SEC delves into Illumina’s ill-fated GRAIL acquisition

USA —A new chapter unfolds in the saga of Illumina’s ambitious US$7.1 billion takeover of cancer diagnostics firm GRAIL, as the Securities and Exchange Commission (SEC) steps onto the stage with its probing inquiry.

The secretive dealings, antitrust battles, and regulatory clashes surrounding this high-stakes acquisition have thrust the DNA sequencing giant into a flurry of legal challenges, internal turmoil, and financial penalties.

Recently unveiled in a filing to the SEC, Illumina disclosed the entrance of the regulatory watchdog into the ongoing saga.

The SEC’s inquiry letter, sent in July 2023, outlines the agency’s investigation into the acquisition deal.

The focus lies on acquiring crucial documents and communications linked to the merger, in addition to statements and disclosures associated with GRAIL and its offerings.

The SEC is also keen on gaining insights into the conduct and remuneration of key figures within both Illumina and GRAIL’s management.

Illumina, in its filing, expressed a willingness to cooperate fully with the SEC’s investigation, signaling a cautious acknowledgment of the regulatory microscope that has honed in on its actions.

The narrative takes us back to September 2020 when the ink dried on the acquisition agreement between Illumina and GRAIL.

However, this promising union was met with staunch resistance from multiple fronts, particularly on the antitrust battlefield.

The Federal Trade Commission (FTC) emerged as a formidable adversary, lodging a complaint in March 2021 that underscored concerns about the potential erosion of competition within the U.S. multi-cancer early detection test market.

Despite the headwinds, the companies persisted, securing a favorable ruling from an Administrative Law Judge in September 2022.

Yet, the FTC’s persistence paid off when, in March 2023, it decreed that the merger indeed transgressed antitrust regulations, mandating that Illumina sever ties with GRAIL.

A global setback

The ordeal extended beyond U.S. borders, reaching the shores of Europe. The European Commission (EC) echoed similar apprehensions, kicking off its own investigation and subsequently rejecting the merger in September 2022.

Citing concerns about stifled innovation and excessive market control, the EC cast a shadow over the merger’s global aspirations.

In a stunning turn of events, July 2023 witnessed the EC levy a substantial US$476 million fine on Illumina for prematurely finalizing the GRAIL acquisition, a move that flouted regulatory approval protocols.

GRAIL, too, faced a nominal fine, etching its name into history as the first target company to receive such a sanction.

Leadership exodus amid turmoil

The tumultuous journey also exacted a toll on Illumina’s leadership. Activist investor Carl Icahn’s crusade in April 2023 aimed to reshape the company’s board, spotlighting then-CEO Francis deSouza’s contentious decision to finalize the GRAIL transaction amidst regulatory turbulence.

The aftermath was seismic: deSouza’s departure in June 2023, accompanied by the exit of Chief Technology Officer Alex Aravanis and Chief Medical Officer Phil Febbo, culminating in a monumental change of guard.

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