Despite looming antitrust investigations on both sides of the Atlantic, Illumina has pushed forward with finalizing its $8 billion deal to acquire Grail, maker of a newly launched blood test to detect dozens of different cancers.
First announced nearly one year ago, the transaction would see the DNA sequencing giant welcome home its spinout—and give it a strong foundation within the clinical testing markets, with a diagnostic that sifts for the genetic material that tumors shed into the bloodstream and traces it back to its organ of origin.
But competition watchdogs in Europe as well as the U.S. Federal Trade Commission have said the apple of Illumina's eye may prove too tempting, by handing the company an opportunity to throttle the R&D progress of competing cancer test makers, courtesy of its massive global market share in DNA analyzers.
Illumina’s latest move is the capstone to its defiance: The company has long pledged to “vigorously defend” its acquisition of Grail and earlier this year filed a lawsuit in European courts to stop regulators from investigating the deal, claiming they have no jurisdiction as Grail does no business on the continent.
As for the FTC? “There is no legal impediment to acquiring Grail in the U.S.,” Illumina said in a statement, while committing to “abide by whatever outcome is ultimately reached in the U.S. courts.”
Illumina also said it would keep Grail as a separate, wholly owned subsidiary, pending regulators’ final reviews, which are both projected to conclude some time after the original terms of the multibillion-dollar deal are set to expire in mid-December.
But that does not appear to be enough to satisfy the watchdog officials in Brussels: Less than two days later, the commission announced that Illumina's decision to forge ahead with the deal has triggered a new, immediate investigation—into whether the companies breached European "standstill" regulations that aim to prevent irreparable damage to international commerce.
"We deeply regret Illumina's decision to complete its acquisition of Grail, while our investigation into the transaction is still ongoing," said Margrethe Vestager, the commission's executive VP in charge of competition policy.
"Companies have to respect our competition rules and procedures," Vestager said. "Under our ex-ante merger control regime companies must wait for our approval before a transaction can go ahead."
This would be in addition to the full investigation into the substance of the deal that the European antitrust bureau announced this past July, following a monthslong preliminary probe. Violating the standstill regulations can result in fines reaching up to 10% of the two companies' aggregate turnover, the commission said.
Meanwhile, across the pond, the FTC said it would postpone its own regulatory actions—while the agency works through a “tidal wave” of separate merger filings—until potentially after the commission makes its decision. However, an administrative trial within the agency is scheduled to begin Aug. 24, with Illumina expecting a decision in early 2022.
Earlier this month, the FTC’s competition unit said it may not be able to meet the deadlines of each multimillion-dollar deal it receives, due to a surging caseload, but noted the caveat that a lack of response from regulators doesn’t equal a green light.
The FTC said it can determine a merger is illegal even after a deal is completed and warned companies that “proceed with transactions that have not been fully investigated are doing so at their own risk.”
“The stakes here are high, because, simply put, this deal saves lives, and we feel a moral obligation to ensure that the deal has a full review,” Illumina CEO Francis deSouza said on a call with investors.
“Right now, Grail’s multicancer early detection test is available in the U.S. to those able to pay $950 out of pocket,” deSouza said. “We want to provide the financial support, expertise and scale to get it widely distributed and covered by insurers.
“We estimate that, with Illumina acceleration, the Galleri test can conservatively save 10,000 additional lives in the U.S. and additional lives in the E.U. over the next nine years,” he added. “Reuniting Illumina and Grail is the fastest way to make this test available to everyone, everywhere.”
Grail’s quest over the past five years has seen it reap more than $2 billion in venture capital to power clinical trial programs enrolling more than 115,000 people with and without cancer. Now available with a prescription, the test is meant to screen patients at an elevated risk for cancer, such as adults over the age of 50.
Previous studies have pegged Galleri’s total positive predictive value at 44.6% and found that it accurately determined a tumor’s origin site 96.3% of the time. In addition, Grail has shown its test is more sensitive to cancers that may be more aggressive than expected, based on a person’s age and the tumor’s stage and type.
Illumina has estimated the diagnostic could help screen as many as 50 million people after its initial debut as a lab-developed test, before Grail pursues a full FDA approval in 2023.
“Just as you are now able to be tested for early‐stage diabetes and high cholesterol, you will soon be able to receive multicancer early screening from a simple blood draw in your doctor’s office,” deSouza said. “This will be nothing short of transformational for human health.”
Editor's note: This story has been updated to include the European Commission's announcement of a new investigation into potential breaches of its "standstill" merger regulations.