The European Commission, which acts as the competition enforcer in the 27-country bloc, said on Tuesday that Illumina's remedies did not adequately address its concerns, confirming a Reuters story in July.
Illumina completed the deal in August last year ahead of EU regulatory approval, resulting in an EU order to keep Grail separate and appoint independent managers to run the company until the investigation's conclusion.
"With this transaction, Illumina would have an incentive to cut off Grail's rivals from accessing its technology, or otherwise disadvantage them," EU antitrust chief Margrethe Vestager said in a statement.
"It is vital to preserve competition between early cancer detection test developers at this critical stage of development. As Illumina did not put forward remedies that would have solved our concerns, we prohibited the merger," she said.
Illumina said it would challenge the EU veto.
"To prepare for the anticipated divestment order from the European Commission in the coming months, the company will begin reviewing strategic alternatives for GRAIL in the event the divestiture is not stayed pending Illumina's appeal," it said in a statement.
The EU watchdog said Illumina offered to give a licence for its NGS (next generation sequencing) patents to some NGS suppliers, with provisions in agreements valid until 2033. It also offered a three-year patent truce with Chinese rival BGI Genomics.
Illumina is already in talks with the Commission to divest Grail, people familiar with the matter told Reuters on Monday.
Illumina scored a victory last week when a U.S. administrative judge backed its challenge against a lawsuit by the Federal Trade Commission (FTC) against the deal. The FTC has said it will appeal.
Separately, Illumina faces an EU fine of as much as 10% of its annual global turnover for jumping the gun and has set aside $453 million for this.
The deal would have given Illumina access to Grail's flagship Galleri blood test used to diagnose cancers at early stages when the disease is easier to treat.
(Reporting by Foo Yun Chee; editing by Philip Blenkinsop)
By Foo Yun Chee
