The Securities and Exchange Commission (SEC) has initiated an investigation into Illumina regarding its controversial $7.1 billion acquisition of cancer test developer Grail, according to a securities filing released by the DNA sequencing company. The SEC notified Illumina about the probe and requested relevant documents and communications related to the deal, as well as statements and disclosures regarding the “conduct and compensation” of certain members of both Illumina and Grail’s management. Illumina stated in the filing that it is cooperating with the SEC, while an agency spokesperson has yet to comment on the investigation. Subsequently, Illumina’s shares dropped approximately 4% on Friday.
This SEC investigation further adds to the pressure on Illumina, as the company has suffered significant financial losses since completing the acquisition in August 2021. Its market value has plummeted to around $28 billion from the initial $75 billion when the deal concluded. In addition to the SEC’s probe, Illumina’s Grail deal has faced scrutiny from antitrust regulators in both the United States and the European Union (EU).
The EU’s executive body, the European Commission, recently imposed a record-breaking $476 million fine on Illumina for finalizing the acquisition without obtaining regulatory approval. Concerns were raised by the commission that the deal would hinder innovation and consumer choice in the emerging market for cancer detection tests. Illumina has appealed the European Commission’s decision, asserting that the body lacks jurisdiction to block the merger between the two American companies. The company expects a final decision on the appeal in late 2023 or early 2024, alongside the outcome of its appeal against a similar order by the U.S. Federal Trade Commission.
Should Illumina lose either appeal, it has stated its intention to divest Grail. The determination to retain Grail has led to a contentious proxy battle between Illumina and activist investor Carl Icahn, who holds a 1.4% stake in the company. Icahn’s opposition primarily stems from Illumina’s decision to finalize the acquisition without obtaining antitrust regulators’ approval.
Despite the challenges, Illumina remains steadfast in its belief that it can enhance the availability, affordability, and profitability of Grail’s Galleri test, which can screen for over 50 types of cancers using a single blood draw.
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