JPM23: Illumina could face the EU's maximum fine for jumping the gun with Grail deal: report

Illumina could well be facing the maximum fine the European Commission can impose, totaling up to 10% of its annual revenues, over the DNA sequencing giant’s premature acquisition of the blood testing company Grail, according to a report from Reuters.

Though it’s long been known such a penalty was on the table—following previous EU ultimatums as well as the fact that Illumina set aside more than $450 million last year for a just-in-case fund earmarked for “legal contingencies”—the news service this week was the first to describe the full possibility as likely and that European officials remained unswayed by Illumina’s case following a closed hearing last month.

Illumina told Reuters that it plans to appeal any fine, which is expected to be handed down in the coming months. The commission vetoed the company’s $8 billion acquisition of Grail and its multi-cancer early detection test last September, more than a year after Illumina moved ahead with the deal without waiting for the completion of antitrust reviews.

In the time since the acquisition, Grail has been managed at arm’s length as a separate subsidiary—though, earlier this week, Illumina challenged those requirements as well, Reuters reported

But the ties between Illumina and its former spinout could have to be unraveled further, pending an official EU divestment order that is yet to come as well as depending on the results of Illumina’s appeals filed in European courts. Meanwhile, Illumina has also said it has started exploring its options for either selling Grail off or watching it go independent for the second time.

So how much could a 10% fine on yearly turnover shake out to be? Illumina offered a look at its books this week at the J.P. Morgan Healthcare Conference in San Francisco, with a preview of its full-year 2022 earnings report scheduled for Feb. 7.

The company estimated a haul of nearly $4.6 billion in revenue during the last year, a slight increase over the $4.5 billion it collected in 2021—though that figure had represented a 40% gain over 2020’s $3.2 billion. That could place the money already in Illumina’s contingency fund within the ballpark.

Next year, Illumina said it hopes to see sales grow by 7% to 10%, for between $4.9 billion and $5 billion total, driven in no small part by its upcoming NovaSeq X systems.

Announced last September, the NovaSeq X and X Plus are designed to be the company’s fastest and most powerful DNA sequencers, with the ability to parse as many as 20,000 whole human genomes per year, at a cost of about $200 each.

Speaking during his investor presentation at the conference, CEO Francis deSouza said that Illumina has already logged more than 140 pre-orders for the NovaSeq X line, for the strongest pre-launch demand in the company’s history. With each machine costing nearly $1 million or more, Illumina expects to begin shipping 40 to 50 of the sequencers by the end of March, and more than 300 by the end of 2023.

“We have already effectively sold out not just for Q1, but for most Q2 too,” deSouza said. “So we feel really good about the demand side of it. Obviously the work to do now is to scale up manufacturing.”

In addition, more than 35% of NovaSeq X preorders were from clinical users, while about one-in-six were from customers making their first entries into high-throughput sequencing instead of upgrading from a previous sequencer, according to Illumina’s chief technology officer, Alex Aravanis, M.D., Ph.D.

“It's really cool to see what customers are thinking about the instrument,” Aravanis told Fierce Medtech during the conference.

“For example, maybe they're doing a small liquid biopsy panel, and this will allow them to do a larger liquid biopsy panel—or they could think about doing research studies with whole genomes, versus exomes,” he said. “We have one customer who's very interested in clinical trials, and they talked about how going to a single-day runtime would be very enabling for them and their patients.”

At the same time, hospitals, health systems and other organizations are taking their first plunges into massive sequencing capabilities, with the NovaSeq X’s price-per-genome costs pushing them to make investments in the systems now, Aravanis said.

Also during JPM, Illumina announced a joint project with Amgen and Nashville Biosciences, a subsidiary of Vanderbilt University Medical Center, to deliver whole-genome sequences from about 35,000 DNA samples, primarily made up from Black participants.

Most genomic data sets are drawn from people of European descent. That lack of diversity has led to gaps in the understanding of diseases and the use of precision medicine. The multiyear collaboration aims to produce the largest data set of its kind.

Amgen’s deCODE genetics subsidiary will perform the sequencing using Illumina hardware and will upload the data to Illumina’s analytics platform, which be available for academic research within Vanderbilt.

"Once complete, this data set will provide a wealth of new information about the human genome and accelerate the study of disease in—and discovery of new therapeutics for—populations less well represented in prior large-scale sequencing efforts,” Nashville Biosciences CEO Leeland Ekstrom said in a release. “The opportunity to sequence this diverse set of samples will help broaden our understanding for individuals who have been underrepresented in genetic research and continue to experience health disparities."