Illumina hit with record EU advantageous over Grail deal

European Union regulators on Wednesday fined Illumina a record 432 million euros ($476 million) for closing its acquisition of cancer test developer Grail without first securing regulatory approval. 

The advantageous from the European Commission, the EU’s executive body, amounts to 10% of San Diego-based Illumina‘s turnover. That’s the utmost allowed under EU merger rules.

The Illumina advantageous exceeds the commission’s previous largest merger regulation advantageous of $125 million, or 1% of annual turnover, imposed on telecommunications company Altice in 2018. 

An Illumina spokesperson on Wednesday said the DNA sequencing company would appeal the advantageous. Illumina has already put aside $453 million to cover a possible maximum advantageous of 10% of turnover, in keeping with a regulatory filing from earlier this 12 months. 

And the deal has already cost Illumina great sums of cash. The corporate’s market value has fallen to roughly $29 billion from around $75 billion in August 2021, the month it closed its acquisition of Grail. 

But Illumina maintains that the transaction would “maximize value for shareholders” and save lives. 

The commission said in a release that Illumina “strategically weighed up the danger of a gun-jumping advantageous against the danger of getting to pay a high break-up fee if it didn’t takeover Grail.” Gun-jumping refers back to the act of completing a merger before it receives regulatory clearance.

Illumina also “considered the potential profits it could obtain by jumping the gun, even when it were ultimately forced to divest Grail,” the commission said. “It then intentionally decided to proceed and to shut the deal while the Commission was still investigating the transaction that was ultimately prohibited.” 

“This can be a very serious infringement, which requires the imposition of a proportionate advantageous, with the aim of deterring such conduct,” the European Commission continued.

The commission added that Grail “played an energetic role within the infringement.” It issued Grail, which relies in Menlo Park, California, a separate “symbolic advantageous” of around $1,100. It’s the primary time the commission has imposed a advantageous on the goal of an acquisition.

The European Commission last July alleged that closing the Grail acquisition was a “serious breach” of EU merger regulation that could lead on to “hefty fines.” 

Two months later, the commission blocked the deal over concerns it could stifle innovation and consumer alternative within the emerging marketplace for cancer detection tests. 

Illumina has appealed the European Commission’s decision, arguing that the agency lacks jurisdiction to dam the merger between the 2 U.S. corporations. 

Illumina expects a final decision on an appeal in late 2023 or early 2024. That is also when the corporate anticipates a choice on its appeal of an analogous order by the U.S. Federal Trade Commission. 

Still, the corporate has said it would divest Grail if it loses either appeal. 

Illumina believes it could expand the supply, affordability and profitability of Grail’s Galleri test, which might screen for greater than 50 kinds of cancers through a single blood draw.

U.S. Republican lawmakers, a dozen state attorneys general and several other advocacy groups have similarly argued that the merger could promote the widespread availability of the lifesaving technology. Those parties sided with Illumina in the corporate’s ongoing legal battle with the FTC last month.

Illumina’s determination to maintain Grail sparked a heated proxy showdown with activist investor Carl Icahn, who holds a 1.4% stake in the corporate. 

Much of Icahn’s opposition stemmed from Illumina’s decision to shut the acquisition without gaining approval from antitrust regulators within the EU and U.S. 

Illumina shareholders voted to oust former board Chair John Thompson in May and install one in all Icahn’s nominees. 

Weeks later, CEO Francis deSouza abruptly stepped down from his post despite surviving the proxy vote. 

Now, Illumina is trying to find a latest CEO while implementing a cost-cutting plan designed to shore up the corporate’s shrinking operating margins.