Illumina (ILMN) investors appear unfazed by days of roller-coaster events and headlines tied to its $7 billion purchase of cancer blood test developer Grail, judging by how steady the sequencing giant’s stock price has remained this month.

Illumina started September on a high as administrative law judge ruled in its favor against the U.S. Federal Trade Commission (FTC)’s challenge to the Grail acquisition.

While a jubilant Illumina first trumpeted the judge’s action via press release on September 1—the decision has not been made public—the FTC later did disclose its Notice of Appeal from the decision by the agency’s Chief Administrative Law Judge D. Michael Chappell, posting it on its website.

According to Illumina, Chappell rejected the agency’s key argument in fighting Illumina’s planned purchase of Grail: that the deal would lessen innovation in the U.S. market for multi-cancer early detection (MCED) tests like those marketed by the cancer blood test developer. The decision is subject to review by the full FTC.

The FTC had contended that Illumina is the nation’s only provider of DNA sequencing that is a viable option for MCED liquid biopsy tests. Grail’s Galleri™ test, according to Illumina, can detect more than 50 cancers across all stages—of which more than 45 do not have recommended screening in the United States—and correctly identified the tissue of origin in 93% of positive results, with >99% specificity.

Despite the favorable legal outcome, Illumina’s shares actually dipped 0.5% the day it announced the decision, from $201.64 to $200.62, and declined 2% on September 2, to $196.07.

This week, however, started with Illumina shares bouncing back 2.5% on Tuesday, to $201.02, and rose another 2.35% on Wednesday, to $205.75.

The stock bounceback was touched off by Reuters reporting Monday, citing unnamed sources, that Illumina was in talks with the European Union to divest itself of Grail, in apparent anticipation of an EU decision blocking the acquisition.

That anticipation proved well-founded, since on Tuesday the EU blocked Illumina’s deal. The EU concluded Illumina’s purchase of Grail would stifle innovation and reduce choice in the emerging market for blood-based early cancer detection tests. cited Illumina being the only “credible” supplier of sequencing technologies to develop and process Grail’s Galleri test.

“With this transaction, Illumina would have an incentive to cut off Grail’s rivals from accessing its technology, or otherwise disadvantage them. It is vital to preserve competition between early cancer detection test developers at this critical stage of development,” Executive Vice-President Margrethe Vestager, who heads the EU’s competition policy, said in a statement. “As Illumina did not put forward remedies that would have solved our concerns, we prohibited the merger.”

Illumina responded to the EU with a statement declaring its intent to appeal the decision:

“Illumina can make Grail’s life-saving multi-cancer early detection test more available, more affordable, and more accessible—saving lives and lowering healthcare costs,” vowed Charles Dadswell, Illumina’s General Counsel. “This merger is pro-competitive and will accelerate innovation.”

But acknowledging that its appeal prospects are iffy at best, Illumina also stated that it will start reviewing strategic alternatives for Grail in order to brace itself for an EU divestment order expected in coming months.

The bad news for Illumina of a blocked deal to buy Grail is good news for Illumina’s investors, according to one analyst.

“GRAIL’s divestiture is likely to be viewed positively for ILMN shares since ILMN will no longer recognize GRAIL EPS [earnings per share] dilution,” Puneet Souda, senior managing director, life science tools and diagnostics, and a senior research analyst with SVB Securities, wrote in a research note.

Souda and SVB estimate that Grail will account for a dilution of ~$3.75 to Illumina’s share price this year, declining to a projected $3.35 in 2023 and $2.45 dilution in 2024.

“The [EU] decision narrows ILMN’s options, in our view, and likely places the company on a path for GRAIL’s divestiture. The divestiture is still likely to take time and still have limited options given the current state of capital markets and potential for exits,” Souda observed.

He said Illumina could ultimately benefit from divesting itself of Grail, however, by extracting from regulators like the FTC and the EU concessions such as less scrutiny for future mergers-and-acquisitions transactions, since the regulators have resisted Illumina’s previous M&A deals in recent years—notably its attempted $1.2 billion acquisition of Pacific Biosciences (PacBio), which the companies scrapped at the start of 2020.

In an earlier research note, Souda said regulatory uncertainty surrounding the Grail acquisition will delay Illumina’s prospects of realizing cost synergies from owning Grail, “while the $50B+ MCED opportunity [an SVB Securities estimate] remains years ahead.”

Illumina announced its plan to buy Grail in September 2020, saying the deal would accelerate the commercialization of Galleri, then being planned for launch in 2021. While Illumina disclosed the deal as being $8 billion, it still had a stake in Grail, reducing its value to $7.1 billion.

In March 2021, the FTC began challenging Ilumina’s purchase of Grail. The agency reasoned that Illumina can raise prices charged to Grail competitors for next-generation sequencing (NGS) instruments and consumables; impede Grail competitors’ research and development efforts; or refuse or delay executing license agreements that all MCED test developers need to distribute their tests to third-party laboratories.

Illumina completed its purchase of Grail in August 2021, despite the FTC challenge and an antitrust review of the deal by the European Union.

Eiger Biotherapeutics (EIGR)

Eiger shares tumbled 29% from $8.55 to $6.04 on Tuesday, when the company acknowledged being told by the FDA that the agency could not determine whether the company could meet Emergency Use Authorization (EUA) criteria for peginterferon lambda as a treatment of patients with mild-to-moderate COVID-19. Eiger said the uncertainty remains despite what it called “a cooperative and extensive pre-EUA information exchange with FDA” regarding data from the Phase III TOGETHER trial (NCT04727424 ), assessing peginterferon lambda in COVID-19.

Back in March, Eiger released data from TOGETHER showing that peginterferon lambda significantly reduced the risk of COVID-19-related hospitalizations or emergency room visits greater than six hours by 50%—meeting the study’s primary endpoint—and reduced the risk of COVID-19 related death by 60%. Data was evaluated from 1,936 patients, with 84% of patients having received at least a single dose of any COVID-19 vaccine.

More recently, Eiger said, it generated new data from TOGETHER’s intent-to-treat population of 1,154 patients (567 with peginterferon lambda, 587 with placebo), including further statistical modeling and efficacy analyses of the study’s primary and secondary endpoints in patients treated within three days of symptom onset. Eiger showed a relative risk reduction of 0.62 in both patients hospitalized due to COVID-19 as well as hospitalized patients with mortality due to COVID-19.

“We appreciate the active dialogue with FDA and remain committed to continued engagement with the agency to obtain the necessary alignment to submit our EUA application for peginterferon lambda,” stated David Cory, Eiger’s President and CEO.

First Wave BioPharma (FWBI)

Shares of First Wave dropped 25% from $4.22 to $3.24 on Wednesday, the day the company acknowledged that it will submit an amendment to its Investigational New Drug (IND) application to the FDA for a Phase II proof-of-concept trial assessing an optimized version of adrulipase as a treatment for exocrine pancreatic insufficiency (EPI) associated with cystic fibrosis (CF) and chronic pancreatitis (CP). First Wave said it expected to begin the trial before the end of this year upon IND acceptance.

First Wave defended the move by citing in vitro data which it said suggested that the new formulation would allow for adrulipase to mix with food in the duodenum where it can provide its therapeutic effect through a delayed-release profile designed to ensure that adrulipase is protected in the stomach and delivered to the targeted areas of the GI tract. That improvement is expected to result in consistent coefficient of fat absorption (CFA) values above 80%.

The enhanced formulation could also significantly decrease the number of pills a patient would need to take to achieve the desired therapeutic effect, First Wave added.

“By every measure, the new adrulipase formulation outperformed prior versions of the drug, and we look forward to evaluating this potential in a proof-of-concept Phase II clinical trial,” James Sapirstein, First Wave’s President and CEO, said in a statement.

Imara (IMRA)

Imara shares leaped 66% from $1.17 to $2.01 on Wednesday, the day it disclosed in a regulatory filing that it agreed a day earlier to sell its failed sickle cell disease and beta-thalassemia candidate tovinontrine (IMR-687) a small molecule inhibitor of phosphodiesterase-9 (PDE9), and all other assets related to its PDE9 program for up to $105 million.

In addition to $250,000 previously paid to Imara for executing a non-binding term sheet, Cardurion agreed to pay Imara $34.75 million in upfront cash upon closing of the transaction; and up to $60 million in milestones consisting of a $10 million payment tied to Cardurion achieving proof of concept or other specified clinical milestones; and a $50 million payment tied to Cardurion achieving regulatory and/or commercial milestones.

Should the deal fall through, Imara would have to pay Cardurion a termination fee of $1.5 million.

The asset purchase agreement comes five months after Imara announced disappointing interim results in April from the Phase IIb Ardent trial (NCT04474314) in sickle cell disease and the Forte trial (NCT04411082) in beta-thalassemia.

The Ardent trial results showed that tovinontrine produced no significant difference vs. placebo in the median annualized rate of vaso-occlusive crises in a high-dose group within an intent-to-treat population. In Forte, tovinontrine showed no meaningful benefit vs. placebo in transfusion burden, nor did it show improvement in most disease-related biomarkers, including total hemoglobin (Hb).

Imara halted both trials and ended development of tovinontrine in sickle cell disease and beta thalassemia.

Tucked at the bottom of that filing was perhaps another reason for investor enthusiasm: The company restated that it had begun a “comprehensive” assessment of strategic options intended to maximize shareholder value.

Iveric Bio (ISEE)

Iveric Bio shares rocketed 66% on Tuesday, from $9.44 to $15.70, after the company announced positive topline results from its second Phase III trial of Zimura® (avacincaptad pegol), its complement C5 inhibitor, as a treatment for geographic atrophy (GA). Iveric said its GATHER2 trial (NCT04435366) met its prespecified primary endpoint with a 14.3% reduction in the mean rate of growth (slope) in GA area over 12 months via square root transformation, and a 17.7% reduction via observed GA area. Zimura’s safety profile was favorable, the company added.

Results from GATHER2, the Phase II/III GATHER1 trial (NCT02686658), and a Special Protocol Assessment with the FDA will underpin a New Drug Application that Iveric said it planned to submit to the agency by the end of first quarter 2023.

“We are thrilled to see for the first time an investigational therapy with a statistically significant reduction in the rate of GA progression at the 12-month primary endpoint across two Phase III clinical trials,” Iveric Bio CEO Glenn P. Sblendorio said in a statement.

That comment appeared intended to contrast Zimura with Apellis Pharmaceuticals (APLS)’ Pegcetacoplan, since Apellis’ targeted C3 therapy for GA aced one Phase III trial (OAKS; NCT03525613) but narrowly missed its primary endpoint in the other (DERBY, NCT03525600). Yet in both studies and the Phase II FILLY trial (NCT02503332), according to Apellis, treatment with both monthly and every-other-month pegcetacoplan resulted in clinically meaningful reductions of GA lesion growth over 12 and 18 months across a broad, heterogeneous population of more than 1,500 patients.

Last year, Apellis won FDA approval for pegcetacoplan under the name Empaveli® as the first and only targeted C3 therapy indicated to treat adults with paroxysmal nocturnal hemoglobinuria (PNH), a rare blood disease characterized by destruction of red blood cells, blood clots, and impaired bone marrow function.

As for GA, Pegcetacoplan is under FDA review with a Prescription Drug User Fee Act (PDUFA) target decision date of November 26. In July, the FDA gave Apellis the good news that it would not convene an advisory committee to review Pegcetacoplan—a point emphasized by Apellis CEO Cedric Francois Wednesday during an address at the Citi BioPharma Conference. Investors responded to Francois’ remarks by sending Apellis shares jumping 11%, from $58.01 to $64.25.

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