Illumina fights Roche bid with 'poison-pill' maneuver

A day after Roche's ($RHHBY) hostile $5.7 billion bid to scoop up Illumina ($ILMN) hit the news, investors are wagering that the maker of DNA sequencing machines will attract a better offer. Illumina's share price was more than $53 early this afternoon, well above Roche's $44.50 bid, indicating that investors believe that there's a bigger bid in the offing.

The San Diego-based company isn't giving in to Roche, at least not without a fight. To keep Illumina's shareholders from selling their stock to Roche, Illumina is offering a dividend of one preferred stock purchase right for each share of common stock held through Feb. 6, Bloomberg reported. 

Illumina is the dominant player in the rapidly evolving DNA sequencing game, and Roche's takeover move has generated tremendous buzz about what it could mean for the DNA decoding machine business and personalized medicine. Roche is a leading developer and provider of targeted cancer drugs, but the Swiss healthcare giant is way behind Illumina in the business of making the sequencing machines that help researchers study new gene targets for personalized drugs. Roche's own sequencing technology, purchased in its 454 Life Sciences buyout, lags behind that of Illumina. (Forbes' Matthew Herper writes that the 454 technology brought the cost of sequencing a whole genome to $500,000, while Illumina's machines have taken the price down to around $5,000.)

So far, Illumina and rivals such as Life Technologies ($LIFE) have primarily served the research market with their sequencing machines, but the dramatic drop in the cost of sequencing anticipated over the next several years is expected to expand use of the technology into clinics, where the systems can show doctors the genetic blueprints of their patients. With those data, doctors can tailor treatments to combat diseases such as cancer and genetic illnesses, Bloomberg reports.

"This is going to be an enormous opportunity, and now you see it unfolding," Life Technologies CEO Greg Lucier told Bloomberg. The chief executive speculated in the interview that Roche, which has a large diagnostics business, is eying Illumina's sequencing technology to provide diagnosis in the cancer arena.

But with the sequencing field changing at a breakneck pace, there's no guarantee that 10 years from now Illumina's technology will be as dominant as it is today. Genomics pioneer J. Craig Venter has seen firsthand how in a decade the sequencing field has transformed, and he threw some cold water on Roche's heated takeover move in an interview with Bloomberg: "I don't understand why Roche would do this deal when the technology is changing so rapidly. I am puzzled."

- get more in the Bloomberg article
- see Herper's coverage

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