Illumina hits yet another legal snag as clock ticks on $8B deal for Grail

Illumina's multibillion-dollar deal for cancer blood test developer Grail was already under an antitrust microscope in the U.S. and Europe. Now, the watchdogs have raised a new threat.

A federal court allowed U.S. regulators to potentially postpone their action to block the deal, pending legal outcomes across the pond—all while the deal runs up against a deadline set to expire before the end of this year.

Illumina CEO Francis deSouza described the Federal Trade Commission’s latest move as “time-wasting maneuverings” in a report from the Financial Times, after the agency asked a San Diego federal judge to drop the challenge it originally brought in March.

The FTC originally intervened by claiming Illumina’s ownership of a proprietary cancer diagnostic could harm similar development efforts by other test makers, which almost assuredly rely on the company’s DNA sequencing hardware, with Illumina’s instruments and consumables making up about 75% of the global market.

Though court proceedings on a potential injunction against the buyout had been scheduled for early August, the FTC said moving forward would not be appropriate while European regulators are also holding up the deal, according to The Wall Street Journal

The court granted the FTC’s withdrawal request but left the door open for the agency to pick up the case again internally later this year. The deal's terms state the $8 billion transaction must close by December 20 at the latest. 

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“The biggest challenge is getting the FTC to move with the appropriate sense of urgency and getting the FTC to stop the time-wasting maneuverings and just focus on the case and get this case to trial,” deSouza told the FT.

Meanwhile, in Brussels, Illumina is mounting a separate legal challenge to an antitrust crackdown, saying the E.U. has no jurisdiction because Grail does no business in Europe. The commission’s directorate-general for competition took up the case after receiving requests from six countries: Belgium, France, Greece, Iceland, the Netherlands and Norway.

First announced last September, Illumina’s quest to buy back its own former spinout would give it a strong footprint in clinical testing, with Grail planning to launch its Galleri cancer screening blood test in the U.S. this year.

Designed to detect and trace the locations of as many as 50 different tumors from DNA found in a single blood draw, the Galleri test could reach 50 million people after its initial launch and before a full FDA submission slated for 2023, Ilumina has said, as the DNA sequencing giant plans to throw its manufacturing and marketing weight behind the effort. 

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Since it struck out on its own from Illumina in 2016, Grail has grown to more than 430 employees and raised nearly $2 billion in venture capital money, including investments from Bill Gates, Jeff Bezos and others, to support a clinical testing program spanning 115,000 participants with and without cancer.

And after regulators raised their concerns, Illumina pledged new standard contracts and guarantees to sequencing access for its oncology customers, alongside a commitment to lower prices by more than 40% over the next four years.

The contracts include 12 years’ supply of sequencing instruments and consumables with no price increases, and a promise not to discontinue the sale of any product as long as it's being purchased by a cancer test developer.