Illumina fined €432m for ignoring Grail merger objection

Grail Galleri test

The European Commission has levied a substantial penalty on DNA sequencing giant Illumina for closing its takeover of cancer detection company Grail without EU regulatory approval.

Illumina has been fined €432 million – the maximum amount possible – with a negligible €1,000 penalty also applied to Grail. The penalties are for breach of the EU’s merger control rules, which stipulate that merging companies are not allowed to complete transactions before antitrust approval.

Illumina completed its takeover of Grail in August 2021, a month after the Commission opened an enquiry into the acquisition and more than a year before the probe completed with the conclusion that it would have anticompetitive effects on the emerging multi-cancer early detection (MCED) or ‘liquid biopsy’ market.

MCEDs, like Grail’s Galleri test, aim to detect dozens of different forms of cancer from fragments of cell-free DNA (cfDNA) that leak from tumours and can be detected in the blood. As Illumina is the biggest supplier of equipment used to analyse DNA in blood samples, the Commission was concerned it could squeeze other MCED developers out of the market.

Meanwhile, in the US the Federal Trade Commission also ordered the deal to be reversed on similar grounds to the EU authorities, prompting a legal battle that saw an early victory for Illumina, but has since gone to appeal.

“Illumina strategically weighed up the risk of a gun-jumping fine against the risk of having to pay a high break-up fee if it failed to takeover Grail,” said the Commission. “It also considered the potential profits it could obtain by jumping the gun, even if it were ultimately forced to divest Grail.”

The decision to go ahead without regulatory approval in both key jurisdictions prompted a shareholder revolt spearheaded by billionaire activist investor Carl Icahn, which accused management of reckless behaviour in pursuing the merger.

That has resulted in both the chair and chief executive of Illumina – respectively, John Thompson and Francis deSouza – having to stand down in the last few weeks.

“If companies merge before our clearance, they breach our rules,” said Margrethe Vestager, executive vice president in charge of competition policy at the Commission.

“Illumina and Grail knowingly and deliberately did so by implementing their tie-up as we were still investigating,” she added. “Today’s decision to fine both companies, for a total amount of €432 million, shows that this is a very serious infringement.”

Illumina has also filed a legal challenge to the EU’s decision on the merger and is currently waiting for that to be considered by the European Court of Justice (ECJ), with a verdict expected in late 2023 or early 2024. If it wins, the company expects the fine to be voided.

A company spokesperson said: “We believe that the fine announced by the European Commission today – while expected and accrued for over the last year – is unlawful, inappropriate, and disproportionate.”

He went on to say that “we closed the transaction in 2021 because there was no impediment to closing in the US and the deal timeframe would have expired before the EC could reach a decision on the merits.”