FTC shows health care muscle in blocking Illumina-Grail deal
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The decision by the Federal Trade Commission to block DNA sequencing giant Illumina's $7.1 billion purchase of Grail puts the focus on how much power one company should wield in the burgeoning cancer detection market.
Driving the news: The FTC on Monday rejected the deal, saying the combination of Grail — which makes liquid biopsy test — with Illumina, the only provider of sequencing for multi-cancer early detection (MCED) tests will "stifle competition and innovation in the U.S. market."
- Under the order, Illumina has six months to divest of Grail. The FTC also is blocking the company from entering the MCED testing space without approval.
- Illumina has promised to appeal. But the company is facing a fight on both sides of the Atlantic, after the European Commission in December blocked the deal on similar grounds.
Catch up quick: Illumina is a $36 billion company that specializes in DNA sequencing and array-based technologies.
- As Axios' Alison Snyder previously reported, new competition has been entering the sequencing playing field. But Illumina has dominated with an estimated 80% share of the global market.
- Illumina — which founded Grail in 2016 and later spun off the company, keeping a minority share — set its sights on bringing the company and its MCED tests back in the fold in 2020. It closed the deal in 2021.
- It has since faced heavy pushback from regulators, as well as a proxy fight from investor Carl Icahn, who owns a 1.4% stake in Illumina and sent an open letter to shareholders Monday questioning the company's leadership.
State of play: At the heart of the case is the future of MCEDs, used to detect cancers before there are symptoms.
- These tests, a subset of liquid biopsies, are blood tests that have the capability to detect more than one type of cancer from a single sample, making them minimally invasive and cost-effective.
- For instance, Grail's Galleri tests can detect a signal shared across more than 50 types of cancer, many of which do not yet have a screening test, the company says. The list price is about $950.
- Guardant Health has a liquid biopsy test for breast and lung cancers approved by the FDA as a companion diagnostic for patients already diagnosed with cancer for targeted treatment options.
- Liquid biopsies are already part of an $8 billion market which is expected to grow to $26.2 billion by 2030, according to a recent estimate.
Yes, but: MCED tests are not yet FDA-cleared or approved as diagnostic tools, although they can be ordered by a doctor.
- There are still many questions about the effectiveness of MCED test to prevent cancer deaths and more research is needed, according to the National Cancer Institute.
The big picture: The FTC action is evidence of the Biden administration antitrust team's increased focus on health care mergers.
- "I think it's a sign they haven’t abandoned that more pro-enforcement agenda," said Rebecca Haw Allensworth, an antitrust professor at Vanderbilt Law School, told the Wall Street Journal.
What they're saying: Conor McNamara, an RBC Capital Markets' health care analyst, said Monday the FTC's move was in line with expectations, saying he believes "the Grail distraction is coming to an end."
- With the deal, Illumina essentially purchased one testing customer, picking a winner over other testing companies that use its technology, McNamara said.
- "We read [the ruling] as the FTC is saying, 'Look, if sequencing was a widely available technology that anyone could provide to the test makers, it wouldn't be a big deal but Illumina is really the only game in town," McNamara told Axios. "That's part of why we like the Illumina stock ... there's no real competition."
