American genetic variation and biological function company Illumina, Inc. is buying cancer screening company Grail, Inc. in a cash-and-stock deal estimated to be worth around $8 billion. The acquisition will include the purchase of Amazon founder Jeff Bezos' shares in the company.
The acquisition will effectively return Grail to its former owner. Illumina founded Grail more than four years ago as a separate company. Grail raised more than $2 billion through private investors that included Bezos and Microsoft joint founder Bill Gates.
Grail has filed to go public. Illumina is currently Grail's largest shareholder with a 14.5% stake.
In the deal Grail shareholders will receive a combination of Illumina stocks and cash. The company said Monday shareholders would receive $3.5 billion in cash and about $4.5 billion worth of Illumina shares.
Once complete Illumina plans to have Grail concentrate on blood-testing technologies for cancer detection, diagnosis and post-treatment. This includes liquid biopsies that utilize advanced sequencing technologies capable of detecting tumor DNA in blood samples. Industry analysts estimate the market for these types of blood tests could be worth between $30 billion and $130 billion in the U.S. alone.
Analysts at Cowen said the timing of the deal doesn't make sense because Grail is still a relative infant in the business. Grail is still conducting clinical product development and studies. Analysts estimate it might be doing so for years before it releases a profitable commercial product.
The research company said the acquisition might result in some conflicts with Illumina's clinical customers. By acquiring Grail, Illumina might be directly competing with its own customers aiming to develop liquid biopsy screening technologies.
Market participants shared these concerns, sending the company's stock price down following the announcement. Illumina shares were last trading unchanged at $270.13. On Monday its shares fell more than 8.4% to closing the day at its current $270.13 each.
