Shares of Illumina Inc. fell Monday after the genetic analysis instrument maker said it will buy the prenatal testing company Verinata Health Inc. in a deal worth up to $450 million.
THE SPARK: Illumina plans to pay $350 million for privately held Verinata and may pay up to an additional $100 million through 2015 if certain targets are met. The transaction will be financed mostly with available cash.
Illumina, based in San Diego, expects the acquisition to reduce its 2013 adjusted earnings by about 20 cents per share and then add to its earnings starting in 2014 and beyond. Verinata is based in San Carlos, Calif.
THE BIG PICTURE: Verinata's verifi test analyzes cell-free fetal DNA naturally found in a pregnant woman's blood to look for missing or extra copies of chromosomes. The test can detect birth defects such as Down syndrome, Edwards syndrome and Patau syndrome. The test also includes the option to evaluate sex chromosome abnormalities, such as Turner syndrome, Triple X, Klinefelter syndrome and Jacobs syndrome.
THE ANALYSIS: Citi analyst Amit Bhalla said in a research note the deal price surprised him. He added that he expected the shares to face some pressure due in part to the near-term hit the deal places on Illumina earnings and questions about the longer-term impact of Illumina competing against customers like Sequenom Inc.
SHARE ACTION: Down 7.8 percent, or $4.27, to $50.49 in afternoon trading. The stock is now down about 12 percent since hitting a 52-week high of $57 on Dec. 20.
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