FTC Directs Illumina to Abandon Acquisition of Grail in a $7.1 Billion Deal

Grail Company

The Federal Trade Commission (FTC) on Monday ordered Illumina to divest its contentious acquisition of cancer test developer Grail, arguing that the deal would hinder competition and innovation.

This decision overturns an administrative judge’s September ruling, which had dismissed the FTC’s initial challenge to the $7.1 billion acquisition.

“The Commission found that the acquisition would diminish innovation in the U.S. market for [multi-cancer early detection] tests while increasing prices and decreasing choice and quality of tests,” the FTC stated in a press release.

“This is extremely concerning given the importance of swiftly developing effective and affordable tools to detect cancer early.”

Illumina announced its intention to appeal the FTC’s decision in federal court, seeking an expedited resolution. The DNA sequencing company asserted that it has a “strong case on appeal,” highlighting its previous victory over the FTC last year.

Shares of Illumina fell by more than 2% in afternoon trading on Monday.

Illumina anticipates a final decision on the appeal in late 2023 or early 2024. The company also expects a decision on its appeal against a similar order by European Union regulators around the same time.

Last year, the European Commission blocked Illumina’s acquisition over similar concerns regarding consumer choice and innovation.

Illumina argued last month that the European Commission lacks jurisdiction to block the merger between the two U.S. companies.

Winning these appeals would “maximize value for shareholders,” Illumina stated.

Illumina Company

“It enables Illumina to expand the availability, affordability, and profitability of the groundbreaking Galleri test in the $44-plus billion multi-cancer screening market,” Illumina said, referencing a Grail test product that screens for 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, according to Illumina.

The FTC’s order on Monday was accompanied by an opinion highlighting Illumina’s dominance in next-generation genetic sequencing platforms, which are crucial for multi-cancer screening tests as they analyze genetic material from blood samples.

Illumina will likely remain the “only viable supplier” of these platforms in the near future, which could harm competition, according to the FTC.

“The acquisition of GRAIL potentially gives Illumina incentives to favor GRAIL over its rivals by providing GRAIL preferential access or preferential terms for acquiring NGS inputs,” the FTC noted.

“Such preferences could distort competition in the research, development, and commercialization of [multi-cancer early detection] tests.”

Additionally, Illumina “stands to earn substantially more profit on the sale of GRAIL tests than it does by supporting rival test developers,” the commission added.

The FTC also dismissed Illumina’s claims that the acquisition would “save lives” by accelerating the development, approval, and adoption of Grail’s cancer tests.

The commission’s opinion asserted that fostering competition would “do more to save lives than allowing a monopolist to vertically integrate and capture the market.”

Illumina’s acquisition of Grail has also faced opposition from activist investor Carl Icahn, who holds a 1.4% stake in Illumina. Icahn’s resistance stems from Illumina’s decision to proceed with the acquisition without antitrust approval.

Last month, Icahn launched a proxy fight, seeking seats on Illumina’s board of directors and urging the company to unwind the deal.

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