Illumina Inc. (NASDAQ: ILMN) shares dipped early Monday after the company announced that it would be making a critical acquisition. Grail is the target in this case, and Illumina’s acquisition makes moot Grail’s previous plan to come public in an initial public offering.
What stands out here is that Grail was spun out from Illumina as a standalone company in 2016. It uses Illumina’s NGS technology to develop state-of-the-art data science and machine learning and create the atlas of cancer signals in the blood, enabling multi-cancer early detection tests.
Grail’s management believes that its multi-cancer early detection test, Galleri, can lead to a dramatic increase in early cancer diagnosis. The test is designed as a screening test for asymptomatic individuals over 50 years of age and is currently in late-stage development. Grail previously said that it plans to launch Galleri commercially in 2021 as a laboratory developed test.
Under the terms of the deal, Illumina will acquire Grail for $8 billion in a cash and stock agreement. Additionally, Grail stockholders will receive future payments representing a tiered single-digit percentage of certain Grail-related revenues.
The $8 billion price tag consists of $3.5 billion in cash and $4.5 billion in shares of Illumina common stock. Currently, Illumina holds 14.5% of Grail’s shares.
The agreement has been approved by the boards of directors of Illumina and Grail. The transaction is expected to close in the second half of 2021.
After all is said and done, Grail will operate as a standalone division within Illumina, with a dedicated leadership team to ensure continuation of Grail’s success.
Illumina stock traded down about 8% Monday morning, at $271.76 in a 52-week range of $196.78 to $404.20. The consensus price target is $351.33.