Illumina is continuing to evaluate “strategic options” for Grail as it faces antitrust pushback for its $7.1 billion acquisition of the maker of blood tests used to detect cancer, according to analysts at J.P. Morgan.
Illumina outlined potential paths forward at an Oct. 3 investor day, J.P. Morgan analyst Julia Qin wrote in a research note on Monday. It completed its purchase of Grail last year even amid antitrust investigations from the U.S. Federal Trade Commission and the European Commission.
In September, the European Commission moved to block the deal, issuing a prohibition order. Illumina is appealing this as well as the regulator’s jurisdiction to review the deal, and expects a decision in the second half of 2023, Qin wrote.
The company also is waiting for a separate order from the European Commission requiring it to divest Grail, which it expects to receive by the end of this year or early 2023. The order would provide a specific time frame for Illumina to divest the company, likely within six to 18 months, Qin wrote.
In the meantime, Illumina is “running a standalone process to evaluate strategic options for Grail, with management noting its intention to resolve the situation sooner rather than later,” according to the analyst note.
While an IPO isn’t likely, Illumina could sell the company to long-term strategic buyers, she added. A deal between Grail and the U.K.’s National Health Service could also boost the company’s valuation in 2024, Qin wrote.
Even amid challenges in the current market, Illumina is confident that funding won’t be an issue for Grail, Qin wrote, adding the company could seek damages from the European Commission and investments in the company could be recouped through dividend paybacks.