US-based diagnostic company Illumina has announced that it is divesting its cancer diagnostic subsidiary Grail, after a lengthy legal battle following the $8bn purchase of the company two years ago.
The decision comes in response to a recent ruling by the US Fifth Circuit Court of Appeals, deeming the merger anti-competitive.
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By GlobalDataThe US Appeals court ordered the Federal Trade Commission (FTC) to re-evaluate Illumina’s acquisition of Grail. The FTC had raised concerns about Illumina’s dominant role in DNA sequencing, fearing potential price hikes and restrictions on selling to Grail’s competitors.
While the court acknowledged flaws in the FTC’s legal arguments, it indicated substantial evidence supporting concerns about competition reduction. This prompted Illumina’s decision not to pursue further appeals. Illumina plans to divest Grail by either selling it to another company or listing it on capital markets, as directed by the European Commission (EC).
Illumina has faced years of lawsuits since the acquisition of Grail completed in 2021. Grail originated as a part of Illumina, was later spun out as an independent startup in 2016, and then reacquired by Illumina in 2020. The company was told that the merger was under investigation by the EC in July 2021, but Illumina completed the deal a month later anyway. In response, the European agency imposed a €432m fine on Illumina in July 2023 for finalising the Grail takeover without obtaining EU antitrust approval.
Investors, including billionaire Carl Icahn, led a successful board challenge in May 2023 after filing a lawsuit against Illumina, alleging the company breached its fiduciary duties regarding the Grail deal. The CEO of Illumina at the time Francis deSouza stepped down just a month later.
In October, Illumina expressed its intention to challenge the EC ruling that called for the company to divest Grail, contending that the EC lacks jurisdiction over the deal. Illumina initiated a jurisdictional challenge, along with the additional challenge at the US Fifth Circuit Court of Appeals.
According to GlobalData’s Medical Intelligence Center, the company’s net income fell by 677.9% between 2021 and 2022, losing $4.4bn.
In the announcement accompanying the divestiture, Illumina CEO Jacob Thaysen said: “The management team and I continue to focus on our core business and supporting our customers. I am confident in Illumina’s opportunities and our long-term success.”
