Illumina ordered by FTC to divest GRAIL over competition concerns

The Federal Trade Commission (FTC) has ordered Illumina (NASDAQ:ILMN) to divest GRAIL, which it acquired in August 2021, over competition concerns in the cancer tests market.

The order is somewhat surprising given that the agency's chief administrative law judge in September 2022 declined a challenge from the FTC to scuttle the $7.1B deal.

GRAIL's key product is a multi-cancer early detection (MCED) test. The company also makes early detection liquid biopsy tests that can screen for multiple types of cancer in very early stages using DNA sequencing, according to the agency.

Illumina is the "dominant producer" of platforms used to analyze the genetic samples taken from MCED tests, the FTC said.

"The Commission found that the acquisition would diminish innovation in the U.S. market for MCED tests while increasing prices and decreasing choice and quality of tests."

Other concerns raised by the FTC in the order are that Illumina (ILMN) will "remain the only viable supplier" of platforms for MCED tests; Illumina (ILMN) can put pressure on GRAIL competitors by raising its rates or limiting access to its supplies or services; and Illumina (ILMN) has incentives to help GRAIL innovate better than its competitor because it can profit more.

The vote was 4-0. Illumina (ILMN) has 60 days to file a request for a review.

The divestiture order comes as famed investor Carl Icahn is in a proxy fight with Illumina (ILMN). He has previously criticized the company for closing the GRAIL deal despite opposition from global regulators.

Earlier Monday, Icahn issued a new letter to Illumina (ILMN) shareholders, where he again criticized CEO Francis deSouza, adding "something is truly rotten in the state of Illumina (ILMN)."

"During [deSouza's] tenure, not only has the company lost $50 billion of shareholder value but many of his talented executives have left or are in the process of leaving," Icahn added. "Why is this board keeping him and, perhaps more importantly, why are we – the shareholders – keeping this board?"

Icahn has also suggested that Illumina (ILMN) bring former CEO Jay Flatley back.