Biotech company Illumina pushes back against Carl Icahn’s proxy fight over $7.1 billion Grail deal

Biotech company Illumina pushed back Monday against Carl Icahn’s proxy fight over the company’s acquisition of cancer test developer Grail, saying the activist investor’s board nominees “do not add value.” 

The San Diego-based DNA sequencing company released its latest response to Icahn’s sharp criticism of the $7.1 billion deal it completed in 2021, saying it’s committed to maximizing shareholder value as it works with antitrust regulators to “define GRAIL’s path forward as expeditiously as possible.”

Icahn, who owns a 1.4% stake in Illumina, sent an open letter to the company’s shareholders last week saying the DNA sequencing company paid too much for Grail and completed the “reckless” deal without getting European antitrust regulatory approval. He claimed those actions have wiped out $50 billion in Illumina’s market value and “clearly shows that shareholders have lost faith in Illumina’s management team and board of directors.” Grail is based in Menlo Park, Calif.

Icahn also announced his intentions to nominate three members to Illumina’s board during the company’s annual meeting of shareholders due to fears that the board “will pursue GRAIL until the end of time without regard to the amount of value destruction they leave in their wake.”

“To paraphrase William Shakespeare’s Hamlet, something is rotten in the state of Illumina,” Icahn wrote. Illumina’s stock, which has lost more than half its value from an August 2021 peak, jumped 17% after Icahn released his letter. 

In its response Monday, Illumina underscored its efforts to work through ongoing regulatory opposition.

Last year, the European Commission blocked the acquisition over concerns that it would hurt consumer choice and unveiled details of a planned order that would force Illumina to unwind the deal. That could result in a fine of up to 10% of Illumina’s annual revenues, which hit more than $4.5 billion last year.

Illumina said it has challenged the European Commission, arguing the agency lacks jurisdiction to block the merger between the two U.S. companies. A final decision is expected in late 2023 or early 2024, the company noted. Illumina said winning a jurisdictional appeal would eliminate any potential fine and “gives the greatest optionality for Illumina to maximize value for shareholders.”

The company also claimed Icahn recognizes the value of Grail to shareholders, pointing to a CNBC interview last week where Icahn referred to Grail as Illumina’s “best equipment.” Illumina added that the billionaire investor acknowledged that he doesn’t understand the regulatory process and has not offered ideas for a “rapid resolution” for Grail. 

“Icahn has no ability to accelerate the legal and regulatory processes and neither do his nominees,” Illumina said. 

The company added it has interviewed each of Icahn’s nominees and found they “lacked relevant skills and experience.” That includes Vincent Intrieri, the founder and CEO of VDA Capital Management who was previously employed by Icahn. It also includes General Counsel of Icahn Enterprises Jesse Lynn and Andrew Teno, a portfolio manager at Icahn Capital LP, an entity where Icahn manages investment funds.

Illumina touted Grail in its release, saying it has “tremendous long-term value creation potential.” Grail claims to offer the only commercially available early screening test that can detect more than 50 types of cancers through a single blood draw, Illumina said. The test generated $55 million of revenue in 2022 and is slated to rake in up to $110 million this year, according to Illumina.

The U.K.’s National Health Service is researching the test in a study with 140,000 participants, Illumina added. If the study is successful, the agency expects to test one million people in the U.K. in 2024.