June 7, 2023

Final month, Carl Icahn launched a proxy struggle with Illumina, the world’s greatest genome sequencing firm, pushing Illumina to unwind its buy of Grail.

With this proxy struggle, Mr. Icahn aligned himself with Lina Khan and the Federal Commerce Fee (FTC), which has dominated in opposition to the $7.1 billion deal. The Grail acquisition is one the place Mr. Icahn has made considered one of his uncommon errors and, maybe with out realizing it, has taken sides with Ms. Khan in her bid to rewrite antitrust legislation. Different traders have been extra supportive, calling the Grail acquisition a “pure extension”  of Illumina’s expertise and deeming it value pursuing.

It’s Ms. Khan and the FTC that Mr. Icahn must be focusing on, not Illumina and its management. As an alternative of forcing the corporate to spend sources to answer his proxy battle, Mr. Icahn may lend his resounding voice to the rising recognition that Ms. Khan’s view of anti-trust legislation is misguided.

Mr. Icahn concedes Illumina is a “nice firm,” though he’s attempting to get the CEO fired for purchasing Grail, the maker of a blood check that may detect greater than 50 various kinds of most cancers with few false positives.

I’ve been following this case for skilled and private causes. A most cancers survivor and advisor to CEOs, I’m alive solely due to the early detection of my most cancers and since I benefitted from cutting-edge expertise in my remedy. I do know first-hand the life-and-death distinction these improvements symbolize. 

There are revealed accounts of docs utilizing Grail’s check to detect pancreatic most cancers at an early stage, working to take away the tumor, and sufferers returning to their regular lives. Docs virtually by no means discover pancreatic most cancers early. Everyone knows household and pals who’ve died of this terrible illness as a result of we by no means discover it till it has unfold to different elements of the physique and it’s too late to cease. At scale, Grail is projected to save lots of tons of of hundreds of lives.

On this period of FTC overreach, the Illumina-Grail transaction would probably have merited little regulatory scrutiny. Ms. Khan, who was nominated “to make massive structural change[s] by reviving antitrust enforcement,” in response to Sen. Elizabeth Warren, has tried to unwind the deal though there is no such thing as a U.S. legislation or authorized precedent to justify barring this vertical transaction.  

The FTC’s determination has created regulatory uncertainty, contributing to the drop in Illumina’s inventory, which, in flip, has enticed Mr. Icahn to purchase a stake of about 1.5%  in a typical activist play. 

In the meantime, Mr. Icahn’s activism has distracted from probably the most problematic situation right here: the FTC’s makes an attempt to make use of novel authorized theories and techniques to sink a transaction.

The FTC’s habits, on this case, ought to concern each firm with acquisition plans within the U.S. and Europe, given the good lengths Ms. Khan and the FTC have gone to companion with European regulators to smother this deal in its cradle.

Contemplate these plain information: FOIA requests have uncovered a flurry of communications between the FTC and European antitrust regulators, which have been adopted by the European Fee (EC) pursuing a novel concept of jurisdiction–and the FTC withdrawing its personal federal lawsuit to cease the deal. 

Below the EU’s personal legal guidelines, any EC evaluation of the acquisition must be barred “as a result of Grail has an inadequate nexus with the EU.” The EU is counting on a novel interpretation of the EU Merger Regulation for its jurisdiction and that interpretation is being challenged within the EU’s highest court docket. In truth, because the U.S. Chamber of Commerce famous just lately, the EU is attempting out this “new and dramatically expanded software” of the laws in opposition to Illumina for the primary time, “though, each firms have been headquartered exterior the European Union and the ‘proposed transaction didn’t [otherwise] meet the thresholds of EU Merger Regulation.’”

As a result of nobody else makes a multi-cancer early detection blood check like Grail’s, the regulators’ quest to regulate this area is misguided. There isn’t any different multi-cancer early detection check available on the market within the U.S. and though a most cancers detection check is on the market in elements of Europe, it assessments for less than a handful of cancers and makes use of a distinct expertise that doesn’t depend on Illumina’s sequencing.

The EC is making up new guidelines to manage firms working in nascent markets alongside non-existent opponents who’ve but to develop any merchandise and may by no means accomplish that. By implication, which means there isn’t a merger transaction wherever on this planet that the EC can’t lengthen an extended arm in to dam if the EC’s motion relating to Illumina stands.  

Why did the EU become involved? The FTC is aware of that U.S. courts probably would look askance at its speculative case in opposition to Illumina. When, after countless agency-manufactured delays, the FTC lastly tried the case earlier than considered one of its personal in-house judges, the choose sided with Illumina, though FTC judges virtually at all times discover for the house workforce.

In truth, this was the primary time ever that an FTC choose determined in opposition to the company in a merger case, discovering that combining the businesses was not anti-competitive and that the FTC had didn’t show its case.  So, enlist European regulators to assist additional your grand design.

It’s fairly clear that Illumina is a pawn within the FTC’s grander scheme. Its actual goal is to set a precedent now by grinding down a smaller life sciences firm so it might probably apply that precedent to massive tech firm mergers later. That’s as unwise as it’s unconscionable, injuring Illumina and all of its shareholders, together with Mr. Icahn, in pursuit of “structural modifications” in antitrust enforcement.

Together with his activist play, Mr. Icahn has unwittingly performed into Ms. Khan’s arms. Illumina should now struggle on two fronts, however Illumina and Mr. Icahn ought to unite in opposition to their widespread foes: the FTC and Ms. Khan.

Mark S. Herr is a lawyer and former regulator who has suggested CEOs and different company leaders for the previous 20 years.

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