Biotech Company Illumina Prepare Defense Against Carl Icahn Over $7.1 Billion Deal

Biotech Company Illumina (Photo: David A. Grogan)

Biotech company Illumina pushed back on Monday against Carl Icahn’s proxy fight over its acquisition of cancer test developer Grail, stating that the activist investor’s board nominees “do not add value.”

The San Diego-based DNA sequencing company issued its latest response to Icahn’s strong criticism of the $7.1 billion deal it completed in 2021, emphasizing its commitment to maximizing shareholder value while working with antitrust regulators to “define GRAIL’s path forward as expeditiously as possible.”

Icahn, who owns a 1.4% stake in Illumina, sent an open letter to the company’s shareholders last week.

In the letter, he claimed that the DNA sequencing company paid too much for Grail and completed the “reckless” deal without obtaining European antitrust regulatory approval.

He argued that these actions have wiped out $50 billion in Illumina’s market value and “clearly shows that shareholders have lost faith in Illumina’s management team and board of directors.” Grail is based in Menlo Park, Calif.

Icahn also declared his intention to nominate three members to Illumina’s board during the company’s annual meeting of shareholders, expressing fears that the board “will pursue GRAIL until the end of time without regard to the amount of value destruction they leave in their wake.”

“To paraphrase William Shakespeare’s Hamlet, something is rotten in the state of Illumina,” Icahn wrote. Following the release of Icahn’s letter, Illumina’s stock, which had lost more than half its value from an August 2021 peak, jumped 17%.

In its response on Monday, Illumina highlighted its ongoing efforts to address regulatory opposition.

Last year, the European Commission blocked the acquisition over concerns that it would harm consumer choice and disclosed details of a planned order that would force Illumina to unwind the deal.

Illumina (Photo: Mike Blake)

This could result in a fine of up to 10% of Illumina’s annual revenues, which exceeded $4.5 billion last year.

Illumina stated that it has challenged the European Commission’s decision, arguing that the agency lacks jurisdiction to block the merger between the two U.S. companies.

A final decision is expected in late 2023 or early 2024. Illumina noted that winning a jurisdictional appeal would eliminate any potential fine and “gives the greatest optionality for Illumina to maximize value for shareholders.”

The company also asserted that Icahn recognizes Grail’s value to shareholders, citing an interview last week in which Icahn referred to Grail as Illumina’s “best equipment.”

Illumina added that the billionaire investor acknowledged he does not understand the regulatory process and has not offered ideas for a “rapid resolution” for Grail.

“Icahn has no ability to accelerate the legal and regulatory processes and neither do his nominees,” Illumina stated.

The company added that it has interviewed each of Icahn’s nominees and found they “lacked relevant skills and experience.”

This includes Vincent Intrieri, the founder and CEO of VDA Capital Management, who was previously employed by Icahn, General Counsel of Icahn Enterprises Jesse Lynn, and Andrew Teno, a portfolio manager at Icahn Capital LP, an entity where Icahn manages investment funds.

Illumina praised Grail in its release, stating it has “tremendous long-term value creation potential.”

According to Illumina, Grail offers the only commercially available early screening test that can detect more than 50 types of cancers through a single blood draw. The test generated $55 million in revenue in 2022 and is expected to bring in up to $110 million this year.

The U.K.’s National Health Service is researching the test in a study with 140,000 participants, Illumina added. If the study is successful, the agency plans to test one million people in the U.K. in 2024.

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