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Illumina Vows to Fight Back as FTC Takes Aim at $8B Grail Acquisition

Rebecca Kelly Slaughter, Acting Chairwoman of the U.S. Federal Trade Commission (FTC)

The U.S. Federal Trade Commission (FTC) said it will challenge Illumina’s planned $8 billion acquisition of cancer blood test developer Grail—drawing a rebuke from the sequencing giant, which is vowing to oppose the agency and fight for the deal it announced just over six months ago.

Commissioners voted 4–0 to file the administrative complaint, as well as authorize agency staff to file a federal lawsuit seeking a temporary restraining order and preliminary injunction against Illumina. The FTC plans to file a complaint in the U.S. District Court for the District of Columbia to block the acquisition pending an administrative trial set to start on August 24.

The FTC had not made public its administrative complaint at deadline, but announced in a press release that the filing alleged that Illumina’s acquisition of Grail would lessen innovation in the U.S. market for multi-cancer early detection (MCED) tests like those marketed by Grail.

“The MCED test is a game-changer for cancer patients and their loved ones. If this acquisition is consummated, it would likely reduce innovation in this critical area of healthcare, diminish the quality of MCED tests, and make them more expensive,” stated FTC acting chairwoman Rebecca Kelly Slaughter, who was designated by President Joe Biden in January after serving as a commissioner since 2018.

The FTC reasons that Illumina can raise prices charged to Grail competitors for next-generation sequencing (NGS) instruments and consumables; impede Grail competitors’ research and development efforts; or refuse or delay executing license agreements that all MCED test developers need to distribute their tests to third-party laboratories.

Even if a viable competitor to Illumina’s NGS platform emerged in the market, the FTC argued, MCED test developers would not likely switch to it for years because they would have to reconfigure their tests to work with the new NGS platform, and in some situations, conduct new clinical trials.

According to the agency, Illumina is the nation’s only provider of DNA sequencing that is a viable option for MCED liquid biopsy tests, which can detect as many as 50 types of cancer. Grail’s Galleri™ test, Illumina said, can detect more than 50 cancers across all stages—of which more than 45 do not have recommended screening in the United States—and correctly identified the tissue of origin in 93% of positive results, with >99% specificity.

Fighting back 

An hour after the FTC announced its opposition to Illumina buying Grail, Illumina said it will fight back and continue pursuing plans to proceed with the deal. Illumina contended that acquiring Grail and re-combining the organizations would save lives by accelerating the adoption of a breakthrough multi-cancer early detection blood test faster and less expensively.

Illumina added that its purchase of Grail would not squelch competition since the two companies do not compete, and would not spark higher prices because it has offered clinical oncology customers contractual guarantees of “equal and fair access” to Illumina sequencing—as well as a commitment to cut prices by more than 40% by 2025.

Illumina CEO Francis deSouza

“Illumina’s commitment to advancing human health by innovating next-generation sequencing is unwavering,” CEO Francis deSouza said in a statement. “Improving early cancer detection is the most promising approach to bending the cancer mortality curve.”

“We have a deeply vested interest in ensuring that all organizations have equal and fair access to high quality, reliable, and cost-effective sequencing to enable them to develop breakthrough products, such as liquid biopsy, and make them accessible to the greatest number of patients possible, quickly, and safely,” deSouza added.

Joining deSouza in the statement was Grail CEO Hans Bishop: We continue to believe that together we could transform cancer care by catching more cancers earlier.”

The MCED market “is still years away from becoming a meaningful market,” making it difficult to support the FTC’s contention, Puneet Souda, managing director, life science tools and diagnostics with SVB Leerink, wrote Tuesday in a research note.

Hurdles to scale 

To become meaningful, Souda asserted, the MCED market would need to scale several hurdles, which he summarized as:

  • Confirming the efficacy of MCED tests through clinical trials large enough to enroll 80,000 or more patients.
  • Pursuing FDA approvals without an agency precedent multi-cancer tests.
  • Persuading the U.S. Preventive Services Task Force to include the test in its clinical preventive services guidelines.
  • Investing significant sums to develop the market

“It’s important to note that multi-omics/multi-analyte (non-ILMN) technology could play [an] important role in the market given its significance in the multi-cancer early detection liquid biopsy tests,” Souda said.

One such example cited by Souda was the early-stage CancerSEEK test from Thrive, which was acquired by Exact Sciences for up to $2.15 billion in a deal completed January 5. CancerSEEK is a DNA- and protein-based liquid biopsy designed to detect cancer by analyzing eight tumor-specific genomic mutations in circulating tumor DNA (ctDNA) and cancer-associated protein biomarkers in plasma to identify abnormalities that are common across multiple cancers.

“Thus it is hard for us to see if the FTC argument would hold,” Souda said, noting that FTC opposition “but we would also point out that ILMN’s proposed acquisition of PacBio was previously rescinded for competitive dynamics, driven by pushback from the FTC, which we believe was more merited vs the proposed Grail acquisition.”

Second FTC challenge 

The FTC challenge is the agency’s second against an Illumina acquisition in the past 18 months. During 2019, the FTC and its U.K. counterpart sought to block Illumina’s planned $1.2 billion purchase of Pacific Biosciences (PacBio).

The FTC alleged in an administrative complaint that Illumina was unlawfully seeking to maintain its monopoly in the U.S. market for NGS systems by eliminating potential competition from PacBio. Two months earlier in October 2019, the U.K.’s Competition and Markets Authority (CMA) issued provisional findings concluding that the merger will result in a significant loss of competition between Illumina and PacBio. The companies ultimately scrapped their planned merger in January 2020.

Illumina joined investors that included Bill Gates and Jeff Bezos in committing more than $100 million toward launching Grail in 2016, with the goal of commercializing a simple test that screens for multiple early-stage cancers by measuring ctDNA in the blood.

As of August 31, 2020, Illumina owned a 14.6% stake in Grail, according to the company’s Form S-1/A amended registration statement, filed September 17—part of a planned initial public offering (IPO) that ended four days later with Illumina’s announcement that it agreed to acquire Grail for $8 billion.

Since then, the value of Illumina’s shares has jumped nearly 37%, to $368.96 at the close of trading yesterday—a 7% one-day decline from Monday’s closing share price of $395. Under the planned acquisition, Illumina would acquire Grail for $3.5 billion in cash and $4.5 billion in Illumina common stock.

Speaking with analysts on Illumina’s most recent quarterly conference call on February 11, deSouza said his company expected to close the Grail acquisition in the second half of 2021, leading to “the largest application for genomics by far.”

Grail would be run as a separate division of Illumina, deSouza said, and initially sell its tests to integrated health systems in the United States, as well as concierge health systems, self-insured employers, and national health systems outside the United States. In November, Grail announced a partnership with the U.K.’s National Health Service (NHS) to make Galleri available in mid-2021 through a pilot test involving 165,000 patients.

“We see a vast number of opportunities ahead of us and there has never been a more exciting time to be in genomics and at Illumina,” deSouza added.

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