Dive Brief:

• Activist shareholder Carl Icahn, in the midst of a proxy battle with Illumina, is advocating for a spinoff of the company’s Grail cancer-detection business into a separate publicly traded entity and the return to a focus on its core DNA-sequencing business.
• In a 39-page regulatory filing Tuesday, Icahn Enterprises spelled out its “case for change” at Illumina, calling for the company to replace CEO Francis deSouza and questioning board Chair John Thompson’s willingness to hold deSouza accountable for mistakes. 
• Icahn in recent weeks has repeatedly called for Illumina to end its appeals of regulators’ orders to separate the two companies.

Dive Insight:

Icahn has been urging Illumina to immediately divest Grail, and both the U.S. Federal Trade Commission and European Commission are ordering the company to do so. The FTC, reversing an administrative court judge’s ruling, last week issued a final order requiring a divestiture.

In the latest filing with securities regulators, Icahn provided more detail on his strategy for Illumina and Grail. The document from Icahn Enterprises offers a plan that includes spinning off Grail and backing it with funds raised through a stock offering.  

Illumina’s current shareholders “can choose for themselves, without board interference, whether to invest more in Grail or sell their rights (and profit in that fashion),” the report said.

Icahn Enterprises also said its three director nominees “will bring financial and legal acumen, common sense, and a history of fixing companies in crisis.”

The report comes a day after Illumina nominated its nine-member board of directors, including deSouza and Thompson, for re-election.

Icahn’s report states: “All of [Illumina’s] directors have impressive resumes, but the Grail deal and the fact that they have enabled this morass causes serious concerns.”

The billionaire investor argues that under deSouza, Illumina’s core business has deteriorated due to a “talent exodus, decrease in new product cycles, slowing revenue growth, and declining margins.”

Despite these problems, Icahn said in the new filing, the board of directors “inexplicably just gave him an 87% pay increase to $27 million in 2022 even though he has destroyed $50 billion of value, among many other failures.”

Illumina has vowed to appeal the FTC’s directive to divest Grail. Icahn contends that continued appeals of U.S. and EU regulators’ demands come at shareholders’ expense, will result in significant fines and tax liabilities, and will “absorb the capital needed to defend against Illumina’s competition.”

The Icahn document also pointed to “many academic criticisms,” including from the University of Leeds and University of Cambridge, questioning the efficacy of Grail’s multi-cancer early detection test, known as a liquid biopsy.

The report said Illumina’s board should ask former leader Jay Flatley or a “similar individual” to return as CEO or chairman.