Illumina, under pressure from activist investor Carl Icahn to give up the fight with regulators over its Grail cancer-testing purchase, said it’s working as fast as it can to resolve antitrust challenges to the acquisition.
Icahn last week announced plans to nominate three people to Illumina’s board with the aim of persuading the DNA-sequencing company to abandon its quest to keep Grail in the face of regulators’ objections.
Illumina bought Grail for $7.1 billion in 2021 while still facing antitrust challenges from U.S. and European regulators.
The company’s shares, which have lost more than half their value from a peak in August 2021, jumped 17% after Icahn released his public letter last week suggesting three nominees for the board who he said can “help keep Illumina from sinking further into the quicksand.”
Illumina said in a statement on Monday that it’s working with regulators to “define Grail’s path forward as expeditiously as possible” and argued Icahn’s director nominees would damage its core business.
“Illumina is moving as quickly as possible to work through the legal and regulatory processes to maximize value for shareholders with respect to Grail, including defining the conditions and options of a potential divestiture,” the company said.
Illumina could be forced by the European Commission to divest Grail. The company, which has challenged the Commission's jurisdiction to review the Grail acquisition, said it expects a final decision in late 2023 or early 2024.
“Winning a jurisdictional appeal eliminates any EC fine and gives the greatest optionality for Illumina to maximize value for shareholders,” the company said.
If it loses the EU jurisdictional appeal, Illumina said it will follow the terms of the final divestiture order.
Illumina said Icahn doesn't understand the regulatory process and hasn’t offered any new ideas for a more rapid resolution.
“The board's ongoing management of the Grail process is carefully considered and informed by thorough analysis,” Illumina added.
The company said Grail’s multicancer early-detection test Galleri saw the fastest first-year revenue ramp of any cancer screening test, generating $55 million in revenue in 2022, even ahead of anticipated commercial or government-based reimbursement. It’s on track to deliver $90 million to $110 million of revenue in 2023, Illumina said. More than 60,000 Galleri tests have been ordered, it added.
Still, revenue last year from the test, launched in June 2021, was below Illumina management’s original forecast of $70 million to $90 million, according to J.P. Morgan analyst Julia Qin.
“Adoption has been slower than management’s own original expectations,” Qin said in an email.
“Lack of reimbursement has been the primary limiting factor, although test performance has also been viewed as lackluster by many physicians, especially when compared to other single-cancer screening products,” the analyst said.
Illumina said its shareholders aren’t required to take any action regarding Icahn’s nominees at this time, and that the company will file preliminary materials ahead of its 2023 annual meeting in the coming weeks.
The Federal Trade Commission also filed an administrative complaint against Illumina in March 2021. An administrative law judge dismissed the challenge in September, and the FTC staff appealed that decision to the full commission. Oral arguments were held before the commission in December.
“As of yet, the commissioners have not issued their opinion,” FTC spokesperson Peter Kaplan said in an emailed statement.
Illumina shares fell 1.2% to $221.94 in late-morning trading on the Nasdaq exchange on Monday.