Sequencing giant Illumina on Thursday announced that it will take a $1.47 billion hit in the second quarter of 2024 related to the recently completed spinoff of cancer testing company Grail.
In an SEC filing, Illumina said the “goodwill impairment charge” corresponds to the “full remaining carrying value of goodwill” associated with Grail as of March 31, 2024. Illumina also expects to absorb a $420 million impairment charge for Grail’s in-process research and development intangible assets in the second quarter.
Illumina does not expect these goodwill impairments to translate into future material cash expenditures. The company will also not reflect these impairment charges from its non-GAAP figures.
Thursday’s impairment charges come days after the sequencing powerhouse successfully closed the spinoff of Grail—ending years of antitrust and regulatory trouble. Grail debuted on the Nasdaq Global Select Market on Tuesday with the ticker symbol GRAL.
The two companies parted on good terms—Illumina left grail with an undisclosed amount in funding to help the biotech achieve its long-term goals. The sequencing company also retains a minority 14.5% stake in the cancer detection company.
Illumina unveiled its plans to buy Grail in September 2020, putting up $8 billion in cash and stock to gain access to the biotech’s multi-cancer screening test Galleri. At the time, former Illumina CEO Francis deSouza considered Galleri as “among the most promising new tools in the fight against cancer.”
However, the acquisition soon attracted the attention of antitrust regulators in the U.S. and the European Union. In March 2021, the Federal Trade Commission issued a complaint letter against both companies, charging that their merger could compromise competition in the multi-cancer early detection market and “potentially increasing prices and reducing the choice and quality” of detection tests.
The European Commission (EC) launched an investigation into the deal in July 2021, which the companies did not wait to complete before consummating their merger. In response, the EC was forced to adopt binding measures in October 2021 to keep Illumina and Grail separate and independent from each other.
The EC eventually ruled that the companies had violated its merger regulations and levied a historic $476 million fine against Illumina.
Internally, the Grail acquisition has also been a source of discord for Illumina. In June 2023, deSouza stepped down as CEO amid activist Carl Icahn’s attacks and an attempt to seat three of his representatives on the company’s board. In December 2023, Icahn targeted what he called the “legacy conflicted directors” on Illumina’s board and campaigned for their removal.
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