In 2021, Illumina, the leading manufacturer of gene-sequencing technology, completed its acquisition of Grail, a promising cancer-test developer, in a transaction valued at $7.1 billion. Grail originated as a research project within Illumina before being spun out as an independent company in 2016. The company has developed innovative technology for early detection of various cancers, including pancreatic, head and neck, and ovarian cancers.
The Federal Trade Commission (FTC) has recently ordered Illumina to divest Grail, marking a significant development in antitrust regulation. This decision follows a similar ruling by the European Union last September, which also blocked the deal. The FTC's decision was unanimous, with commissioners voting 4-0 to reverse a previous ruling by an administrative law judge who had initially ruled in Illumina's favor.
In its official statement, the FTC concluded that the acquisition would "diminish innovation in the U.S. market for multicancer early-detection tests while increasing prices and decreasing choice and quality of tests." The commission also expressed concerns that Illumina could leverage its dominant position as the leading supplier of gene-sequencing services to undermine Grail's competitors by "raising their costs or withholding or degrading access to supply, service or new technologies."
Illumina has indicated its intention to appeal both the FTC ruling and the European decision in federal appeals court. However, the company has stated that if these appeals prove unsuccessful, it will "move expeditiously" to divest Grail.
The prolonged uncertainty surrounding Grail's fate has negatively impacted Illumina's financial performance, with the company's stock price declining by approximately 37% over the past year. Prior to recent developments, Illumina shares were trading below $200, but have since shown marginal movement, closing at $230 per share after the FTC announcement.
Adding to Illumina's challenges, activist investor Carl Icahn has initiated a proxy fight against the current management team. Icahn has characterized the Grail acquisition as an "overpriced mistake" and has advocated for the return of former CEO Jay Flatley to replace current chief executive Francis deSouza, who was the principal architect of the Grail acquisition.
According to antitrust experts, this case extends well beyond a single biotech transaction and represents a test of regulators' renewed efforts to prevent large companies from acquiring emerging innovators. Both European and American regulators have adopted increasingly aggressive stances toward such acquisitions.
The case is particularly noteworthy because Grail does not directly compete with Illumina in gene sequencing—it represents what is known as a "vertical acquisition." Historically, courts have been reluctant to block or unwind such deals. If the FTC's challenge is upheld by the courts, it could significantly impact future acquisition strategies by tech giants and other dominant companies, potentially leading to additional divestiture orders.
FTC Chair Lina Kahn, a prominent advocate for pre-emptive regulatory action in merger oversight, has made this case a centerpiece of the commission's more assertive approach to antitrust enforcement.