SAN FRANCISCO -- Illumina, the leading manufacturer of DNA sequencing machines, said Monday that it would buy the privately held Verinata Health for at least $350 million in cash to expand its push into the diagnostics business.
Verinata, based in Redwood City sells a test that uses a blood sample from a pregnant woman to determine whether her baby will have Down syndrome or some other chromosomal abnormalities.
Such tests, which have been available for only about a year, have been rapidly catching on as an alternative, in some situations, to invasive tests like amniocentesis that carry a slight risk of inducing a miscarriage.
Illumina's stock fell almost 8 percent in early trading Monday, though that was probably more because of reports that Illumina itself would not be acquired by Roche Holding, the Swiss pharmaceutical and diagnostics company. Illumina shares closed at $50.88, down 7 percent.
Roche's chairman, Franz Humer, was quoted Sunday by a Swiss newspaper, Sonntags Zeitung, as saying a deal was off because Illumina wanted too high a price.
In April, Roche dropped a hostile bid for Illumina, valued at $51 a share, or about $6.7 billion.
But a different Swiss newspaper reported in December that Roche was trying to buy Illumina again, this time for $66 a share. Neither Illumina nor Roche commented publicly on that report.
Both Roche's interest in Illumina and Illumina's acquisition of Verinata suggest
Illumina wants to be more than a seller of sequencing machines. It already offers a service sequencing the genomes of people to help diagnose rare diseases or figure out the best treatment for a cancer. In September, it bought BlueGnome, a British company that uses sequencing to screen for various genetic abnormalities.
"The agreement with Verinata demonstrates Illumina's commitment to developing innovative diagnostic solutions and providing our partners with the most advanced technologies for improved patient care," Jay T. Flatley, chief executive of Illumina, said in a statement.
Verinata's test, called Verifi, uses sequencing to analyze fragments of fetal DNA that can be found in a pregnant women's blood. That allows for detection of Down syndrome, in which a person has three copies of chromosome 21 instead of the usual two.
Such noninvasive tests for Down syndrome appear to be catching on rapidly. Verinata, however, is believed to substantially lag the market leader, Sequenom, in market share.
Sequenom, a publicly traded company, introduced the first noninvasive Down syndrome test in October 2011.
Verinata said on its website that it would continue to operate as a subsidiary of Illumina. Beyond the initial payment of $350 million, Verinata shareholders will be eligible to receive up to an additional $100 million in milestone payments through 2015.
Illumina said the deal would dilute its earnings per share by 20 cents in 2013 but add to them in 2014.
Illumina made its announcement on the eve of the J.P. Morgan Healthcare Conference in San Francisco, an annual Wall Street and medical industry gathering at which numerous companies make announcements.