Recently, Illumina, the global leader in gene sequencing instruments, announced that its board of directors has approved the spin-off of its early cancer screening company GRAIL through a stock distribution to existing shareholders, expected to take effect on June 24, 2024. GRAIL will become an independent company and plans to go public on NASDAQ under the ticker symbol “GRAL”.

Grail, Inc. was founded in 2016 and is committed to the development of early cancer screening technologies and products using liquid biopsy. The company’s Series A funding round raised $100 million, led by Illumina and renowned venture capital firm ARCH Venture Partners, followed by multiple additional rounds of investment. In September 2020, Illumina and Grail, Inc. jointly announced that they had reached a definitive agreement, under which the former would acquire the latter for $3.5 billion in cash and $4.5 billion in stock, totaling $8 billion. This transaction aims to acquire the shares of Grail, Inc. not already held by Illumina, as well as its related products and technologies.

Illumina, as the leading company in global gene sequencers, once occupied 70% of the global market share, with 90% of gene sequencing data provided by its equipment.GRAIL, Inc.'s early screening tests rely heavily on the underlying support of gene sequencers. This kind of vertical integration, which involves leading companies in two closely related niche fields, is considered to potentially lead to monopolization, thereby reducing competition and innovation in the cancer detection market.

On March 30, 2021, the U.S. Federal Trade Commission (FTC) issued a statement opposing Illumina's plan to acquire GRAIL, Inc. In April 2021, the European Competition Authority (EC) announced it would review the transaction, later expanding the review into an in-depth investigation. In August 2021, Illumina preemptively announced the completion of its acquisition of Grail, Inc. However, in April 2023, the FTC again rejected the deal between Illumina and Grail, overturning a previous ruling by an administrative law judge that had supported the large medical testing company. The FTC stated that the acquisition would harm the development of the early cancer screening market and lead to higher prices. In July 2023, the European Commission fined Illumina €432 million for completing the acquisition of cancer detection provider Grail without obtaining approval from EU regulators. This is the largest penalty ever imposed by the European Commission for a regulatory breach related to mergers.

In addition to facing regulatory headwinds, Illumina's acquisition of GRAIL has also exerted a drag on its financial performance. According to Illumina's 2022 annual report, GRAIL generated revenue of only $55 million in 2022, accounting for approximately 0.1% of Illumina's total revenue. Meanwhile, GRAIL incurred R&D expenses of $330 million, sales and administrative expenses of $296 million, and goodwill impairment of $3.914 billion in 2022. This goodwill impairment directly led to Illumina recording a net loss of $4.404 billion in 2022, compared to a profit of $762 million in 2021. In the third quarter of 2023, Illumina’s net loss was also impacted by $821 million in goodwill and intangible asset impairments related to GRAIL.

In December 2023, the U.S. Court of Appeals ruled in favor of the Federal Trade Commission in the case brought by Illumina, ordering Illumina to completely divest its ownership of GRAIL. After reviewing the court's opinion, Illumina chose not to further appeal the Fifth Circuit Court’s decision and decided to divest GRAIL.

Recently, Illumina announced that its board of directors had approved the spin-off of GRAIL, marking the conclusion of their dramatic association. In a statement, Illumina noted it would retain 14.5% of the company and distribute dividends comprising 85.5% of GRAIL's issued common stock to Illumina shareholders on a pro-rata basis.

"Illumina CEO Jacob Thaysen stated, 'Today's announcement marks a milestone for Illumina and represents an important step forward for the company. The divestiture of GRAIL is one of our key priorities for 2024. As we prepare to lead the next era of genomics innovation, we believe GRAIL will play a significant role in driving industry progress and improving human health.'"

Data shows that GRAIL, Inc.'s total revenue for the full year of 2023 was $93 million, representing a 68% year-over-year increase. In the first quarter of 2024, the company's revenue reached $27 million, a 36% increase from $20 million in 2023. As of March 2024, GRAIL had sold 180,000 testing products, with testing revenue in 2023 amounting to $75 million, up from $40 million in 2022.

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