Dear Reader,
There have been some interesting developments unfolding between two companies that Bleeding Edge readers will likely know well – Illumina and Grail.
Last September, Illumina announced that it was acquiring Grail for $8 billion. What made the deal interesting is that Illumina was actually the entity that founded Grail in the first place.
It incubated and spun out Grail, and then it invested in its Series A round back in 2016. Illumina’s investment in Grail was joined by an impressive list of investors at the time like ARCH Venture Partners, Bezos Expeditions, Google Ventures, and Bill Gates.
It made perfect sense. Illumina, as the world’s dominant provider of next-generation genetic sequencing equipment, “created” Grail, a company whose goal was to develop a multi-cancer screening test that uses genetic sequencing to detect cancer early. Brilliant, right?
It launched a company that will provide a service that requires Illumina’s sequencing technology… Basically, Illumina created a company that will need to buy a lot of its own products. Very smart.
Even better is that Grail has been successful in its endeavors. It quickly became one of the most promising startups in the diagnostics and screening industry, and by mid-2020, it was valued at $3.8 billion after its Series D raise.
After the raise, there were talks of a possible initial public offering (IPO), which would have been logical given the progress that Grail had made.
But Illumina, hungry for even more growth, saw the opportunity to expand its business into the diagnostics market. Its move to make a large acquisition didn’t come as a surprise after its failed attempt to buy Pacific Biosciences (PacBio), which it abandoned last year due to opposition from the Federal Trade Commission (FTC).
That also didn’t come as a surprise. Had Illumina acquired Pacific Biosciences, it would have essentially become a monopoly in the next-generation sequencing industry, controlling both long- and short-read genetic sequencing technology.
FTC opposition was expected, but I don’t blame Illumina for giving it a shot. It may have even been part of the plan. I believe that Illumina knew the PacBio deal was never going to go through.
But by trying and conceding to the FTC, it gained somewhat of a bargaining chip that it could use in the future. It conceded on PacBio in order to be in a position to politely ask for fair treatment on a future deal. Perhaps Grail was the target all along…
Illumina also knew that a Grail acquisition would come under scrutiny. After all, Illumina sells the next-generation sequencing equipment to all of Grail’s competitors. One could argue that if Illumina owns Grail, it could give Grail an unfair competitive advantage.
It could give the latest and greatest sequencing technology to Grail months, perhaps years in advance. Grail could become the Illumina of the cancer screening and diagnostics industry as a result.
And again, not surprisingly, both the FTC and the European Commission raised concerns about the potential acquisition and put the deal under review. Normally what happens in these situations is that Illumina would wait for the reviews to be completed, receive the green light, and then complete the deal.
But that’s not what happened. Illumina just closed the deal on August 18 without approvals. It’s an unusually bold move, and one that will certainly raise the ire of both the FTC and the European Commission.
Many have derided the move and believe that it will end up in failure. I don’t see it that way at all. It was a calculated move, and the reality is that Illumina holds all the cards. It can’t lose.
The terms of its agreement with Grail expire on December 20. In other words, if it didn’t close the deal by then, the deal would be entirely off. And there is no way that the FTC and European Commission reviews would have been completed by then. Illumina had to move.
What most don’t see is that Grail is worth a lot more than the $8 billion price tag agreed upon back in September 2020. That was a year ago, and Grail is the golden goose – a decacorn in the making.
If the deal fell through, the future price in 2022 would have been billions of dollars higher.
So Illumina closed the deal. And it got out in front of the criticism by stating that Grail will be held as a separate operating entity. In other words, it won’t be merged or integrated with Illumina until regulatory approvals have been given.
This also implies that Illumina is keeping the deal “clean.” That way, it will be easy to spin Grail back out for an IPO or sell it to a group of private investors if it doesn’t gain the deal approvals it needs.
Illumina will pay out all of the private investors in Grail now at an $8 billion valuation and own 100%. If it has to sell Grail to private investors or conduct an IPO, it will be at a higher valuation.
In either case, Illumina wins. After all, Grail will continue to use Illumina’s technology regardless of whether or not it is owned by Illumina.
And it will walk away with a multibillion-dollar profit to boot. And if Illumina succeeds in the acquisition, it wins as well. This is smart corporate strategy from the time of spinning out Grail to now.
See what I mean? Illumina holds all the cards. Nothing but respect.
And the best part? The world is going to benefit from the technology that Illumina and Grail have produced. Lives will be saved and extended, and there will be far better outcomes as a result.
Brilliant!
Blockchain company Circle just made an interesting move.
As a reminder, Circle is one of the companies behind the U.S. Dollar Coin (USDC). With a circulating supply of $27.5 billion, USDC is the second-largest U.S. dollar stablecoin on the market today. It trails only Tether (USDT), which currently maintains a supply of $65.5 billion.
And if we follow the breadcrumbs, we can see what Circle’s ultimate goal here is…
Circle just announced its intention to apply for a bank charter. If approved, Circle would become a normal bank that’s regulated by the Federal Reserve (the Fed).
But there’s a nuance – Circle only wants a “narrow” bank charter. That means it doesn’t want to become a full-service bank that provides loans to customers. Instead, it only wants the ability to hold its cash reserves at the Fed.
There are two benefits to this.
Banks earn a small rate of interest on the deposits they keep with the Fed. Perhaps more importantly, banks also get access to cheap money in the event that they need to borrow it from the Fed. When we hear about the Fed cutting interest rates, this is the interest rate they are cutting – the rate at which it lends money to member banks.
In this way, banks are effectively backed by the Fed. They can’t fail because they always have access to more money when they need it. That’s why bank charters are so valuable.
We can see what Circle is doing here. The company is making a move to hold its cash reserves at the Fed. These will be the reserves that back USDC. This would make USDC effectively a central bank digital currency (CBDC). It would be backed by the Fed.
This is a shrewd move. And I think Circle’s bank charter has a great chance of approval.
That’s because Circle has established its stablecoin in a regulatory-compliant manner. It has credible backers with strong ties to the legacy financial system. And it is in the process of becoming a public company. That’s hugely important for transparency.
Plus, having a trusted CBDC would benefit the U.S. government and the Fed. It would help them keep pace with countries like China, which is rushing ahead with its own CBDC plans.
So this is a very strategic move and one that we’ll want to keep a close eye on. If successful, it could be a backdoor into a “Fedcoin” or a formally recognized Fed-backed digital representation of the U.S. dollar.
And this is yet another example of how blockchain technology is becoming a critical trend for investors. If you haven’t yet watched last week’s livestream covering the potential here, then I’d encourage you to do so now before it goes offline.
This is not one to miss. It’s something that I have been working on for years, waiting for the right moment to share with my subscribers. Now is the time. Simply go right here to watch.
An exciting breakthrough technology just caught my eye.
A small early stage company called Altoida has developed an assessment that can diagnose Alzheimer’s disease and dementia in patients. And even more impressive, this system can predict whether a person will get Alzheimer’s or dementia within the next three years.
Altoida’s system utilizes both artificial intelligence (AI) and augmented reality (AR) technology to make its predictions. This is technology that we largely didn’t have even five years ago – at least not in its current form.
The assessment consists of three simple tests. They take about 10 minutes each to complete. And get this – the tests can be self-administered with any smartphone or tablet capable of handling AR-based applications. That means any recent iPhone or iPad will work.
Each test uses AR technology to map out the room that the person is in. This includes all furniture and objects in the room.
In the first test, the user is asked to hide several virtual items around the room. For example, the user may be asked to drag a virtual item behind the couch. After the items are hidden, the user is then asked to relocate them in the room in random order.
The second test develops a fire evacuation plan for the room and trains the user to execute it. The user has to learn the specific order of tasks and moves that need to be done to complete the evacuation.
Lastly, the third test requires users to locate virtual objects or tools in the room with loud sounds being played. It requires the person to think clearly under pressure.
And that’s the entire assessment. Pretty straightforward, right?
Believe it or not, these three tests utilize 20 years of cognitive research. And they engage about 800 biomarkers in the brain, comprising 11 different neurocognitive domains. And that’s where the AI comes in.
Altoida feeds the biomarker data from these tests to its AI for analysis. The AI can then diagnose Alzheimer’s disease or dementia on the spot. And it can predict whether the person is likely to get Alzheimer’s or dementia within the next three years.
It’s incredible to think the AI can accomplish this based on three simple tests on an iPad. But the results have been incredible. Altoida’s system has demonstrated a prognostic accuracy of 94% – all from a 10-minute test.
This is so promising that the U.S. Food and Drug Administration (FDA) just designated Altoida’s software as a breakthrough device.
And what’s most exciting here to me is how this will accelerate clinical research and treatment for high-risk patients.
As Early Stage Trader subscribers know, immense progress is being made in the treatment of neurodegenerative diseases right now.
In fact, one of our portfolio companies has already demonstrated that its lead therapy can slow the progression of dementia by 47%. If you’d like to learn more, please go here.
The company is an incredible buy right now.
And that’s just the tip of the spear. The ultimate goal is to reverse the disease and cure it entirely. That’s what is coming down the pipeline.
So if we can identify the onset of Alzheimer’s and dementia early, we can treat patients sooner and potentially develop preventative therapies as well. That would be a major win for everybody.
We’ll wrap up today with a fascinating development in trauma care.
A team of researchers from MIT and the Mayo Clinic developed a new medical paste that can stop bleeding in seconds. This is the first major breakthrough in trauma care in decades.
And guess what the key to their research was – barnacles. These are crustaceans that can stick to wet and slimy surfaces. They are often found attached to boats and other marine objects.
The research team took what they learned from studying barnacles and applied that research to this new medical paste. It consists of a silicone oil with a barnacle-inspired powder suspended within it.
When applied to a bleeding wound, the oil disperses the blood, which allows the powder to adhere around the wound. It takes about 15–30 seconds to form a tight seal, stemming the loss of blood completely.
The ability to staunch bleeding wounds on the spot like this has never existed before. Up to this point, paramedics would have to manually stitch the wound – which is time-consuming and sometimes impossible if the blood loss is too strong.
For that reason, blood loss is the second leading cause of death for civilian trauma patients. And it is the leading cause of death for military trauma patients. This paste will change that.
And here’s the best part – the paste’s adhesive seal can remain intact for weeks. That makes this a one-time solution. Or if doctors need to treat the wound again, it’s possible to dissolve the paste sooner.
So this is absolutely a game changer when it comes to trauma care. And it represents the first major advance for how paramedics and emergency room personnel go about their work in a very long time.
I am sure a pharmaceutical company will license this technology and commercialize it quickly. That’s what I will be watching closely for. That company would instantly become a fantastic investment target.
Regards,
Jeff Brown
Editor, The Bleeding Edge
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The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
