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Thursday, September 20, 2012

BGI acquires Complete Genomics



The biotech industry is, collectively (despite the occasional wins), a huge net destroyer of investor capital. That Complete Genomics was able to go public in 2010 (NAS: GNOM) is crazy: both their business model and technology were unproven -- but that's biotech investing! BGI paid a startup price for a NASDAQ company ... Word on the street: over $100M invested by VCs pre-IPO, with a > $100M raise in the IPO float.
NYTimes: 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. ...
See earlier post Physicists can do stuff. Despite the poor outcome for investors, Complete Genomics did develop good technology that will further the science of genomics. This is a very competitive space, and most companies that make sequencing breakthroughs will have a tough time putting it all together: bioinformatic services, sample handling, etc. (on these factors no one can beat BGI's cost advantages). They'll either have to make it in the hardware business or sell themselves to someone like BGI.

Today's WSJ has an article on success rates for venture backed startups. The claim is that 3/4 fail to return investor capital. I suspect the actual success rate is even lower (IIRC from earlier studies).

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