Illumina, a biotech firm based in San Diego, has announced its decision to sell or spin off its subsidiary, Grail, after facing regulatory challenges. Grail specializes in the development of blood tests for cancer and was acquired entirely by Illumina in 2021 for $7.1 billion. However, both U.S. and European regulators raised concerns about the deal, fearing that it would hinder advancements in medical innovation. In October, the European Commission ordered Illumina to reverse the acquisition, following a similar demand made by the U.S. earlier this year. Recently, a U.S. court ruled in favor of the government’s right to challenge the acquisition.
This move by Illumina indicates that the company did not see a viable solution to address regulators’ objections. The prolonged antitrust battle has had a significant impact on Illumina’s stock, which has experienced a 37% decline this year. Furthermore, CEO Francis deSouza stepped down from his position in June.
By choosing not to contest the objections any further, Illumina will now be able to redirect its focus towards its gene-sequencing business. Consequently, the company’s shares saw a slight increase of 1.5% to $129.01 during premarket trading on Monday.
Illumina has stated its intention to complete the divestment process next year. Should it decide to spin off Grail, the company will need to allocate sufficient capital to support Grail’s operations for at least two years and ensure its continued competitiveness. Alternatively, Illumina may explore the option of finding a suitable corporate buyer for the subsidiary.
In response to this news, shares of Thermo Fisher Scientific, one of Illumina’s competitors, experienced a modest 0.3% increase early on Monday. Meanwhile, pharmaceutical giant Pfizer saw a 1% increase in its stock.
