A San Diego judge’s ruling Friday afternoon was a setback for Illumina’s hopes of completing its $7.1 billion bid to acquire Grail, a Bay Area cancer diagnostic firm.
The judge granted the Federal Trade Commission’s motion to dismiss a prior request for an injunction hearing by the federal agency. That may sound like good news for Illumina, as the injunction would have kept the company from acquiring Grail before a judge could decide whether the deal would violate antitrust laws. But the FTC can still file another injunction in the future, delaying the deal further.
That could be a problem. If Illumina doesn’t complete the acquisition by Sept. 20, the deal will expire unless extended. That’s the argument attorneys for Illumina and Grail made before U.S. District Judge Cathy Ann Bencivengo of the Southern District of California.
But Bencivengo wasn’t swayed. She said she was granting the FTC’s request because there was no evidence that doing so would prevent Illumina and Grail from using any of their current arguments in favor of the deal in court in the future.
“Most of what I heard was about equities of positions, tactical advantages and disadvantages … threat of future litigation,” Bencivengo said of the companies’ arguments. “That’s not legal prejudice.”
After filing a preliminary injunction complaint at the end of March, the FTC said it reversed its position after learning that the European Commission, the European Union’s executive arm, was also investigating the Illumina-Grail deal. And because the commission’s investigation prevents Illumina from closing the deal, FTC attorneys argued, there was no longer a need for an injunction.
That could be a flawed argument, Bencivengo admitted, but that wasn’t her call.
“Right or wrong, that’s their decision,” she said.
It’s not the verdict that Illumina, San Diego’s largest life science company, was hoping for. Since announcing its plans to acquire Grail in September, Illumina has said that it believes it can help the Menlo Park company get its Galleri test, which detects up to 50 types of cancer from blood samples of people who don’t yet have symptoms, approved by the Food and Drug Administration and available to a wider audience, saving up to 100,000 lives a year.
But the bipartisan FTC voted 4-0 in March to oppose the acquisition, arguing that because Grail’s competitors depend on Illumina’s sequencing equipment and supplies, the company could easily raise prices, deny services or in other ways squeeze out the competition. And that, the agency argued, would make the early cancer detection market less competitive, driving up prices and driving down access to a potentially life-saving technology.
A judge will hear both sides’ arguments in an administrative trial slated for Aug. 24 in Washington, D.C. In the meantime, Illumina is fighting the European Commission’s claim that it has jurisdiction to review the case.
It’s unclear exactly what Illumina’s next move will be. In an email exchange between attorneys for Illumina and the FTC, the company’s legal team said that dismissing the preliminary injunction hearing meant “there would be no impediment to closing the transaction in the United States.” And the company rejects the European Commission’s claim that it can’t acquire Grail until the commission reaches a decision, though it’s unclear if Illumina will proceed with the deal now.
“Defendants do not confirm and do not agree they are currently barred from consummating their proposed merger as related to the European Commission,” wrote Illumina’s attorneys in an email to the FTC’s legal team. “The European Commission’s assertion of jurisdiction is unprecedented and unlawful and you should make no assumptions regarding what the parties can or cannot do in closing the transaction, either in whole or in part.”
The San Diego Union-Tribune reached out to Illumina for comment but did not receive a reply in time for publication.