EU Orders Illumina to Divest Grail, Mandating Full Independence and Competitive Viability

The European Commission said in an order issued on Thursday that Illumina must unwind its acquisition of Grail.

The order includes several principles that Illumina must comply with. The European Commission stated in a press release: "First, the unwinding of the transaction must restore Grail's independence from Illumina to pre-acquisition levels. Restoring Grail’s independence will eliminate the harm to competition caused by Illumina's ability and incentive to delay or disadvantage Grail’s competitors."

Grail must remain "viable and competitive" as it was before the acquisition, and this process must be completed "within a strict timeframe and with sufficient confidence."

Illumina will have the option to choose the method of divestiture, such as a sale or an initial public offering, but it must submit a plan for approval by the European Commission. It must also comply with "interim measures" to ensure that Illumina and Grail continue to operate separately, replacing the temporary measures that have been in effect since October 2022.

"The decision today restores competition in the development of early cancer detection tests, which could be a breakthrough in our fight against cancer," said Commissioner Didier Reynders, in charge of competition policy. "By ordering Illumina to restore Grail's independence, we are ensuring a level playing field in this crucial market, ultimately benefiting European consumers."

"Illumina is currently reviewing the European Commission's divestiture order," an Illumina spokesperson said in a statement.

The European Commission did not disclose financial details, such as how much cash Illumina needs to provide to Grail.

Evercore ISI analyst Vijay Kumar wrote in a note to investors: "Investors are nervous about the amount of cash Illumina must provide to ensure Grail's survival. Some investors believe that [Grail's current annual expenditure level][approximately] $700 million implies a potential cash outlay of [approximately] $1.5 billion, assuming Illumina has to provide two years' worth of cash."

This order was issued more than a year after the European Commission announced that Illumina would not be allowed to retain Grail, on the grounds that doing so could cut off or disadvantage Grail's competitors from accessing critical next-generation sequencing technology, of which Illumina is a leading supplier.

Illumina Announces Plan to Acquire Grail for $8 Billion by End of 2020, Drawing Scrutiny from EU Commission and US Federal Trade Commission. In July 2023, the EU Commission Fines Illumina €432 Million ($479 Million) for Completing the Acquisition Prematurely.

The Federal Trade Commission also ordered Illumina to unwind the deal, overturning its own administrative law judge's ruling, who believed it was unnecessary.

Illumina, Inc. challenged the jurisdiction of the European Commission to review the deal and lost a July 2022 bid to halt the preliminary investigation. The company has appealed that decision and claims that if it wins its appeal, it will be allowed to keep Grail.

The European Commission said that if Illumina does not comply with the new restorative measures, the European Commission can impose periodic penalties on it, with the maximum penalty amounting to 5% of its daily revenue. If the regulations are not followed, a fine of up to 10% of global revenue may also be imposed.

On October 12, during Nasdaq early trading, Illumina's stock price fell by 2%, to $135.06.

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