US Clears DNA Firm’s Acquisition by Chinese

Andrew Pollack
H. Singh | Custom Medial Stock Photo | Getty Images

The federal government has given national security clearance to the controversial purchase of an American DNA sequencing company by a Chinese firm.

The Chinese firm, BGI-Shenzhen, said in a statement this weekend that its acquisition of Complete Genomics, based in Mountain View, Calif., had been cleared by the federal Committee on Foreign Investment in the United States, which reviews the national security implications of foreign takeovers of American companies. The deal still requires antitrust clearance by the Federal Trade Commission.

Some scientists, politicians and industry executives had said the takeover represented a threat to American competitiveness in DNA sequencing, a technology that is becoming crucial for the development of drugs, diagnostics and improved crops.

The fact that the $117.6 million deal was controversial at all reflects a change in the genomics community.

A decade ago, the Human Genome Project, in which scientists from many nations helped unravel the genetic blueprint of mankind, was celebrated for its spirit of international cooperation. One of the participants in the project was BGI, which was then known as the Beijing Genomics Institute.

But with DNA sequencing now becoming a big business and linchpin of the biotechnology industry, international rivalries and nationalism are starting to move front and center in any acquisition.

Much of the alarm about the deal has been raised by Illumina, a San Diego company that is the market leader in sequencing machines. It has potentially the most to lose from the deal because BGI might buy fewer Illumina products and even become a competitor. Weeks after the BGI deal was announced, Illumina made its own belated bid for Complete Genomics, offering 15 cents a share more than BGI's bid of $3.15. But Complete Genomics rebuffed Illumina, saying such a merger would never clear antitrust review.

Illumina also hired a Washington lobbyist, the Glover Park Group, to stir up opposition to the deal in Congress. Representative Frank R. Wolf, Republican of Virginia, was the only member of Congress known to have publicly expressed concern.

BGI and Complete Genomics point out that Illumina has long sold its sequencing machines — including a record-setting order of 128 high-end machines — to BGI without raising any security concerns. Sequencing machines have not been subject to export controls like aerospace equipment, lasers, sensors and other gear that can have clear military uses.

"Illumina has never previously considered its business with BGI as 'sensitive' in the least," Ye Yin, the chief operating officer of BGI, said in a November letter to Complete Genomics that was made public in a regulatory filing. In the letter, Illumina was accused of "obvious hypocrisy."

BGI and Complete said that Illumina was trying to derail the agreement and acquire Complete Genomics itself in order to "eliminate its closest competitor, Complete."

BGI is already one of the most prolific DNA sequencers in the world, but it buys the sequencing machines it uses from others, mainly Illumina.

Illumina, joined by some American scientists, said it worried that if BGI gained access to Complete's sequencing technology, the Chinese company might use low prices to undercut the American sequencing companies that now dominate the industry.

Some also said that with Complete Genomics providing an American base, BGI would have access to more DNA samples from Americans, helping it compile a huge database of genetic information that could be used to develop drugs and diagnostic tests. Some also worried about protection of the privacy of genetic information.

"What's to stop them from mining genomic data of American samples to some unknown nefarious end?" Elaine R. Mardis, co-director of the genome sequencing center at Washington University in St. Louis, said in an e-mail.

Dr. Mardis could not specify what kind of nefarious end she imagined. But opponents of the deal cited a November article in The Atlantic saying that in the future, pathogens could be genetically engineered to attack particular individuals, including the president, based on their DNA sequences.

BGI and Complete Genomics dismissed such concerns as preposterous.

"There is absolutely no basis for such a wild and speculative claim" about biological weapons, Clifford A. Reid, the chief executive of Complete Genomics, said in a regulatory filing.

BGI already is doing sequencing of American DNA samples with partners including the Children's Hospital of Philadelphia and the patient-advocacy group Autism Speaks. BGI said any sequencing intended for medical use of American patients would be done in the United States in accordance with American laws regarding clinical research and patient privacy.

Some other executives at American sequencer manufacturers said they saw no cause for concern. "I can't believe they can come up with a rational explanation of why this is a national security issue," said Michael W. Hunkapiller, the chief executive of Pacific Biosystems.

Jonathan M. Rothberg, who runs the Ion Torrent sequencer division of Life Technologies, also said the acquisition "does not appear to raise national security issues."

Jay T. Flatley, the chief executive of Illumina, said there was a difference between selling sequencing machines and selling sequencing technology. He compared it selling someone a Coke and selling the formula to make Coca-Cola.

"Providing access to the fundamental technology is entirely different," he said in an e-mail Friday. "It would allow funding from the Chinese government to move the technology forward at a pace that no U.S. company could match because we do not have access to such funding sources."

Illumina has characterized BGI as an entity of the Chinese government. BGI denies that, saying it is a private company owned by its employees.

Complete Genomics, while it makes it own sequencing machines, does not sell them to others. Rather, it offers sequencing as a service. Its customers have included the National Cancer Institute, Genentech and the Mayo Clinic.

Mr. Hunkapiller of Pacific Biosciences said Complete's technology is "very slow."

He said of Illumina: "I can't believe they are worried about Complete's technology taking them out. That's nuts."