Illumina today said it signed a definitive agreement to acquire Verinata Health, a provider of noninvasive tests for early identification of fetal chromosomal abnormalities, for $350 million up-front plus up to $100 million in milestone payments through 2015.

The deal expands Illumina’s product offerings to include Verinata’s verifi® prenatal test, and the company’s noninvasive prenatal test (NIPT) intellectual property—and with them, a key presence in noninvasive prenatal testing, one of the most rapidly growing areas utilizing next-generation sequencing technologies like those sold by the company.

“The acquisition helps transition Illumina from a tools supplier (high academic exposure, intense technology risk/competition) to a molecular diagnostic test provider,” Mizuho securities analysts Peter Lawson and Eric Criscuolo wrote in a research note to investors today. “We estimate prenatal testing is approximately a $600 [million] market, growing strong double digits and expected to double or triple in size in 5 years,” when according to Illumina, 1.5 to 2 million tests are projected to be performed annually.

Jay Flatley, Illumina’s president and CEO, in a statement cited the company’s expertise as dominant provider in next-generation sequencing—and its acquisition in September of UK-owned BlueGnome for an undisclosed sum. BlueGnome, now an Illumina subsidiary, focuses on screening of genetic abnormalities associated with developmental delay, cancer, and infertility. The BlueGnome and now Verinata acquisitions position Illumina beyond its longtime role as a next-gen sequencing giant, toward a key role in genomic-based diagnostics, especially in reproductive health and cancer.

Verinata’s verifi test, available through a physician, analyzes cell-free fetal DNA naturally found in a pregnant woman’s blood to look for aneuploidies—specifically, in Down syndrome (trisomy 21 or T21), Edwards syndrome (trisomy 18 or T18), and Patau syndrome (trisomy 13 or T13). Verifi is also the first noninvasive prenatal test with the option to include evaluation of sex chromosome aneuploidies, such as Turner syndrome (Monosomy X), Triple X (XXX), Klinefelter syndrome (XXY), and Jacobs syndrome (XYY).

According to Illumina, verifi provides more definitive information than traditional protein serum screens that calculate probabilities and does not carry the risk of complications found in invasive procedures such as amniocentesis.

Illumina said it will finance its Verinata acquisition primarily with cash on hand, and expects to close on the purchase after customary regulatory approvals. The company said the transaction will reduce its non-GAAP earnings in 2013 by approximately $0.20 per share, before generating revenue beginning in 2014 and beyond.

Illumina said it will provide additional information on the impact of the Verinata deal in its guidance when it offers guidance to investors on fiscal year 2013 during the Company’s fourth quarter and fiscal year 2012 earnings call.

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