SEC Investigating Illumina’s Multi-Billion Dollar Merger with GRAIL

Pictured: Illumina office at its headquarters in California/iStock, JHVEPhoto

Pictured: Illumina office at its headquarters in California/iStock, JHVEPhoto

The Securities and Exchange Commission is the latest government agency to look into Illumina’s $8 billion acquisition deal with cancer diagnostics company GRAIL, the DNA sequencing giant revealed Thursday in an SEC filing.

The SEC sent an inquiry letter in July 2023 informing Illumina that its staff were looking into the deal and, as part of its investigation, was requesting documents and communications related to the acquisition. The agency also asked for statements and disclosures connected to GRAIL and its products, as well as information “related to the conduct and compensation of certain members of Illumina and GRAIL management.”

Illumina is cooperating with the SEC’s investigation, the company said in its SEC filing.

The companies inked their acquisition agreement in September 2020 and was quickly met with strong antitrust pushback. In March 2021, the Federal Trade Commission lodged a complaint against the deal claiming that it would “substantially lessen competition in the U.S. multi-cancer early detection test market.”

The companies pushed through with the merger after an Administrative Law Judge ruled in their favor in September 2022. Nevertheless, the FTC found in March 2023 that the acquisition was indeed in violation of antitrust laws and ordered Illumina to divest GRAIL.

European regulators also moved to block the acquisition. Soon after the FTC’s complaint, the European Commission also launched its own investigation into the deal and in September 2022 vetoed the merger. According to the EC, Illumina’s buyout of GRAIL would suppress innovation and competition in the next-generation sequencing market, as well as give Illumina too much power in this space.

In July 2023, the EC slapped Illumina with a record $476 million fine for closing the GRAIL acquisition before securing regulatory approval. GRAIL also received a symbolic fine of $1,100, the first ever target company to be sanctioned under the Commission’s merger regulations.

“Illumina and Grail knowingly and intentionally breached the standstill obligation during the Commission’s in-depth investigation,” the EC wrote in a press release announcing the fines.

The troubled acquisition of GRAIL has caused Illumina internal strife as well. In April 2023, activist investor Carl Icahn campaigned to place three of his representatives on Illumina’s board ahead of its annual shareholder meeting. Icahn’s pitch focused on then-CEO Francis deSouza’s actions, particularly his “reckless decision to close the GRAIL transaction” in the middle of regulatory scrutiny.

In June 2023, amid the tussle with Icahn and mounting anti-trust investigations, deSouza stepped down as Illumina’s CEO. He was followed by Chief Technology Officer Alex Aravanis and Chief Medical Officer Phil Febbo, the company announced Thursday in its second-quarter earnings report.

Tristan Manalac is an independent science writer based in Metro Manila, Philippines. He can be reached at tristan@tristanmanalac.com or tristan.manalac@biospace.com.

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