Illumina Buys Cancer Test Startup Grail for $8B

The deal will move Illumina “deeper into the application of its gene-sequencing technology to the diagnosis and treatment of patients."
Matthew HellerSeptember 21, 2020

Illumina said Monday it had agreed to acquire biotech startup Grail for $8 billion in a move to accelerate its push into clinical applications for its gene-sequencing technology.

Grail was founded by Illumina in 2016 as a standalone company to develop early detection tests for cancer using Illumina’s next-generation sequencing (NGS) technology. Grail’s “liquid biopsy” blood test, Galleri, is expected to be launched commercially in 2021.

The deal will move Illumina “deeper into the application of its gene-sequencing technology to the diagnosis and treatment of patients, a potential multibillion-dollar market,” The Wall Street Journal said.

Illumina currently owns 14.5% of Grail. Under the terms of the deal, it will pay $7.1 billion in cash and stock to Grail’s other shareholders.

“Galleri is among the most promising new tools in the fight against cancer, and we are thrilled to welcome Grail back to Illumina to help transform cancer care using genomics and our NGS platform,” Illumina CEO Francis deSouza said in a news release.

“Together, we have an important opportunity to introduce routine and broadly available blood-based screening that enables early cancer detection when treatment can be more effective and less costly,” he added.

According to Illumina, the total market for NGS-based cancer tests is expected to grow at a compound annual rate of 27% to $75 billion in 2035, with early-detection testing accounting for $46 billion of the market.

The company says studies have found Galleri, which searches for molecular markers to identify tumors, could detect more than 50 different cancers and generated false positives less than 1% of the time.

Illumina already sells molecular tests that help doctors diagnose genetic diseases and pick cancer therapies. “The deal’s success will depend on Illumina successfully launching Grail’s cancer-detection blood test and persuading health insurers to pay for it,” the WSJ said.

In trading Monday, Illumina shares fell 9.3% to $268.04.

“We don’t see the clear fit for acquiring a company that is still at a stage where clinical studies and clinical product development are still critical and will be for years,” Cowen analyst Doug Schenkel said in a client note.