September 16, 2020
(Bloomberg) — Genetic sequencing giant Illumina Inc. is in talks to acquire cancer-detection startup Grail Inc., according to people familiar with the matter.
Illumina could pay more than $8 billion for Grail, said the people, who asked not to be identified as the details aren’t public. The startup had a valuation of $6 billion from its previous fundraisings, said the people. As a private company Grail has raised more than $1.9 billion, regulatory filings show.
The companies could announce a deal as soon as this week, said the people. No final decision has been made and talks could fall apart.
Shares of Illumina, which initially jumped, fell 6.3% at 1:19 p.m. in New York trading, giving the San Diego-based company a market value of $48 billion. The acquisition would be Illumina’s biggest ever deal, data compiled by Bloomberg show.
Representatives for Illumina didn’t respond to requests for comment. A representative for Menlo Park, California-based Grail declined to comment.
Bloomberg Intelligence analyst Jonathan Palmer called the potential deal “a little bit of a head scratcher” given the companies’ shared history. Grail was formed as a subsidiary of Illumina in 2015, and the San Francisco-based company still owns more than 10% of its stock, according to regulatory filings.
Buying Grail would put Illumina in direct competition with its customers, who use Illumina’s sequencers to develop their own liquid biopsies, Palmer said. The company has in the past been reluctant to compete with its client base, he added.
Illumina is a giant in the DNA sequencing space, serving as the backbone for consumer genetics tests and becoming an integral part of pharmaceutical research efforts. Grail is developing a blood test that aims to detect cancers early.
Illumina is also its sole supplier of the sequencers that Grail uses for performing its genomic tests. Combining the two companies would bring the testing and sequencing under one roof.
Grail has a list of high-profile tech and health-care backers, including Bill Gates, Jeff Bezos, Merck & Co. and Johnson & Johnson, according to its website. The company had filed for an initial public offering this month.
It’s possible that Illumina sees the opportunity as too big to pass up, Palmer said.
“I could imagine a scenario where they have the best look under the hood and see this as potentially being a very large market in the future and wanting to own that asset,” he said.
(Updates with valuation and shareholder details starting from second paragraph.)