The European Commission decided on Tuesday 6 September to prohibit the acquisition of GRAIL by Illumina under the EU Merger Regulation.
The merger would have stifled innovation and reduced choice in the emerging market for blood-based early cancer detection tests. Illumina has not proposed sufficient remedies to address these concerns (see EUROPE 12996/13).
The European Commission opened an in-depth investigation on 22 July to assess Illumina’s proposed acquisition of GRAIL (see EUROPE 12768/19).
Illumina is a global health technologies company, and leading supplier of next generation sequencing (NGS) systems for genetic and genomic analysis, which include NGS instruments, consumables and ancillary services. GRAIL is an Illumina client company that develops cancer screening tests based on NGS systems.
The Executive Vice-President responsible for Competition Policy, Margrethe Vestager, said that with this transaction (merger), “Illumina would have an incentive to cut off GRAIL’s rivals from accessing its technology, or otherwise disadvantage them”.
“Competition in this field is fierce, as it will transform the way we screen for cancer. The market potential is huge: by 2035, the market is expected to exceed €40 billion per year”, said Ms Vestager.
Remedies deemed insufficient. She explained: “Our investigation showed that the proposed remedies would not have been effective in practice and would have been easy to circumvent. The remedies offered were so complex, that it would have been hard for market participants and the Commission to monitor and enforce Illumina’s compliance”.
First, Illumina proposed a remedy to clear the way for the emergence of a suitable new NGS supplier. This remedy included a licence to some of Illumina’s patents. The company also suggested a ‘patent peace’ promise, meaning that Illumina would stop patent litigation against Chinese competitor BGI Genomics for three years.
However, Illumina has many more patents that competitors would need to develop an alternative system. “Illumina’s competitors face many other obstacles than intellectual property”, she said. For example, they need to have the know-how to develop a reliable NGS system, they need a strong support network and they need to build up a reputation with customers. The remedy did not address these obstacles.
Second, Illumina offered to provide GRAIL’s rivals with supply conditions comparable to those of GRAIL when purchasing Illumina’s NGS systems. To this end, GRAIL’s competitors were invited to sign a standard contract valid until 2033.
“But our investigation showed that this standard contract requires Illumina to respect a complex set of behaviours. It would be easy for Illumina to evade these rules. Due to this complexity, it would also be very difficult for the Commission to monitor compliance with this remedy”.
Given the significant negative effects of the merger and the absence of suitable remedies, the Commission blocked the merger, said Ms Vestager.
“Our decision today means that the innovation race between developers of NGS-based cancer detection tests will continue. In the future, Europeans will be able to access this promising technology at competitive prices and will have a choice of suppliers”, concluded the Vice-President. (Original version in French by Lionel Changeur)