Illumina purchases Grail without clearance from FTC or European Union

Illumina, the DNA sequencing giant, said Wednesday it has closed its $8 billion purchase of Grail, a cancer diagnostics firm, even though the U.S. Federal Trade Commission has sued to block the deal and the European Union is investigating it.

Grail is developing blood tests that aim to detect multiple types of cancer early, before they become deadly. Illumina is the leading maker of the basic technology on which such tests, which are being developed by multiple firms, are based.

The company said in a press release that the merger “will save lives.” But the deal terms, Illumina said, were set to expire on Dec. 20, before a chance for a full review. “The clock will just run out,” the press release said.

“We felt a moral obligation even to make sure this deal does get through the regulatory process and we feel that by acquiring the company and keeping it separate, we achieve both aims,” said Francis deSouza, Illumina’s CEO, during a conference call. “We get the deal to get its full review through the regulatory process and we respect the process happening through the European Commission by keeping the companies separate.”

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Closing the deal means that Grail’s current shareholders, who are private investors and venture capitalists, will be paid now. But Grail will continue to operate as a separate company, meaning that if regulators block the deal the two firms could easily be separated. This might be done by assembling a new syndicate of private investors or listing Grail on the public markets, something the startup was expected to do before Illumina’s plan to acquire it was announced almost a year ago. It’s possible that a public listing would allow Illumina to recoup much or all of what it is spending.

Illumina’s deSouza has argued that the deal is in no way anticompetitive, even though Illumina sells technology to Grail’s competitors, noting that Grail was originally spun out of Illumina in 2016.  The company says that when it entered the market for non-invasive prenatal diagnostics, used to detect genetic abnormalities in a developing fetus, “prices dropped, reimbursement expanded, the number of providers increased, and more expectant parents had access to testing.”

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Illumina also argues that the European Commission does not have jurisdiction over the deal. Although Grail is currently selling its cancer blood test, Galleri, for $950 in the US, it does not have plans to market the test in Europe. The General Court of the European Union will hear that case later this year, Illumina says.

The FTC made clear its concerns about the acquisition in a March 30 press release, the agency said Grail’s test is “a game changer for cancer patients and their loved ones” but that Illumina’s purchase “would likely reduce innovation in this critical area of healthcare, diminish the quality of [these] tests, and make them more expensive.”

Plowing forward with the deal anyway risks enraging regulators on both sides of the Atlantic.

It is the second time deSouza has seen a pivotal deal challenged by regulators. In 2020, Illumina abandoned a plan to purchase a DNA sequencing firm, Pacific Biosciences, due to opposition from the FTC.

This time, he seems to be telegraphing, he won’t back down so easily.

Source: STAT