Illumina wins lawsuit against FTC over Grail acquisition

Illumina wins lawsuit against FTC over Grail acquisition
Illumina wins lawsuit against FTC over Grail acquisition

Illumina said the judge rejected the FTC’s position that the deal would harm competition in the market for early detection tests for multiple cancers.

“As we have indicated from the outset, this transaction is pro-competitive, will advance innovation, reduce healthcare costs and save lives,” said Charles Dadswell, general counsel for Illumina.

The ruling, which FTC staff can appeal, suggests the agency may face hurdles as it tries to push for new theories of harm that may result from unchecked merger activity. The FTC alleged that Illumina’s purchase of Grail could diminish innovation, a concern that goes beyond the traditional antitrust focus on price levels and production.

In a statement, FTC Competition Bureau Director Holly Vedova said agency staff were disappointed with the decision and believed it was sound. “We are reviewing the notice and evaluating our options,” Ms Vedova said.

San Diego-based Illumina, which makes genetic sequencing products, agreed in 2020 to acquire Grail, which develops blood tests for the early detection of cancer. Illumina founded Grail and spun it off in 2017, retaining a minority stake. The 2020 deal was to acquire the part of Grail that he didn’t already own.

But in 2021, the FTC decided to block the deal, saying it would hurt competition in an emerging area of ​​testing for the early detection of several types of cancers.

The FTC said Grail and other early-stage cancer screening test developers all rely on Illumina’s DNA sequencing platform. “If the acquisition is completed, Illumina will have an incentive to exclude or disadvantage companies that pose a material competitive threat to Grail,” the FTC wrote in its complaint last year. Illumina countered that it had made an open offer to provide continued access to its DNA sequencing to all of Grail’s competitors.

Illumina completed its acquisition of Grail in 2021, despite ongoing legal challenges.

The case is not the first time Chief Administrative Law Judge D. Michael Chappell has ruled against the FTC on one of its lawsuits. Earlier this year, he dismissed Altria Group’s challenge from the FTC Inc.

purchase of a large stake in e-cigarette maker Juul Labs Inc. FTC staff appealed the decision. The case is now pending before the Commissioners.

Judge Chappell also ruled against the FTC in a data security case in 2015.

The FTC, under Chairman Lina Khan, has investigated other proposed mergers and pledged to take a tougher stance against deals that could threaten competition. Ms Khan said antitrust authorities need to be more forward-looking and prioritize concerns such as preserving incentives for innovation, protecting workers and strengthening small businesses.

The Illumina deal was an example of a vertical merger, a type of transaction that integrates complementary rather than competing businesses, allowing the combined company to expand into new or related businesses or reduce its input costs. Vertical agreements have often been viewed with far less skepticism, but last year the FTC withdrew its guidelines to review them, indicating that authorities planned to apply more scrutiny to them.

“This case has always been a bit of a stretch,” said Wayne State University law professor Stephen Calkins. “This was a vertical case, which is a difficult area of ​​law, and the judge of the law pointedly noted during oral argument that there were very high stakes in terms of healthcare innovation .”

Illumina’s legal challenges are not over, as FTC staff may appeal Judge Chappell’s decision to the agency’s commission. The commission cleared the legal challenge to the deal in March 2021 in a bipartisan vote. If the commission overturns Judge Chappell’s decision, the companies could take their case to a federal appeals court.

The FTC had originally sought a federal court injunction that would have blocked the closing of the acquisition, but it backed down because Illumina and Grail were under antitrust scrutiny in Europe.

Instead, the FTC filed an administrative complaint regarding the deal, which culminated in a trial before an administrative law judge in August and September 2021. The new decision stems from that lawsuit and post-trial briefs filed by Illumina and the FTC.

In July, a European Union court ruled that the EU competition regulator had jurisdiction to review the Illumina-Grail deal under EU merger rules. Illumina said it intends to appeal the decision. The European Commission said in July that Illumina’s decision to enter into the Grail deal breached European regulations.

Illumina is keeping the Grail business separate from the rest of its business while these legal challenges unfold.

For Illumina, full control of Grail would give it a strong position in what analysts estimate is a $50 billion market for tests that can detect multiple cancers early.

Last year, Grail introduced Galleri, a test designed to detect more than 50 types of cancer. The test is intended for people at high risk of cancer, such as adults aged 50 and over, and as an adjunct to standard single cancer screening tests. Galleri costs around $950 per test and is usually not covered by insurers.

But Galleri’s sales to date have fallen short of expectations as some health systems have taken a measured approach to using the test.

“We think it’s a fantastic test,” Illumina CEO Francis deSouza said in an interview. “We believe that in the hands of Illumina, we can make this test available to more people, more cheaply, and faster than in the hands of Grail.” He added that it could save many lives and healthcare costs.

Illumina shares were down 0.5% at $200.62 on Thursday. SVB Securities analysts said in a research note that despite the win, there is still regulatory uncertainty surrounding the deal, delaying Illumina’s full integration of Grail and its benefits.

Write to Peter Loftus at [email protected] and Dave Michaels at [email protected]

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. Illumina wins lawsuit vs FTC for acquisition Grail

. Illumina wins lawsuit FTC Grail acquisition

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