The European Commission has imposed a significant penalty on Illumina, a leading DNA sequencing company, for finalizing its acquisition of Grail, a cancer detection company, without obtaining regulatory approval from the EU.
Illumina has been fined the maximum amount of €432 million, while Grail has received a nominal penalty of €1,000. These penalties were imposed due to a violation of the EU’s merger control rules, which prohibit merging companies from completing transactions before obtaining antitrust approval.
Illumina completed its takeover of Grail in August 2021, one month after the Commission initiated an inquiry into the acquisition. The investigation concluded more than a year later, determining that the acquisition would have anticompetitive effects on the emerging market for multi-cancer early detection (MCED) or ‘liquid biopsy’ technology.
MCEDs, such as Grail’s Galleri test, aim to detect various forms of cancer by analyzing fragments of cell-free DNA (cfDNA) that are released from tumors and can be found in the blood. As Illumina is the largest supplier of equipment used to analyze DNA in blood samples, the Commission was concerned that Illumina’s dominance could hinder other MCED developers’ market access.
In the US, the Federal Trade Commission also ordered the reversal of the deal based on similar grounds as the EU authorities, leading to a legal battle. Illumina initially obtained an early victory, but the case is currently under 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 proceed without regulatory approval in both jurisdictions triggered a shareholder revolt led by billionaire activist investor Carl Icahn, who accused the management of pursuing the merger recklessly.
Consequently, both the chairman and chief executive of Illumina, John Thompson and Francis deSouza respectively, have recently stepped down.
Margrethe Vestager, the Executive Vice President responsible for competition policy at the Commission, stated that companies that merge without obtaining clearance violate their rules.
Illumina has also filed a legal challenge against the EU’s decision on the merger, which is awaiting consideration by the European Court of Justice (ECJ). A verdict is expected in late 2023 or early 2024. If Illumina succeeds in its challenge, the company anticipates the fine to be invalidated.
“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. 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.”
– Company spokesperson
