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FTC orders Illumina to divest Grail acquisition

FTC orders Illumina to divest Grail acquisition

Francis deSouza, Chief Executive Officer of Illumina Inc., during a panel session on day three of the World Economic Forum (WEF) in Davos, Switzerland on Thursday, January 19, 2023.

Stefan Wermuth | Bloomberg | Getty Images

The Federal Trade Commission ruled on Monday Enlightenment to divest its controversial acquisition of cancer test developer Grail, saying the deal would stifle competition and innovation.

The decision reverses an administrative judge’s September ruling that dismissed the FTC’s initial challenge to the $7.1 billion deal.

“The Commission determined that the acquisition would hamper innovation in the US market [multi-cancer early detection] testing while increasing prices and reducing the choice and quality of testing,” the FTC said in a press release.

Illumina said in a statement that it intends to appeal the FTC’s decision in federal court and seek an expedited decision. The DNA sequencing company noted that it believes it has a “strong case on appeal,” noting how it prevailed against the FTC last year.

Illumina shares fell more than 2% in afternoon trade on Monday.

Illumina said it expects a final decision on an appeal in late 2023 or early 2024. At that time, the company also awaits a decision on its appeal of a similar order by European Union regulators, Illumina added.

The EU’s executive body, the European Commission, blocked the acquisition of Illumina last year over similar concerns that it would hurt consumer choice and innovation. Illumina said last month it had challenged the European Commission, arguing that the agency had no jurisdiction to block the merger between the two US companies.

Said Illumina Monday that the success of those appointments “would maximize value for shareholders,” the company added.

“It enables Illumina to expand the availability, affordability and profitability of the breakthrough Galleri test in the $44 billion multi-cancer screening market,” said Illumina, noting a single-test Grail testing product screened for more than 50 types of cancer 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 issued a statement accompanying its order Monday, highlighting that Illumina is the dominant manufacturer of next-generation genetic sequencing platforms. These products are a “critical component” of multi-cancer screening tests because they are used to analyze genetic material from blood samples taken for the tests, the commission noted.

Illumina is likely to remain the “only viable provider” of these platforms in the near term, which could hurt competition, the FTC said.

“The acquisition of GRAIL may provide Illumina with incentives to favor GRAIL over its competitors by providing GRAIL with preferential access or preferential terms for acquiring NGS inputs,” the FTC said. “Such preferences could distort competition in the research, development and commercialization of [multi-cancer early detection] Exams.”

Illumina “could make significantly more profit selling GRAIL tests than supporting competing test developers,” the commission added.

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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 says it believes that an increase in competition “would do more to save lives than allow a monopolist to integrate vertically and conquer the market”.

Illumina’s acquisition of Grail has sparked a backlash from another opponent, activist investor Carl Icahn, who owns a 1.4% stake in Illumina. His opposition to the deal stems from Illumina’s decision to complete it without antitrust approval. Icahn launched a proxy fight last month to seek seats on Illumina’s board and urge the company to back out of the deal.

Icahn did not immediately respond to a request for comment.

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