Illumina's quest for Grail potentially blocked for good, as EU jacks up legal pressure: report

It may be the end of the road for Illumina's quest for Grail. After extending yet another olive branch to the European antitrust regulators adjudicating its premature acquisition, Reuters reports that the $8 billion deal is likely to be vetoed. 

Earlier this month, the DNA sequencing giant had offered to give its rivals royalty-free access to certain global patent licenses and pledged a three-year truce on patent litigation against its Chinese competitor BGI. However, the European Commission's concerns remain, and the watchdogs aren't convinced that the latest proposal would boost competition, the news service said.

Those moves came after the continent’s second-highest court ruled that the European Commission’s probe into Illumina’s acquisition could proceed. The company had challenged whether the deal fell under EC jurisdiction at all.

They also follow the commission’s recent upping of the ante: On July 19, the EU’s competition watchdog officially alleged Illumina had breached regulations by closing the deal before the investigation could be completed.

“If companies jump the gun and implement deals that are subject to our review, they undermine the effective functioning of our EU merger control system,” Margrethe Vestager, the commission’s executive vice-president in charge of competition policy, said in a statement.

“This is a serious breach of the standstill obligation,” Vestager said. “Illumina and Grail have openly done so by implementing their deal while the Commission is still carrying out its in-depth investigation. This could result in hefty fines.”

Those penalties could reach up to 10% of Illumina and Grail’s worldwide revenue—an amount that topped $4.5 billion in 2021 and is expected to pass $5 billion this year. 

The commission is scheduled to decide on the matter by mid-September, Reuters reported. Officials are now collecting feedback from Illumina’s rivals about the latest offers. 

Illumina previously offered concessions last year in a bid to head off antitrust concerns on both sides of the Atlantic, including a pledge to sign new standard contracts with its customers developing cancer diagnostics. The new contracts would guarantee access to hardware with no price increases for at least 12 years.

However, both the EC and the U.S. Federal Trade Commission have continued to express misgivings about the Grail acquisition. They say ownership of Grail's multi-cancer early detection test would tempt Illumina—with its control over the majority of the international market share of sequencing machines—into throttling back DNA research of its newfound competitors in oncology.

Illumina CEO Francis deSouza has said that unlocking the full potential of Grail’s Galleri test—which aims to detect as many as 50 different cancers through a single blood draw—requires a complete commercial integration of the two companies.

“The European regulatory and reimbursement environment is complex,” deSouza told Fierce Medtech earlier this year. “That is a lot of work, and we have a lot of people on the ground doing that. That is not something that we could just do as a favor or as a consulting assignment to Grail—that will take a lot of people working in our company.”

“Similarly, we have production labs that do millions of genomic tests a year in the U.S. and outside—they’re our labs, with our people and our other tests, and that’s not something we could rent to somebody else to just roll their test in our environment,” he said.

Currently, Illumina is holding Grail at arms’ length as a separately managed subsidiary, pending final decisions from antitrust regulators.