Roche to exit $75M diagnostics development deal with PacBio

Having developed the Sequel System with Pacific Biosciences and met all the milestones set forth in their agreement, Roche will be exiting its collaboration with the company. Image: Pacific BioSciences

Three years ago, Pacific Biosciences stock leaped 73% on the news of a product development deal with Roche that saw the latter forking over $35 million up front. Now, the pair is calling it quits, freeing up PacBio to sell its tech in any market and Roche to focus on other projects.

Under the deal, originally inked in September 2013, Pacific Biosciences would develop diagnostic products, such as those for gene sequencing, and license them exclusively to Roche’s diagnostics unit. Roche would secure exclusive rights to distribute the products worldwide in the field of in vitro diagnostics, while PacBio would retain the rights to market in every field other than human in vitro diagnostics. The products would be based on PacBio’s Single Molecule, Real-Time (SMRT) platform and PacBio stood to collect up to $40 million in milestone payments.

The agreement allowed Roche to exit the partnership for any reason within 60 days’ notice. PacBio shares dropped more than 38% Thursday morning, after Roche announced its exit. During the collaboration, the duo developed the Sequel System, a sequencing platform it debuted in September last year that met all of the milestones declared in the agreement, said PacBio CEO Dr. Michael Hunkapiller, in a statement.

“As a result of this decision we will have greater focus on our internal development efforts and drive our long term strategy which is to be a leader in clinical diagnostic sequencing,” said Neil Gunn, Head of Roche Sequencing Solutions, in a statement. “We are continuing to actively pursue multiple technologies and commercial strategies internally and externally to ensure we address the specific needs of our customers in the clinical diagnostic sequencing market segment.”

PacBio is putting on a brave face: “While we are disappointed with Roche’s decision to terminate the agreement, we are already familiar with this market and Roche’s decision does not significantly change our near-term plans for expanding our business to address this market,” Hunkapiller said.

Roche had planned to develop targeted assays and software for the Sequel System under the agreement. Now that Roche has exited the deal, PacBio will now “immediately” focus on other opportunities in the clinical research and sequencing space that don’t require assay-specific kits, Hunkapiller said.

Back in February, there were rumblings that Roche was considering an acquisition of PacBio.