Cancer-Detection Deal Tests Antitrust Merger Policy

• Jurisdiction: United States,Federal,European Union
• Law Firm: Cahill Gordon & Reindel LLP
• Subject Matter: orporate/Commercial Law, Antitrust/Competition Law, M&A/Private Equity, Antitrust, EU Competition
• Author: Mr Elai Katz
• Published date: 10 January 2023

A ntitrust authorities on both sides of the Atlantic reached opposing conclusions about the legality of an acquisition of the developer of a cancer-detection test by a DNA-sequencing supplier. These decisions grapple with several hotly debated issues in antitrust law. The transaction does not involve the horizontal combination of competitors, but rather a vertical acquisition of a customer in an emerging and innovative market, raising concerns that, if the acquisition were not blocked, other current or potential customers'developers of cancer-detection tests'might be foreclosed from access to critical technology. Decision-makers also had to confront the buyer's commitment to solve the concerns by promising not to discriminate against these other customers. Adding further complexity, these merger challenges arose in an unusual procedural posture' especially in Europe, where the transaction did not meet the relevant thresholds for pre-merger notification' because the parties consummated the deal while investigations on both sides of the Atlantic were ongoing.

Illumina, Inc. supplies DNAsequencing technology used for genetic and genomic analysis. Grail, Inc., is a developer of a multi-cancer early detection test that, along with similar tests still in development, is understood to be groundbreaking in the early detection and treatment of cancer. Illumina formed Grail in 2016 and then spun it off shortly afterwards, while maintaining a minority stake. Illumina agreed to reacquire Grail in September 2020, and the deal was consummated in August 2021.

FTC Administrative Decision A Federal Trade Commission (FTC) administrative law judge (ALJ) decided that the merger would not substantially lessen competition in violation of antitrust law. The ALJ rejected arguments from FTC staff that the transaction would harm potential Grail competitors that use Illumina's DNA sequencing technology'also known as 'next-generation sequencing' systems'to develop similar cancer tests. Initial Decision (Sept. 9, 2022). The FTC staff argued that Illumina would have the incentive and ability to hinder Grail's rivals from access to this technology, which could impede their ability to innovate, bring cancer-detection tests to market, and save lives. Illumina countered that lives will be saved by the reunited company because it will make the test more widely available, at an affordable cost.

The ALJ found that the transaction would not change Illumina's incentives to lessen competition by...