San Diego sequencing giant Illumina to reunite with Grail for $8B in bid to detect cancer earlier

San Diego gene sequencing giant Illumina announced an $8 billion deal Monday to acquire Grail Therapeutics, a Bay Area biotech once part of Illumina that is developing a blood test to catch cancer sooner.

“This deal is quite transformative for Illumina,” said Dr. Phil Febbo, chief medical officer, as it shows that the gene sequencing giant is “a company that also cares about testing for providers and patients.”

Illumina is the biggest biotech in town, and the acquisition, slated to go through by the second half of 2021, is one of the largest deals in San Diego biotech history.

It’s also something of a homecoming.

Grail spun out of Illumina in 2016 after researchers stumbled on an odd finding. They were working on a way to test a pregnant mother’s blood for signs that her child carries a genetic birth defect. But scientists found something they weren’t looking for: signs of cancer in some of the soon-to-be-mothers.

That observation launched Grail. Prior to the acquisition, Grail raised about $2 billion, with some of its most noticeable backers including Jeff Bezos and Bill Gates. Much of the excitement was fueled by the potential of its Galleri blood test. The idea behind the test is that tumors shed little pieces of DNA that show up in the blood, and this DNA has telltale chemical modifications that give away that a person has cancer and reveal where that tumor is located.

Grail isn’t the only company working in this space. Researchers have long searched for a simple blood test to catch cancer sooner. Grail’s name is an allusion to that search, which many researchers compare to the quest for the Holy Grail.

But Febbo says that what sets Grail apart is the amount of supporting evidence it has amassed.

“We’ve seen some incredible early data about the performance of the test,” Febbo said.

That includes a study of nearly 6,700 participants published earlier this year. Close to 2,500 of those in the study eventually developed one of more than 50 types of cancer, ranging from pancreatic to stomach to lung cancer.

Among those who were later diagnosed with cancer, Galleri caught early signs of disease 44 percent of the time. The test accurately pinpointed the tumor’s location 93 percent of the time.

For those who didn’t develop cancer, Galleri produced a false positive result less than 1 percent of the time; a low false positive rate means fewer false alarms for patients and doctors.

Illumina expects to debut Galleri in the second half of 2021, and it believes there is a huge and growing market for such tests. Illumina estimates that widespread adoption of the test could avoid 100,000 cancer-related deaths a year, and that 52 million U.S. adults could benefit from routine blood tests that detect a wide swath of cancers.

The company thinks such tests could be profitable, too. Illumina estimates all forms of sequencing-based cancer testing, from screening the healthy to monitoring those who’ve been diagnosed, could be worth $75 billion by 2035. The Galleri test uses Illumina sequencers to detect tumor-associated DNA modifications.

Grail stockholders will get $3.5 billion in cash and $4.5 billion in shares in Illumina stock. Current Grail stockholders can also opt for additional cash and stock or a slice of revenue from any future Grail-related sales.

Market analysts with investment bank Robert W. Baird & Co. expressed cautious optimism around Illumina’s announcement, noting that, while it’s a plus that Illumina already owns about 14 percent of Grail, it will take a while to see the deal pay off.

“We think ILMN’s existing stake/relationship is an attractive way to play the potential upside,” read a recent report. “It’ll likely take several years and significant investment before any potential meaningful revenue generation.”

Shares in Illumina closed at $270.13 Monday, down $25.37.

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