What happened

Shares of Pacific Biosciences of California (PACB -6.21%) are falling today, down 11.5% as of 11:46 a.m. EDT, after the Competition and Markets Authority (CMA) in the United Kingdom announced a provisional decision that the proposed merger between Illumina (ILMN -2.78%) and PacBio would "result in a significant loss of competition" in the next-generation gene sequencing market.

So what

The U.K. CMA's provisional decision wasn't a shock. Earlier this year, the agency launched an investigation of the Illumina-PacBio merger

Businessman holding wood block with "No Deal" printed on it

Image source: Getty Images.

Based on the CMA's announcement, it appears that the primary concern is that Illumina could be eliminating competition for itself with the buyout of PacBio. The CMA stated that its "investigation has found that PacBio is one of Illumina's closest competitors and vice versa" and that PacBio's new technology could position it "to be a stronger competitor in the future." What the CMA didn't say was that the U.K. is home to Oxford Nanopore, another competitor in the gene-sequencing market that could be affected even more by Illumina acquiring PacBio.

PacBio's shares have soared based on the planned merger with Illumina. It's definitely bad news for the company if the deal has to be scrapped. PacBio remains unprofitable and will almost certainly soon need to raise additional cash to fund operations if it isn't acquired by Illumina.

Now what

Illumina and PacBio have until Nov. 14, 2019, to respond to the CMA's provisional decision. Investors should learn more about what might happen next when Illumina hosts its third-quarter conference call after the market closes today. If the deal does fall through, investors will need to go back to evaluating PacBio as a growth stock on its own merits rather than as a potential part of a much bigger company.