Illumina Ordered by FTC to Unwind Grail Purchase From 2021 (1)

Illumina Inc.’s was ordered to unwind its $7 billion acquisition of cancer startup Grail by the Federal Trade Commission, an uncommon move by antitrust regulators who said the deal raises competition concerns for cancer testing.

The FTC’s 4-0 decision announced Monday overturned an earlier ruling by its in-house judge who found last year that the tie-up wouldn’t harm innovation in the market for early-stage cancer detection.

Illumina plans to appeal the FTC’s decision, according to a statement. The shares fell 1.5% as of 12:23 p.m. in New York.

Grail was spun off from DNA-sequencing giant Illumina in 2016 to develop a blood test to detect 50 types of early stages of cancer. Illumina sought to buy back the startup, closing the deal in August 2021.

The trajectory of the FTC’s case has been unusual from the beginning. The agency sued to block the merger even though the cancer screening industry is relatively new, testing out novel legal theories around “potential competition” in a nascent market. Throughout the process, Illumina has moved aggressively, opting to close the deal even in the face of a lawsuit from the FTC and European regulators. The US has staunchly defended the case even in the face of opposition. The FTC only occasionally overrules its internal judge.

Following a trial, FTC Administrative Law Judge Michael Chappell issued a preliminary ruling in favor of the companies in September. The FTC appealed Chappell’s decision, sending the case to the agency’s five commissioners.

“The Commission found that the acquisition would diminish innovation in the U.S. market,” the FTC said in a statement, adding that it could increase prices and “decrease choice and quality of tests.”

Illumina will appeal the FTC’s decision further to a federal appeals court. The company is already challenging a merger veto by the European Commission, the EU’s merger watchdog, as well as a case over the commission’s decision to review the deal.

Illumina said it seeks to resolve both European and FTC appeals by late 2023 or early 2024. Winning the appeals would enable Illumina to “expand the availability, affordability and profitability” of the early-detection Galleri test, which is part of an over $44 billion multi-cancer screening market, the company said.

Billionaire activist investor Carl Icahn has pushed Illumina to end its regulatory battles over Grail and spin off the company. Icahn, who has a 1.4% stake in the company according to a filing, nominated three candidates for Illumina’s nine-member board. The company opposes Icahn’s nominees, saying they don’t have the skills or expertise needed for the roles.

(Updates with case history in fifth paragraph.)

To contact the reporters on this story:
Leah Nylen in Washington at lnylen2@bloomberg.net;
Emily Birnbaum in Washington at ebirnbaum3@bloomberg.net

To contact the editors responsible for this story:
Sara Forden at sforden@bloomberg.net

John Lauerman

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