Illumina Ordered To Divest Cancer Test Grail

Illumina, a gene sequencing leader that recently purchased the cancer-testing start-up Grail for $8 billion, has been ordered to unwind the deal by the Federal Trade Commission Monday.

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ILMN stock dropped 1.5% to $229 when the FTC's action was announced, while the Nasdaq Composite COMP -0.82% fell 1% when the FTC's action was announced.

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It is expected that Illumina will appeal the order of the commission in a federal court as soon as possible.

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As part of Illumina's 2020 buyout of Grail, Francis deSouza has advocated for the company to enter the nascent market for blood tests that can detect early signs of undiscovered cancers, a market that is largely underdeveloped. It was the Grail deal which sparked complaints from clinical labs that were working on competing cancer screens with Illumina sequencers who are trying to develop these “liquid biopsies” based on Illumina's underlying technology for reading genes. These labs used Illumina's technology to conduct their studies.

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As a result of Illumina's possible discrimination against Grail's rivals, antitrust regulators in the U.S. and Europe expressed concern about it. Illumina had to appeal the divestiture order that was previously ordered by European regulators. In addition, the FTC staff found that Illumina would unfairly assist Grail in staying ahead of its competitors in the cancer testing industry.

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Despite this, an in-house judge at the Federal Trade Commission ruled against the FTC's staff last year in finding no antitrust violation on Illumina's part, and on Monday, the Federal Trade Commission overruled the judge, overriding the in-house judge's decision.

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Illumina's investors have been unimpressed with the 2020 acquisition, as it has dropped Illumina's market capitalization by $50 billion, and sales of its Grail products have been slow to take off, adding hundreds of millions of dollars in losses every year, not to mention all the antitrust issues.

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Among the investors making a fuss is Carl Icahn who is mounting an antitrust lawsuit against the Illumina corporation in an attempt to force their termination of the acquisition and replace the CEO deSouza.