Update (September 7): California-based life sciences company Illumina (NASDAQ:ILMN) has hit an iceberg that may compel it to divest cancer-test developer Grail Inc. The European Union antitrust regulator has blocked the $7.1 billion acquisition deal, claiming that it could hurt competition and innovation in the early cancer-detection blood test market. However, Illumina plans to contest the EU’s decision.
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Illumina-Grail Deal: Doubts Persist Despite FTC Defeat
Investors seemed to approach Illumina (ILMN) stock cautiously despite the company obtaining a favorable ruling against the Federal Trade Commission (FTC) in the Grail acquisition case. The FTC has another option to try to thwart the Illumina-Grail merger. Moreover, EU antitrust regulators are also scrutinizing the deal.
California-based Illumina provides genetic sequencing products. Grail provides cancer tests, and Illumina is its supplier. Illumina founded Grail in 2016 but later spun it out as a standalone company in 2017. In 2020, Illumina decided to reunite with Grail, agreeing to acquire the cancer screening business for about $8 billion in cash and stock.
FTC Objected to the Illumina-Grail Merger
The FTC rejected Illumina’s plan to reunite with Grail. The regulator argued that the merger would hurt competition and innovation. Despite the FTC’s objection, Illumina went on to close the Grail acquisition in 2021. The issue was referred to an administrative law judge. Illumina announced on September 1 that the judge had ruled in its favor in the dispute with the FTC over the Grail deal.
However, investors showed little excitement toward ILMN stock despite the favorable ruling. On September 1, Illumina shares fell 0.51% in the regular session and rose less than 0.20% in extended trading.
Illumina-Grail Merger Faces More Headwinds
The FTC has an option to appeal the judge’s ruling in its bid to undo the Illumina-Grail merger. Depending on the outcome of the appeal, the matter could go to a federal court.
Apart from the FTC challenge, the Illumina-Grail merger has also raised antitrust concerns in the EU. Illumina failed in its bid to block EU antitrust regulators from looking into the deal. Although it went on to close the Grail acquisition last year, Illumina continued to run Grail as a separate business due to pending regulatory and legal issues.
Is ILMN a Good Buy?
Illumina shares have declined more than 47.2% year-to-date. Wall Street is mostly split about the stock. According to TipRanks’ analyst rating consensus, ILMN stock is a Hold based on four Buys, eight Holds, and two Sells. The average Illumina stock price prediction of $252.92 implies over 25.8% upside potential.
ILMN stock is a favorite of retail investors. TipRanks’ Stock Investors tool shows that retail investor sentiment is currently Very Positive on Illumina. In the past 30 days, 2.5% of the best-performing portfolios tracked by TipRanks increased their exposure to ILMN stock.
Moreover, Illumina stock is seeing some favorable mentions on financial blogs. TipRanks data shows that financial blogger opinions are 62% Bullish on ILMN stock, compared to a sector average of 68%.
Final Thoughts
Illumina stock remains under a cloud of uncertainty as long as the FTC and EU regulators still have room to challenge the Grail merger. The challenges also mean that Illumina will need to continue to hold Grail separately, potentially delaying its plans for the business.
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