Illumina: Plans to Divest Grail After U.S. Antitrust Case Faces More Hurdles

On Friday, a U.S. court ruled that narrow-moat Illumina's acquisition of the Grail liquid biopsy company was likely anticompetitive, while also ruling that regulators did not adequately consider Illumina's plans to provide its legacy sequencing tools to other liquid biopsy makers at the same price it would provide Grail to alleviate those concerns. Facing a lengthy appeals process to prove the latter, Illumina announced plans on Sunday to divest Grail through a third-party or capital markets transaction, with terms expected to be settled by mid-2024. We already pulled Grail out of our Illumina model in late 2024, and we are not changing our fair value estimate, which is $228 per share including $180 on the legacy sequencing business and $48 on the Grail business. Illumina shares look steeply undervalued, even when just considering the value of the legacy sequencing operations, in our opinion.