Illumina and Grail Condemn FTC’s Merger Challenge as ‘Hopelessly Speculative’

DNA-sequencing company Illumina Inc. and multi-cancer early detection (MCED) test developer Grail Inc. answered the Federal Trade Commission’s (FTC) complaint filed in connection with the companies’ $7.1 billion proposed merger on Tuesday. The companies argued that contrary to the FTC’s allegations, the merger will save tens of thousands of lives. In addition, they contended that as companies vertically, rather than horizontally aligned in the supply chain, the merger does not threaten competition.

The FTC’s complaint, filed on March 30, claimed that the merger will substantially weaken competition among MCED test developers, stifle innovation, and potentially increase prices. The agency asked for a preliminary injunction to halt the proposed transaction.

Illumina and Grail’s answer explained that cancer kills more than half a million Americans each year. The proposed deal would accelerate the development and rollout of a “revolutionary” blood test that will be able to detect more than 50 cancers, over 45 of which have no approved screening test. Further, the test would enable early detection, giving patients a much better chance of fending off the disease.

The companies contended that an injunction would deprive the public of this test on an accelerated timeline. Further, they argued that their vertical relationship does not pose competition concerns. Instead, the filing alleged that well-established legal precedent, agency guidelines, and economic theory acknowledge that such mergers generate efficiencies that promote consumer welfare.

The answer explained that Illumina founded Grail five years ago with the goal of developing an early screening test for multiple cancers. The companies subsequently split, but Illumina retained a 14.5% equity share in Grail. The companies argued that Grail “still faces significant hurdles, including obtaining regulatory approval, payor reimbursement and production and distribution of its test at scale.” To survive and thrive, they contended, Grail needs financial injection and other support Illumina will provide.

The answer also pointed out that Illumina “offered binding, irrevocable contractual commitments to all of its U.S. oncology customers, which address every one of the FTC’s stated concerns.” The guarantees include supply and price locks for a period of 12 years.

Illumina is represented by Cravath, Swaine & Moore and Buckley LLP, Grail by Latham & Watkins LLP.