UNITED STATES OF AMERICA
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` BEFORE THE FEDERAL TRADE COMMISSION
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` COMMISSIONERS:
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` Rebecca Kelly Slaughter, Acting Chairwoman
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` Noah Joshua Phillips
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` Rohit Chopra
` Christine S. Wilson
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`In the Matter of
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`Illumina, Inc.,
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`a corporation
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`and
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`GRAIL, Inc.,
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`a corporation.
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`Docket No. 9401
`REDACTED-PUBLIC VERSION
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`COMPLAINT
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`Pursuant to the provisions of the Federal Trade Commission Act (“FTC Act”), and by
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`virtue of the authority vested in it by the FTC Act, the Federal Trade Commission (“Commission”),
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`having reason to believe that Respondents Illumina, Inc. (“Illumina”) and GRAIL, Inc. (“Grail”)
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`have executed a merger agreement in violation of Section 5 of the FTC Act, 15 U.S.C. § 45, which
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`if consummated would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and
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`Section 5 of the FTC Act, and it appearing to the Commission that a proceeding by it in respect
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`thereof would be in the public interest, hereby issues its complaint pursuant to Section 5(b) of the
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`FTC Act, 15 U.S.C. § 45(b), and Section 11(b) of the Clayton Act, 15 U.S.C. § 21(b), stating its
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`charges as follows:
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` NATURE OF THE CASE
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`1.
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`Illumina, the dominant provider of DNA sequencing, proposes to acquire Grail. If
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`consummated, the Acquisition would substantially lessen competition in the U.S. multi-cancer
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`early detection (“MCED”) test market by diminishing innovation and potentially increasing prices
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`and reducing the choice and quality of MCED tests. In other words, it is likely to harm U.S.
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`consumers.
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`2.
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`MCED tests are poised to revolutionize how cancer is detected and treated, having
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`the potential to save millions of lives in the United States and around the world. Although cancer
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`is the second leading cause of death in the United States, healthcare providers currently are able to
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`screen for only a small number of cancer types, testing for one cancer at a time. Doctors currently
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`lack the option to broadly screen for multiple types of cancer using a single test. As a result, the
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`vast majority of cancers are only detected after patients exhibit symptoms, when it is often too late
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`to treat the cancer effectively.
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`3.
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`Rather than wait for cancer symptoms to arise, MCED tests use a “liquid biopsy”
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`process to examine fragments of DNA in the bloodstream to determine whether cancer cells have
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`shed any DNA. The vast majority of tumors shed cancer cells, making detection of cancer through
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`liquid biopsy possible at very early stages of the disease and allowing for early treatment that could
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`dramatically improve patients’ outcomes. The MCED testing workflow is as follows: First, a
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`phlebotomist collects a blood sample from a patient and ships it to a laboratory. At the laboratory,
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`the DNA in the sample is extracted and analyzed using a next-generation sequencing (“NGS”)
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`platform (which includes the NGS equipment and designated consumables such as cells/cartridges
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`and reagents). The NGS platform quickly and accurately identifies the order of the component
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`blocks—called nucleotides—in the DNA sample, and it produces a data read-out that is used to
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` determine whether a patient has mutations and/or other biomarkers associated with any of the
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`cancers analyzed by the MCED test.
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` 4.
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` Respondent Grail, with its Galleri MCED test, is racing against several other firms
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` to develop and ultimately commercialize this revolutionary technology. Grail and its rivals are
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` developing MCED tests that seek to shift the cancer paradigm by simultaneously screening for
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` multiple cancers, including those not screened for today, using blood samples. MCED tests will
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`ultimately saving lives. Illumina recognizes the life-saving benefits of MCED tests and estimates
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`that “[e]ach year of testing can potentially avert [approximately] 100,000 cancer-related deaths . .
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`. .” Grail, its rivals, and others in the industry view MCED tests as a major advancement in the
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`war on cancer.
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`5.
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`Illumina’s NGS platforms are an essential input for the development and
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`commercialization of MCED tests. Grail’s Galleri test, along with its rivals’ MCED tests in
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`development, must and do rely on Illumina’s NGS platforms. They use Illumina’s platforms to
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`sequence the short fragments of DNA found in the bloodstream, known as cell-free DNA or
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`“cfDNA,” to determine whether any DNA comes from cancerous tumors and potentially where in
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`the body that tumor is located.
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`6.
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`Illumina is a dominant provider of NGS platforms, which are used for a wide array
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`of applications in addition to developing MCED tests. Illumina accounts for the vast majority of
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`NGS instrument and reagent sales in the United States, and its platforms produce more than 90
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`percent of the world’s sequencing data. With respect to the application relevant to this case—
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`MCED tests—Grail’s rivals have no substitutes for Illumina’s NGS platforms. Due to the
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`technical limitations of other NGS and non-NGS products, Grail’s rivals cannot use any product
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`other than Illumina’s NGS platforms to develop a clinically effective and connnercially viable
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`MCED test capable of competing with Grail’s Galleri test.
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`7.
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`Illumina initially formed Grail in 2015 with the purpose of “[enabling] the early
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`detection of cancer in asymptomatic individuals through a blood screen,”—the “holy grail” of
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`early cancer detection (hence, its name). At the time, Illmnina identified cancer screening as -
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`8.
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`Two years after forming Grail, Illumina reduced its ownership interest to below 20
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`percent of the voting rights in the company, after concluding that—
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`—. Today
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`Illumina owns 14.5 percent of Grail’s voting shares, while other investors including Arch Venture
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`Partners, Jeff Bezos, Bill Gates, and Johnson & Johnson control the rest. Since reducing its stake
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`9- Granprojectscaneriwine—and
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`that it will be able to detect 11p to 50 types of cancer, often at very early stages, in asymptomatic
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`individuals. Grail
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`is currently conducting a—
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`—. Grail plans to launch its Galleri test as a laboratory developed test (“[DT,”
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` meaning it can only be run in Grail’s own laboratory) in 2021.
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` , it plans
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` to obtain U.S. Food and Drug Administration (“FDA”) approval for Galleri.
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` 10.
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` Illumina recognizes that cancer screening is
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` worldwide, with a projected market size of tens of billions of dollars by 2035.
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`Similarly, Grail projects Galleri could earn
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`11.
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`As the only supplier of a critical input, Illumina already possesses the ability to
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`foreclose or disadvantage Grail’s MCED rivals. Illumina has several tools available that it could
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`use to impede the competitiveness of any MCED test developer. If Illumina determined it would
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`maximize its profits by limiting the competitiveness of an MCED test that posed a threat to Grail's
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`Galleri business, among other things, it could (1) raise the test developer’s prices for NGS
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`instruments and consumables, (2) impede the rival’s research and development efforts by denying
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`important technical assistance and other proprietary information needed to obtain FDA approval
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`or design a commercially successful MCED test, or (3) refuse or delay the execution of a license
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`agreement required to sell distributed in vitro diagnostic (“IVD”) versions of the test (or offer the
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`license on terms that would restrict the competitiveness of the rival’s IVD test). Respondents
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`recognize the combined firm will have the ability to disadvantage Grail’s rivals. For example, one
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`Illumina executive explained that the combined firm will have the
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` 12.
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` If the Acquisition is consummated, Illumina will gain the incentive to foreclose or
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` disadvantage firms that pose a significant competitive threat to Grail and to limit the
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` competitiveness of any MCED product that Respondents expect to compete closely with Galleri.
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` While Illumina currently benefits from selling NGS platforms and consumables to all MCED test
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` developers, if the Acquisition is consummated, instead of realizing profits only from the sale of
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` NGS platforms and consumables, Illumina stands to profit significantly from sales of Grail’s
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`MCED test. In fact, Illumina projects that it will
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` estimating that by
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`13.
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`Grail’s rivals have no alternative to using Illumina’s NGS platforms to develop and
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`commercialize their MCED tests, therefore, they will be unable to divert away from Illumina if
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`the combined firm raises their costs or otherwise forecloses or disadvantages them. As a result,
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`after the Acquisition, Illumina will control the fate of every potential rival to Grail for the
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`foreseeable future.
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`14.
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`Post-Acquisition, Illumina will have the ability to monitor each company
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`developing an MCED test using its NGS platform and the incentive to kill or disable any products
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`that appear likely to take significant business away from Galleri. Because Respondents expect
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`Galleri to be the
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`Galleri would likely recapture
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`all or most of the sales from Grail’s rivals that the combined firm disadvantaged or
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`foreclosed. To maximize its profits, the combined firm would have the incentive to prevent the
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` launch, or limit the competitiveness, of each rival MCED test that appeared likely to compete
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` closely with (and thus divert sales from) Galleri, while simultaneously promoting sales and
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` development efforts of other Illumina NGS platform customers working on non-competing
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` products. Preserving robust competition among MCED test developers is critically important to
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` the public and the effort to save American lives in the war against cancer. As Grail’s CEO
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` explained,
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`Allowing Illumina to purchase Grail and
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`act on the incentives created by the Acquisition would cause substantial harm to U.S. consumers,
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`who would experience reduced innovation, as well as potentially higher costs and reduced choice
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`and quality for these life-saving products.
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`15.
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`There are no countervailing factors sufficient to offset the likelihood of competitive
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`harm from the Acquisition. Respondents cannot demonstrate that new entry of an MCED test that
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`does not rely on Illumina’s NGS platform would be timely, likely, or sufficient to offset the
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`anticompetitive effects of the proposed Acquisition.
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`16.
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`Respondents will be unable to show sufficient cognizable, verifiable, or merger-
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`specific efficiencies that would offset the likely and substantial competitive harm from the
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`Acquisition.
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`JURISDICTION
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`17.
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`Respondents are, and at all relevant times have been, engaged in activities in or
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`affecting “commerce” as defined in Section 4 of the FTC Act, 15 U.S.C. § 44, and Section 1 of the
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`Clayton Act, 15 U.S.C. § 12.
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`18.
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`The Acquisition constitutes a merger subject to Section 7 of the Clayton Act, 15
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`U.S.C. § 18.
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` THE PARTIES AND THE PROPOSED ACQUISITION
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`19.
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`Plaintiff, the Federal Trade Commission, is an agency of the United States
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`government, established, organized, and existing pursuant to the FTC Act, 15 U.S.C. §§ 41 et seq.,
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`with its principal offices at 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The
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`Commission is vested with authority and responsibility for enforcing, inter alia, Section 7 of the
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`Clayton Act, 15 U.S.C. § 18, and Section 5 of the FTC Act, 15 U.S.C. § 45.
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`20.
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`Respondent, Illumina, is a publicly-traded Delaware corporation, headquartered in
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`San Diego, California. Illumina develops, manufactures, and markets life sciences tools and
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`integrated systems for the large-scale analysis of genetic variation and function. Founded in 1998,
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`Illumina’s main product offerings are short-read NGS systems and the associated consumables.
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`Illumina’s NGS platforms are used for DNA sequencing. In the United States, Illumina sells the
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`only NGS platforms capable of being used by MCED test developers. In 2020, Illumina earned
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`$3.24 billion in revenue worldwide,
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`of which was from U.S. sales.
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`21.
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`Respondent, Grail,
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`is a private pre-commercial diagnostics company,
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`headquartered in Menlo Park, California. Grail develops NGS-based oncology tests, with a focus
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`on early cancer detection. Grail’s development pipeline includes three NGS-based oncology tests
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`with distinct applications: Galleri, an MCED test that screens for early signs of cancer in
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`asymptomatic patients; a diagnostic aid to cancer (“DAC”) test, which confirms cancer diagnoses
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`in patients suspected to have cancer; and a minimal residual disease (“MRD”) test, designed to
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`assess cancer recurrence after a patient has already undergone treatment. Today, Grail has no
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`revenue but has raised approximately $2 billion in private funding since 2016.
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`22.
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`Grail’s flagship test, Galleri, has been designed to detect over 50 different types of
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`cancer from a single blood draw, most of which have “no existing recommended screening tests.”
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` Grail’s goal is for Galleri to be used in all patients over the age of 50 to detect cancer early, even
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` in asymptomatic, otherwise healthy patients.
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` . Grail
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` plans to launch Galleri in the United States as an LDT in 2021 and to obtain FDA approval for
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`Galleri in
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` Grail also plans to
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`. All of
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`Grail’s tests depend on the use of Illumina’s NGS platforms.
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`23.
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`Grail was originally formed by Illumina in 2015. Starting in 2017, Illumina reduced
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`its ownership of Grail to below 20 percent of the company’s voting interest. Currently, Illumina
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`retains 14.5 percent
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` ownership of Grail’s voting
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` and shares
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` On September 20, 2020, Illumina
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`entered into an Agreement and Plan of Merger to acquire the approximately 85.5 percent of Grail
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`voting shares outstanding that it does not already own for cash and stock consideration valued at
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`approximately $7.1 billion and additional contingent payments to Grail’s non-Illumina
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`stockholders valued at approximately $1.2 billion.
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`INDUSTRY BACKGROUND
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`24.
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`Cancer is the second leading cause of death in the world. In 2020, nearly two
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`million new cases of cancer were diagnosed in the United States and over six hundred thousand
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`Americans died from the disease. Most cancers are detected only after a patient exhibits
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`symptoms, when the tumor has grown and the cancer has often metastasized, or spread, to other
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`parts of the body. At this advanced stage, it is frequently too late for effective treatment and,
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`unfortunately, the patient often dies from the disease.
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`25.
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`Currently in the United States, very few asymptomatic individuals are screened for
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`many types of cancer. In fact, the U.S. Preventive Services Task Force (“USPSTF”) provides
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` screening recommendations for only four cancers—lung, breast, colorectal, and cervical. The
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` screening recommendations for these four cancers allow cancer to be detected at very early stages
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` when chances of survival are high. Other cancers go undetected until a patient shows symptoms
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` at later stages, resulting in worse treatment options and prognoses.
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` 26.
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` Grail and other MCED test developers are researching, designing, and working to
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` commercialize products that will shift the cancer screening and treatment paradigm. Their MCED
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` tests are designed to simultaneously screen for multiple cancers, including cancers that are not
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` screened for at all today, using blood samples. The tests compare DNA fragments in patients’
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` blood samples with a clinical database of known biomarkers or patterns that indicate the presence
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` of cancer. Thus, the more clinical data that an MCED test developer acquires, the better the test
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`performs.
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`27.
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`An MCED test may be initially launched as a LDT. An LDT can only be run in a
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`test developer’s own proprietary laboratory because it has not undergone the rigorous FDA pre-
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`market approval process. LDTs provide only a limited commercial opportunity because payers
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`may not reimburse LDTs as they have not yet received FDA approval for cancer screening.
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` 28.
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`IVD MCED tests must undergo the FDA’s premarket approval process, or PMA.
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`An IVD test can either be approved as a single-site IVD test, meaning each laboratory site where
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`samples will be processed must be approved by the FDA including the MCED test supplier’s own
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`laboratory, or as a distributed IVD test, meaning tests can be sold as “kits” to third-party
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`laboratories to run in their own laboratories. As more patients receive access to MCED tests
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`generally, it will likely become more important for MCED tests developers to offer distributed or
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`kitted IVD tests.
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`As
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` Illumina executive explained, a former
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`. Industry participants anticipate that
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` selling distributed IVD versions of MCED tests will be important to the effective long-term
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` commercialization of these products because distributed IVD tests, unlike single-site IVDs, can be
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` performed at third-party laboratories. Many customers are expected to prefer distributed IVD tests.
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` 29.
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` To analyze DNA fragments in the blood, MCED tests require the use of an NGS
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` platform and consumables to determine the order of DNA components and identify mutations or
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` patterns consistent with the presence of cancer. While Grail and its rivals are currently at different
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` stages of development, they all rely on Illumina’s NGS platform and sequencing reagents (today
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` and in the future) to develop, launch, and eventually market their MCED products. No other NGS
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` platform has the cost, accuracy, and throughput necessary for use in MCED tests. As one MCED
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`test developer explained,
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`As a result, Grail’s competitors are self-described
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`as Illumina’s
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`because if Illumina chose to stop supplying its
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`instruments or reagents, or significantly increased its prices, that would end or derail their
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`development efforts or greatly diminish their competitiveness.
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`30. MCED test developers depend on Illumina at every stage of the development
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`process. For example, when a developer is designing its MCED test, it specifically tailors the test
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`to work with a particular sequencer and reagents. Further, because MCED tests are designed to
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`work with a specific Illumina NGS platform, if an MCED test developer decides to seek FDA
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`platform, and the MCED test developer must rely on Illumina to supply vital information, such as
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` integrated Illumina in order for those MCED test developers to grow and better penetrate the
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` THE RELEVANT ANTITRUST MARKET IS MCED TESTS
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` 31.
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` The Acquisition would substantially lessen competition in the market for the
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` research, development, and commercialization of MCED tests in the United States and cause harm
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` A. MCED Tests is the Relevant Product Market
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` 32. MCED tests are being designed to detect multiple types of early-stage cancer in
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` or “ctDNA.” MCED tests look for ctDNA by examining the small cfDNA fragments
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` (approximately 150-180 base pairs), sometimes in conjunction with other analytes such as RNA,
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` using an NGS platform to determine whether any cfDNA has been shed from cancerous cells.
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` Because cancerous cells begin to shed DNA at very early stages, MCED tests are designed to
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` 33.
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` Because existing cancer screening methods, like a mammography for breast cancer
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` or a pap smear for cervical cancer, can only screen for a specific cancer type and are unlikely to
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` expand to screen for more types of cancers, existing screening methods are not substitutes for
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`MCED tests and are properly excluded from the relevant product market. The USPSTF
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`for cancer screening and recommends cancer screening tests for only four types of
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`cancer—lung, breast, colorectal, and cervical. MCED tests are
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`by detecting other types of cancer for which there are no
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`screening options today. These cancers, such as pancreatic, liver, and stomach cancer, are, instead,
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`typically only detected after patients have more advanced cancer (after exhibiting symptoms),
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` which is often too late to treat the cancer effectively. Also, unlike existing screening methods,
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` MCED tests can screen for multiple types of cancer at the same time. A single MCED test can
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` look for thousands or tens of thousands of potential biomarkers (such as mutations or methylation
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` many cancers at once and providing detailed information about the specific cancer, its genetic
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`drivers, and often the cancer’s location in the body.
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` One existing testing technology, polymerase chain reaction (“PCR”), can be used
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` to look for certain changes in a gene or chromosome, which may help with finding a specific
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` genetic condition or a disease. However, PCR-based tests can only search for the existence of a
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` few cancer-related biomarkers per each run of the platform. As a single cancer can have dozens
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` or hundreds of possible biomarkers located throughout the genome, the utility of these tests as an
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` oncology screening tool is severely limited compared to MCED and is unlikely to be a substitute
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` for MCED tests in the near future.
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` 35.
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` NGS-based single-cancer early detection tests are also unlikely to be substitutes for
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` MCED tests in the near future. Although several single-cancer early detection tests utilize the
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`same technology as MCEDs, Grail recognizes that MCED tests
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` 36.
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` Finally, a tissue biopsy is not a substitute for MCED tests. Unlike a minimally
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` invasive liquid biopsy, a tissue biopsy requires the removal of a tissue sample from a patient to
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` analyze. This process is not only invasive, but some tumors are inaccessible for biopsy and others
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` do not provide sufficient tissue to elicit conclusive results. As a result, a tissue biopsy is often
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` difficult to do, costly, time-consuming and may sometimes cause further spread of the cancer.
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` Moreover, a tissue biopsy typically is used for assessing the presence of cancer in symptomatic
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` B. The United States is the Relevant Geographic Market
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` The United States is the relevant geographic market to assess the competitive
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` 37.
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` effects of the Acquisition. U.S. MCED customers cannot practically turn to an MCED test
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` provider located outside the United States. Turnaround time for MCED tests is important to ensure
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` that cancer is identified and treated quickly, making customers unlikely to turn to a foreign-based
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` 38. MCED tests will likely require approval by the FDA to receive reimbursement from
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` not approved for sale in the United States, do not provide viable competitive alternatives for U.S.
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` consumers. In addition, distributed IVDs will require approval by the FDA prior to use in any
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` 39.
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` C. Size and Structure of U.S. MCED Test Market
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` Although no MCED test is currently commercialized, Illumina, test developers, and
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` others in the industry expect the U.S. MCED market to be large and have sales of tens of billions
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` of dollars annually. As Grail noted in its amended Form S-1 Registration Statement filing, “[w]e
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` believe Galleri has the potential to integrate directly into the healthcare delivered to individuals
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` time, we expect adopting physicians to recommend our test to be ordered annually as part of an
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` individual’s physical examination or wellness appointment, or when undertaking other screening
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` examinations.”
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`Illumina recognizes that cancer screening is
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`with a projected market size of tens of billions of dollars by 2035.
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`have also analyzed the projected addressable U.S. MCED test market and estimated sales of tens
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`of billions of dollars annually.
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`41. Multiple firms are developing MCED tests that would likely compete with Grail’s
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`Galleri test. These firms include
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`many have spent hundreds of millions of dollars to research, develop, and conduct clinical trials
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`for their respective MCED tests. MCED test developers use data collected from their clinical trials
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`to improve the quality of their MCED tests. All rely on Illumina’s NGS platform to perform their
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`tests. For example, as one MCED test developer,
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`42.
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`Grail’s Galleri MCED test will likely be
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`LDT. In addition, Grail expects that its Galleri MCED test will obtain FDA approval
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`after the Galleri LDT is launched. Grail’s expected
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`is one reason
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`Illumina chose to acquire Grail. Grail projects that its Galleri test could generate
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`at a volume of
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`43.
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`appears closest to marke
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`44. _also plans to launch an MCED test.
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`45. _expect to compete directly with Grail by launching MCED
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`46- —a1so expect to launch—
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`as first steps towards developing MCED tests that would compete with Grail’s
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`Galleri test. Similarly,—, plans to lalmch an MCED
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`Because the MCED market is pie-commercial, market shares do not yet exist.
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`However, given Grail’s expected _status, Illlunina’s intemal projections estimate
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`that Grail will have- market share when it lalmches, likely_
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`ANTICOMPETITIVE EFFECTS
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`48.
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`The Acquisition would substantially lessen competition in the US. MCED test
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`market, resulting in reduced iimovation and potentially increased prices and reduced choice and
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` quality of MCED tests, thus negatively impacting the ability for Americans to receive early-stage
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` diagnoses and successful treatment of their cancers. As the Vertical Merger Guidelines explain, a
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` vertical merger may diminish competition by leaving the merged firm with the ability and
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` incentive to use its control of the related product to weaken or remove the competitive constraint
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` from one or more of its actual or potential rivals in the relevant market. As the only provider of a
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` critical input into MCED tests, Illumina possesses multiple means of foreclosing or disadvantaging
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` rivals to Grail. After the Acquisition, Illumina will have an increased incentive to disadvantage
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` close competitors to Grail because the value of foregone NGS instrument and consumable sales to
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` disadvantaged third-party MCED test developers will be offset by the gain in MCED testing
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` revenue captured by Grail.
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` I.
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` As the Dominant Provider of NGS Platforms for MCED Tests, Illumina Has the
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` Ability to Lessen Competition in the U.S. MCED Test Market by Raising Costs
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` and Hindering Development Efforts of Grail’s Rivals
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` 49. MCED test developers must and do rely on Illumina’s NGS platform, along with
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` its service and support, to research, develop, launch, and sell their MCED tests successfully. As
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` the dominant provider of NGS platforms for MCED test developers, Illumina can use its control
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` of a critical input to foreclose or disadvantage Grail’s rivals through at least the following means:
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` by raising the test developer’s prices for NGS instruments and consumables, impeding the rival’s
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` research and development efforts by denying important technical assistance and other proprietary
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` information needed to obtain FDA approval or design a commercially successful MCED test, or
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` refusing or delaying the execution of an agreement required to sell distributed IVD versions of the
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` test (or offering the agreement on terms that would restrict the competitiveness of the rival’s IVD
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` test) – terms that allow rivals to compete effectively with Grail.
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` A. Illumina is the Dominant (and Currently Only) Provider of a Related Product
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` and Necessary Input to MCED Tests
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` 50.
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` Illumina’s NGS platform is the related product and is a critical input for MCED
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` tests. As the only NGS platform option for MCED test developers, the related product gives
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` Illumina the ability to foreclose, raise the cost of, or otherwise disadvantage Grail’s MCED rivals.
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` 51.
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` A critical input for MCED tests is a sequencing platform that analyzes accurately
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` and efficiently DNA fragments that measure no more than 150-180 base pairs. The sequencing
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` platform must be highly sensitive to detect even the lowest levels of ctDNA in the bloodstream,
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` and highly specific to accurately identify those patients with cancer-related ctDNA. In addition to
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` sensitivity and specificity, MCED testing requires a cost-effective sequencing technology capable
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` of high-throughput—the ability to sequence DNA samples at a high rate at a low cost per base
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` pair. Collectively, these technical capabilities make it possible to detect genomic variations in
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` accessible to the American public.
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` 52.
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` Short-read NGS—the type of sequencing provided by Illumina’s platforms—is the
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` only sequencing technology that can satisfy all requirements for MCED tests, including the ability
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` to read short fragments of DNA, high sensitivity, high specificity, fast turnaround times, high
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` throughput, and low cost per base.
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` 53.
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` Long-read NG