Illumina stock jumped Tuesday after the European Commission vetoed the company's acquisition of Grail, another wrench thrown into the tortured path in Illumina's efforts to purchase the early cancer-detection outfit.
The EC decision comes despite the U.S. Federal Trade Commission blessing the $8 billion deal a week ago. Further, Illumina ignored regulators' concerns and concluded the deal more than a year ago, ahead of the approval process.
EC Executive Vice President Margrethe Vestager said the acquisition would have incentivized Illumina to throttle its rivals' efforts to develop cancer-detection tests. Illumina makes next-generation sequencing technology, a key piece behind Grail's cancer test.
Grail sells Galleri, a test that analyzes a single blood draw for more than 50 types of cancer. The test aims to bolster early cancer detection. Illumina estimates less than 20% of patients with a late-stage cancer diagnosis survive five years. But 90% of early diagnoses can live that long.
"Illumina can make Grail's lifesaving multi-cancer early detection test more available, more affordable and more accessible — saving lives and lowering health care costs," Illumina General Counsel Charles Dadwell said in a written statement. "As we continue to believe, this merger is pro-competitive and will accelerate innovation."
Investors apparently never liked the deal, however. On today's stock market, Illumina stock surged 2.5% to close at 201.02.
Grail's Hang On Illumina Stock
The battle to acquire Grail has been an albatross draped over Illumina.
Illumina actually spun out Grail in 2016. Four years later, Grail was preparing for an initial public offering when its founders announced a plan to buy it back. Over initial objections from officials in the U.S. and Europe, Illumina finished that acquisition in August 2021. Illumina stock has fallen ever since.
Last week, the FTC officially signed off on the deal. But the European Commission said the deal would push Illumina to cut access to its technology to Grail's rivals. The technology is expected to grow rapidly and, by 2035, could be worth more than $39.6 billion annually, the EC said.
Illumina proposed an open license to suppliers of next-generation sequencing technology and a three-year commitment to stop patent lawsuits in the U.S. and Europe against another supplier called BGI Genomics. Illumina also said it would use a standard contract with Grail's rivals.
But the EC didn't agree with Illumina's remedies. Now, Illumina says it's planning to appeal the decision. Meanwhile, it's examining its options for Grail, including a divestment.
The European Commission decision to block the merger is odd. Over the last decade, the EC has allowed more than 3,000 mergers. The Illumina-Grail kibosh is just the 10th deal the bloc has rejected over the past 10 years.
Lowly Rated Stock
It's important to note, despite Tuesday's jump, Illumina stock has trended down since August 2021, when it finished acquiring Grail ahead of regulators' weighing in on the deal.
Shares are now below their 50-day moving average, according to MarketSmith.com. Illumina stock also has low Composite and Relative Strength ratings, according to IBD Digital.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
