End of the wedding for Illumina and Grail. On Thursday October 12, the European Commission ordered the global DNA sequencing giant to sell the biotech specializing in the development of early cancer detection tests, which it had acquired in 2021 for 7.1 billion dollars (6.74 billion euros).
Fearing having to pay its compatriot termination fees of $300 million, the American Illumina celebrated the marriage without waiting for agreement from the European Union (EU). A forceful passage which had greatly irritated Brussels.
Seized by the competition authorities of six member states, including France, the European executive launched, on June 16, 2021, an in-depth investigation into the merger of the two American companies, which resulted in a ban on marriage on September 6, 2022. The European Commission feared that the merger “Hinders innovation and reduces supply in the emerging market for early cancer detection blood tests”.
Promising market
Illumina, which designs, manufactures and sells DNA sequencing machines to hospitals and research laboratories around the world, does not compete directly with Grail, but is the only company to market the solutions needed to develop these early detection tests. With the acquisition of Grail, Brussels was worried that Illumina would degrade access to its products for biotech rivals, and thus harm the growth of this promising market.
The decision rendered this Thursday, which orders Illumina to undo this marriage, was therefore hardly surprising. Brussels sets strict conditions for divorce, intended to restore “the situation prior to the completion of the operation”. The DNA sequencing giant is free in the choice of the operation, whether for example through a sale to an investor or an IPO, provided, however, that the outcome of the Grail transfer is “as viable and competitive as before its acquisition by Illumina”.
Financial penalties
The transfer plan must be submitted for approval to the Commission. The European executive also specifies that it will have to intervene “within strict deadlines”, without however detailing the timetable put in place. In the event of non-compliance with this decision, the company risks financial penalties in the form of fines of up to 5% of its daily turnover.
In July, Brussels had already fined the company 432 million euros for buying Grail without authorization from the EU competition authority. The saga of this takeover has practically become a textbook case. She might be “nicknamed the affair of the first times, as it is an opportunity for the Commission to use all the arsenal at its disposal to sanction non-compliance with the procedural rules of merger control”, underlined, in a note published in July, the law firm Allen & Overy. The company’s setbacks with regulators also led to the departures this year of its managing director, Francis deSouza, and its president, John Thompson, ousted under pressure from investors.