Case 1:21-cv-00873-RC Document 49 Filed 04/06/21 Page 1 of 40
`
`
`
`UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF COLUMBIA
`
`
`
`
`FEDERAL TRADE COMMISSION,
`
`Plaintiff,
`
`v.
`
`ILLUMINA, INC. AND GRAIL, INC.,
`
`
`
`
`Civil Action No. 1:21-cv-00873-RC
`
`Defendants.
`
`FILED UNDER SEAL
`
`
`
`ANSWER OF DEFENDANTS ILLUMINA, INC. AND GRAIL, INC.
`
`Defendants Illumina, Inc. (“Illumina”) and GRAIL, Inc. (“GRAIL”) (together,
`
`“Defendants”) answer the Complaint for temporary restraining order and preliminary injunction
`
`(Dkt. No. 14) (the “Complaint”) filed by the Federal Trade Commission (the “FTC”) in relation
`
`to Illumina’s proposed acquisition of GRAIL (the “Transaction”) as follows:
`
`PRELIMINARY STATEMENT
`
`This case involves a transaction that, if consummated, will save tens of thousands
`
`of lives. In the United States alone, cancer kills more than 500,000 people annually. The
`
`Transaction will accelerate the development, approval and adoption of a revolutionary blood test
`
`that can simultaneously detect more than 50 cancers, over 45 of which have no approved
`
`screening test today. The test does so across all stages, including earlier stages when cancers are
`
`more likely to be cured. The FTC’s challenge to the Transaction, which would deprive patients
`
`of this acceleration, is speculative and baseless. The FTC and DOJ have not successfully
`
`enjoined a vertical merger in over forty years. There is a reason for that track record.
`
`
`
`

`

`Case 1:21-cv-00873-RC Document 49 Filed 04/06/21 Page 2 of 40
`
`
`
`Longstanding legal precedent, agency guidelines and economic literature recognize that vertical
`
`mergers of this kind lead to efficiencies that promote consumer welfare and generally do not
`
`raise competitive concerns. The FTC’s request for a preliminary injunction should be denied.
`
`Illumina is a leading provider of sequencing products for genetic and genomic
`
`analyses. Its mission is to improve human health by unlocking the power of the genome.
`
`Illumina founded GRAIL five years ago with the goal of developing an early screening test for
`
`multiple cancers. In 2017, GRAIL was spun out as a standalone company to invest in the
`
`extensive, population-scale clinical trials needed to create an “atlas” of cancer signals in the
`
`blood, and the attendant state-of-the art machine learning platform to interpret those signals,
`
`enabling asymptomatic early cancer screening tests. Since the spinoff, GRAIL has developed an
`
`early screening test, Galleri, that can simultaneously screen for more than 50 cancers in
`
`asymptomatic patients who have no signs of cancer. GRAIL is also continuing to develop other
`
`tests for different patient populations. GRAIL plans to launch its Galleri test as a laboratory
`
`developed test in the United States in April 2021 but GRAIL is still many years from being able
`
`to commercialize Galleri at a wide scale. In short, GRAIL is a discovery and development
`
`company that has accomplished the very discovery and development goal contemplated by
`
`Illumina when it created GRAIL. Illumina stands poised to help GRAIL bring those benefits to
`
`the public as quickly and efficiently as possible.
`
`Illumina maintains approximately a 14.5% equity stake in GRAIL and, under its
`
`existing supply agreement with GRAIL, is entitled to a percentage of GRAIL’s net revenues,
`
`once GRAIL has such revenues. The transaction seeks to fully reunite Illumina and GRAIL at a
`
`critical juncture. While GRAIL has made significant progress in developing Galleri, it still faces
`
`significant hurdles, including obtaining regulatory approval, payor reimbursement and
`
`2
`
`

`

`Case 1:21-cv-00873-RC Document 49 Filed 04/06/21 Page 3 of 40
`
`
`
`production and distribution of its test at scale. As the Complaint acknowledges, there are no
`
`early cancer screening tests on the market today that simultaneously screen for more than one
`
`cancer. No other company has publicly disclosed a test in development that can identify such a
`
`broad range of cancers in asymptomatic patients. And Illumina is uniquely situated to use its
`
`experience and resources to accelerate the widespread adoption of GRAIL’s early cancer
`
`screening test, Galleri, and reach more patients faster. The combined company will launch a new
`
`era of cancer screening, accelerating commercialization and adoption of GRAIL’s transformative
`
`multi-cancer screening test. Galleri has the potential to reduce the cancer burden in the U.S. and
`
`worldwide—this Transaction thus means saving thousands of lives by reducing that burden
`
`sooner and at lower costs.
`
`The FTC’s challenge to this purely vertical transaction is hopelessly speculative.
`
`No NGS-based cancer screening tests have been launched on the market anywhere in the world.
`
`There are no “rivals” to GRAIL. The FTC’s case is based entirely on speculation about what,
`
`theoretically, Illumina might be able to do to a hypothetical rival to GRAIL in the future. Even if
`
`such speculation were permitted, it would have no place here: before the FTC filed its
`
`Complaint, Illumina offered binding, irrevocable contractual commitments to all of its U.S.
`
`oncology customers, which address every one of the FTC’s stated concerns. Specifically, such
`
`commitments include guarantees that:
`
`•
`Under a 12-year supply agreement, customers will have uninterrupted supply of
`the sequencing instruments and consumables that they use;
`
`•
`During that 12-year term, Illumina will not increase the price of any of the
`supplied sequencing instruments or consumables;
`
`•
`Far from increasing the price, by 2025, Illumina will decrease the cost of
`sequencing on Illumina’s highest throughput sequencing instrument, using the highest
`throughput consumable, by at least 43%, for all customers, regardless of application or use case;
`
`3
`
`

`

`Case 1:21-cv-00873-RC Document 49 Filed 04/06/21 Page 4 of 40
`
`
`
`•
`All customers shall receive “universal pricing” for any new sequencing product,
`and customers shall receive access to the same sequencing products at the same pricing as
`GRAIL under a “most-favored nations” clause;
`
`•
`Illumina will not discontinue any sequencing product supplied for a 12-year term
`as long as the customer continues to purchase that product;
`
`•
`To the extent Illumina receives confidential information from any customer,
`Illumina will not share that information with GRAIL;
`
`•
`Illumina will provide any documentation or information reasonably required to
`seek FDA approval or FDA marketing authorization to sell a clinical test using the sequencing
`products supplied under the agreement;
`
`•
`Any customer who wants to develop an in vitro diagnostic (“IVD”) distributable
`kitted test using Illumina’s FDA-approved instruments may enter into a separate agreement with
`Illumina under the standard terms in Illumina’s commitments;
`
`•
`An annual audit will be conducted by an independent third-party auditor
`confirming compliance with the terms of the supply commitments; and
`
`•
`Disputes on supply terms will be adjudicated through baseball-style arbitration,
`and Illumina must continue to supply products to the customer during the pendency of any
`dispute.
`
`These binding, irrevocable commitments are publicly available on Illumina’s website1 and open
`
`for a period of six years. Some of Illumina’s largest oncology customers have signed agreements
`
`on similar terms and stated that these binding commitments address any concerns they may have
`
`had regarding the merger. The FTC received these contractual commitments prior to filing its
`
`Complaint and does not address any of the specific terms in those agreements, despite the fact
`
`that the most analogous legal authority (and the only decision involving a challenge to a vertical
`
`merger in the last 40 years) relied on similar commitments in rejecting a vertical merger
`
`challenge. United States v. AT&T Inc., 310 F. Supp. 3d 161, 241 n.51 (D.D.C. 2018) (finding
`
`that arbitration commitment “will have real world-effects” and puts the merging parties’
`
`
`1 https://www.illumina.com/areas-of-interest/cancer/test-terms.html?SCID=2021-
`270ECL5522.
`
`4
`
`

`

`Case 1:21-cv-00873-RC Document 49 Filed 04/06/21 Page 5 of 40
`
`
`
`“‘money where [their] mouth is’ in showing that the proposed merger, far from being aimed at
`
`‘doing any of the things that the government alleges,’ is instead a ‘vision deal’ being pursued to
`
`achieve ‘lower prices, improved quality, enhanced service, and new products’”).
`
`The FTC bears the burden to show that issuing a preliminary injunction is in the
`
`public interest based on an assessment of (1) the FTC’s likelihood of success on the merits, and
`
`(2) the balance of the equities. That burden is substantial, especially in a case like this where the
`
`FTC’s theory is speculative and the benefits of this transaction are concrete and profound:
`
`accelerating access to this life-saving technology, and at lower prices. A preliminary injunction
`
`will prevent the transaction from ever being consummated and, consequently, these benefits from
`
`being realized. Thus, it is “an extraordinarily drastic remedy”. FTC v. RAG-Stiftung, 436 F.
`
`Supp. 3d 278, 290 (D.D.C. 2020). A mere “showing of a fair or tenable chance of success on the
`
`merits will not suffice for injunctive relief.” Id.
`
`The FTC does not contest that the proposed merger is a purely vertical
`
`transaction. Because it is purely vertical, the FTC “cannot use a short cut to establish a
`
`presumption of anticompetitive effect”; it must make a “fact-specific” showing that the proposed
`
`merger is anticompetitive. United States v. AT&T, Inc., 916 F.3d 1029, 1032 (D.C. Cir. 2019).
`
`The FTC has not met its heavy burden here.
`
`The FTC Improperly Defines the Relevant Product Markets. “Defining the
`
`relevant market is a necessary predicate to finding a Clayton Act violation.” RAG-Stiftung, 436
`
`F. Supp. 3d at 291. The FTC cannot meet this predicate.
`
`First, as the Complaint acknowledges, the downstream market in which Galleri
`
`will compete is non-existent and many years from reaching commercial scale. At this early stage
`
`of its development, it is impossible to know what technologies will be deemed substitutes for
`
`5
`
`

`

`Case 1:21-cv-00873-RC Document 49 Filed 04/06/21 Page 6 of 40
`
`
`
`non-invasive early cancer screening. Today, some tests are based on polymerase chain reaction
`
`(“PCR”) technology, which amplifies DNA to detect the presence of genomic mutations and
`
`methylation changes. GRAIL’s Galleri test in development is based on next-generation
`
`sequencing (“NGS”) technology, which uses sequencing to identify changes in methylation
`
`profiles in cell-free DNA in the blood. A variety of different technologies are expected to be
`
`used for cancer screening tests in the future, including proteomics, which identifies cancer
`
`antigens or other pathologically significant proteins in blood samples, microarray, which
`
`identifies genomic mutations and methylation changes using an orderly and specific arrangement
`
`of probes attached to solid support, and PCR. The FTC offers no factual basis to exclude these
`
`innovative technologies from the relevant market in which, years from now, multi-cancer
`
`screening tests may compete. Only five years ago, GRAIL was a newly formed subsidiary of
`
`Illumina with a moonshot goal of finding a way to detect multiple cancers early from a blood
`
`draw. The FTC has no grounds to predict that, five-plus years from now, other technologies,
`
`some already used today, others being developed, for cancer screening will not compete in the
`
`relevant downstream market with NGS-based multi-cancer screening tests.
`
`Second, the FTC fails to define a relevant upstream market. It is the FTC’s
`
`burden to define a relevant upstream market, and it has not even alleged one. Indeed, other
`
`clinical diagnostics platforms compete with Illumina’s NGS systems as a platform for cancer
`
`screening tests, and, just as the downstream market is dynamic and evolving, so too is the
`
`upstream market—as the FTC itself alleged over a year ago in its challenge to Illumina’s
`
`proposed acquisition of Pacific Biosciences of California, Inc. The FTC improperly ignores this
`
`intensifying competitive landscape.
`
`6
`
`

`

`Case 1:21-cv-00873-RC Document 49 Filed 04/06/21 Page 7 of 40
`
`
`
`No Vertical Foreclosure. The merger will not lead to any form of foreclosure or
`
`higher prices of any potential rival to GRAIL who is, or may become, an Illumina customer. As
`
`the FTC has recognized, the profitability of a foreclosure strategy depends on the “significance
`
`of the merged firm’s potential gains in the relevant market and any potential losses from reduced
`
`sales of the related product” resulting from the strategy.2 Here, a foreclosure strategy would
`
`cause significant losses from reduced sales of Illumina’s upstream sequencing products, and
`
`there is no basis to predict that those losses would be offset by diversion of sales of unknown
`
`future rivals to Galleri. Thus, it is implausible that Illumina would attempt any such strategy,
`
`even if it were not contractually prohibited from doing so (which it is).
`
`Illumina’s long-standing and core strategy is to catalyze development
`
`and expansion of sequencing into new applications, particularly in clinical markets. By
`
`increasing demand for sequencing tests, Illumina grows its opportunity to sell more sequencing
`
`products. Illumina’s reacquisition of GRAIL is transformational for both companies. However,
`
`it does not change this strategic imperative to supply test developers with low-cost NGS products
`
`that facilitate the expansion of sequencing into emerging clinical applications such as cancer
`
`screening. Following the transaction, Illumina will continue to have powerful strategic and
`
`economic incentives to reduce the cost of sequencing and provide innovative products to all
`
`customers, regardless of whether they may compete with GRAIL in the future.
`
`Illumina currently faces competition from rival platforms and will face increased
`
`competition in the near future. Illumina recognizes that its customers have options, and that the
`
`platform landscape is only growing more competitive. That is why Illumina has put its money
`
`
`2 Fed. Trade Comm’n, Commentary on Vertical Merger Enforcement § 3(A)(ii) (2020),
`https://www.ftc.gov/system/files/documents/reports/federal-trade-commissionscommentary-
`vertical-merger-enforcement/p180101verticalmergercommentary_1.pdf.
`
`7
`
`

`

`Case 1:21-cv-00873-RC Document 49 Filed 04/06/21 Page 8 of 40
`
`
`
`where its mouth is by extending long-term contracts that prevent price increases and ensure
`
`customers receive the benefits of Illumina’s upstream innovations—which Illumina would do in
`
`all events given its strategic goal to accelerate adoption of NGS testing. The hypothetical future
`
`conduct that the FTC alleges—which is impossible given those commitments—would also be
`
`incredibly damaging to Illumina’s core strategy and financial incentives. Such tactics would
`
`cause significant harm to Illumina’s reputation and discourage future development of tests on
`
`Illumina’s platform. Further, because the cost of Illumina’s sequencing products are a small—
`
`and shrinking—portion of the likely costs of future cancer screening tests, any attempt by
`
`Illumina to divert sales to GRAIL by raising any future rivals’ costs would be ineffective, while
`
`still inflicting substantial reputational and financial damage on Illumina’s core business.
`
`Additionally, in evaluating vertical mergers, the FTC must show that “the merged
`
`firm will benefit significantly from responsive changes in rivals’ behavior or from their lost
`
`sales” as a result of a foreclosure strategy.3 The FTC cannot show that such “diversion” of sales
`
`in the future market in which Galleri will compete is likely.
`
`
`
`
`
` In reality, it is impossible to know what such
`
`future tests might actually turn out to be, which cancers they might be able to screen, what
`
`patient populations they might serve, or for what uses they might be approved. What is known
`
`today is that Galleri is the only test that has demonstrated the ability to screen at least 50 cancers,
`
`and also the only test to demonstrate the capability to detect the “cancer signal of origin” to help
`
`identify the location of the cancer.
`
`
`3 Fed. Trade Comm’n, Commentary on Vertical Merger Enforcement § 3(A)(ii) (2020),
`https://www.ftc.gov/system/files/documents/reports/federal-trade-commissionscommentary-
`vertical-merger-enforcement/p180101verticalmergercommentary_1.pdf.
`
`8
`
`

`

`Case 1:21-cv-00873-RC Document 49 Filed 04/06/21 Page 9 of 40
`
`
`
`The tests alleged in the FTC’s Complaint are in such early stages of development
`
`that most have not even been publicly disclosed. For example, the FTC asserts, without any
`
`supporting evidence, that
`
` (Compl. ¶ 49.) Yet, there is no indication
`
`
`
`
`
` that is remotely similar to Galleri, much less that
`
`
`
`According to its public disclosures,
`
`
`
`
`
`
`
`
`
` is nothing like a
`
`generalized 50+ cancer test for population-scale screening of asymptomatic individuals who are
`
`not known to have had cancer and certainly have never been treated for cancer. The Complaint
`
`also asserts that
`
` (Id. ¶ 48.)
`
`
`
`
`
`
`
` In developing Galleri, GRAIL has conducted multiple multi-
`
`year large-scale clinical studies, costing several hundred million dollars, and has initiated more,
`
`aimed at demonstrating the clinical value and safety of a 50+ cancer screening test that has tissue
`
`of origin capabilities; and GRAIL is still years from achieving scaled adoption. Given the low
`
`prevalence of cancer in asymptomatic average-risk individuals, such multi-year studies are
`
`essential to safely launch such a test. The FTC’s baseless speculation that the test developers
`
`identified in the Complaint (or others) will develop close substitutes to Galleri—when none have
`
`disclosed an intent to develop a test for nearly as many cancers as Galleri much less given any
`
`9
`
`

`

`Case 1:21-cv-00873-RC Document 49 Filed 04/06/21 Page 10 of 40
`
`
`
`public indication that they have started similar studies themselves—does not come close to
`
`satisfying the FTC’s burden.
`
`In fact, other tests, whenever they are developed, are likely to be differentiated
`
`from Galleri in several ways, including the number and types of cancers detected, the level of
`
`sensitivity and specificity for different cancers, the ability or inability to detect tissue of origin,
`
`the indications approved by the FDA and the clinical uses for which Medicare and other
`
`coverage is available. The FTC’s assertion that these tests, with very different characteristics
`
`based on what is known today, will be close substitutes to Galleri in a future market that does not
`
`yet exist is pure speculation. And, given the degree of differentiation among tests in
`
`development, there is no basis to predict that Illumina would recoup the value of its lost sales of
`
`sequencing products by selling more Galleri tests. It would make no economic sense for
`
`Illumina to sacrifice profits upstream—and cause substantial and irreversible injury to its
`
`reputation as a trusted supplier of NGS platforms—by pursuing a foreclosure strategy when it
`
`could have no confidence that the strategy would create enough incremental profits from
`
`diverted downstream sales to offset such damage to its core business. And, in any event,
`
`Illumina has contractually disabled itself from pursuing such a strategy.
`
`Illumina’s Long-Term Contracts. Illumina has addressed every one of the FTC’s
`
`alleged harms by making binding contractual commitments to all of its U.S. oncology customers.
`
`The Complaint alleges three ways in which Illumina purportedly could harm future downstream
`
`rivals: raising their prices for NGS products, impeding their research and development efforts,
`
`and refusing or delaying the execution of an IVD agreement. Compl. ¶ 11. Illumina’s long-term
`
`commitments, summarized above, address all of these concerns. In the Complaint, the FTC
`
`merely asserts that supply agreements “cannot account for each and every current and future”
`
`10
`
`

`

`Case 1:21-cv-00873-RC Document 49 Filed 04/06/21 Page 11 of 40
`
`
`
`foreclosure method (Complaint ¶ 70), ignoring that the commitments Illumina has made in fact
`
`address each and every method alleged in the Complaint, and provide even more protections to
`
`current or future oncology customers.
`
`The Complaint also ignores that
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`credible;
`
`The few customers that appear to have voiced objections to the transaction are not
`
`
`
` Such
`
`baseless objections offer no support to the FTC’s speculative claims and must be disregarded.
`
`The Merger Will Produce Enormous Procompetitive Effects. While the FTC’s
`
`allegations of harm are speculative and improbable, the procompetitive benefits arising from the
`
`reunion of Illumina and GRAIL are certain to be realized and substantial. Most critically, the
`
`transaction will enable GRAIL to get its life-saving test to more patients, in the U.S. and
`
`globally, more quickly, and at lower prices than GRAIL could achieve absent the transaction.
`
`The impact of such acceleration and price reductions cannot be overstated—tens of thousands of
`
`additional lives will be saved, and there will be substantial cost savings for consumers and
`
`healthcare systems, because of the merger. This acceleration will also pave the way for other test
`
`11
`
`

`

`Case 1:21-cv-00873-RC Document 49 Filed 04/06/21 Page 12 of 40
`
`
`
`developers to obtain regulatory approvals, reimbursement and adoption of NGS-based multi-
`
`cancer screening tests. The merger will thus save lives and encourage innovation in cancer
`
`screening.
`
`including:
`
`These important benefits arise from a number of merger-specific efficiencies,
`
`•
`Accelerating FDA Approval and Medicare Reimbursement. Despite GRAIL’s
`progress in developing Galleri, it still faces the challenge of obtaining FDA approval. Indeed,
`FDA approval will be an enormous undertaking, and GRAIL on its own could readily hit
`speedbumps that result in delays of several months or even years. Illumina brings significant
`regulatory and quality resources with deep experience in obtaining FDA approval for clinical
`diagnostic products. Illumina will be able to leverage these resources to accelerate GRAIL’s
`submission activities, minimize the chance of error, and speed up FDA review time to result in
`earlier approval for Galleri. Moreover, because it is unlikely that Galleri will be able to obtain
`Medicare coverage without FDA approval, accelerating FDA approval will accelerate Medicare
`coverage, which is critical for Galleri to achieve widespread adoption in the U.S.
`
`•
`Accelerating Private Insurance Reimbursement. Illumina has extensive
`experience obtaining reimbursement for NGS-based products, and has set the standard in value-
`based healthcare through partnerships with insurers for clinical tests. GRAIL has no such
`experience. Illumina will leverage its capabilities to accelerate obtaining reimbursement for
`GRAIL’s tests from private insurers.
`
`
`
`
` This will vastly accelerate access to Galleri
`
`for U.S. consumers.
`
`•
`Speed to Scale. Illumina has the global operational infrastructure and experience
`operating regulated manufacturing and laboratory facilities to assist GRAIL in commercializing
`its tests at scale, in compliance with the quality and safety standards required by regulators.
`Illumina’s operational and commercial infrastructure will allow GRAIL to make its test more
`widely available at a faster rate and at lower costs.
`
`•
`Elimination of Double Marginalization (“EDM”). Absent the transaction,
`Illumina and GRAIL would each separately charge a mark-up over their costs, resulting in two
`margins (Illumina’s on NGS products; GRAIL’s on its tests) reflected in the price for GRAIL’s
`tests. The merger will eliminate this double margin. Moreover, Illumina will have strong
`incentives to pass the resulting savings through to consumers in the form of lower prices for
`GRAIL’s tests, which will increase output and save lives. As the FTC itself acknowledged in its
`Vertical Merger Guidelines, “vertical mergers often benefit consumers through the elimination of
`double marginalization, which tends to lessen the risks of competitive harm.”4 In addition to
`
`4 Federal Trade Commission Vertical Merger Guidelines, at 34 (June 30, 2020).
`
`12
`
`

`

`Case 1:21-cv-00873-RC Document 49 Filed 04/06/21 Page 13 of 40
`
`
`
`these standard EDM benefits, the merger will uniquely eliminate a significant royalty that
`GRAIL would otherwise owe Illumina on its future revenues. In combination with EDM, the
`savings from these efficiencies will be in excess of $2 billion over the next 10 years, which will
`be passed through to consumers. Thus, the merger will create an enormous opportunity to lower
`the price of Galleri far more than GRAIL would be able to absent the merger, and expand its
`reach to underserved communities.
`
`•
`Accelerating International Expansion. GRAIL has virtually no international
`presence and no international expansion plans, while Illumina has boots on the ground across the
`globe, has platforms or tests registered in over 45 countries globally, and has substantial
`experience commercializing clinical tests internationally. Illumina’s global footprint will
`significantly accelerate the availability of GRAIL’s products outside the U.S. by years.
`Importantly, international acceleration will benefit not just the patients in those foreign
`jurisdictions, but also U.S. patients and the U.S. healthcare system. The diverse datasets
`generated from testing patients in different regions of the globe can be used as evidence of
`additional clinical validation as part of GRAIL’s FDA submission, and to demonstrate the
`economic benefits of Galleri to U.S. insurers, which cover patient populations with diverse
`ethnic backgrounds. Thus, international acceleration will further accelerate U.S. adoption of
`GRAIL’s tests.
`
`•
`R&D Efficiencies. The combination of Illumina’s expertise in sequencing-based
`solutions and molecular biology with GRAIL’s machine learning capabilities and repository of
`clinical data will help accelerate new breakthroughs in oncology and other fields. These
`efficiencies are important and far from speculative, as history demonstrates. When Illumina
`acquired Verinata Health, Inc.—through which it vertically integrated into the downstream
`market for NIPT—over 100,000 expectant mothers had taken Verinata’s NIPT test. In a handful
`of cases, a signal was detected in the mother’s blood that was initially believed to be a false
`signal indicating a genetic abnormality in the fetus. After the acquisition, scientists at Illumina
`gained access to and analyzed that data, discovering that the NIPT test had detected circulating
`tumor DNA fragments present in the mother’s bloodstream. Verinata’s NIPT test had,
`incidentally, detected cancer in the blood, albeit at a late stage. From there, Illumina set out to
`achieve one of the most critical goals of cancer care—detecting cancer in the blood at its earliest
`stages. It is from that discovery, arising from R&D efficiencies created as a result of the vertical
`acquisition of Verinata, that Illumina formed GRAIL.
`
`Importantly, these critical benefits are merger-specific. GRAIL does not have the
`
`capabilities that Illumina can bring to bear to accelerate the scaled launch of GRAIL’s tests. The
`
`institutional expertise, experiences and competencies that Illumina will use to aid GRAIL in its
`
`regulatory and commercialization efforts will minimize the chances of delays, and maximize the
`
`chances of accelerating wide-scale access to Galleri by U.S. consumers. Even if it were assumed
`
`that, absent the merger, GRAIL eventually could build the competencies that Illumina has
`
`13
`
`

`

`Case 1:21-cv-00873-RC Document 49 Filed 04/06/21 Page 14 of 40
`
`
`
`developed from years of investment and experience, there is significant timing and execution
`
`risk. Illumina has those competencies already and, with the merger, GRAIL will have access to
`
`them swiftly, which will minimize the risks of missteps and delay—and here, delay will cost
`
`lives.
`
`Further, there is no possibility that the parties would achieve these benefits absent
`
`the merger. Illumina does not provide such services to any third party, and has no history of
`
`providing such extensive development and go-to-market services as a third-party consultant.
`
`Illumina is not involved in the development or regulatory efforts of its clinical customers in any
`
`material way. And Illumina’s clinical customers, including GRAIL, do not and would not share
`
`proprietary data relating to the development or use of their tests with Illumina. Without access to
`
`such data, Illumina cannot materially assist GRAIL in its regulatory, payor and
`
`commercialization efforts. The merger is necessary to eliminate these barriers to collaboration
`
`between Illumina and GRAIL in order to unlock the enormous, life-saving efficiencies that this
`
`procompetitive reunion will create.
`
`The Balance of Equities Favors the Transaction. If the Court issues a preliminary
`
`injunction, the transaction will collapse. The Merger Agreement provides for termination rights
`
`in the event that the transaction is not consummated on or before September 20, 2021, subject to
`
`a three-month extension period, and both parties have stated that they will not go forward with
`
`the transaction in the event that a preliminary injunction is issued. And with the collapse of the
`
`transaction, an important opportunity to save tens of thousands of lives would be lost. The
`
`equities plainly favor allowing this transaction to go forward.
`
`14
`
`

`

`Case 1:21-cv-00873-RC Document 49 Filed 04/06/21 Page 15 of 40
`
`
`
`RESPONSE TO THE SPECIFIC ALLEGATIONS OF THE COMPLAINT
`
`Except to the extent specifically stated herein, Defendants deny each and every
`
`allegation contained in the Complaint, including all allegations contained in headings or
`
`otherwise not contained in one of the Complaint’s 90 numbered paragraphs.
`
`The first paragraph of the preamble to the Complaint characterizes this action and
`
`asserts legal conclusions to which no response is required; to the extent that a response is deemed
`
`necessary, Defendants state that the FTC has petitioned this Court for a preliminary injunction
`
`enjoining the Transaction and in all other respects denies the allegations in the first paragraph of
`
`the preamble to the Complaint.
`
`The second paragraph of the preamble to the Complaint characterizes this action
`
`and asserts legal conclusions to which no response is required; to the extent that a response is
`
`deemed necessary, Defendants state that the FTC has filed an administrative complaint before
`
`the FTC and in all other respects denies the allegations in the second paragraph of the preamble
`
`to the Complaint. Specifically, Defendants deny that competition will be harmed if the Court
`
`denies the FTC’s request for a preliminary injunction enjoining the Transaction; and Defendants
`
`deny that the FTC’s administrative hearing will determine the legality of the acquisition or will
`
`provide all parties a full opportunity to conduct discovery and present testimony and other
`
`evidence regarding the likely competitive effects of the acquisition.
`
`To the contrary, Defendants aver that administrative proceedings before the
`
`Commission frequently take years to complete and that the administrative proceeding against
`
`Defendants would conclude long after the transaction’s deadline, given a weeks-long trial, post-
`
`trial briefing, a months-long window for the Administrative Law Judge to issue an opinion, an
`
`appeal to the Commissioners and an appeal to the United States Court of Appeals. Given the
`
`15
`
`

`

`Case 1:21-cv-00873-RC Document 49 Filed 04/06/21 Page 16 of 40
`
`
`
`commercial realities surrounding the transaction, this Court’s determination with respect to this
`
`preliminary injunction action will decide the fate of the transaction on the merits.
`
`Defendants respond to the numbered paragraphs of the Complaint as follows:
`
`NATURE OF THE CASE
`
`1.
`
`Defendants state that the allegations in paragraph 1 purport to describe