Home 5 Articles 5 Re-Acquisition of Grail to Boost Illumina’s Cancer Presence, but Investors Are Skeptical

Re-Acquisition of Grail to Boost Illumina’s Cancer Presence, but Investors Are Skeptical

by | Oct 21, 2020 | Articles, Deals-lir, Essential, Laboratory Industry Report

M&A activity during the time of COVID-19 has been notable for two and largely incongruous characteristics: scant numbers of overall deals and unexpected, rather curious blockbusters. A month after the cratering of the Thermo Fisher Scientific takeover of Qiagen, those patterns continued in September with low volume and the announcement of Illumina’s planned $8 billion acquisition of Grail. Illumina to Reacquire Grail On Sept. 21, Illumina announced that it had signed a definitive agreement to acquire its Grail, the liquid biopsy firm it spun off in 2016 spinoff and which had announced its own plans to go public just a week earlier. The price: $3.5 billion in cash and $4.5 billion in shares of Illumina common stock. Under the acquisition agreement, which has been approved by each company’s board of directors, Grail shareholders, who include Bill Gates and Jeff Bezos, will also get payments of 2.5% off the first $1 billion of Grail-related revenues and 9% off revenues above $1 billion per year over 12 years. When and if the deal closes, which is expected to happen in the second half of next year, Illumina shareholders would own about 93% percent of the combined company. The deal will enable Illumina […]

M&A activity during the time of COVID-19 has been notable for two and largely incongruous characteristics: scant numbers of overall deals and unexpected, rather curious blockbusters. A month after the cratering of the Thermo Fisher Scientific takeover of Qiagen, those patterns continued in September with low volume and the announcement of Illumina’s planned $8 billion acquisition of Grail. Illumina to Reacquire Grail On Sept. 21, Illumina announced that it had signed a definitive agreement to acquire its Grail, the liquid biopsy firm it spun off in 2016 spinoff and which had announced its own plans to go public just a week earlier. The price: $3.5 billion in cash and $4.5 billion in shares of Illumina common stock. Under the acquisition agreement, which has been approved by each company’s board of directors, Grail shareholders, who include Bill Gates and Jeff Bezos, will also get payments of 2.5% off the first $1 billion of Grail-related revenues and 9% off revenues above $1 billion per year over 12 years. When and if the deal closes, which is expected to happen in the second half of next year, Illumina shareholders would own about 93% percent of the combined company. The deal will enable Illumina to expand its position in the cancer diagnostics market. Grail is planning a 2021 launch of a highly touted blood-based screening test called Galleri that uses methylation sequencing for ultra early detection of over 50 different types of cancers. Illumina president and CEO’s statement described Galleri as being “among the most promising new tools in the fight against cancer,” and said that the acquisition would help Illumina “transform cancer care using genomics and our NGS platform.” Illumina, which currently owns 12% of its former spinoff, is also the supplier of the sequencers that Grail uses for performing its genomic tests. Bringing the two companies back together would put the testing and sequencing under one roof. However, investors were far less excited. After rumors of the buyback drove Illumina share prices down about 11%, announcement of the actual deal caused another decline of 4.5% to $282.14 per share on the Nasdaq market. Investor concerns were based on the high purchase price and potential distraction from Illumina’s core business. “We don’t see a clear fit for acquiring a company that (a) is still at a stage where clinical studies and clinical product development are still critical and will be for years, and (b) would benefit from true clinical commercial infrastructure/reach that does not really exist at Illumina,” noted Cowen & Co. analyst Doug Schenkel, as cited in a report from GenomeWeb. Qiagen Buys the Rest of NeuMoDx Molecular The second most impactful M&A transaction in a month with fewer than half a dozen deals involved the same firm that made headlines last month when its shareholders rejected a tender offer from Thermo Fisher Scientific. On Sept. 17, Qiagen announced its acquisition of the remaining 80% of NeuMoDx that it didn’t already own for $248 million in cash. The purchase represents an exercise of the option the molecular testing company acquired when it bought a 19.9% stake in NeuMoDx. Qiagen currently distributes the high-throughput NeuMoDx 288 and medium-throughput NeuMoDx 96 diagnostic testing platforms in Europe and other markets outside the U.S. NeuMoDx has also received FDA clearance for a group B Streptococcus test on the platforms. A new multiplex test for influenza, respiratory syncytial virus (RSV), and SARS-CoV-2 is scheduled for launch in the fourth quarter of 2020.
Here’s a summary of the key M&A diagnostic deals announced in September 2020:
MERGERS, ACQUISITIONS & ASSET SALES
Acquiring Company Target(s) Deal Summary
Illumina Grail
  • Price: $8 billion, including $3.5 billion cash + $4.5 billion shares of Illumina common stock; Grail shareholders to also get payments of 2.5% off first $1 billion of Grail revenue + 9% off revenues above $1 billion per year over 12 years
  • Status: Expected to close in 2021
  • Acquisition of former Illumina spinoff, which will Grail, which will operate as standalone division within Illumina and keep its own leadership team
Qiagen NeuMoDx Molecular
  • Price: $248 million in cash to acquire the roughly 80% of NeuMoDx that Qiagen doesn’t already own
  • Status: Closed
  • Qiagen purchased 19.9% stake in 2018 and currently distributes the NeuMoDx 288 + NeuMoDx 96 testing platforms in Europe and other markets outside the US
Bruker Canopy Biosciences
  • Price: Undisclosed
  • Status: Closed
  • Addition of Canopy’s gene editing, gene expression analysis and bioprocessing services expands Bruker’s product line for targeted multi-omics and fluorescence-based imaging technologies
LabCorp Franciscan Missionaries of Our Lady Health System
  • Price: Undisclosed
  • Status: No closing date announced
  • LabCorp acquires FMOLH’s clinical ambulatory lab business and will provide reference testing for all of the latter’s facilities and clinics
Hologic Acessa Health
  • Price: $80 million in cash and contingency payments
  • Status: Closed
  • Acquisition of firm and its markets the Acessa ProVu laparoscopic system bolsters Hologic’s position in gynecological surgery space and broaden its fibroid treatments portfolio

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