23andMe Goes Public While the Clock Ticks on Illumina’s Grail Acquisition

M&A deal making in the diagnostics space remained hot and heavy in June. Key deals included Danaher’s announced $9.6 billion acquisition of life sciences plasma DNA maker Aldevron and the closing of Hologic’s acquisition of Finnish molecular infectious disease test firm Mobidiag for $795 million. But the big story was the closing of previously announced deals, one of which actually happened and another which may never come to pass.

23andMe Goes Public

Based purely on Wall Street reaction, the biggest M&A blockbuster of June was the coming out party of 23andMe, the pioneer of direct-to-consumer (DTC) at-home genetic tests. The company began selling saliva test kits at about $99 a pop for personalized medicine and ancestral lineage 15 years ago. Since then, it has built up a massive database of users analyzed for a comprehensive list of nearly 1,000,000 single nucleotide polymorphism genetic markers.

This compilation of personal genetic data on individuals and their probabilities of developing different medical conditions has engendered privacy concerns and sparked action from the FDA to ban unmedically justified disclosures. However, even amid the accusations that the agency was denying people the right to obtain information from their own genome, the FDA has broken ground in clearing 23andMe products for a wide variety of DTC uses.

The firm went public on June 17, 2021, after closing its merger with a Richard Branson-owned special purpose acquisition company called VG Acquisition Corp. First announced in February 2021, the deal placed 23andMe’s enterprise value at roughly $3.5 billion. Since then, the high-profile creator of direct-to-consumer genetic tests has raised nearly $600 million which it plans to invest in its consumer health and therapeutics product lines and genetic and phenotypic database. Shares of the new entity (assigned ticker symbol ME) spiked as high as 22 percent on the very first day of trading on the Nasdaq.

Illumina’s $8 Billion Grail Acquisition Hits a New Snag

Meanwhile, what would be among the year’s most impactful deals, Illumina’s $8 billion acquisition of former spinout Grail, remains very much in doubt. Concerns from the U.S. Federal Trade Commission (FTC) over the new cancer genomics powerhouse’s potential dampening of competition were fairly easy to predict. However, what few probably saw coming is the regulatory opposition from across the Atlantic.

Last April, the European Commission’s Directorate-General of Competition announced that it plans to review the deal under its controversial new guidance that enables the Commission to demand notification of a deal even when no such notification is required by the member states. “The combined [Illumina/Grail] entity “could restrict access to or increase prices of next-generation sequencers and reagents to the detriment of Grail’s rivals active in genomic cancer tests following the transaction,” according to a Commission statement.

Now a U.S. federal court has allowed the FTC to postpone legal action to block the deal pending resolution of the situation in Europe. Thus, even if it beats back the frying pan of the EC challenge, Illumina could be stepping into the fire of FTC regulatory action and litigation. All the while, the clock ticks down to the contractual deadline that the deal close by the end of the year.

Illumina CEO Francis deSouza described the FTC’s latest move as “time-wasting maneuverings.” The report from the Financial Times also quotes deSouza as saying that “The biggest challenge is getting the FTC to move with the appropriate sense of urgency and getting. . . this case to trial.”

Here’s a summary of the key new M&A diagnostic deals announced in June 2021:

MERGERS, ACQUISITIONS & ASSET SALES