Illumina's $7 billion deal for cancer-test developer Grail is rejected by the FTC

A $7 billion deal to buy cancer-test developer Grail Inc. from Illumina Inc. has been rejected by the Federal Trade Commission, which said that if this deal were to go ahead, it would hurt competition in one of the new frontiers of diagnostic medicine.

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The FTC ordered Illumina to cancel the merger on Monday, overturning an administrative law judge's decision in favor of the large medical testing firm and providing the latest indication that the commission is adopting a more assertive approach to deal-making.

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The decision was approved by a unanimous vote of the commission's members, including its lone Republican.

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The FTC claimed that a partnership between Grail and Illumina would hinder the development of early cancer detection tests while raising costs because Illumina is the leading manufacturer of the gene-sequencing technology that these tests employ to hunt for cancerous signals in blood samples.

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The FDA noted, "Given the necessity of promptly developing efficient and reasonably priced methods to identify cancer early, this is quite troubling."

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Illumina declared it will take the FTC's decision to a federal court on appeal and anticipates the order from the FTC to be postponed while the appeal is pending.

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The deal is being scrutinized because it involves a significant and developing area of medicine: the use of complex tests to identify diseases before it's too late to treat them.

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Leading these initiatives are Grail's liquid biopsies, which are testing for cancer diagnosis. Due to their potential to identify cancers in their earliest stages of sickness, when they are simpler to treat, the tests may aid physicians in curing patients.

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The cancer-detection assays developed by Grail may aid in patient recovery. Grail was founded by Illumina, primarily renowned for its gene-sequencing equipment, which later spun it out in 2017 while keeping a tiny share.

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Illumina, based in San Diego, reached an agreement to acquire the portion of Menlo Park, California-based Grail that it did not already own in 2020 and finalized the acquisition that same year.

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Despite worries from the FTC and European antitrust authorities that Illumina would harm competition, the company pushed on. The European Commission began last year to outline its preparations for requiring Illumina to unwind the Grail acquisition, and the FTC sought to prohibit the agreement in 2021.

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After several years in which technology and healthcare businesses had been allowed to pursue ever-larger combinations unimpeded, the corporation continued to move forward despite indicators that the regulatory environment for deal-making was tightening.

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Researchers mention instances of healthcare consolidation that increased costs, and lawmakers chastise large social media businesses for exposing kids to inappropriate information. Thus, the government's perspective has changed.

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The FTC will evaluate acquisitions more rigorously, especially those involving the technology and healthcare industries, according to Chairperson Lina Khan.

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In a 4-0 vote against Illumina, she joined the other three commission members. The lone Republican, Christine Wilson, published a concurring opinion before leaving on Friday.

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Illumina is anticipated to continue serving as the principal supplier of the goods required to carry out multi-cancer screening tests, the FTC stated in its conclusion.

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According to the commission, Illumina has strong financial motivations to make sure Grail works better than rival products, and Illumina could easily increase prices for those rival products or take other steps to reduce their ability to compete.

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In the upcoming weeks, a fine from the EU's competition watchdog is anticipated against Illumina for completing the Grail acquisition before the Commission had finished its review. Up to 10% of Illumina's revenue could be fined, and the business has set aside $458 million to cover this possibility.

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Also, a divestiture decision from the EU is anticipated in the upcoming weeks. Illumina has stated that it will challenge any divestment decision. In the event that it loses its appeal before the FTC or the EU, the business declared that it would act swiftly to divest itself of the Grail.

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Carl Icahn, an activist investor, has started a proxy battle against Illumina in response to his criticism of the company's handling of the Grail purchase. In addition to rehiring Illumina's former CEO, he wants to add three nominations to the company's board of directors. Illumina has pleaded with shareholders to oppose Mr. Icahn's plan.