Illumina is reportedly the target of an upcoming proxy battle, stemming from the sequencing giant’s decision to plow ahead in its $8 billion reacquisition of former spinout Grail in 2021 in defiance of regulators.
Billionaire activist investor Carl Icahn is spearheading the proxy fight, the Wall Street Journal reported Sunday. In a letter that he planned to send to Illumina shareholders on Monday and that was reviewed by the WSJ, Icahn laid out his plans to overhaul the company’s board of directors, a decision he said he came to after attempts to strike a deal with Illumina came up short.
“We are convinced that at least three shareholder representatives are needed on Illumina’s board to attempt to put an end to this insanity now before the reckless decision-making escalates into a no-return situation,” the letter reportedly reads.
Those representatives would include Vincent Intrieri, the founder and CEO of private investment firm VDA Capital Management, as well as Jesse Lynn, general counsel for Icahn’s eponymous holding company, and Andrew Teno, a portfolio manager at Icahn Enterprises, according to the WSJ.
In a press release sent to Fierce Medtech on Monday, Illumina confirmed that it has received notice from Icahn Partners of its intent to nominate the trio for election to the board of directors at Illumina's upcoming annual shareholders' meeting. The company said that CEO Francis deSouza and John Thompson, its independent chairman of the board, have had "multiple conversations" with Icahn. According to Illumina, the investor "was explicit and unyielding in his demand that any resolution should give him outsized influence and control."
The company said its nominating and corporate governance committee has also met with the proposed nominees. Between the meetings with them and with Icahn, Illumina said, "The board has determined Icahn's nominees lack relevant skills and experience, and that it is not in the best interests of shareholders to appoint Mr. Icahn's three nominees to the board of Illumina. The board recommends that shareholders not support Mr. Icahn's nominees."
Icahn’s planned proxy battle comes over a year after Illumina wrapped up its Grail buyout in August 2021, even as investigations by antitrust watchdogs in Europe and the U.S. were still pending. Though Illumina won its stateside case with the U.S. Federal Trade Commission in September 2022, that success didn’t carry over across the pond—where the European Commission ruled just days later to officially block the buyout.
Illumina, which has repeatedly pushed back on the anti-competitive claims, has said it will appeal the commission’s decision. It's also in the process of appealing the commission's determination that it had jurisdiction over the case at all; Illumina claims it doesn't, arguing that Grail currently has no business in Europe.
In the meantime, Illumina continues to manage Grail as a separate subsidiary and has also set aside nearly half a billion dollars to prepare for potential fines associated with breaking the EU’s “standstill obligation” by moving forward with the acquisition—fines that Illumina has said it would appeal, too.
Additionally in a full-year earnings report published last month, Illumina listed a net loss of more than $4.4 billion and a diluted loss of $28 per share. The downturn was attributed in large part to a $3.91 billion goodwill impairment charge taken “primarily due to the negative impact of current capital market conditions and higher discount rates, including a standalone risk premium, on the fair value calculation of the Grail segment,” according to the company.
In his letter to shareholders, Icahn reportedly argued that Illumina overpaid in its $8 billion bid for Grail and that continuing to hold on to the subsidiary is costing the company about $800 million per year.
Icahn also claimed that the buyout has cost investors around $50 billion, as the company’s valuation has plummeted from a high of around $70 billion in the summer of 2021 down to about $30 billion now, per the WSJ.
In response to those claims, Illumina said in Monday's release that "Icahn's letter neither recognizes the real value that Grail can provide to Illumina's shareholders, nor reflects an understanding of the regulatory process." The company said it's in the process of divesting Grail ahead of an official order from the European Commission—"unless Illumina wins the jurisdictional appeal in the meanwhile," it added.
In the wake of Sunday’s report of Icahn’s proxy fight preparations, Illumina’s shares skyrocketed on Monday to their highest price in months. The stock closed Friday at just over $194, then opened Monday morning at $213.48—a 10% leap—before continuing to climb upwards, reaching heights not seen since November by mid-morning.
Editor's note: This story was updated to include comments from Illumina.