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Illumina chief executive Francis deSouza has resigned following a bruising proxy battle with activist investor Carl Icahn over the future of the world’s biggest gene sequencing company.
Illumina said on Sunday that the company’s board of directors had accepted deSouza’s immediate resignation and begun a search for a replacement. DeSouza will stay on in an advisory capacity at Illumina until July 31, said the company.
Illumina said Charles Dadswell, a senior vice-president and general counsel at the company, has been named interim chief executive.
The resignation of deSouza, who was appointed chief executive in 2016, follows the departure last month of Illumina chair John Thompson, who was ousted in a shareholder vote following a proxy campaign by Icahn.
The 87-year-old activist investor led a shareholder campaign that focused on Illumina’s “reckless decision” to close its $8bn acquisition of cancer test developer Grail in 2021 against the wishes of EU and US antitrust regulators.
Icahn, who has a 1.4 per cent stake in Illumina, said it was “inexplicable and unforgivable” that the board led by Thompson went ahead with the deal without ascertaining whether it would get clearance from EU regulators.
Icahn had called on Illumina’s board to fire deSouza, saying he had masterminded a “Hail Mary” powergrab by acquiring Grail and allowing the core business to deteriorate. He also alleged most of Illumina’s directors were handpicked by deSouza — a claim the company denied.
DeSouza survived the leadership vote on May 25, receiving 71 per cent support from shareholders. But the proxy battle weakened his position, and he began negotiations with the company last week on his exit, according to sources with knowledge of the talks.
Illumina said there is no severance payment associated with the resignation.
The Grail acquisition has plunged Illumina into years-long legal battles with antitrust regulators in Brussels and Washington at a time when its core business is under pressure from new entrants to gene sequencing.
In December, Brussels ordered Illumina to divest Grail and is planning to issue a fine worth up to $453mn for “gun jumping”.
The US Federal Trade Commission has also ordered Illumina to divest Grail. Illumina is appealing against the EU and US regulators’ orders. Icahn also alleged the board lacked independence and that most directors were handpicked by deSouza.
Illumina’s market capitalisation has plunged from $75bn in August 2021, when it bought Grail, to less than $32bn as of Friday.
In a letter to Illumina employees posted to LinkedIn, deSouza said his decision to leave was “extremely difficult” but he felt a sense of “fulfilment and pride at where we have taken the company”, including the acquisition of Grail.
“My belief in the potential of Grail’s potentially life-saving technology and the benefits of merging it with Illumina remains unshakeable,” he wrote.
But many shareholders are sceptical about Illumina’s determination to hold on to Grail and want the board to negotiate a deal with EU authorities to spin off the cancer diagnostics company.
The departure of deSouza, who is also a director of Disney, comes at a critical time for Illumina, which recently launched a new generation of gene sequencing machines, called NovaSeq X.
The company faces growing competition from several new entrants and Chinese gene sequencing company MGI.
In a tweet, Icahn described the leadership changes as “important steps for Illumina in particular and activism in general”.
Dan Brennan, an analyst at Cowen, an investment bank, said: “We expect the stock to react favourably given the certainty of the Grail exit is now higher (a positive) with deSouza’s departure, plus the upside potential from a new leader improving the company’s execution.
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