Signal: Illumina’s Grail troubles continue as Carl Icahn sues over deal

Illumina proceeded with its re-acquisition of Grail despite the concerns of regulators, irking them and inviting Icahn's lawsuit.

Isaac Hanson October 26 2023

Illumina, the sequencing and diagnostics giant, is facing a class-action lawsuit led by activist investor Carl Icahn over its attempted acquisition of Grail, a biotech company it spun out in 2016. The company has been in trouble for some time over the deal that closed in August 2021, and this latest saga suggests that its problems are unlikely to disappear any time soon.

When Illumina sought to acquire Grail, it likely seemed simple: the company had once been a part of the company itself, and bringing the test manufacturer back in-house would allow Illumina to accelerate the development of its cancer test, allowing it to help more people more quickly.

Unfortunately for the board, the Securities and Exchange Commission (SEC) and European Commission (EC) disagreed, arguing that the deal would inhibit competition in the diagnostics space as Illumina is the largest manufacturer of the technology that processes Grail’s tests. Disappointing, certainly, but perhaps not a complete failure. As Microsoft’s eventual acquisition of Activision Blizzard earlier this month shows, regulators can be convinced given time and work.

Illumina took a different path, however. Rather than wait for regulators to decide, it ploughed ahead with the acquisition regardless. Regulators aren’t given to being ignored and don’t take it kindly when they are. Since then, Illumina has been fined a record sum by the EC, lost its CEO and now faces both the EC and the US’ Federal Trade Commission demanding the divesture of Grail.

Somehow, these divesture orders might not be the worst thing to happen to Illumina’s board this year. Icahn, known for his heavy involvement in the companies in which he holds shares, is suing the board for moving ahead with the deal.

In the recently unsealed suit, Icahn’s investment group takes aim at particular members of the board, including former CEO Francis deSouza who was deposed by Icahn earlier this year. The suit aims to extract not only the value of the EC fine – $476m – but also the costs of Illumina’s continued support of Grail and the costs of its eventual divesture.

Should the company lose the suit, an outcome that seems eminently probable given the damage done to shareholders’ financial standings, the board will also have to resign, further deepening a crisis that has already cost the company billions.

Despite this, and the company’s updated growth guidance that suggests no increase in revenue from 2022, the company’s public face remains hopeful. GlobalData analysis of corporate filings and transcripts suggests that the net positive sentiment of remarks made is 0.7, meaning 70% of key takeaways are positive.

Of course, this doesn’t mean that things are going well behind the scenes, but at the very least it suggests that the company wants to appear hopeful.

Our signals coverage is powered by GlobalData’s Thematic Engine, which tags millions of data items across six alternative datasets — patents, jobs, deals, company filings, social media mentions and news — to themes, sectors and companies. These signals enhance our predictive capabilities, helping us to identify the most disruptive threats across each of the sectors we cover and the companies best placed to succeed.

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