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Illumina Says Judge Issued Favorable Decision in FTC Challenge to Grail Acquisition

This story has been updated to include comments from the FTC's Bureau of Competition and Canaccord Genuity Analyst Kyle Mikson.

NEW YORK – Illumina said on Thursday afternoon that it has received a favorable initial decision from the judge overseeing the US Federal Trade Commission's challenge to Illumina's purchase of Grail.

In a statement, the San Diego-based firm said Administrative Law Judge Michael Chappell "ruled for Illumina and rejected the FTC's position that the deal would adversely affect competition in a putative market for multi-cancer early detection tests."

The initial decision is not yet public, and Illumina does not have a copy to share, the firm said in an email.

"As we've stated from the outset, this transaction is procompetitive, will advance innovation, lower healthcare costs and save lives. We are pleased that, after considering the evidence, the ALJ has reached the same conclusion," Charles Dadswell, Illumina general counsel, said in a statement.

"The [FTC] Bureau of Competition is disappointed with this decision," Director Holly Vedova said in a statement. "We are reviewing the opinion and evaluating our options."

Illumina first announced plans to acquire Grail in late 2020 for approximately $8 billion. The FTC said in March 2021 that it would challenge the deal and was joined a month later by European competition regulators. The European Commission has since expanded its investigation of the deal.

In August 2021, Illumina pushed through the acquisition while vowing to operate Grail separately until any legal issues were resolved. The EC has since opened a second investigation into the deal and recently alleged that Illumina "jumped the gun" by finalizing the deal before regulators completed their review.

Chappell's decision is based on a hearing begun in August 2021 as well as briefs submitted by both sides.

"Though the news is a positive development for the deal, we expect it to be neutral to Illumina, given it is already recognizing dilution from Grail," SVB Securities Analyst Puneet Souda wrote in a note to investors. "We don't believe today's decision has any bearings on the EC's decision, which is expected on Sept. 12."

"We recently spoke to experts in EU merger law who referred to the EC's blockage of the GRAIL merger as 'a done deal,'" Canaccord Genuity Analyst Kyle Mikson wrote in his note on the matter.

The FTC's complaint counsel may appeal the decision. If it does so, the Commission will review Chappell's determination, receive additional briefings and oral arguments, and issue a final decision.

In Thursday afternoon trading on the Nasdaq, shares of Illumina closed flat at $200.62.