Illumina said on Monday it would buy cancer screening startup Grail in a cash-and-stock deal worth $8 billion, buying out investors including Jeff Bezos and snatching back a business it hived off four years ago as a separate company. The deal comes weeks after Grail filed to go public.
Illumina will get access to Grail’s “liquid biopsy” blood test, Galleri, which helps identify early-stage cancers and is expected to be launched commercially in 2021, betting on a market that is expected to grow rapidly in coming years.
Grail was founded by Illumina as a separate company in 2016 and had raised about $2 billion, with investors including Bezos and Microsoft.
Illumina is Grail’s largest shareholder, holding a 14.5% stake. Grail stockholders, including Illumina, will receive $3.5 billion in cash and $4.5 billion in shares of Illumina stock, the companies said on Monday.
Grail plans to follow Galleri with more blood tests for cancer diagnosis, detection and post-treatment monitoring of cancer patients.
Most liquid biopsies use next-generation sequencing to scan blood samples for fragments of tumor DNA in people previously diagnosed with cancer.
Analysts peg the market for liquid biopsies in the range of least $30 billion to $130 billion in the United States alone.
But shares of Illumina were down 8.4% at $270.80, as some questioned the rationale.
“We don’t see the clear fit for acquiring a company that is still at a stage where clinical studies and clinical product development are still critical and will be for years,” Cowen analyst Doug Schenkel said in a client note.
Acquiring Grail would also create conflicts with many of Illumina’s existing clinical customers, Schenkel added, noting that many of Illumina’s major customers have ambitions to develop liquid biopsy-based cancer screening tools.
Grail stockholders will also receive future payments based on Grail-related revenue.