Fate of Illumina’s Grail Acquisition Remains Very Much in Doubt
It’s beginning to look like Illumina’s roll of the dice is going to come up snake eyes regarding the potential acquisition.
These are tense times for Illumina. Last August, facing a contractually required $300 million termination fee, the DNA sequencing giant decided to gamble and complete its $8 billion acquisition of former liquid biopsy spinoff Grail without regulatory approval from the European Commission (EC) Directorate-General. We’ll deal with the EC later and hold Grail at arm’s length as a wholly-owned, independently operating subsidiary just in case, Illumina figured. However, it’s beginning to look like Illumina’s roll of the dice is going to come up snake eyes.
EC Turns Up the Heat
From the beginning, Illumina has challenged the EC’s regulatory authority over an acquisition that it contends is purely a US transaction. However, the European General Court recently affirmed the EC’s jurisdiction to review the deal under European Union (EU) mergers and acquisitions (M&A) laws. And, on July 19, the EC fired a salvo of its own by sending Illumina and Grail a Statement of Objections accusing the firms of violating the “standstill obligation” requiring companies not to proceed with proposed M&A transactions unless and until they receive the required regulatory approval, a violation that carries a potential fine of up to 10 percent of a company’s annual revenues, which in the case of Illumina and Grail, are expected to top $5 billion this year.
“If companies jump the gun and implement deals that are subject to our review, they undermine the effective functioning of our EU merger control system,” noted Margrethe Vestager, EC executive vice president in charge of competition policy, in a statement. She characterized the companies’ decision to close their deal while the EC investigation is still taking place as “a serious breach of the standstill obligation” that could result in “hefty fines.”
Like the US Federal Trade Commission (FTC), the EC has serious concerns that acquiring Grail and its Galleri multi-cancer early detection test will give Illumina control over the majority of the international market share of sequencing machines, along with the power to stifle DNA oncology research by competitors.
In response to these concerns, Illumina has pledged to sign new standard contracts guaranteeing customers that are developing cancer diagnostics access to hardware with no price increases for at least 12 years. However, the EC and FTC have both made it abundantly clear that they still have concerns about the Grail acquisition.
The EC is expected to make a ruling on the standstill violation in September. Investigation into the legality of the underlying Grail acquisition could continue into next year. For now, all Illumina can really do is continue to hold Grail at arm’s length and hope for the best.
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Here’s a summary of the key new M&A diagnostic deals that were announced and/or closed in July 2022:
Mergers, Acquisitions, & Asset Sales
| Acquiring Company | Target(s) | Deal Summary |
|---|---|---|
| Ginkgo Bioworks | Zymergen | • Price: $300 million all-stock deal with Zymergen stockholders to receive .9179 shares of Ginkgo's Class A common stock for each Zymergen share, giving Zymergen shareholders about 5.25 percent pro forma ownership of Ginkgo • Status: Definitive agreement to acquire approved by boards of both companies and is expected to close by Q1 2023, subject to regulatory approval • Ginkgo plans to integrate Zymergen's core automation and software technologies for scaling strain engineering capacity into its foundry, including machine learning and data science tools for exploring genetic design space • Acquisition follows Gingko’s acquisitions of FGen and Project Beacon COVID-19 in 2022 and Dutch DNA Biotech in 2021 |
| SomaLogic | Palamedrix | • Price: Up to $52.5 million, including $14 million in cash and $21 million in SomaLogic common stock at closing + up to $17.5 million contingent revenues based on milestones • Status: Signed agreement to acquire slated to close in Q3 • SomaLogic to use Palamedrix's DNA nanotechnology platform to develop the next generation of its SomaScan proteomic platform for biopharma, academic, and diagnostic markets |
| SD Biosensor + SJL Partners | Meridian Bioscience | • Price: $1.53 billion in cash and other financing; Meridian shareholders to receive $34.00 per share in cash + a 32% premium over Meridian's closing stock price on day before SD Biosensor and SJL's first offer on March 18 + a 16% premium based on one-month average price per share of common stock, starting June 7 • Status: Expected to close in Q4 • SD Biosensor to own 60% and SJL, an investment vehicle, to own 40% of Meridian common stock with consortium to operate Meridian as an independent entity under its current leadership and in its current Cincinnati HQ |
| Genetic Technologies of Australia | AffinityDNA | • Price: Undisclosed • Status: Closed • Acquisition of direct-to-consumer firm, along with its websites, brands, lab testing, and distribution agreements for an undisclosed amount gives Genetic Technologies new platform for growth in consumer genomics market |
| MFine | LifeCell | • Price: $80 million investment from OrbiMed • Status: Signed merger agreement • Health tech startup MFine to merge with diagnostics business of Indian biotech LifeCell to form a new entity called LifeWell which will have combined user base of over 6 million, expected to grow to over 50 million over next 4 years • LifeWell to build its nationwide lab network by acquiring and merging with "high quality radiology and pathology lab assets" |
| Solvias | Cergentis | • Price: Undisclosed • Status: Closed • Acquisition firm that provides genomic analysis and genetic quality control services expands Swiss CRO’s biologics and cell and gene therapy testing and customer service network |
| Capnopharm | Capnomed | • Price: Undisclosed • Status: Asset purchase agreement signed with no closing date announced • Acquisition of all assets of firm that has played an essential role in developing pressurized intraperitoneal aerosol chemotherapy (PIPAC), a minimally-invasive delivery method for peritoneal cancer treatment |
| RetinalGenix Technologies | DNA/GPS | • Price: Undisclosed • Status: Closed • Acquisition of pharmacogenomics company and developer of platform technology enabling healthcare workers to monitor and screen patients from their homes via retinal imaging and genetic mapping |
| EQT IX Fund from Battery Ventures | SPT Labtech | • Price: Undisclosed • Status: Closed • Global investment fund acquires UK-based developer and manufacturer of automated life science instruments and consumables • Acquisition to support SPT Labtech's next phase of growth by focusing on continued product innovation and scaling the cryo-EM sample preparation segment |
| Illumina | IDbyDNA | • Price: Undisclosed • Status: Closed • Acquisition of developer of metagenomic technology for infectious disease testing and pathogen surveillance with which Illumina has an alliance to comarket IDbyDNA's Explify platform for use with Illumina's NGS instruments and library preparation kits |
| McKesson | Genospace | • Price: Undisclosed • Status: Acquisition agreement signed with no closing date announced • Acquisition of personalized medicine software developer, which is currently owned by Hospital Corporation of America, whose platform aggregates genomic and other biomedical data to recruit patients for clinical trials and guide clinical decision-making • Acquisition part of a larger deal to form a joint venture combining McKesson's US Oncology Research with the Sarah Cannon Research Institute |
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