Illumina stock inched ahead Monday after the company said it would divest its cancer detection outfit, Grail, following a lengthy battle with U.S. and European regulators.
The DNA-reading behemoth acquired Grail in mid-2021 for $7.1 billion, vaulting over antitrust concerns from regulators. Grail makes Galleri, a blood test that can detect 50 different cancers.
But Grail's acquisition put Illumina almost immediately in hot water as it faced down fines and a lengthy court process. On Friday, the Fifth Circuit Court of Appeals ruled in favor of the Federal Trade Commission, which challenged the acquisition. But it chided the FTC for how it considered Illumina's proposed fixes for the acquisition, according to the Wall Street Journal.
Illumina says it decided not to appeal the court's decision.
"We are committed to an expeditious divestiture of Grail in a manner that allows its technology to continue benefitting patients," Illumina Chief Executive Jacob Thaysen said in a statement. "The management team and I continue to focus on our core business and supporting our customers."
Illumina stock rose 1.6% to 129.10 on today's stock market. That pared back from a roughly 5% gain in premarket action.
Other Concerns Hamstring Illumina Stock
Canaccord Genuity analyst Kyle Mikson said the divestiture process "will not be a simple task."
"We note that Illumina's challenge of the European Commission's jurisdiction to review the merger remains ongoing in the European Court of Justice," he said in a report. "The outcome may affect the company's specific plans to divest Grail."
Mikson kept his hold rating on Illumina stock.
Evercore ISI analyst Vijay Kumar, though, says the divestiture news should come as no surprise. New management following a proxy battle with activist investor Carl Icahn had committed to divesting Grail, he said in a report.
"While it doesn't change the outcome, we are happy to see Illumina commit to a deadline and having clarity on message," he said.
Illumina plans to finalize its divestiture plans by the end of the second quarter.
"Investors can now focus on standalone Illumina," he said. "The key question is when consumable revenues turn around (bear debate around price elasticity of demand given the two-thirds price drop on price per genome) and the timeline for normalizing operating margins."
He kept his outperform rating and 160 price target on Illumina stock.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
