Illumina (NASDAQ:ILMN) has finally decided to divest its cancer diagnostic test-making subsidiary, Grail, due to regulatory pressure. The decision follows last week’s ruling by the U.S. Fifth Circuit Court of Appeals, which agreed to the Federal Trade Commission’s concerns about unfair competition in the market for cancer blood tests.
ILMN aims to divest Grail by selling it to another company or listing it on the capital markets and expects to finalize the deal terms by the end of the second quarter of 2024.
Brief History of ILMN & Grail Merger
In 2021, Illumina acquired GRAIL in a $7.1 billion deal without the European Commission’s approval and has held it as a separate company since then. Following the closing of the deal, the company faced antitrust pressure from the U.S. and European regulators.
In September 2022, ILMN’s acquisition of GRAIL faced a major setback when the European Commission (EC) prohibited the merger as well as imposed a €432 million fine for prematurely implementing the deal. Illumina, however, disputed the EC’s decision over the acquisition.
Later in October 2023, EC demanded not only the unwinding of the Grail acquisition but also the restoration of Grail’s pre-merger independence and competitive level. Furthermore, non-compliance with the divestment order is expected to result in a hefty fine of up to 10% of Illumina’s annual global revenue.
Will Illumina Stock Go Up?
The decision to divest Grail would relieve Illumina from the long-running legal battle and allow the company to focus on its gene-sequencing business.
Currently, Illumina stock has a Moderate Buy consensus rating based on 10 Buys, six Holds, and two Sells. Analysts expect ILMN stock’s price to reach $140.89 in the next 12 months, indicating a 10.9% upside potential from the current level.
