Europe's antitrust regulator on Tuesday moved to block San Diego's Illumina from acquiring Grail — one week after a U.S. administrative law judge found that the blockbuster $7.1 billion merger should be allowed to stand.
This latest twist in Illumina's high-stakes bid to reunite with Grail highlights the ongoing battles over how antitrust laws should apply to acquisitions of technologies that aren't big yet but could be someday.
With a single blood test, Grail's Galleri can screen asymptomatic patients for more than 50 types of cancer, many of which have no other form of screening and are often caught too late to treat.
Last year, it became the first company to launch such a test commercially on a limited basis — although several rivals are on its heels.
Illumina makes next-generation genomic sequencing equipment and consumables, which Grail and its rivals rely on to process these early detection, multicancer tests.
On Tuesday, the European Commission prohibited the Illumina-Grail merger on the grounds that it would stifle innovation and reduce choice in the market.
"In a race with other companies, Grail is developing a blood-based early cancer detection test," said Margrethe Vestager, the European Commission's executive vice president in charge of competition policy, in a statement. "Illumina is currently the only credible supplier of a technology allowing to develop and process these tests. With this transaction, Illumina would have an incentive to cut off Grail's rivals from accessing its technology, or otherwise disadvantage them."
Illumina plans to appeal the commission's findings. The company said the acquisition would accelerate the widespread availability of Grail's tests in Europe by at least five years.
"Illumina can make Grail's life-saving multicancer early detection test more available, more affordable, and more accessible — saving lives and lowering health care costs," said Charles Dadswell, general counsel for Illumina. "As we continue to believe, this merger is pro-competitive and will accelerate innovation. Last week the chief judge of the U.S. Federal Trade Commission issued a decision supporting Illumina acquiring Grail."
While administrative law Judge D. Michael Chappell gave a green light to Illumina's acquisition of Grail, the FTC filed notice on Friday that it intends to appeal the decision.
Meanwhile, Illumina will begin looking at "strategic alternatives" in case it is forced to sell off Grail. The company will ask a European court to shelve an anticipated divestment order from the commission pending its legal challenge. But that request may be denied, the company said.
Seven years ago, Illumina started Grail internally with the goal of developing a single blood test capable of screening for multiple types of cancer. The disease kills about 630,000 Americans each year.
In 2016, Illumina spun off Grail, which went on to raise money from Johnson & Johnson, Amazon's Jeff Bezos and others.
In August 2021, Illumina brought Grail back under its umbrella. But Grail has been operating as a standalone entity overseen by an independent monitor pending the commission's anti-trust review.
The European Commission rejected the Illumina-Grail deal after reinterpreting its rules to expand its jurisdictional reach.
The merger did not meet two revenue thresholds that were previously required to enable European anti-monopoly regulators to review a merger involving two American companies, said Don Rosenberg, an antitrust expert who recently retired as general counsel for Qualcomm.
"Just looking at that alone should provoke a lot of outrage," said Rosenberg. "I wonder what the commission's reaction would be if next week China decided it was going to block the merger of two European companies, neither of which met the review threshold, because China thought there was the possibility of anti-competitive behavior."
In July, a European court said the commission could launch an antitrust probe under its expanded interpretation of what can be reviewed. Illumina has appealed the jurisdiction issue.
"It is a good appeal," said Rosenberg. "I am very interested in seeing what the ultimate conclusion is in the European Union because I think this is overreach from a procedural perspective, and I am also concerned about what it projects about their attitude toward what is anti-competitive and how is competition law to be interpreted."
Illumina's shares ended trading Tuesday up 2.5 percent at $201.02 on the Nasdaq exchange.
