(Reuters) - Illumina Inc (O:ILMN) said on Monday it would buy cancer screening startup Grail Inc in a cash-and-stock deal worth $8 billion (£6.23 billion), buying out investors including Jeff Bezos and snatching back a business it hived off four years ago as a separate company.
Illumina will get access to Grail's "liquid biopsy" blood test called Galleri, which helps identify early-stage cancers and is expected to be launched commercially in 2021, betting on a market that is expected to grow rapidly in coming years.
Grail was founded by Illumina as a separate company in 2016 and had raised about $2 billion, with investors including the founders of Amazon.com Inc (O:AMZN) and Microsoft (O:MSFT).
Illumina is Grail's largest shareholder, holding a 14.5% stake, and the deal is almost a month after the startup filed for a stock market listing.
Grail stockholders, including Illumina, will receive $3.5 billion in cash and $4.5 billion in shares of Illumina stock, the companies said http://pdf.reuters.com/htmlnews/htmlnews.asp?i=43059c3bf0e37541&u= on Monday.
Grail plans to follow Galleri with more blood tests for cancer diagnosis, detection and post-treatment monitoring of cancer patients.
Most liquid biopsies use next-generation sequencing to scan blood samples for fragments of tumor DNA in people previously diagnosed with cancer.
Analysts peg the market for liquid biopsies in the range of least $30 billion to $130 billion in the United States alone.
But shares of Illumina were down 8.4% at $270.80, as some questioned the rationale.
"We don't see the clear fit for acquiring a company that is still at a stage where clinical studies and clinical product development are still critical and will be for years," Cowen analyst Doug Schenkel said in a client note.
Acquiring Grail would also create conflicts with many of Illumina's existing clinical customers, Schenkel added, noting that many of Illumina's major customers have ambitions to develop liquid biopsy based cancer screening tools.
Grail stockholders will also receive future payments based on Grail-related revenue.