Illumina Faces Battle to Save Grail Deal From EU Veto

(Bloomberg) -- Illumina Inc. faces a battle to save its $8 billion bid for cancer-test provider Grail from a European Union veto ahead of a Friday deadline to allay antitrust concerns.

EU officials are currently leaning toward blocking the deal by a March 4 deadline, according to people familiar with the review who asked not to be identified because a decision isn’t final. Illumina could still win over regulators by making acceptable concessions by Jan. 28.

That chance may be slim. The EU is worried that Illumina could hamper rivals from developing such tests. Illumina has tried to address this with an offer it made to U.S. authorities last year that aims to secure supply, technology access and reduced prices for rivals and customers. 

“We’re right in the middle of it,” Francis deSouza, Illumina’s chief executive officer, told reporters at a Brussels briefing on Wednesday. Talks with regulators involve “good constructive engagement, but it’s too early to call the outcome.”

Illumina said that discussion with the commission will go further than the U.S. offer to try and tackle EU concerns.

Ioannis Kokkoris, law professor at Queen Mary University of London was more skeptical.

“There seems to be just one way forward for this which would be a break-up” of the business,” he said. “I don’t think a long-term behavioral access remedy will do it here,” he said, referring to the type of proposal made to U.S. watchdogs. 

Grail has no sales in the EU and the proposed tie-up has become a test case for the European Commission’s new policy of targeting potentially troublesome deals that would previously have escaped a review. 

Illumina didn’t expect it would need EU scrutiny when it announced the deal in 2020, deSouza said, and hadn’t scheduled enough time to secure approval. 

The company now risks a separate $400 million fine for closing the deal without EU permission and is asking an EU court to rule that officials have no right to weigh in.

The firm said a veto will delay the roll-out of life-saving cancer tests and damage a deal that could lead to “tens of thousands of lives saved in the EEA alone and billions of euros saved in healthcare costs.”

If the EU orders the deal to be unwound, Grail will try to raise money through a public offering and ditch potential plans to sell more rapidly in Europe, focusing first on the U.S., Canada and the U.K. market, deSouza said. 

“There’s been no other company that’s shown up to express interest” in Grail, he said. “So it’s unlikely that there’ll be a bidder.”

The European Commission declined to comment.

While merger vetoes are rare, antitrust officials around the world have been arguing for a tougher line against mergers and acquisitions that can allow companies grab more market power. 

A top U.S. regulator this week warned that he’d prefer vetoes to settlements and was unlikely to accept so-called behavioral pledges, where companies promise to avoid problematic actions. Nvidia Corp. is planning to abandon its bid for Arm Ltd after failing to clear regulatory hurdles, people familiar with that deal have said.

Grail was founded by Illumina in 2016 and later spun off. The company’s researchers discovered that signs of cancer were detectable in maternal blood samples. Known as “liquid biopsies,” such tests are a long-sought goal in the world of biomedical research. 

Illumina is a giant of DNA sequencing, serving as both the backbone for consumer genetics tests and an integral part of pharmaceutical research efforts.

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