The European Commission has blocked Illumina’s acquisition of early cancer-detection testing company Grail, leaving the company’s future uncertain after a U.S. administrative judge ruled last week to let the merger move forward.
The EC wrote in a statement on Tuesday that the merger would stifle innovation and reduce options in the blood-based early cancer detection test market. The regulator added that Illumina failed to provide remedies for those concerns.
“With this transaction, Illumina would have an incentive to cut off GRAIL's rivals from accessing its technology, or otherwise disadvantage them. It is vital to preserve competition between early cancer detection test developers at this critical stage of development,” said Margrethe Vestager, the EC’s commissioner of competition. “As Illumina did not put forward remedies that would have solved our concerns, we prohibited the merger.”
Illumina said on Tuesday that it’s reviewing the commission’s order and intends to appeal.
“Illumina can make GRAIL's life-saving multi-cancer early detection test more available, more affordable, and more accessible – saving lives and lowering healthcare costs,” Charles Dadswell, Illumina's general counsel, said in a statement from the company. “This merger is pro-competitive and will accelerate innovation.”
The company said that it’s preparing for the anticipated divestment order from the EC “in the coming months” and “will begin reviewing strategic alternatives for GRAIL in the event the divestiture is not stayed pending Illumina's appeal.”
Illumina valued the deal at $8 billion when it was announced in September 2020, or $7.1 billion, excluding the stake Illumina already held in Grail. Grail was spun out of Illumina in 2016.
The EC’s decision comes less than a week after an administrative law judge in the U.S. ruled in favor of the merger, countering anti-competitive concerns made by the Federal Trade Commission.
Holly Vedova, director of the FTC’s Bureau of Competition, wrote in an emailed statement on Friday that the bureau is “disappointed” by the judge’s decision and it is “reviewing the opinion and evaluating our options.”
The FTC filed a notice of appeal on Friday.
Illumina has defended the deal amid scrutiny in the U.S. and Europe, and even closed the acquisition before approval from the European Union. Illumina could face hundreds of millions of dollars in fines from the EC if the company violated rules when closing the acquisition.
The company said in an August earnings release that it has set aside $453 million in contingencies for a potential fine from the EC.
The EC said Illumina’s response to its concerns failed to ensure that “ competition would be preserved on a lasting basis, and said the concessions “did not fully remove Illumina's ability or incentives to foreclose GRAIL's rivals.”
Illumina had offered to conclude agreements with Grail’s rivals under the standard contract conditions, the Commission said. Illumina also offered to license some of Illumina's NGS patents to next-generation sequencing (NGS) suppliers and would commit to stopping patent lawsuits in the U.S. and Europe against the China-based NGS supplier BGI Genomics for three years.
“The Commission found that the remedies offered by Illumina were not sufficient to address the competition concerns whereby emergent competition in blood based early cancer detection tests would be hindered or even eliminated,” the EC wrote in its decision. “As a result, the remedies were not sufficient to prevent the harm to innovation in the area of NGS-based cancer detection tests resulting from the Transaction.”
Illumina also is appealing a July decision from the EU’s General Court regarding the EC’s jurisdiction to challenge the Grail acquisition.
Illumina’s shares rose 5.5% to $206.88 in early trading on Tuesday.