed contractual obligations from Eiger that include a 3% royalty on future sales of avexitide in PBH, if approved, to certain academic institutions. Eiger shares dipped 1% from $11.99 to $11.85.
- HilleVax (HLVX) shares cratered 88% from $14.06 to $1.63 between July 8 and Wednesday, after the company said it would end development of its initial program HIL-214 in infants after the virus-like particle (VLP) based vaccine candidate failed the Phase IIb NEST-IN1 trial (NCT05281094). The trial—designed to evaluate the efficacy, safety, and immunogenicity of HIL-214 in over 3,000 infants—missed its primary endpoint of showing protective efficacy against moderate or severe norovirus-related acute gastroenteritis (AGE) events associated with GI.1 or GII.4 norovirus strains (excluding certain co-infections) during a pre-determined surveillance period that began one month after administration of the second dose of HIL-214. HIL-214 also missed the trial’s secondary endpoints, including evaluation of the protective efficacy of HIL-214 against any GI or GII norovirus strain, and evaluation of safety and immunogenicity of HIL-214. HilleVax added that it is weighing continued development of HIL-214 and HIL-216, HilleVax’s Phase I ready vaccine candidate, in adults.
- Indivior (INDV) shares nosedived 34% from $15.34 to $10.19 Tuesday after the company said it will eliminate approximately 130 employees, end sales and marketing for its adult schizophrenia drug Perseris® (risperidone), and chop its adjusted operating profit guidance for this year by 14% to 16%, from between $330 million and $380 million to between $285 million and $320 million. The company said it continued to expect year-over-year net revenue growth for Sublocade of 25%, and year-over-year adjusted operating income growth of 12% this year. Individior blamed its decision to stop selling Perseris on increasing management of coverage decisions by payors, yielding financial impacts “expected to make the product no longer financially viable.” Individior said its cost-cutting moves would save about $50 million in ongoing annual operating expenses, of which $20 million is expected to be saved in the second half of this year.
- Kazia Therapeutics (KZIA) shares more than tripled, catapulting 248% from 19 cents to 67 cents Wednesday after the company announced positive data from the global Phase II/III GBM-AGILE trial (NCT03522298) showing clinically meaningful improvement in a prespecified secondary analysis for overall survival in newly diagnosed unmethylated (NDU) glioblastoma patients treated with paxalisib. Median overall survival for the 54 NDU patients dosed with paxalisib was 15.54 months vs. 11.89 months for the 46 NDU patients receiving standard of care (SOC). Also, a prespecified sensitivity analysis in NDU patients showed similar median OS difference between paxalisib patients (15.54 months) and concurrent SOC patients (11.70 months). GBM-AGILE is sponsored by the nonprofit Global Coalition for Adaptive Research (GCAR), whose members include researchers from Memorial Sloan Kettering Cancer Center and Dana-Farber Cancer Institute.
- uniQure (QURE) shares nearly tripled, zooming 168% over two days, from $3.78 to $6.67 Tuesday and $10.12 Wednesday, after the company published positive interim data from its Phase I/II trials of the Huntington’s disease candidate AMT-130 showing that it achieved statistically significant, dose-dependent, and durable evidence of potential therapeutic benefit. Patients receiving high-dose AMT-130 showed 80% slowing of disease progression in the composite Unified Huntington’s Disease Rating Scale (cUHDRS) at 24 months compared to a propensity score-weighted external control. AMT-130 also achieved statistically significant lowering of CSF neurofilament light protein (NfL) compared to baseline at 24 months in patients treated with AMT-130, while mean CSF NfL levels for both high and low doses were below baseline at 24 months.
