Would Illumina’s acquisition of GRAIL constrict the expansion of the liquid biopsy space?

Earlier this year, the Federal Trade Commission’s (FTC) posed a roadblock in the path of sequencing giant Illumina’s $7.1 billion proposed acquisition of Grail, a healthcare company focusing on early cancer detection, and importantly, a 2016 spin-out from the former. Right now, the European Commission (EC) is also investigating the soundness of this deal.

The justification provided by the FTC for this move was to prevent the monopolization of innovation in the early cancer detection/liquid biopsy space. Illumina is a leader in genome sequencing and in vitro diagnostics and offer their services to companies developing cancer and infectious disease detection tests. The FTC’s concerns are that if Illumina is successful in this acquisition, it can snuff out Grail’s competitors, who depend on Illumina’s sequencing equipment, by either raising the cost or by segregating key services.

What does this mean for different companies in the companion diagnostics world? While at the moment this decision of the FTC to not immediately approve the bending acquisitions of Grail by Illumina seems prudent and ethical, it may be nothing more than standard procedure for a relatively new Democratic administration, or it may be something else. Had the FTC been more perceptive, it probably would have prohibited Illumina from creating Grail in the first place.  It could also be that they did not have any jurisdiction over an equipment maker creating a customer facing company. From a business development standpoint, Illumina simply wanted to diversify and develop an additional market for its products.

Between 2016 – 2018, Grail had raised $1.5 billion in venture capital funding rounds. The reason it is important to note, is that much of this capital ended up with Illumina, as Grail purchased their services and products. All in all, Illumina was successful in creating a feedback loop through Grail that allowed flow of capital. A good portion of Grail’s $300 million Series A directly went to Illumina.

Whether the financial landscape would have expanded similarly without the formation of Grail, is a scenario we would not know about. The company was able to buy Illumina equipment due to the large amount of private capital it raised.  It is curious that a top investment bank served as placement agent for Grail’s private rounds.  This is highly unusual, especially for the Series A and warrant the question: Did Illumina influence that bank’s decision to do so in contrast to their policy and the policy of other top banks?

On the other side, It has been rumored that some of Grail’s other investors have been disappointed. [link?]  What is the company is trying to accomplish – developing a test to detect cancer from virtually any tissue of origin – is a heavy lift.  Their approach requires time.

In the past, Exact Sciences had announced publicly for a couple of years its interest in cannibalizing its own stool-based colon cancer screening test. Shortly after Illumina bid to acquire Grail, Exact announced plans to acquire Thrive for only $2.15 billion. Thrive’s pioneering early-stage screening test CancerSEEK has data behind it from a 10,000-patient interventional study that used a mutation and protein biomarker approach and could detect 10 different types of cancer. Interesting to note, that two established and large companies looked to liquid biopsy as the future.

Illumina’s Grail bid was $7 billion.  This price was dictated, in part, by the valuations set in Grail’s private funding rounds. A skeptic might speculate that Illumina itself are hoping the FTC might block the acquisition.

The FTC has the authority to review this proposed merger, propose modifications or outright block it from happening. Personally, as a veteran in this field, I do not feel that this acquisition of a customer by a supplier is a significant factor.  Illumina wants to sell its equipment products.  Illumina will likely continue to be interested in selling its products to other customers even if it is permitted to complete this acquisition.

What happens to Grail will be determined by the company’s ability to generate data of high sensitivity and specificity with its approach.  This is the determinant for any competitor in medical diagnostics. Grail does not have any products or services that are FDA approved and commercially available.  Therefore, the immediate harm to consumers of the proposed acquisition cannot be the reason for the FTC review.

The capacity of the new or next generation of equipment may have become a crutch for some in the diagnostics industry.  30,000 sequences, multiple types of markers are being used and are possible.  These approaches significantly drive up the assessment time and cost.  Quick turnaround time and low cost are critical to marketability especially for an early detection diagnostic test.  In addition, it seems these companion diagnostics (Dx) companies are relying way too much on the equipment and suppliers than contributing innovative breakthrough discovery.

In contrast, should it not be the focus to apply biochemistry to accurately screen for all non-tumor associated, wild type sequences from the samples first, before amplification on the mutant sequence? Innovators should focus greatly on the science and try to eliminate variables by rationale and research. This approach will significantly reduce false negatives, increase sensitivity, and decrease sequencing time and cost.  In many respects, it does not matter what the FTC or the EC decides. For those who remember, the government had once ruled that movie studios could no longer own theaters when the television was being introduced into the markets.

Photo: cookron, Getty Images