On June 25, 2024, Illumina, Inc. announced the completion of the tax-free spin-off of GRAIL, Inc. Both stocks started regular way trading with Illumina focusing on consumables, instruments, and services, while GRAIL operates in early cancer detection with its Galleri test. The spin-off involved the distribution of 85.5% of outstanding shares of GRAIL on a pro-rata basis to ILMN shareholders. The record date for the spin-off was June 13, 2024, and the distribution occurred on June 24, 2024. Both stocks commenced regular-way trading on June 25, 2024.
Illumina filed the initial Form-10 on May 6, 2024, disclosing the deal overview and separation agreement while GRAL filed an amended Form-10 on June 3, 2024. This separation agreement resulted in each ILMN shareholder receiving one share of GRAIL common stock for every six shares of ILMN common stock held. Illumina will continue to hold up to 14.5% of outstanding shares of GRAIL common stock. European Commission Litigation in 2016 led to Illumina spinning off GRAIL before reacquiring it in 2020. The litigation involved challenges to the acquisition due to concerns about competition and ultimately led to Illumina divesting GRAIL through the spin-off.
With Illumina maintaining a target price of $85.11 per share and a SELL rating, the company anticipates long-term growth in genomic medicine but faces challenges in the near term due to weaker demand and macroeconomic factors. GRAIL, on the other hand, has a fair value estimate of $36.66 per share and a BUY rating. The company holds a strong cash position of nearly $1.0 billion, providing ample liquidity to cover product development costs and capitalize on the unmet cancer detection market.
Looking ahead, Illumina aims to lead in the diagnostic market with innovative technologies and solutions, including the NovaSeq X platform. GRAIL is set to leverage its Galleri test in various studies to gain regulatory approvals and pave the way for widespread adoption. Reimbursement by governments for Multi-Cancer Early Detection (MCED) tests could unlock significant opportunities for GRAIL. Despite remaining cash-intensive in the short term, GRAIL’s potential for long-term growth and profitability is promising.
In conclusion, Illumina’s spin-off of GRAIL marks a significant restructuring in the genomic and healthcare industries. Illumina focuses on core business areas while GRAIL operates independently in the early cancer detection market. Both entities offer distinct financial profiles and investment opportunities, with investors able to independently decide on their investments in Illumina and GRAIL. The spin-off is expected to optimize shareholder value and unlock new opportunities for both companies as they pursue their growth strategies.
