Although the Federal Trade Commission (FTC) of the United States has sued to block this transaction, and the European Union is also launching an antitrust investigation, the acquisition case has still been completed.
On August 18, 2021, global sequencing leader Illumina announced that it had acquired GRAIL, a leader in the early screening industry for cancer.
GRAIL was initially founded in 2016 with funding from Illumina. After 5 years of development, Galleri, a pan cancer gene early screening product, will be launched in 2021, embarking on a commercialization process. Galleri is based on detecting cfDNA methylation in blood, covering over 50 types of cancer, with market potential far exceeding similar products. Just like a carefully trained adopted son who has finally come of age! Illumina also had the idea of officially being included in the legitimate lineage.
On September 21, 2020, Illumina announced its acquisition of GRAIL for the first time. GRAIL accepts Illumina's acquisition terms of 52.3 billion RMB (8 billion US dollars). The transaction will be completed in the form of cash and stocks, with $3.5 billion in cash and the remaining $4.5 billion in Illumina common stock. Illumina will own up to 93% of the shares after the merger, while other existing GRAIL shareholders will own the remaining 7% of the shares.
Illumina established GRAIL separately in the past to control costs in an uncertain field and attract external capital to share risks; As GRAIL's achievements gradually emerge and commercialization is approaching, it is also natural to recycle GRAIL. However, as a leading enterprise in the field of early screening of tumors, will GRAIL's accumulated patents become a big stick for Illumina to crack down on industry competitors in the future?
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The United States and Europe are investing in antitrust investigations one after another
Illumina is known as the oligopoly of gene sequencers, once occupying 70% of the global market share, with 90% of gene sequencing data provided by its equipment. The news of Illumina's acquisition of GRAIL immediately attracted high attention from regulatory authorities, and the United States and the European Union immediately launched antitrust investigations into it.
FTC is the first to file a lawsuit
Illumina, as the only DNA sequencing supplier in the United States, is suspected of having an economic motive for acquiring GRAIL.
The Federal Trade Commission (FTC) believes that the Galleri test can be used to detect up to 50 types of cancer, most of which currently do not have early screening methods. This test product can save millions of lives worldwide. The acquisition will put GRAIL's competitors at a disadvantage, thereby hindering industry competition and innovation, ultimately hindering consumer protection, and forming an industry monopoly.
FTC indictment
Based on this, FTC filed a lawsuit against Illumina in the District Court for the District of Columbia, with an administrative trial scheduled for August 24, 2021.
EU expansion review
Although Illumina and GRAIL are both American companies, in the context of trade globalization, any industry monopoly that arises will affect the world.
The European Commission revised the merger regulations in March of this year. France has made a review request for Illumina's acquisition of GRAIL in accordance with Article 22 (1) of the new EU Merger Regulations (which allows member states to make review requests for mergers that do not belong to the EU level but may affect trade within the single market, particularly potentially seriously affecting competition within the requesting member states). After France submitted a review request, Belgium, Greece, Iceland, the Netherlands, and Norway also submitted the same review request.
On April 20, 2021, the European Commission decided to initiate a review process on Illumina's acquisition of GRAIL and stated that it would conduct a comprehensive investigation into the merger of this transaction. On July 22nd, the preliminary review was completed and a second round of review will be conducted. The review results will be determined before November 29th.
Illumina's rebuttal
Firstly, Illumina believes that it has no plans to sell Galleri in Europe, so the EU is not qualified to review the merger case.
GRAIL is currently selling Galleri testing in the United States for $950, which is not currently covered by insurance reimbursement. Illumina's experience in market development will help accelerate market coverage and reimbursement.
GRAIL was formed by Illumina, and the first batch of GRAIL employees were also from Illumina. Illumina and GRAIL are not competitors, and this is a vertical acquisition.
Illumina has promised to the US Federal Trade Commission and the European Commission to take these remedial measures: to guarantee a 12 year supply agreement to US/EU customers and to reduce the sequencing price per GB by 40% by 2025.
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GRAIL standing on the shoulders of giants
Thanks to Illumina's full support, GRAIL can be said to have developed smoothly and also created three "best" in the industry: the largest financing scale, the best early screening technology, and the largest number of clinical trials.
GRAIL Financing Path
In 2016, GRAIL was jointly founded by Illumina with several capital investments of $100 million. In the following years, it completed a total of over $2 billion in financing, setting a record in the field of cancer early screening financing.
In March 2017, GRAIL announced the completion of the B-round initial financing, totaling $900 million, led by Arch Venture Partners. Johnson&Johnson, Amazon, Bristol Myers Squibb, Celgene, McKesson Ventures, Merck, Tencent Holdings, and Varian Medical Systems are all on the investor list.
In June 2017, GRAIL merged with Cirina, becoming GRAIL's operating subsidiary. Cirina is a company that also focuses on early cancer diagnosis, co founded by Professor Lu Yuming and colleagues Professor Zhao Huijun and Professor Chen Junci from the Chinese University of Hong Kong, as well as the main investor, Decheng Capital. The merger of the two companies further consolidates GRAIL's research capabilities and lays an important foundation for continuing to develop the global commercial product market, including in Europe, America, and various parts of Asia.
In May 2018, GRAIL announced the completion of a $300 million round C financing. The leading investor in this round of financing is Huiqiao Capital, and Tonghe Yucheng and Hillhouse Capital also participated in the investment. Famous domestic and foreign institutions such as Blue Pool Capital, China Merchants Securities International, CRFInvestment, Huangpujiang Capital, ICBC International, Sequoia Capital China, and Yao Mingma also participated in the investment.
On September 9, 2020, GRAIL announced its sprint to NASDAQ, and less than half a month later, it was acquired by Illumina as "Jiehu", bringing an abrupt end to its original IPO journey.
Early screening milestone Galleri
The Galleri, a multi cancer early detection product, is used for cancer screening in asymptomatic populations over 50 years old. It has the ability to detect over 50 types of cancer with a single tube of blood. In May 2019, it was approved by the US FDA as a breakthrough device, which can be considered a milestone for both the global cancer early screening field and GRAIL company.
The breakthrough device certification of the US FDA usually grants products and equipment that provide more effective diagnosis for diseases that endanger human life, such as cancer, to accelerate the development, evaluation, and review of medical devices, enabling them to obtain authorization and provide timely services to patients and healthcare service providers.
Galleri is a tumor detection product based on cfDNA methylation. Researchers have found that when tumor cells in cancer patients rupture, a circulating tumor DNA (ctDNA) is released. By comparing blood derived DNA fragments with known tumor mutated gene sequences, more tumor information can be obtained, which has clinical guiding significance for early tumor screening, medication, and other aspects.
But the difficulty lies in the extremely low ctDNA content in plasma and the high background noise of second-generation sequencing, which makes it easy for tumor signals to be completely submerged in the background noise. This reflects the importance of capture technology.
Therefore, in addition to having a large amount of funding for back-to-back support, a large number of clinical trials are also needed
The largest clinical trial in the industry
General tumor NGS companies will choose to conduct tumor early screening while developing tumor associated diagnostic products, in order to achieve faster commercialization; GRAIL, on the other hand, has shown great patience: choosing to focus on the field of early screening of tumors and continuously using large cohorts of clinical research to collect data to polish the product.
Principle of CCGA detection target selection
In 2016, GRAIL initiated a clinical study on circulating cell free DNA atlas (CCGA). CCGA is a prospective, observational, longitudinal clinical study aimed at obtaining genomic cancer signal features in the blood to identify individuals with or without cancer. The study consists of three sub studies.
Through collaboration with multiple academic centers, CCGA included over 15000 participants with (56%) or without (44%) cancer. Analyze their blood samples using comprehensive targeted panels and ultra deep sequencing strategies. The project plans to track participants for five years, focusing on comparing the heterogeneity or diversity of cfDNA patterns between healthy individuals and cancer patients with different stages and types.
On March 30, 2020, GRAIL released the research results of the CCGA (Circulating Cell free Genome Atlas) project.
The results showed that GRAIL's cfDNA targeted methylation analysis method based on liquid biopsy can distinguish more than 50 types of cancer in multiple stages, including high mortality cancer and early cancer without screening guidelines, with specificity>99% and a single false positive rate<1%. The sensitivity of this test for stage I-III cancer is 43.9%, and the sensitivity for stage I-IV cancer is 54.9%. When detecting cancer signals, the detection can also accurately locate the tissue origin of cancer with 93% accuracy.
Meanwhile, the study used information from the SEER database to simulate the impact of early cancer detection on cancer mortality. The results show that if one-third of stage IV cancers are diagnosed in stage III, one-third in stage II, and one-third in stage I, the expected number of cancer deaths will decrease by 24%.
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Officially entering the midstream market
As one of the three giants in the field of gene sequencing (the other two being Roche and Huada), Illumina's core advantages and labels have always been in the upstream market.
After acquiring Blue Gnome, a British genetic variation sequencing service company, in 2011, Illumina broke the previous situation of not competing with customers and officially entered the midstream market. Until now, Illumina's business landscape has included various aspects of gene sequencing technology, including sequencing technology, sequencing reagents, test sample processing, and test data analysis.
In 2013, Illumina also acquired Verinata Health, a company that specializes in NIPT. And in 2014, Sequenom established a patent consortium with Sequenom, which holds the core patent of NIPT "540", continuously suppressing its clients and major competitors in the NIPT industry, Natera and Ariosa Diagnostics, until today.
So acquiring GRAIL and directly competing with midstream service providers in specific niche areas is not Illumina's first attempt. It has acquired technology leading enterprises at crucial time points and entered the highly potential clinical diagnosis market, seeking new business growth points.
Currently, Illumina is also the only supplier of sequencing machines used by GRAIL for genome testing. Therefore, it is quite certain that after a successful acquisition, Illumina may extend from a pure sequencer provider to downstream applications, further consolidating its dominant position in the field of DNA sequencing.
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A Big Cake for Early Screening of Tumors
Currently, there are no available guidelines for recommended screening methods for most deadly cancers, and most cancers are already in their advanced stages when detected. Among patients diagnosed after the spread of cancer, the five-year survival rate is only 21%, while among patients diagnosed early before the spread, the five-year survival rate is 89%. If more than 50% of cancers are found at an early stage, millions of lives can be saved worldwide every year, and the incidence rate caused by invasive treatment can be greatly reduced.
GRAIL's cost control of its commercial product Galleri will crush its competitors and occupy almost all advantages.
According to GRAIL's prospectus, the expected number of Galleri's target users is approximately 52 million. At a customer price of $1400 and a penetration rate of 1%, it is estimated that Galleri will generate over $700 million in revenue in its first year of listing, while Illumina's annual service sector business is only 614 million yuan.
Even if it fails in the antitrust case a few months later, Illumina can still recover a large amount of funds by facilitating the listing of GRAIL. However, the big cake of early screening for tumors is still very tempting. Let's wait and see how the final outcome of this acquisition case will be!
