Takes Aim at Illumina Over Grail Deal
This article from Barron’s may be of interest to subscribers. Here is a section:
Illumina was valued at more than $70 billion in the summer of 2021, when it said it had closed the deal for Grail, compared with around $31 billion now. It is still fighting a decision by European regulators to block its acquisition of Grail and potentially force it to divest the company. Illumnina currently holds Grail as a separate unit.
Shares in Illumina were up 20% on Monday but have fallen about 25% over the past 12 months. As well as the uncertainty over the Grail acquisition, the company is facing a projected slowdown in sales of its gene-sequencing products.
Illumina has adopted a combative attitude to EU regulators. The basis for their argument is both Illumina and Grail are US companies so the EU does not have jurisdiction. The EU’s argument is they control a large market and are already concerned with monopolistic practices in the gene sequencing sector.
There is no denying Grail’s blood biopsy technology is attractive for Illumina. It is the vector through which everyone would have their DNA sequenced at an annual health check for example. Screening automatically for cancers or other illnesses is a major innovation. If the merger is allowed, it will create a dominant force in what is a vital emerging technology. It seems likely that Icahn wishes to settle the dispute and improve value for shareholders.
Illumina is a very cyclical company. Historically, they have brought a new machine and that has spurred sales so the share rallies. Then it ranges for several years until they bring out the next machine.
The company released its latest machine last year which will compress the price of sequencing from around $200 to $100. However, the stock has not responded. That is partly because the new machines are expensive but also because the surge of spending on biotech during the pandemic has not been sustained and interest rates are now considerably higher.
The share has been ranging, mostly above $200 since June 2022 and popped on the upside today to test the upper side of the developing base formation.
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