424B3

424B3 1 d801214d424b3.htm 424B3 424B3

Filed Pursuant to Rule 424(b)(3)
File No. 333-250941

CONSENT SOLICITATION STATEMENT OF GRAIL, INC. AND PROSPECTUS OF ILLUMINA, INC.

To Stockholders of GRAIL, Inc.:

As you may be aware, GRAIL, Inc. (“GRAIL”) entered into an Agreement and Plan of Merger, dated as of September 20, 2020 (as amended on February 4, 2021, the “Merger Agreement”), with Illumina, Inc. (“Illumina”) and two of Illumina’s wholly owned subsidiaries, pursuant to which, through two successive mergers, GRAIL will be acquired by Illumina (the “Transaction”).

Subject to the terms and conditions set forth in the Merger Agreement, at the effective time of the first merger (the “Effective Time”), each issued and outstanding share of GRAIL common stock and GRAIL preferred stock (“GRAIL Stock”) (with limited exceptions, including shares with respect to which dissenters’ rights have been validly exercised in accordance with Delaware law) will be converted into, at the holder’s election, either:

•

the right to receive (a) an amount in cash, without interest, equal to the amount obtained by dividing $3,500,000,000 plus the “Aggregate Option Exercise Price,” which is the aggregate exercise price of all Company Stock Options (as defined in the Merger Agreement) that are outstanding as of immediately prior to the Effective Time, by the “GRAIL Fully Diluted Share Count,” which is the aggregate number of shares of GRAIL Class A common stock, par value $0.001 per share (“GRAIL Class A Common Stock”), outstanding immediately prior to the Effective Time on a fully diluted basis (including all shares of GRAIL Class A Common Stock issuable upon conversion of all outstanding shares of GRAIL Class B common stock, par value $0.001 per share (“GRAIL Class B Common Stock”), and GRAIL preferred stock and in respect of all outstanding options and other direct or indirect rights to acquire shares of GRAIL Class A Common Stock) (the “Cash Consideration”), plus (b) a number of validly issued, fully paid and non-assessable shares of common stock, par value $0.01 per share, of Illumina (the “Illumina Common Stock”) obtained by dividing the Aggregate Stock Consideration (as defined below) by the GRAIL Fully Diluted Share Count (the “Stock Consideration”), plus (c) one contingent value right (a “CVR”) issued by Illumina, subject to and in accordance with the CVR Agreement described below (clauses (a), (b) and (c), collectively, the “CVR Consideration”); or

•

the right to receive (a) the Cash Consideration, plus (b) the Stock Consideration, plus (c) a number of shares of Illumina Common Stock and/or an amount in cash, such number and/or amount to be determined by Illumina in its sole discretion (the “Alternative Consideration”), which number of shares of Illumina Common Stock and/or amount of cash will be determined and announced to the GRAIL stockholders when they are asked to make the election (clauses (a), (b) and (c), collectively, the “Cash & Stock Consideration”).

The number of shares of Illumina Common Stock to be received for each share of GRAIL Stock may fluctuate with the market price of the Illumina Common Stock and will, subject to the collar described in the definition of “Aggregate Stock Consideration” below, be determined based on the volume-weighted average trading price of a share of Illumina Common Stock on The NASDAQ Global Select Market (“NASDAQ”) over the 20 consecutive trading day period ending on (and including) the trading day that is 10 trading days prior to the date of the Effective Time, rounded to four decimal places (such price, the “Average Illumina Stock Price”) and the GRAIL Fully Diluted Share Count.

“Aggregate Stock Consideration” means: (i) if the Average Illumina Stock Price is an amount greater than $399, then the Aggregate Stock Consideration will be 11,278,195 shares of Illumina Common Stock; (ii) if the Average Illumina Stock Price is an amount greater than or equal to $295 but less than or equal to $399, then the Aggregate Stock Consideration will be a number of shares of Illumina Common Stock equal to the quotient obtained by dividing (x) $4,500,000,000 by (y) the Average Illumina Stock Price; or (iii) if the Average Illumina Stock Price is an amount less than $295, then the Aggregate Stock Consideration shall be 15,254,237 shares of Illumina Common Stock.

The Average Illumina Stock Price may be greater than, less than or equal to the price of Illumina Common Stock as of the date of the Merger Agreement, the date of this consent solicitation statement/prospectus or the Election Deadline and the value of the Aggregate Stock Consideration may be

greater than, less than or equal to $4,500,000,000. Accordingly, GRAIL stockholders cannot be certain of the number or value of the shares of Illumina Common Stock to be delivered upon consummation of the Transaction. You are encouraged to obtain current market price quotations for Illumina Common Stock before you determine how to vote on the proposal set forth in this consent solicitation statement/prospectus; however, as noted above, the prices at the Effective Time may be greater or less than, or the same as, such price quotations.

Illumina Common Stock is traded on NASDAQ under the symbol “ILMN.” On February 3, 2021, the most recent practicable date prior to the printing of the accompanying consent solicitation statement/prospectus, the last reported sale price of Illumina Common Stock on NASDAQ was $420.20.

The board of directors of GRAIL (the “GRAIL Board”) has considered the Transaction and the terms of the Merger Agreement and at a meeting of the GRAIL Board, by the unanimous vote of all directors present, including both the Preferred Directors (as defined in GRAIL’s restated certificate of incorporation), the GRAIL Board (i) determined that the Merger Agreement and the Transaction are fair to and in the best interests of, GRAIL and its stockholders and (ii) approved and declared advisable the Merger Agreement and the Transaction. The adoption of the Merger Agreement and approval of the Transaction requires the affirmative vote of, or the execution and delivery to GRAIL of a written consent by, (i) the holders of a majority of the total voting power of the outstanding shares of GRAIL Class A Common Stock and GRAIL Class B Common Stock (together, the “GRAIL Common Stock”) and GRAIL’s outstanding shares of preferred stock (the “GRAIL Preferred Stock”), voting together as a single class and (ii) the holders of a majority of the GRAIL Preferred Stock, voting together as a single class on an as-converted to GRAIL Class A Common Stock basis (together, the “GRAIL Stockholder Approvals”).

The GRAIL Stockholder Approvals are required for the Transaction to close, and you are being sent this document to ask you to approve the adoption of the Merger Agreement and the Transaction by executing and returning the written consent furnished with the accompanying consent solicitation statement/prospectus.

The GRAIL Board has set February 4, 2021 as the record date (the “Record Date”) for determining GRAIL stockholders entitled to execute and deliver written consents with respect to this solicitation. If you are a holder of GRAIL Stock on the Record Date, you are urged to complete, date and sign the enclosed written consent and promptly return it to GRAIL. See “Solicitation of Written Consents” beginning on page 148 of the accompanying consent solicitation statement/prospectus.

Subsequent to the execution of the Merger Agreement, certain stockholders of GRAIL (collectively, the “Selling Investors”), including Illumina in its capacity as a stockholder of GRAIL, entered into a voting and support agreement with Illumina (the “Selling Investor Support Agreement”). As of September 20, 2020, the Selling Investors collectively held shares of GRAIL Stock representing over a majority of the total voting power of GRAIL Stock and over a majority of outstanding shares of GRAIL Preferred Stock. Under the Selling Investor Support Agreement, the Selling Investors agreed, among other things, to execute and deliver a written consent promptly after the registration statement of which this consent solicitation statement/prospectus forms a part is declared effective by the Securities and Exchange Commission (“SEC”), approving the adoption of the Merger Agreement and approving the Transaction, which will constitute receipt by GRAIL of the GRAIL Stockholder Approvals. Under the terms of the Selling Investor Support Agreement, the Selling Investors are generally prohibited from transferring ownership of GRAIL Stock prior to the earlier of the consummation of the Mergers and the termination of the Merger Agreement in accordance with its terms, subject to limited exceptions.

No vote of Illumina stockholders is required to complete the Transaction.

You are encouraged to read carefully the accompanying consent solicitation statement/prospectus and the documents incorporated by reference into the accompanying consent solicitation statement/prospectus in their entirety, including “Risk Factors” beginning on page 36 of the accompanying consent solicitation statement/prospectus.

Neither the SEC nor any state securities commission has approved or disapproved of the securities to be issued under the accompanying consent solicitation statement/prospectus, or determined if the accompanying consent solicitation statement/prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The accompanying consent solicitation statement/prospectus is dated February 9, 2021, and is first being mailed to GRAIL stockholders on or about February 9, 2021.

Hans E. Bishop

Chief Executive Officer

GRAIL, Inc.

1525 O’Brien Drive

Menlo Park, CA 94025

Notice of Solicitation of Written Consent

To Stockholders of GRAIL, Inc.:

Pursuant to an Agreement and Plan of Merger, dated as of September 20, 2020 (the “Original Merger Agreement”), as amended on February 4, 2021 by the Amendment to the Agreement and Plan of Merger (the “Merger Agreement Amendment” and the Original Merger Agreement as amended by the Merger Agreement Amendment, the “Merger Agreement”), by and among Illumina, Inc. (“Illumina”), SDG Ops, Inc., a wholly owned subsidiary of Illumina (“First Merger Sub”), SDG Ops, LLC, a wholly owned subsidiary of Illumina (“Second Merger Sub”), and GRAIL, Inc. (“GRAIL”), First Merger Sub will be merged with and into GRAIL (the “First Merger”), with GRAIL continuing as the surviving corporation and a wholly owned subsidiary of Illumina, and as soon as practicable following the First Merger, GRAIL, as the surviving corporation in the First Merger, will be merged with and into Second Merger Sub (the “Second Merger” and, together with the First Merger, the “Mergers”), with Second Merger Sub continuing as the surviving company and a wholly owned subsidiary of Illumina. The transactions contemplated by the Merger Agreement, including the Mergers, are collectively referred to as the “Transaction.”

The accompanying consent solicitation statement/prospectus is being delivered to you on behalf of the board of directors of GRAIL (the “GRAIL Board”) to request that GRAIL stockholders as of the record date of February 4, 2021 approve the adoption of the Merger Agreement by executing and returning the written consent furnished with the accompanying consent solicitation statement/prospectus.

The accompanying consent solicitation statement/prospectus describes the Merger Agreement, the Transaction, including the Mergers, and the actions to be taken in connection with the Transaction and provides additional information about the parties involved. Please give this information your careful attention. A copy of the Original Merger Agreement and the Merger Agreement Amendment are attached as Annex A and Annex A-1, respectively, to the accompanying consent solicitation statement/prospectus.

The GRAIL Board has considered the Transaction and the terms of the Merger Agreement and at a meeting of the GRAIL Board, by the unanimous vote of all directors present, including both the Preferred Directors (as defined in GRAIL’s restated certificate of incorporation), the GRAIL Board (i) determined that the Merger Agreement and the Transaction are fair to, and in the best interests of, GRAIL and its stockholders and (ii) approved and declared advisable the Merger Agreement and the Transaction.

Parties to the Voting Agreement:

If you are a stockholder of GRAIL that is party to that certain Amended and Restated Voting Agreement, dated as of November 27, 2019, by and among GRAIL and certain investors, as amended by Amendment No. 1, dated as of April 17, 2020, and Amendment No. 2, dated as of May 11, 2020 (as amended, the “GRAIL Voting Agreement”), and therefore an “Investor ” identified on Schedule A to the GRAIL Voting Agreement or a “Key Holder” as identified on Schedule B to the GRAIL Voting Agreement, you were sent a notice dated September 24, 2020, informing you that as of September 20, 2020, the conditions specified in Section 2 of the GRAIL Voting Agreement have been satisfied and Section 2 of the GRAIL Voting Agreement applies to the Transaction, including the Mergers.

Pursuant to the terms of the GRAIL Voting Agreement, you are obligated to, among other things:

•

vote all shares of GRAIL capital stock held by you in favor of, and to adopt, the Transaction, including the Mergers, and in opposition to any and all other proposals that could delay or impair the ability of GRAIL to consummate the Transaction, including the Mergers;

•

execute and deliver all related documentation and take such other action in support of the Transaction, including the Mergers, as shall reasonably be requested by GRAIL or the Selling Investors (as defined in the GRAIL Voting Agreement) to carry out the terms and provision of Section 2 of the GRAIL Voting Agreement, including executing and delivering a support agreement with Illumina (the “Support Agreement”) in the form attached to the accompanying consent solicitation statement/prospectus as Annex E; and

•

refrain from exercising any dissenters’ rights or rights of appraisal under applicable law in connection with the Transaction, including the Mergers.

Accordingly, if you have not already done so, please date and sign the written consent furnished with the accompanying consent solicitation statement/prospectus and return it promptly to GRAIL by one of the means described in “Solicitation of Written Consents” beginning on page 148 of the accompanying consent solicitation statement/prospectus.

Other Stockholders:

If you are a stockholder of GRAIL that is not party to the GRAIL Voting Agreement, a summary of the appraisal rights that may be available to you is described in “Appraisal Rights” beginning on page 266 of the accompanying consent solicitation statement/prospectus. Please note that if you wish to exercise appraisal rights you must not sign and return a written consent approving the adoption of the Merger Agreement. However, so long as you do not return a written consent at all, it is not necessary to affirmatively vote against or disapprove the adoption of the Merger Agreement. In addition, you must take all other steps necessary to perfect your appraisal rights in accordance with Section 262 of the General Corporation Law of the State of Delaware.

Please complete, date and sign the written consent furnished with the accompanying consent solicitation statement/prospectus and return it promptly to GRAIL by one of the means described in “Solicitation of Written Consents” beginning on page 148 of the accompanying consent solicitation statement/prospectus.

By Order of the Board of Directors:

Marissa Lee Song

General Counsel and Corporate Secretary

TABLE OF CONTENTS


IMPORTANT NOTE ABOUT THIS CONSENT SOLICITATION STATEMENT/PROSPECTUS			1
QUESTIONS AND ANSWERS			2
SUMMARY			17

The Parties (page 104)			17
Solicitation of Written Consents (page 148)			18
The Transaction and the Merger Agreement (pages 152 and 177)			20
Merger Consideration (page 152)			20
GRAIL’s Reasons for the Transaction; Recommendation of the GRAIL Board (page 159)			21
Opinion of Financial Advisor to the GRAIL Board (page 161 and Annex F)			21
Regulatory Approvals (page 173)			22
Financing (page 174)			23
Selling Investor Support Agreement (pages 176 and 227)			24
Treatment of GRAIL Equity Awards (page 179)			24
No Solicitation (page 189)			26
Change in the GRAIL Recommendation (page 191)			27
Conditions to Completion of the Transaction (page 199)			28
Termination of the Merger Agreement (page 200)			29
Expenses and Termination Fee (page 202)			30
Description of the CVRs (page 210)			31
Interests of GRAIL’s Directors and Executive Officers in the Transaction (page 229)			31
Accounting Treatment (page 176)			32
Material U.S. Federal Income Tax Considerations (page 236)			32
Comparison of Stockholders’ Rights (page 245)			33
Appraisal Rights (page 266)			33
Risk Factors (pages 34 and 36)			33

RISK FACTORS SUMMARY			34
RISK FACTORS			36
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS			102
INFORMATION ABOUT THE COMPANIES			104

Illumina, Inc.			104
First Merger Sub			104
Second Merger Sub			104
GRAIL, Inc.			104

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF ILLUMINA			106
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF GRAIL			108
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA			110
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION			111
COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA COMBINED PER SHARE DATA			123
MARKET PRICE AND DIVIDEND INFORMATION			125
GRAIL’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			126
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT GRAIL’S MARKET RISK			143
BENEFICIAL OWNERSHIP OF GRAIL STOCK			144
SOLICITATION OF WRITTEN CONSENTS			148
THE TRANSACTION			152

Structure of the Transaction			152


The Merger Consideration			152
Background of the Transaction			153
GRAIL’s Reasons for the Transaction; Recommendation of the GRAIL Board			159
Opinion of Financial Advisor to the GRAIL Board			161
GRAIL Unaudited Forecasted Financial Information			169
Closing; Effective Time			172
Regulatory Approvals			173
Financing			174
Listing of Illumina Common Stock Issued in the First Merger			176
Selling Investor Support Agreement			176
Accounting Treatment			176

THE MERGER AGREEMENT			177
DESCRIPTION OF THE CVRs			210
SELLING INVESTOR SUPPORT AGREEMENT			227
INTERESTS OF GRAIL’S DIRECTORS AND EXECUTIVE OFFICERS IN THE TRANSACTION			229
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS			236
MATERIAL CONTRACTS AND ARRANGEMENTS BETWEEN THE PARTIES			243
COMPARISON OF STOCKHOLDERS’ RIGHTS			245
APPRAISAL RIGHTS			266
EXPERTS			271
VALIDITY OF ILLUMINA COMMON STOCK AND CVRs			272
WHERE YOU CAN FIND MORE INFORMATION			273


ANNEX A:		AGREEMENT AND PLAN OF MERGER
ANNEX A-1:		AMENDMENT TO AGREEMENT AND PLAN OF MERGER
ANNEX B:		FORM OF CVR AGREEMENT
ANNEX C:		SELLING INVESTOR SUPPORT AGREEMENT
ANNEX D:		FORM OF WRITTEN CONSENT
ANNEX E:		FORM OF SUPPORT AGREEMENT
ANNEX F:		OPINION OF MORGAN STANLEY & CO. LLC
ANNEX G:		SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
ANNEX H:		GRAIL AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
ANNEX I:		GRAIL UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2020 AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

IMPORTANT NOTE ABOUT THIS CONSENT SOLICITATION STATEMENT/PROSPECTUS

This consent solicitation statement/prospectus, which forms part of a registration statement on Form S-4 filed with the Securities and Exchange Commission (the “SEC”) by Illumina (File No. 333-250941), constitutes a prospectus of Illumina under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the Illumina Common Stock and CVRs to be issued to GRAIL stockholders pursuant to the Merger Agreement. This consent solicitation statement/prospectus also constitutes a consent solicitation statement under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of GRAIL with respect to the proposal to approve the adoption of the Merger Agreement.

This consent solicitation statement/prospectus incorporates by reference important business and financial information of Illumina from documents that are not included in or delivered with this consent solicitation statement/prospectus. This information is available without charge to you upon written or oral request. You can obtain the documents incorporated by reference into this consent solicitation statement/prospectus by requesting them in writing, by email or by telephone from Illumina at the address and telephone number listed below. The information on Illumina’s website listed below does not constitute a part of, and is not incorporated by reference into, this consent solicitation statement/prospectus. To ensure timely delivery, any request must be made no later than March 8, 2021.

Illumina, Inc.

5200 Illumina Way

San Diego, CA 92122

Attention: Juliet Cunningham, VP, Investor Relations

Email: ir@illumina.com

Website: https://investor.illumina.com

Neither Illumina nor GRAIL has authorized anyone to give any information or make any representation about the Transaction, Illumina or GRAIL that is different from, or in addition to, that contained in this consent solicitation statement/prospectus or in any of the materials that have been incorporated by reference. Therefore, neither Illumina nor GRAIL takes any responsibility for, or can provide any assurance as to the reliability of, any information other than the information contained in or incorporated by reference into this consent solicitation statement/prospectus.

This consent solicitation statement/prospectus is dated February 9, 2021. The information contained in this consent solicitation statement/prospectus is accurate only as of that date or, in the case of information in a document incorporated by reference, as of the date of such document, unless the information specifically indicates that another date applies. Neither the mailing of this consent solicitation statement/prospectus to GRAIL stockholders nor the issuance by Illumina of Illumina Common Stock or CVRs pursuant to the Merger Agreement will create any implication to the contrary.

This consent solicitation statement/prospectus does not constitute an offer to sell, or the solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

The information concerning Illumina contained in or incorporated by reference into this consent solicitation statement/prospectus has been provided by Illumina, and the information concerning GRAIL contained in this consent solicitation statement/prospectus has been provided by GRAIL.

QUESTIONS AND ANSWERS

The following are some of the questions that stockholders of GRAIL may have regarding the Transaction and answers to those questions. These questions and answers, as well as the summary section that follows, are not meant to be a substitute for the information contained in the remainder of this consent solicitation statement/prospectus, and this information is qualified in its entirety by the more detailed descriptions and explanations contained elsewhere in this consent solicitation statement/prospectus. You are urged to read this consent solicitation statement/prospectus in its entirety. Additional important information is also contained in the Annexes to this consent solicitation statement/prospectus. You should pay special attention to the sections entitled “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”

Questions and Answers about the Transaction

Why am I receiving this consent solicitation statement/prospectus?

The GRAIL board of directors (the “GRAIL Board”) is providing this consent solicitation statement/prospectus to GRAIL stockholders and is soliciting such stockholders’ written consent in connection with the Agreement and Plan of Merger, dated September 20, 2020 (the “Original Merger Agreement”), as amended on February 4, 2021 by the Amendment to the Agreement and Plan of Merger (the “Merger Agreement Amendment” and the Original Merger Agreement as amended by the Merger Agreement Amendment, the “Merger Agreement”), among Illumina, SDG Ops, Inc. (“First Merger Sub”), SDG Ops, LLC (“Second Merger Sub”), and GRAIL. In addition, pursuant to the registration statement of which this consent solicitation statement/prospectus forms a part, Illumina is registering shares of Illumina Common Stock and CVRs issuable to GRAIL stockholders upon completion of the Transaction. This consent solicitation statement/prospectus contains important information about the Transaction, the Merger Agreement and certain related matters, and you should read this consent solicitation statement/prospectus carefully and in its entirety.

What will happen in the Transaction?

Pursuant to the Merger Agreement, at the first effective time (the “Effective Time”), First Merger Sub will be merged with and into GRAIL (the “First Merger”), with GRAIL continuing as the surviving corporation and a wholly owned subsidiary of Illumina, and as soon as practicable following the First Merger, and at the second effective time (the “Second Effective Time”), GRAIL, as the surviving corporation in the First Merger, will be merged with and into Second Merger Sub (the “Second Merger” and, together with the First Merger, the “Mergers”), with Second Merger Sub continuing as the surviving company and a wholly owned subsidiary of Illumina. The transactions contemplated by the Merger Agreement, including the Mergers, are collectively referred to as the “Transaction.”

See “The Transaction—Structure of the Transaction” and “The Merger Agreement—The Transaction,” and the Original Merger Agreement and the Merger Agreement Amendment attached as Annex A and Annex A-1, respectively, to this consent solicitation statement/prospectus for more information about the Transaction and the Merger Agreement.

What will holders of GRAIL Stock receive in the First Merger?

Subject to the terms and conditions set forth in the Merger Agreement, at the Effective Time, each issued and outstanding share of GRAIL Class A common stock, par value $0.001 per share (the “GRAIL Class A Common Stock”), GRAIL Class B common stock, par value $0.001 per share (the “GRAIL Class B Common Stock”, and, together with the GRAIL Class A Common Stock, the “GRAIL Common Stock”), GRAIL Series A redeemable convertible preferred stock, par value $0.001 per share

(the “GRAIL Series A Preferred Stock”), GRAIL Series B redeemable convertible preferred stock, par value $0.001 per share (the “GRAIL Series B Preferred Stock”), GRAIL Series C redeemable convertible preferred stock, par value $0.001 per share (the “GRAIL Series C Preferred Stock”), and GRAIL Series D redeemable convertible preferred stock, par value $0.001 per share (the “GRAIL Series D Preferred Stock,” and, together with the GRAIL Series A Preferred Stock, the GRAIL Series B Preferred Stock, and the GRAIL Series C Preferred Stock, the “GRAIL Preferred Stock,” which, together with the GRAIL Common Stock, is referred to as the “GRAIL Stock”) (with limited exceptions, including shares with respect to which dissenters’ rights have been validly exercised in accordance with Delaware law) will be converted into, at the holder’s election, either:

•

the right to receive (a) an amount in cash, without interest, equal to the amount obtained by dividing $3,500,000,000 plus the “Aggregate Option Exercise Price,” which is the aggregate exercise price of all Company Stock Options (as defined in the Merger Agreement) that are outstanding as of immediately prior to the Effective Time, by the “GRAIL Fully Diluted Share Count,” which is the aggregate number of shares of GRAIL Class A Common Stock, outstanding immediately prior to the Effective Time on a fully diluted basis (including all shares of GRAIL Class A Common Stock issuable upon conversion of all outstanding shares of GRAIL Class B Common Stock, and GRAIL Preferred Stock and in respect of all outstanding options and other direct or indirect rights to acquire shares of GRAIL Class A Common Stock) (the “Cash Consideration”), plus (b) a number of validly issued, fully paid and non-assessable shares of common stock, par value $0.01 per share, of Illumina (the “Illumina Common Stock”) obtained by dividing the Aggregate Stock Consideration by the GRAIL Fully Diluted Share Count (the “Stock Consideration”), plus (c) one contingent value right (a “CVR”) issued by Illumina, subject to and in accordance with the CVR Agreement described below (clauses (a), (b) and (c), collectively, the “CVR Consideration”); or

•

The election form to be distributed to GRAIL stockholders will contain further information regarding the type and amount of the Alternative Consideration. Holders of GRAIL Stock who make no election as to their form of consideration, or who do not submit a properly completed election form to the Exchange Agent prior to the Election Deadline, will be entitled to receive the CVR Consideration.

For a description of the treatment of the GRAIL Equity Awards in the Transaction, see “Interests of GRAIL’s Directors and Executive Officers in the Transaction” elsewhere in this consent solicitation statement/prospectus. For more information, see the sections entitled “The Transaction—The Merger Consideration” and “The Merger Agreement—Consideration; Effect of the Transaction on Capital Stock.”

If I am a GRAIL stockholder, how will I elect and receive the consideration to which I will become entitled?

Election forms will be distributed to GRAIL stockholders not less than 30 days prior to the anticipated closing date, along with a letter of transmittal and instructions for effecting the surrender of the certificates or transfer of book-entry shares of GRAIL Stock pursuant to such letter of transmittal. The election form will enable each GRAIL stockholder to specify the number of shares of GRAIL Stock with respect to which the stockholder elects to receive the CVR Consideration, the number of shares of GRAIL Stock with respect to which the stockholder elects to receive the Cash & Stock Consideration, or that the stockholder makes no election with respect to such stockholder’s shares of GRAIL Stock. GRAIL stockholders will have until 5:00 p.m., Eastern time, on the date which Illumina and GRAIL agree is as near as practicable to three business days prior to the closing date, or such other date as Illumina and GRAIL will, prior to the closing, mutually agree (the “Election Deadline”), to submit election forms. Any election will have been properly made only if the Exchange Agent will have actually received a properly completed election form by the Election Deadline.

After the Transaction is completed, each GRAIL stockholder who is entitled to receive the merger consideration and has not already returned a valid, duly completed letter of transmittal will receive a separate letter of transmittal and instructions for effecting the surrender of the certificates or transfer of book-entry shares of GRAIL Stock pursuant to such letter of transmittal.

Upon surrender of a certificate (or an affidavit of loss in lieu thereof and, if required by Illumina, an indemnity agreement) or book-entry share, together with a valid, duly completed letter of transmittal and such other documents as may be reasonably requested, GRAIL stockholders that submitted a valid, duly completed election form in advance of the Election Deadline will be entitled to receive, based on the holder’s election, either the CVR Consideration or the Cash & Stock Consideration. GRAIL stockholders that did not submit a valid, duly completed election form in advance of the Election Deadline will be entitled to receive the CVR Consideration upon surrender of a certificate (or an affidavit of loss in lieu thereof and, if required by Illumina, an indemnity agreement) or book-entry share, together with a valid, duly completed letter of transmittal and such other documents as may be reasonably requested.

For more information, see the sections entitled “The Transaction—The Merger Consideration” and “The Merger Agreement—Consideration; Effect of the Transaction on Capital Stock.”

Can I make one election for some of my shares of GRAIL Stock and another election for the rest?

Yes. The election form will permit you to specify, among the shares of GRAIL Stock you hold, (i) the number of shares of GRAIL Stock for which you are electing to receive the CVR Consideration, (ii) the number of shares of GRAIL Stock for which you are electing to receive the Cash & Stock Consideration or (iii) that you make no election.

What if I do not make an election or my election form is not received before the Election Deadline?

Holders of GRAIL Stock who make no election as to their form of consideration, or who do not submit a properly completed election form to the Exchange Agent prior to the Election Deadline, will be entitled to receive the CVR Consideration.

Can I change my election after I submit an election form?

Yes. You may revoke your election of merger consideration with respect to all or a portion of your shares of GRAIL Stock by delivering written notice of your revocation to the Exchange Agent prior to the Election Deadline. In the event an election form is revoked prior to the Election Deadline, the shares of GRAIL Stock represented by such election form will be converted into the right to receive the CVR Consideration, unless a subsequent election is properly made prior to the Election Deadline. GRAIL stockholders will not be entitled to revoke or change their election following the Election Deadline. In addition, any election of merger consideration you make will automatically be revoked if the Merger Agreement is terminated.

May I submit an election form even if I do not submit a written consent approving the Transaction?

Yes. You may submit an election form even if you do not submit a written consent approving the Transaction.

May I transfer my shares of GRAIL Stock once I have made an election?

No. If an election has been made for any of your shares of GRAIL Stock, and such election has not been properly revoked, such shares may not be transferred.

GRAIL stockholders who are party to the Selling Investor Support Agreement, dated as of September 20, 2020 (the “Selling Investor Support Agreement”), by and among Illumina and certain GRAIL stockholders, are generally prohibited from transferring ownership of GRAIL Stock prior to the earlier of the consummation of the Transaction and the termination of the Merger Agreement in accordance with its terms, subject to limited exceptions. For further information, see “The Selling Investor Support Agreement.”

What is the value of the CVR Consideration?

The value of the CVR Consideration will depend on a number of factors:

•

The value of the Cash Consideration will depend on the GRAIL Fully Diluted Share Count, which may be greater than, less than or equal to the fully diluted number of shares of GRAIL Stock outstanding as of the date of the Merger Agreement, the date of this consent solicitation statement/prospectus or the Election Deadline. Assuming that the GRAIL Fully Diluted Share Count is 816,218,586, based on the fully diluted number of shares of GRAIL Stock outstanding as of January 31, 2021, the value of the Cash Consideration will be $4.49 per share of GRAIL Stock.

•

market price of the Illumina Common Stock and will, subject to the collar described in the definition of “Aggregate Stock Consideration” above, be determined based on the Average Illumina Stock Price. Assuming that the GRAIL Fully Diluted Share Count is 816,218,586, based on the fully diluted number of shares of GRAIL Stock outstanding as of January 31, 2021, and that the Average Illumina Stock Price is $347, representing the mid-point of the collar, the Stock Consideration will be 0.0159 shares of Illumina Common Stock per share of GRAIL Stock (having a value of $6.68 based on the closing price of Illumina Common Stock on February 3, 2021, the closest practicable date prior to the filing). For further information regarding the sensitivity of the per-share value of the Stock Consideration to fluctuations in the Average Illumina Stock Price, see “The Transaction—The Merger Consideration—Stock Consideration Sensitivity Analysis.”

•

The value of a CVR will depend on the recognition of certain revenues by Illumina (calculated in accordance with the CVR Agreement). Each holder of a CVR will be entitled to receive a pro rata portion of 2.5% of Covered Revenues (as defined below), if any, up to and including $1 billion, plus 9.0% of Covered Revenues, if any, in excess of $1 billion, with such $1 billion threshold measured over an annual period to correspond with Illumina’s fiscal year, in each case, multiplied by a fraction, the numerator of which is the aggregate number of CVRs outstanding as of the applicable payment date, and the denominator of which is the Total Equity Count (as defined below), subject to certain deductions and pro-rations described in “Description of the CVRs.” If those revenues are not recognized as calculated in accordance with the CVR Agreement, no payment will be made under the CVRs and the CVRs will expire valueless. Accordingly, the value, if any, of the CVRs is speculative, and the CVRs may ultimately have no value.

For more information, see the sections entitled “The Transaction—The Merger Consideration,” “The Merger Agreement—Consideration; Effect of the Transaction on Capital Stock” and “Description of the CVRs.”

What is the value of the Cash & Stock Consideration?

The value of the Cash & Stock Consideration will depend on a number of factors:

•

The value of the Stock Consideration will depend on the GRAIL Fully Diluted Share Count, as well as on the Average Illumina Stock Price, which may be greater than, less than or equal to the price of Illumina Common Stock as of the date of the Merger Agreement, the date of this consent solicitation statement/prospectus or the Election Deadline. The number of shares of Illumina Common Stock to be received for each share of GRAIL Stock may fluctuate with the market price of the Illumina Common Stock and will, subject to the collar described in the definition of “Aggregate Stock Consideration” above, be determined based on the Average Illumina Stock Price. Assuming that the GRAIL Fully Diluted Share Count is 816,218,586, based on the fully diluted number of shares of GRAIL Stock outstanding as of January 31, 2021, and that the Average Illumina Stock Price is $347, representing the mid-point of the collar, the Stock Consideration will be 0.0159 shares of Illumina Common Stock per share of GRAIL Stock (having a value of $6.68 based on the closing price of Illumina Common Stock

on February 3, 2021, the closest practicable date prior to the filing). For further information regarding the sensitivity of the per-share value of the Stock Consideration to fluctuations in the Average Illumina Stock Price, see “The Transaction—The Merger Consideration—Stock Consideration Sensitivity Analysis.”

•

The value of the Alternative Consideration will depend on the number of shares of Illumina Common Stock and/or amount in cash selected by Illumina as the Alternative Consideration. The election form to be distributed to GRAIL stockholders will contain further information regarding the type and amount of the Alternative Consideration.

For more information, see the sections entitled “The Transaction—The Merger Consideration” and “The Merger Agreement—Consideration; Effect of the Transaction on Capital Stock.”

What happens if I am eligible to receive a fraction of a share of Illumina Common Stock as part of the merger consideration?

Illumina will not issue fractional shares of Illumina Common Stock in the Transaction. Each converting holder who would otherwise have been entitled to receive a fractional share of Illumina Common Stock will receive a cash payment in lieu of such fractional share of Illumina Common Stock in an amount equal to the amount of such fractional share multiplied by the Average Illumina Stock Price, payable without interest, rounded down to the nearest whole cent and subject to the amount of any withholding taxes as contemplated in the Merger Agreement.

What will holders of GRAIL Equity Awards receive in the First Merger?

Immediately prior to the Effective Time, a portion of each unvested GRAIL Equity Award (as defined in “Summary—Treatment of GRAIL Equity Awards”) will vest as follows:

•

in the case of each award subject solely to service-based vesting criteria that is unvested and outstanding as of immediately prior to the Effective Time, such service-based GRAIL Equity Award will vest as to a number of options, shares or units, as applicable, that would have vested under such GRAIL Equity Award on or prior to the third anniversary of the Effective Time if the holder of such service-based GRAIL Equity Award remained in continued employment or service, as applicable, with GRAIL through such third anniversary, with such accelerated vesting applied first to the options, shares or units (as applicable) that have the longest remaining vesting periods (i.e., in reverse chronological order);

•

in the case of each award subject to performance-based vesting criteria that is unvested and outstanding as of immediately prior to the Effective Time, such performance-based GRAIL Equity Award will vest as to a number of options, shares or units, as applicable, set forth in the company disclosure letter to the Merger Agreement (the “GRAIL Disclosure Letter”), as detailed under the section entitled, “Interests of GRAIL’s Directors and Executive Officers in the Transaction—Accelerated Vesting of Outstanding GRAIL Equity Awards Held by Directors and Executive Officers” elsewhere in this consent solicitation statement/prospectus; and

•

(i) pursuant to the applicable Board of Director offer letters by and between GRAIL and each of Messrs. Barron, Bishop and Ronaghi and Mmes. Foster, Friedman and Ho, the GRAIL Stock Options granted to these directors will, to the extent then unvested, vest in full upon the completion of the Merger, subject to the applicable director’s continued service on the Board of Directors through such time, and (ii) pursuant to the applicable offer letter by and between GRAIL and Mr. Bishop, dated as of June 6, 2019, all of Mr. Bishop’s outstanding GRAIL RSUs will vest in full upon the completion of the Merger, subject to Mr. Bishop’s continued service with GRAIL through such time.

After taking into account the accelerated vesting described above, (i) the vested portion of each award will, immediately prior to the Effective Time, be canceled in exchange for, at the holder’s election, the CVR Consideration or the Cash & Stock Consideration (less any applicable exercise price and tax withholding) and (ii) the remaining unvested portion will be canceled in exchange for an equivalent equity award (i.e., stock option, restricted share or restricted stock unit, as applicable) with respect to shares of Illumina Common Stock. The number of shares of Illumina Common Stock subject to such converted award will be equal to the product (rounded down to the nearest whole share) of (i) the number of shares of GRAIL Stock subject to the unvested portion of the applicable GRAIL Equity Award and (ii) at the holder’s election, the CVR Consideration Award Ratio or the Alternative Consideration Award Ratio (each, as defined in “Summary—Treatment of GRAIL Equity Awards”). A holder who elects the CVR Consideration Award Ratio will also receive a number of fully vested CVRs equal to the number of shares of GRAIL Stock subject to the unvested portion of the applicable GRAIL Equity Award. In the case of GRAIL Stock Options (as defined in “Summary—Treatment of GRAIL Equity Awards”), the exercise price of the converted option award will be equal to the exercise price of the GRAIL Stock Option divided by the CVR Consideration Award Ratio or the Alternative Consideration Award Ratio, as applicable (rounded up to the nearest whole cent).

For more information, see “The Merger Agreement—Treatment of GRAIL Equity Awards.”

What equity stake will GRAIL stockholders hold in Illumina immediately following the Transaction?

Based on the consideration payable to holders of GRAIL Stock pursuant to the Merger Agreement and the number of shares of Illumina Common Stock outstanding as of September 27, 2020, immediately after the closing of the Transaction (the “Closing”), it is expected that GRAIL stockholders will own approximately 8% of the outstanding Illumina Common Stock (assuming the number of shares issued in the Transaction is determined based on the mid-point of the range of the collar, that all holders of GRAIL Stock elect to receive the CVR Consideration and that the holders of all GRAIL Equity Awards being paid out in the Transaction elect to receive solely the CVR Consideration in payment for their awards).

For more details on the merger consideration, see the sections entitled “The Transaction—The Merger Consideration” and “The Merger Agreement—Consideration; Effect of the Transaction on Capital Stock.”

What happens if the Transaction is not completed?

If the Transaction is not completed for any reason, GRAIL stockholders will not receive any merger consideration for their shares of GRAIL Stock, and GRAIL will remain an independent company. Upon termination of the Merger Agreement under specified circumstances, GRAIL may require Illumina to pay GRAIL a termination fee of $300,000,000 and make an additional $300,000,000 payment to GRAIL in exchange for shares of non-voting GRAIL preferred stock. The Merger Agreement may also be terminated in circumstances in which such fee will not be payable and such investment will not be required. As a result of the Transaction not being completed by December 20, 2020, on December 21, 2020, Illumina began making monthly cash payments to GRAIL of $35,000,000 (the “Continuation Payments”). Illumina will continue making monthly Continuation Payments to GRAIL until the Transaction is completed or terminated, subject to certain terms and conditions. In the event that the Merger Agreement is terminated, Illumina will receive shares of non-voting GRAIL preferred stock in respect of all Continuation Payments in excess of $315,000,000, subject to certain terms and conditions. For more information, see the sections entitled “The Merger Agreement—Termination of the Merger Agreement” and “The Merger Agreement—Continuation Payments; Additional Termination Payment; Equity Issuance.”

Failure to complete the Transaction could negatively impact Illumina, GRAIL and their respective businesses, prospects, financial condition and results of operations. The price of Illumina Common Stock may decline to the extent that its current market price reflects a market assumption that the Transaction will be completed. In addition, some costs related to the Transaction must be paid by Illumina and GRAIL even if the Transaction is not completed. Furthermore, Illumina and GRAIL may experience negative reactions from their respective stockholders, customers, suppliers, commercial partners and/or other persons with whom Illumina or GRAIL has a business relationship, which could have an adverse effect on their respective businesses, financial condition and results of operations.

The Merger Agreement contains non-solicitation provisions that restrict the ability of GRAIL to solicit, facilitate or knowingly encourage, participate in any discussions or negotiations regarding, or approve, endorse or recommend, any Competing Proposal (as defined under “The Merger Agreement—Covenants and Agreements—No Solicitation by GRAIL”) for purposes of the Merger Agreement. In addition, the Merger Agreement does not permit GRAIL to terminate the Merger Agreement in order to enter into an agreement providing for, or to complete, such an alternative transaction, even if the alternative transaction provides for the payment of consideration with a higher value per share of GRAIL Stock than the value proposed to be received or realized in the Transaction. Further, under the terms of the Merger Agreement, GRAIL is also subject to certain restrictions on the conduct of its business prior to the completion of the Transaction, which may adversely affect its ability to execute certain of its business strategies, including, among other things, the ability in certain cases to incur indebtedness, make investments or capital expenditures, enter into, amend or terminate certain material contracts, settle litigation, acquire or dispose of assets or make changes with respect to employee matters, including compensation and benefits matters. Such limitations could adversely affect GRAIL’s business, strategy, operations and prospects prior to the completion of the Transaction or in the event the Transaction is not completed. In the event that the Transaction is not completed, the strategic alternatives available to GRAIL, including remaining an independent company, and the opportunities available to GRAIL to raise capital, including through a private or public equity issuance, may not be as favorable as they would have been in the absence of the Transaction and/or may not be as favorable to GRAIL and its stockholders as the Transaction. See the sections entitled “The Merger Agreement—Covenants and Agreements—No Solicitation by GRAIL,” “The Merger Agreement—Covenants and Agreements—Conduct of Business of GRAIL Prior to Completion of the Transaction” and “Risk Factors.”

What are the conditions to the completion of the Transaction?

The completion of the Transaction is subject to the satisfaction or waiver of a number of conditions as set forth in the Merger Agreement, including, among others, the expiration or termination of the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”), the approval of antitrust authorities in certain other specified jurisdictions, if applicable, no law having been enacted, issued, promulgated, enforced or entered, whether temporary, preliminary or permanent, which is then in effect and has the effect of enjoining, restraining, prohibiting or otherwise preventing consummation of the Transaction or imposes any remedies on Illumina or its subsidiaries other than Permitted Restrictions (as defined under “The Merger Agreement—Covenants and Agreements—Reasonable Best Efforts; Regulatory Filings and Other Actions”), the receipt of the GRAIL Stockholder Approvals, the effectiveness of the registration statement of which this consent solicitation statement/prospectus forms a part and the approval for listing on NASDAQ of the shares of Illumina Common Stock to be issued in connection with the Transaction. For more information, see “The Merger Agreement—Conditions to Completion of the Transaction.”

When is the Transaction expected to be completed?

Illumina and GRAIL currently expect the Transaction to close in the second half of 2021, subject to certain conditions. Neither Illumina nor GRAIL can predict, however, the actual date on which the

Transaction will be completed, or whether it will be completed, because the Transaction is subject to factors outside the control of each of Illumina and GRAIL, including whether or when the required regulatory approvals will be received. For more information, see the sections entitled “The Merger Agreement—Conditions to Completion of the Transaction” and “The Transaction—Regulatory Approvals.”

What are the U.S. federal income tax consequences of the Transaction to U.S. holders of GRAIL Stock?

It is intended that, for U.S. federal income tax purposes, the First Merger and the Second Merger, taken together, will constitute a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), which is referred to as the “Intended Tax Treatment”. However, the completion of the Transaction is not conditioned on the Transaction qualifying for the Intended Tax Treatment or upon the receipt of an opinion from counsel to that effect, and whether or not the Transaction will qualify for the Intended Tax Treatment depends on facts that will not be known until the Transaction is completed. In particular, the Intended Tax Treatment requires that the value of the shares of Illumina Common Stock issued to holders of GRAIL Stock in the Transaction, determined as of completion of the Transaction, represents at least a minimum percentage of the total consideration paid to holders of GRAIL Stock in the Transaction. While there is no specific guidance as to precisely what minimum percentage is necessary to satisfy this requirement, it would be satisfied if the Illumina Common Stock (valued as of completion of the Transaction) represents at least 40% of the total consideration. In addition, although the treatment of the Continuation Payments is uncertain, it is possible that the Continuation Payments will be treated as included in such total consideration for purposes of calculating this percentage. Whether this test will be satisfied depends on a number of factors that cannot currently be known with certainty, including the value of Illumina Common Stock as of the completion of the Transaction, the number of holders of GRAIL Stock that elect to receive the CVR Consideration rather than the Cash & Stock Consideration, the fair market value of a CVR as of the completion of the Transaction, the total amount of Continuation Payments made, and the total value of consideration received by dissenting holders of GRAIL Stock, if any. Accordingly, no assurance can be given that the Transaction will qualify for the Intended Tax Treatment. Finally, neither Illumina nor GRAIL intends to request a ruling from the Internal Revenue Service regarding the U.S. federal income tax consequences of the Transaction. Therefore, even if Illumina and GRAIL conclude that the Transaction qualifies for the Intended Tax Treatment, no assurance can be given that the Internal Revenue Service will not challenge that conclusion or that a court would not sustain such a challenge.

Assuming the Transaction qualifies for the Intended Tax Treatment, subject to the limitations and qualifications described in “Material U.S. Federal Income Tax Considerations,” a holder of GRAIL Stock whose shares of GRAIL Stock are exchanged in the Transaction for the Cash & Stock Consideration will recognize capital gain (but not loss) realized on the exchange in an amount not exceeding the amount of cash received by the holder (excluding any cash received in lieu of a fractional share of Illumina Common Stock, as discussed in “Material U.S. Federal Income Tax Considerations—Cash Received Instead of a Fractional Share of Illumina Common Stock”).

If the Transaction fails to qualify for the Intended Tax Treatment, a holder of GRAIL Stock that receives the Cash & Stock Consideration generally would recognize gain or loss in an amount equal to the difference between (1) the fair market value of the shares of Illumina Common Stock and the amount of cash received in the Transaction by the holder (including cash received in lieu of a fractional share of Illumina Common Stock) and (2) the holder’s basis in the GRAIL Stock surrendered.

The treatment of holders of GRAIL Stock who receive the CVR Consideration is complex and subject to uncertainties, as described in more detail below in “Material U.S. Federal Income Tax Considerations.”

For a more detailed discussion of the material U.S. federal income tax consequences of the Transaction, please see “Material U.S. Federal Income Tax Considerations.”

The tax consequences of the Transaction to any particular stockholder will depend on that stockholder’s particular facts and circumstances. Accordingly, you are urged to consult your tax advisor to determine your tax consequences from the Transaction.

Are there any important risks related to the Transaction or Illumina’s or GRAIL’s businesses of which I should be aware?

Yes, there are important risks related to the Transaction and Illumina’s, GRAIL’s and the surviving company’s businesses. Before making any decision on how to vote, you are urged to read carefully and in its entirety “Risk Factors.”

Are GRAIL stockholders entitled to seek appraisal rights?

Pursuant to Section 262 of the General Corporation Law of the State of Delaware (“DGCL”), holders of GRAIL Stock who do not execute and deliver a written consent approving the Merger Agreement, and who otherwise strictly comply with the procedures set forth in Section 262 of the DGCL, have the right to seek appraisal of the fair value of their shares of GRAIL Stock, as determined by the Delaware Court of Chancery, if the First Merger is completed. The “fair value” of shares of GRAIL Stock as determined by the Delaware Court of Chancery could be more or less than, or the same as, the value of the consideration that a GRAIL stockholder would otherwise be entitled to receive under the terms of the Merger Agreement.

GRAIL stockholders that are party to the GRAIL Voting Agreement are obligated, among other things, to execute and deliver written consents approving and adopting the Merger Agreement Proposal (as defined below) and refrain from exercising any dissenters’ rights or rights of appraisal under applicable law in connection with the Transaction, including the Mergers.

To exercise appraisal rights, GRAIL stockholders must strictly comply with the procedures prescribed by Delaware law. These procedures are summarized in “Appraisal Rights.” Failure to strictly comply with these provisions will result in a loss of the right of appraisal.

What are the CVRs?

The CVRs are to be issued in the Transaction by Illumina, pursuant to the Contingent Value Rights Agreement (the “CVR Agreement”), to be entered into at or prior to the Effective Time, by and among Illumina, Computershare Trust Company, N.A. (“Computershare”) and Shareholder Representative Services LLC (“SRS”). The CVRs will not be voting securities of Illumina, will not represent ownership interests in Illumina and holders of the CVRs will not, by virtue thereof, be entitled to any rights of a stockholder or holder of any other equity security or ownership interest of Illumina, either at law or in equity. The CVRs will not have voting or dividend rights and the rights of the CVR holders will be limited to those expressly provided for in the CVR Agreement.

See “Description of the CVRs” for more information about the CVRs.

What payments are holders of CVRs entitled to and when will such payments be made?

measured over an annual period to correspond with Illumina’s fiscal year, in each case, multiplied by a fraction, the numerator of which is the aggregate number of CVRs outstanding as of the applicable payment date, and the denominator of which is the Total Equity Count, subject to certain deductions and pro-rations described in “Description of the CVRs.” Such payments, if any, will be made on a quarterly basis over a 12-year period.

Is interest payable with respect to the CVRs?

Generally, no. Except in certain limited circumstances where a CVR payment is due and has not been paid when due by Illumina or where it has been determined that a CVR payment should have been greater than what was paid, no interest will accrue on the CVR payments.

Are Illumina’s obligations under the CVRs secured or guaranteed?

No. Illumina’s obligations under the CVRs are neither secured nor guaranteed. Illumina’s obligations under the CVRs, if any arise, will be unsecured general obligations of Illumina and will not be guaranteed by any of its affiliates.

Can I sell the CVRs?

The CVRs are subject to transfer restrictions described in the CVR Agreement and other applicable restrictions under securities laws. The CVR Agreement does not require the CVRs to be listed on a securities exchange. As such, no prediction can be made regarding the development or existence of any trading market in the CVRs or the prices at which the CVRs may trade at any point in time, if at all. The tax treatment of holders of GRAIL Stock who receive CVRs is complex and subject to uncertainties, as described in more detail in “Material U.S. Federal Income Tax Considerations.”

Who can help answer my questions?

If you are a GRAIL stockholder and would like additional copies of this consent solicitation statement/prospectus or a replacement written consent, or if you have questions about the Transaction, the process for returning your written consent, or the other matters discussed in this consent solicitation statement/prospectus, you should contact ir@grailbio.com.

If you are an Illumina stockholder and would like additional copies of this consent solicitation statement/prospectus, or if you have questions about the Transaction or the other matters discussed in this consent solicitation statement/prospectus, you should contact ir@illumina.com.

Where can I find more information about Illumina and GRAIL?

You can find more information about Illumina and GRAIL from the various sources described under “Where You Can Find More Information.”

Questions and Answers for GRAIL Stockholders

Did the GRAIL Board approve the Merger Agreement?

Yes. Following the negotiations between GRAIL and its representatives on behalf of GRAIL and Illumina and its representatives on behalf of Illumina with respect to the Merger Agreement and the Transaction, including the Mergers, and a review and discussion of the terms of the Merger Agreement, at a meeting of the GRAIL Board, by the unanimous vote of all directors present, including both the Preferred Directors (as defined in GRAIL’s restated certificate of incorporation), the GRAIL

Board (i) determined that the Merger Agreement and the Transaction are fair to, and in the best interests of, GRAIL and its stockholders and (ii) approved and declared advisable the Merger Agreement and the Transaction. For a discussion of the factors considered by the GRAIL Board in approving the Merger Agreement, see “The Transaction—GRAIL’s Reasons for the Transaction; Recommendation of the GRAIL Board.”

Do any of the GRAIL directors or officers have interests in the Transaction that may differ from or be in addition to my interests as a GRAIL stockholder?

Yes. GRAIL stockholders should be aware that some of GRAIL’s directors and executive officers may have interests in the Transaction that may be different from, or in addition to, the interests of GRAIL stockholders generally. The GRAIL Board was aware of and considered these interests, among other matters, in deciding to approve the terms of the Merger Agreement and the Transaction. For a further discussion of these interests, see “Interests of GRAIL’s Directors and Executive Officers in the Transaction.”

What am I being asked to approve?

GRAIL stockholders are being asked to approve and adopt the Merger Agreement and the Transaction, including the Mergers (the “Merger Agreement Proposal”).

GRAIL stockholders that are party to the GRAIL Voting Agreement are obligated to, among other things, approve the Merger Agreement Proposal.

What is the recommendation of the GRAIL Board?

The GRAIL Board recommends that GRAIL stockholders approve the Merger Agreement Proposal by executing and returning the written consent furnished with this consent solicitation statement/prospectus.

What stockholder consent is required to approve the transaction?

Illumina and GRAIL cannot complete the transaction unless GRAIL stockholders approve the Merger Agreement Proposal.

The approval of the Merger Agreement Proposal requires the affirmative vote of, or the execution and delivery to GRAIL of written consents by, (i) the holders of a majority of the total voting power of GRAIL Common Stock and GRAIL Preferred Stock (voting together as a single class) and (ii) the holders of a majority of the outstanding shares of GRAIL Preferred Stock (voting together as a single class on an as-converted to GRAIL Class A Common Stock basis) (the foregoing clauses (i) and (ii), collectively, the “GRAIL Stockholder Approvals”).

Subsequent to the execution of the Merger Agreement, Illumina and certain stockholders of GRAIL (each, a “Selling Investor”), representing approximately 71.86% of the total voting power of the outstanding shares of GRAIL Stock, approximately 73.58% of the outstanding shares of GRAIL Common Stock and approximately 59.59% of the outstanding shares of GRAIL Preferred Stock, in each case as of the Record Date, entered into a support agreement (the “Selling Investor Support Agreement”) under which they have agreed, promptly (and in any event within five business days) after the registration statement of which this consent solicitation statement/prospectus forms a part is declared effective by the SEC, to execute and deliver written consents approving and adopting the Merger Agreement and the Transaction, including the Mergers, and related matters with respect to all of their shares of GRAIL Stock entitled to act by written consent with respect thereto. The Selling

Investors are required to deliver such written consents even if the GRAIL Board changes its recommendation that GRAIL stockholders approve the Merger Agreement Proposal. The execution and delivery of written consents by all of the Selling Investors will constitute the requisite GRAIL Stockholder Approvals and, therefore, GRAIL expects to receive a number of written consents sufficient to approve the Merger Agreement Proposal.

Under the Selling Investor Support Agreement, each Selling Investor further agreed to execute and deliver a consent (the “Drag-Along Consent”) to exercise their contractual “drag-along” right pursuant to the GRAIL Voting Agreement. Further, the Selling Investors consented, pursuant to the Drag-Along Consent, to the appointment of Illumina as the Selling Investors’ designee to hold and have the sole power to exercise, on behalf of all GRAIL stockholders party to the GRAIL Voting Agreement, the proxy and power of attorney contemplated by the GRAIL Voting Agreement in connection with the Transaction. The Drag-Along Consent was executed simultaneously with the execution of the Selling Investor Support Agreement.

Following the execution of the Drag-Along Consent by the Selling Investors, GRAIL stockholders that are party to the GRAIL Voting Agreement became obligated thereunder to, among other things, execute and deliver written consents approving and adopting the Merger Agreement Proposal and refrain from exercising any dissenters’ rights or rights of appraisal under applicable law in connection with the Transaction, including the Mergers.

In accordance with applicable law, no vote of Illumina stockholders is required in connection with the Transaction.

Given that the delivery of written consents by the Selling Investors will constitute the GRAIL Stockholder Approvals, why are the parties seeking consents from all GRAIL stockholders?

Under applicable SEC guidance, a company may seek a commitment from principal security holders of a target to vote in favor of a business combination transaction and register the securities to be offered and sold in the transaction if, among other things, votes will also be solicited from target stockholders who have not entered into such commitments.

Subsequent to the execution of the Merger Agreement, the Selling Investors entered into the Selling Investor Support Agreement, pursuant to which each of the Selling Investors agreed, promptly (and in any event within five business days) after the registration statement of which this consent solicitation statement/prospectus forms a part is declared effective by the SEC, to execute and deliver a written consent approving and adopting the Merger Agreement and approving the Transaction, including the Mergers, and related matters with respect to all of its shares of GRAIL Stock entitled to act by written consent with respect thereto. Because the Selling Investors have agreed to deliver written consents in favor of the Transaction, GRAIL is seeking written consents from all GRAIL stockholders, in accordance with the applicable SEC guidance referred to above. Nevertheless, the delivery of the written consents by the Selling Investors will constitute receipt by GRAIL of the GRAIL Stockholder Approvals, regardless of the delivery or withholding of consent by any other GRAIL stockholder.

Who is entitled to give a written consent?

The GRAIL Board has set February 4, 2021 as the record date (the “Record Date”) for determining the holders of GRAIL Stock entitled to execute and deliver written consents with respect to this solicitation. Holders of GRAIL Stock on the Record Date will be entitled to give or withhold a consent using the written consent furnished with this consent solicitation statement/prospectus.

How many votes do I have?

Each holder of GRAIL Class A Common Stock is entitled to one vote for each share of GRAIL Class A Common Stock held of record as of the Record Date, and each holder of GRAIL Class B Common Stock is entitled to ten votes for each share of GRAIL Class B Common Stock held of record as of the Record Date.

Each holder of GRAIL Preferred Stock is entitled to the number of votes equal to the number of whole shares of GRAIL Class A Common Stock into which the shares of GRAIL Preferred Stock held by such holder could be converted as of the Record Date. As of the Record Date, each share of GRAIL Preferred Stock could be converted into one share of GRAIL Class A Common Stock.

As of the Record Date, there were 121,763,170 outstanding shares of GRAIL Class A Common Stock, 24,989,397 outstanding shares of GRAIL Class B Common Stock and 534,145,027 outstanding shares of GRAIL Preferred Stock.

What do I do if I am party to the GRAIL Voting Agreement?

If you are a GRAIL stockholder that is party to the GRAIL Voting Agreement, you are obligated, among other things, to give your consent approving and adopting the Merger Agreement Proposal.

How can I return my written consent?

If you hold shares of GRAIL Stock as of the Record Date and you wish to submit your consent, you must fill out the enclosed written consent, date and sign it, and promptly return it to GRAIL. Once you have completed, dated and signed your written consent, deliver it to GRAIL via e-mail to ir@grailbio.com. GRAIL will not call or convene any meeting of its stockholders in connection with the GRAIL Stockholder Approvals. Execution and delivery of the written consent to approve the Merger Agreement Proposal will result in a loss of your right to pursue appraisal pursuant to Section 262 of the DGCL in connection with the First Merger.

What happens if I do not return my written consent?

If you hold shares of GRAIL Stock as of the Record Date and you do not return your written consent, that will have the same effect as a vote against the Merger Agreement Proposal. However, under the Selling Investor Support Agreement, the Selling Investors have agreed to deliver their written consents promptly (and in any event within five business days) after the registration statement of which this consent solicitation statement/prospectus forms a part is declared effective by the SEC. Therefore, a failure of any other GRAIL stockholder to deliver a written consent is not expected to have any effect on the approval of the Merger Agreement Proposal.

If you are a GRAIL stockholder that is party to the GRAIL Voting Agreement, you are obligated to return your written consent approving and adopting the Merger Agreement and related matters.

What is the deadline for returning my written consent?

The GRAIL Board has set March 15, 2021 as the targeted final date for receipt of written consents (such date, as it may be extended in accordance with the next sentence, the “Consent Deadline”). GRAIL reserves the right to extend the Consent Deadline beyond March 15, 2021. Any such extension may be made without notice to GRAIL stockholders.

Can I revoke my written consent?

Yes. Unless you are a GRAIL stockholder who is party to the GRAIL Voting Agreement, you may revoke your consent to the Merger Agreement Proposal at any time before the Consent Deadline; however, such revocation is not expected to have any effect on the approval of the Merger Agreement Proposal, as the delivery of the written consents contemplated by the Selling Investor Support Agreement will constitute the requisite GRAIL Stockholder Approvals at the time of such delivery. If you wish to revoke your consent before the Consent Deadline, you may do so by sending a revocation of your written consent by one of the means described in “Solicitation of Written Consents—Submission of Written Consents.”

If you are a GRAIL stockholder that is party to the GRAIL Voting Agreement, pursuant to the terms of the GRAIL Voting Agreement you are obligated to provide your consent to the Merger Agreement Proposal and not revoke your consent.

What do I need to do now?

GRAIL urges you to read carefully and consider the information contained in this consent solicitation statement/prospectus, including the Annexes, and to consider how the Transaction will affect you as a stockholder of GRAIL. Once the registration statement of which this consent solicitation statement/prospectus forms a part has been declared effective by the SEC, GRAIL will solicit your written consent. The GRAIL Board recommends that all GRAIL stockholders approve the Merger Agreement Proposal by executing and returning to GRAIL the written consent furnished with this consent solicitation statement/prospectus as soon as possible and no later than the Consent Deadline.

What will happen to my existing shares of GRAIL Stock in the transaction?

At the Effective Time, your shares of GRAIL Stock will no longer represent an ownership interest in GRAIL, as each share of GRAIL Stock issued and outstanding immediately prior to the Effective Time (other than any cancelled shares or dissenting shares) will be cancelled and automatically converted into the right to receive the merger consideration payable in respect thereof, any cash in lieu of fractional shares of Illumina Common Stock to which the holders thereof are entitled and any dividends or other distributions to which the holders thereof are entitled. For additional information about the consideration payable to holders of GRAIL Stock pursuant to the Merger Agreement, see the sections entitled “The Transaction—The Merger Consideration” and “The Merger Agreement—Consideration; Effect of the Transaction on Capital Stock.”

Should I send my stock certificates to GRAIL now?

No. Do not send in your certificates now. A letter of transmittal and written instructions for the surrender of GRAIL stock certificates will be mailed to GRAIL stockholders with the election forms.

After the Transaction is completed, each GRAIL stockholder who is entitled to receive the merger consideration and has not already returned a valid, duly completed letter of transmittal will receive a separate letter of transmittal and instructions for effecting the surrender of the certificates. For more information, see “The Merger Agreement—Exchange Procedures.”

Who can help answer my questions?

If you have questions about the Transaction or the process for returning your written consent, or if you need additional copies of this consent solicitation statement/prospectus or a replacement written consent, please contact: GRAIL, Inc., Attention: Investor Relations, 1525 O’Brien Drive, Menlo Park, CA 94025.

SUMMARY

This summary highlights selected information included in this consent solicitation statement/prospectus and may not contain all of the information that is important to you. To better understand the Transaction, you should carefully read this entire consent solicitation statement/prospectus and its Annexes and the other documents referred to in this consent solicitation statement/prospectus. Additional important information about Illumina and GRAIL is also contained in the Annexes to, and the documents incorporated by reference into, this consent solicitation statement/prospectus. For a description of, and instructions as to how to obtain, this information, see “Where You Can Find More Information” elsewhere in this consent solicitation statement/prospectus. Each item in this summary includes a page reference directing you to a more complete description of that item.

The Parties (page 104)

Illumina, Inc.

Illumina is the global leader in sequencing- and array-based solutions for genetic and genomic analysis. Illumina’s products and services serve customers in a wide range of markets, enabling the adoption of genomic solutions in research and clinical settings. Illumina was incorporated in California in April 1998 and reincorporated in Delaware in July 2000.

Illumina’s customers include leading genomic research centers, academic institutions, government laboratories, and hospitals, as well as pharmaceutical, biotechnology, commercial molecular diagnostic laboratories, and consumer genomics companies.

Illumina’s portfolio of integrated sequencing and microarray systems, consumables, and analysis tools is designed to accelerate and simplify genetic analysis. This portfolio addresses the range of genomic complexity, price points, and throughput, enabling customers to select the best solution for their research or clinical application.

Illumina’s principal executive office is located at 5200 Illumina Way, San Diego, CA 92122, and its telephone number is (858) 202-4500.

Additional information about Illumina and its subsidiaries is included in the documents incorporated by reference into this consent solicitation statement/prospectus. See “Where You Can Find More Information.”

First Merger Sub

SDG Ops, Inc., a direct, wholly owned subsidiary of Illumina, is a Delaware corporation that was incorporated on September 11, 2020 for the purpose of entering into the Merger Agreement and effecting the First Merger. At the Effective Time, First Merger Sub will be merged with and into GRAIL, with GRAIL continuing as the surviving corporation in the First Merger and as a wholly owned subsidiary of Illumina. The principal executive office and telephone number of First Merger Sub is the same as Illumina’s.

Second Merger Sub

Time, GRAIL, as the surviving corporation in the First Merger, will be merged with and into Second Merger Sub, with Second Merger Sub continuing as the surviving company and as a wholly owned subsidiary of Illumina. As a result of the Second Merger, Second Merger Sub will own the legacy business of GRAIL. The principal executive office and telephone number of Second Merger Sub is the same as Illumina’s.

GRAIL, Inc.

GRAIL is a healthcare company focused on saving lives and improving health by pioneering new technologies for early cancer detection. GRAIL has built a multi-disciplinary organization of scientists, engineers, and physicians and GRAIL is using the power of next-generation sequencing, population-scale clinical studies, and state-of-the-art computer science and data science to overcome one of medicine’s greatest challenges. Using its platform technology, GRAIL has developed Galleri, a multi-cancer early detection blood test, that has demonstrated in clinical studies the ability to detect more than 50 types of cancer, over 45 of which lack recommended screening tests today—with a low false positive rate of less than 1%. When a cancer is detected, Galleri localizes the cancer signal with high accuracy, all from a single blood draw. Galleri is currently in late-stage development and GRAIL plans to commercially launch it in 2021 as a laboratory developed test.

GRAIL’s principal executive office is located at 1525 O’Brien Drive, Menlo Park, CA 94025, and its telephone number is (650) 542-0372.

Solicitation of Written Consents (page 148)

The Merger Agreement provides that GRAIL will seek the GRAIL Stockholder Approvals pursuant to this consent solicitation statement/prospectus, and GRAIL will not call or convene any meeting of its stockholders in connection with the GRAIL Stockholder Approvals. GRAIL stockholders are being asked to approve the Merger Agreement Proposal by executing and delivering the written consent furnished with this consent solicitation statement/prospectus.

GRAIL stockholders of record as of February 4, 2021, the Record Date, will be entitled to execute and deliver a written consent. Each holder of GRAIL Class A Common Stock is entitled to one vote for each share of GRAIL Class A Common Stock held as of the Record Date. Each holder of GRAIL Class B Common Stock is entitled to ten votes for each share of GRAIL Class B Common Stock held as of the Record Date. Each holder of GRAIL Preferred Stock is entitled to cast the number of votes equal to the number of shares of GRAIL Class A Common Stock into which the shares of GRAIL Preferred Stock held by such holder are convertible as of the Record Date. The holders of GRAIL Preferred Stock will vote together as a single class on an as-converted to GRAIL Class A Common Stock basis, and the holders of GRAIL Class A Common Stock, GRAIL Class B Common Stock and GRAIL Preferred Stock will vote together as a single class.

GRAIL stockholders of record as of February 4, 2021, the Record Date, will be entitled to execute and deliver a written consent. As of the Record Date, there were 121,763,170 shares of GRAIL Class A Common Stock outstanding, 24,989,397 shares of GRAIL Class B Common Stock outstanding and 534,145,027 shares of GRAIL Preferred Stock outstanding, consisting of 85,000,000 shares of GRAIL Series A Preferred Stock, 309,256,591 shares of GRAIL Series B Preferred Stock, 63,144,600 shares of GRAIL Series C Preferred Stock, and 76,743,836 shares of GRAIL Series D Preferred Stock, in each case entitled to execute and deliver written consents with respect to the Merger Agreement Proposal, and directors and executive officers of GRAIL and their affiliates owned and were entitled to consent with respect to 2,044,000 shares of GRAIL Class A Common Stock (representing

approximately 1.68% of such shares outstanding on that date), 24,989,397 shares of GRAIL Class B Common Stock (representing 100% of such shares outstanding on that date) and 92,815,635 shares of GRAIL Preferred Stock (representing approximately 17.38% of such shares outstanding on that date), consisting of 54,500,000 shares of GRAIL Series A Preferred Stock (representing approximately 64.12% of such shares outstanding on that date) and 38,315,635 shares of GRAIL Series B Preferred Stock (representing approximately 12.39% of such shares outstanding on that date).

Subsequent to the execution of the Merger Agreement, Illumina and the Selling Investors entered into the Selling Investor Support Agreement. Pursuant to the Selling Investor Support Agreement, each of the Selling Investors has agreed, promptly (and in any event within five business days) after the registration statement of which this consent solicitation statement/prospectus forms a part is declared effective under the Securities Act by the SEC, to execute and deliver a written consent approving and adopting the Merger Agreement Proposal with respect to all of its shares of GRAIL Stock entitled to act by written consent with respect thereto. The shares of GRAIL Stock that are owned by the Selling Investors and subject to the Selling Investor Support Agreement represent approximately 71.86% of the total voting power of the outstanding shares of GRAIL Stock, approximately 73.58% of the outstanding shares of GRAIL Common Stock and approximately 59.59% of the outstanding shares of GRAIL Preferred Stock, in each case as of the Record Date. The Selling Investors are required to deliver such written consents even if the GRAIL Board changes its recommendation that GRAIL stockholders approve the Merger Agreement Proposal. The execution and delivery of written consents by all of the Selling Investors will constitute the requisite GRAIL Stockholder Approvals and, therefore, GRAIL expects to receive a number of written consents sufficient to approve the Merger Agreement Proposal.

Under the Selling Investor Support Agreement, each Selling Investor further agreed to execute and deliver the Drag-Along Consent to exercise their contractual “drag-along” right pursuant to the GRAIL Voting Agreement. Further, the Selling Investors consented, pursuant to the Drag-Along Consent, to the appointment of Illumina as the Selling Investors’ designee to hold and have the sole power to exercise, on behalf of all GRAIL stockholders party to the GRAIL Voting Agreement, the proxy and power of attorney contemplated by the GRAIL Voting Agreement in connection with the Transaction. The Drag-Along Consent was executed simultaneously with the execution of the Selling Investor Support Agreement.

You may consent to the Merger Agreement Proposal with respect to your shares of GRAIL Stock by completing, dating and signing the written consent enclosed with this consent solicitation statement/prospectus and returning it to GRAIL by the Consent Deadline.

For those GRAIL stockholders that are not a party to the GRAIL Voting Agreement, you may execute a written consent to approve and adopt the Merger Agreement Proposal (which is equivalent

to a vote for such proposal), or withhold your consent with respect to, the Merger Agreement Proposal by not executing and delivering the written consent (which is equivalent to a vote against such proposal). If you do not return your written consent, it will have the same effect as a vote against the Merger Agreement Proposal. Execution and delivery of the written consent to approve the Merger Agreement Proposal waives your rights to appraisal pursuant to Section 262 of the General Corporation Law of the State of Delaware in connection with the First Merger.

If you are a GRAIL stockholder that is party to the GRAIL Voting Agreement, you are obligated to return your written consent approving and adopting the Merger Agreement Proposal.

Due to the obligations of the Selling Investors under the Selling Investor Support Agreement, a failure of any other GRAIL stockholder to deliver a written consent, or any revocation of a previously delivered written consent by any other GRAIL stockholder, is not expected to have any effect on the approval of the Merger Agreement Proposal.

GRAIL stockholders should not send stock certificates with their written consents. A letter of transmittal and written instructions for the surrender of GRAIL stock certificates will be mailed to GRAIL stockholders with the election forms.

The expense of printing and mailing these consent solicitation materials is being borne by Illumina. Officers and employees of GRAIL may solicit consents by telephone and personally, in addition by mail. These persons will receive their regular compensation but no special compensation for soliciting consents.

The Transaction and the Merger Agreement (pages 152 and 177)

The terms and conditions of the Transaction are contained in the Original Merger Agreement and the Merger Agreement Amendment, which are attached to this consent solicitation statement/prospectus as Annex A and Annex A-1, respectively, and are incorporated by reference herein in their entirety. You are encouraged to read the Merger Agreement carefully, as it is the legal document that governs the Transaction.

The Merger Agreement provides, among other matters, for the acquisition of GRAIL by Illumina pursuant to two successive mergers, on the terms and subject to the conditions in the Merger Agreement and in accordance with the DGCL and the Delaware Limited Liability Company Act (the “DLLCA”). Pursuant to the Merger Agreement, at the Effective Time, First Merger Sub will be merged with and into GRAIL, with GRAIL continuing as the surviving corporation and as a wholly owned subsidiary of Illumina. Following the First Merger and at the Second Effective Time, GRAIL, as the surviving corporation in the First Merger, will be merged with and into Second Merger Sub, with Second Merger Sub continuing as the surviving company and as a wholly owned subsidiary of Illumina.

Merger Consideration (page 152)

Subject to the terms and conditions set forth in the Merger Agreement, at the Effective Time, each issued and outstanding share of GRAIL Stock (with limited exceptions, including shares with respect to which dissenters’ rights have been validly exercised in accordance with Delaware law) will be converted into, at the holder’s election, either:

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the right to receive the CVR Consideration; or

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the right to receive the Cash & Stock Consideration.

The election form to be distributed to holders of GRAIL Stock will contain further information regarding the type and amount of the Alternative Consideration. Holders of GRAIL Stock who do not make a valid election will be entitled to receive the CVR Consideration. See “The Merger Agreement—Consideration; Effect of the Transaction on Capital Stock—Election Procedures.”

No fractional shares of Illumina Common Stock will be issued in the Transaction, and GRAIL stockholders will receive cash in lieu of any fractional shares of Illumina Common Stock they otherwise would have been entitled to receive.

GRAIL’s Reasons for the Transaction; Recommendation of the GRAIL Board (page 159)

At a meeting held on September 20, 2020, the GRAIL Board considered the Transaction and the terms of the Merger Agreement and all directors present, including both Preferred Directors (as defined in GRAIL’s certificate of incorporation), unanimously (i) determined that the Merger Agreement and the Transaction are fair to, and in the best interests of, GRAIL and its stockholders, and (ii) approved and declared advisable the Merger Agreement and the Transaction.

The GRAIL Board recommends that GRAIL stockholders adopt and approve the Merger Agreement by executing and returning the written consent furnished with this consent solicitation statement/prospectus. For a discussion of the factors considered by the GRAIL Board in approving the Merger Agreement and the Transaction, see the section entitled “The Transaction—GRAIL’s Reasons for the Transaction; Recommendation of the GRAIL Board.”

Opinion of Financial Advisor to the GRAIL Board (page 161 and Annex F)

GRAIL retained Morgan Stanley & Co. LLC (“Morgan Stanley”), to act as financial advisor to the GRAIL Board in connection with the Transaction. The GRAIL Board selected Morgan Stanley to act as its financial advisor based on Morgan Stanley’s qualifications, expertise and reputation, its knowledge of, and involvement in, recent transactions in the industry, and its knowledge of GRAIL’s business and affairs. At the meeting of the GRAIL Board on September 20, 2020, Morgan Stanley rendered its oral opinion, subsequently confirmed in writing, that as of such date, and based upon and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations on the scope of the review undertaken by Morgan Stanley as set forth in the written opinion, the Base Consideration (as defined below) to be received by the holders of GRAIL Stock pursuant to the Merger Agreement was fair from a financial point of view to such holders of shares of GRAIL Stock.

The full text of the written opinion of Morgan Stanley delivered to the GRAIL Board, dated September 20, 2020, is attached as Annex F and incorporated by reference into this consent solicitation statement/prospectus in its entirety. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion. Stockholders of GRAIL are urged to, and should, read the opinion carefully and in its entirety. Morgan Stanley’s opinion was directed to the GRAIL Board and addressed only the fairness, from a financial point of view, of the Base Consideration to be received by the holders of GRAIL Stock pursuant to the Merger Agreement. Morgan Stanley’s opinion did not address any other aspect

or implications of the Transaction (including the Cash & Stock Consideration or whether such Cash & Stock Consideration was fair, from a financial point of view or otherwise) and does not constitute an opinion, advice or recommendation as to how the holders of GRAIL Stock should act or vote in connection with the Transaction or as to the relative mix of Base Consideration or Cash & Stock Consideration that they may elect to receive or whether to take any other action with respect to the Mergers. In addition, Morgan Stanley’s opinion did not in any manner (i) address the prices at which shares of Illumina Common Stock or the CVRs will trade following consummation of the Mergers or at any time, (ii) express an opinion as to whether or not holders of shares of the GRAIL Stock should seek appraisal for their shares as permitted under the DGCL, (iii) address the Cash & Stock Consideration to be received, if elected, or any component of the Base Consideration or (iv) express an opinion as to whether or not holders of GRAIL Stock should elect to receive the Base Consideration or any alternative consideration that is available pursuant to the Merger Agreement.

Morgan Stanley expressed no view as to the GRAIL Forecasts (as defined below) or the assumptions upon which such projections were based. Morgan Stanley reviewed the potential value of the CVR under two different scenarios prepared by management of GRAIL upon which the contingent consideration that is to be paid pursuant to the CVR is conditioned, and, for purposes of Morgan Stanley’s analysis and opinion, at the direction of the GRAIL Board, Morgan Stanley derived an estimated net present value of the CVR based on the estimated royalty schedules provided by the management of GRAIL. Morgan Stanley expressed no view as to the likelihood of whether any of the benchmarks upon which the contingent consideration that is to be paid pursuant to the CVR will be obtained or whether the contingent consideration that is to be paid pursuant to the CVR will become payable. The summary of Morgan Stanley’s opinion set forth in this consent solicitation statement/prospectus is qualified in its entirety by reference to the full text of Morgan Stanley’s opinion.

For a further discussion of Morgan Stanley’s opinion, see “The Transaction—Opinion of Financial Advisor to the GRAIL Board” beginning on page 161 of this consent solicitation statement/prospectus.

Regulatory Approvals (page 173)

Completion of the Transaction is conditioned on, among other things, the expiration or termination of the applicable waiting periods under the HSR Act, the approval of antitrust authorities in certain other specified jurisdictions, if applicable, and no law having been enacted, issued, promulgated, enforced or entered, whether temporary, preliminary or permanent, which is then in effect and has the effect of enjoining, restraining, prohibiting or otherwise preventing consummation of the Transaction or imposes any remedies on Illumina or its subsidiaries other than Permitted Restrictions.

Pursuant to the Merger Agreement, each party has agreed to use its reasonable best efforts to obtain all necessary actions or nonactions and consents from, and to give any necessary notices to, governmental authorities and third parties and to make all registrations, declarations and filings that are necessary under the HSR Act or required or advisable under other applicable antitrust, competition or pre-merger notification laws of any jurisdiction.

Reasonable best efforts will include (and with respect to remedies, will be limited to) Illumina and its subsidiaries offering and agreeing to undertake certain types of behavioral remedies (“Permitted Restrictions”) as reasonably necessary to obtain pre-merger clearance in as timely a manner as reasonably possible from governmental authorities under Antitrust Laws. However, in no event will Illumina or its subsidiaries, including the surviving company, be required to agree to or accept any

commitment, undertaking or order to divest, hold separate or otherwise dispose of any portion of its or their respective businesses or assets, including after giving effect to the Transaction, or any limitation on the ability of Illumina or its subsidiaries to acquire or hold or exercise full rights of ownership of any capital stock of Illumina or its subsidiaries, including after giving effect to the Transaction. Further, in no event will GRAIL or any of its subsidiaries be permitted to commit or agree to any remedy, including any Permitted Restriction, without Illumina’s prior written consent.

On October 9, 2020, each of Illumina and GRAIL filed a notification and report form pursuant to the HSR Act with the U.S. Federal Trade Commission (the “FTC”) and the U.S. Department of Justice (the “DOJ”). On November 9, 2020, Illumina and GRAIL received requests for additional information and documentary materials (a “Second Request”) regarding the Transaction from the FTC.

There can be no assurance that a challenge to the Transaction on antitrust grounds will not be made or, if such a challenge is made, what the result will be. The required regulatory and other approvals are discussed under the sections entitled “The Transaction—Regulatory Approvals” and “The Merger Agreement—Covenants and Agreements—Reasonable Best Efforts; Further Action.”

Financing (page 174)

The Transaction is not subject to a financing condition.

As of September 27, 2020, Illumina had total indebtedness of approximately $1,173 million and as of September 30, 2020, GRAIL had no indebtedness. In connection with the Transaction, on September 20, 2020, Illumina entered into a bridge facility commitment letter (the “Commitment Letter”) with Goldman Sachs Bank USA (“Goldman Sachs USA”), pursuant to which Goldman Sachs USA committed to provide a 364-day senior unsecured bridge term loan facility in an aggregate principal amount of $1 billion (the “Bridge Facility”).

Illumina intends to replace the Bridge Facility prior to the date of the Closing (the “Closing Date”) with a portion of a permanent financing (the “Permanent Financing”), which Illumina currently expects to include debt securities. Illumina currently intends to issue approximately $1 billion of Permanent Financing, although the amount of the Permanent Financing could change. If the Permanent Financing is not funded prior to the Closing Date, Illumina intends to use the proceeds of the Bridge Facility to pay a portion of the cash portion of the merger consideration and fees and expenses on the Closing Date. Illumina has agreed to use commercially reasonable efforts (to the extent not in contravention of the Merger Agreement) to cause the Permanent Financing to be issued or placed on or prior to the Closing Date, to the extent required to consummate the Transaction without use of the Bridge Facility.

The funding of the Bridge Facility on the Closing Date is subject to the satisfaction (or waiver) of certain conditions set forth in the Commitment Letter, including, among others, completion of the Transaction substantially concurrently with the funding of the Bridge Facility, the non-occurrence of a Company Material Adverse Effect (as defined under “The Merger Agreement—“Representations and Warranties”) with respect to GRAIL, delivery of certain financial statements of Illumina and GRAIL, the accuracy (subject to certain materiality qualifiers) of certain representations and warranties, the execution and delivery of definitive documentation, the absence of certain defaults under such definitive documentation and other customary conditions more fully set forth in the Commitment Letter.

For information regarding the financing, see “The Transaction—Financing.”

Selling Investor Support Agreement (pages 176 and 227)

As of January 31, 2021, the GRAIL stockholders party to the GRAIL Voting Agreement that are subject to the drag-along obligation therein, together with the Selling Investors, collectively held 96.0% of the total voting power of GRAIL Stock, voting together as a single class, and 100.0% of GRAIL Preferred Stock, voting together as a single class on an as-converted to GRAIL Class A Common Stock basis. Accordingly, the execution and delivery of written consents by such GRAIL stockholders will constitute the GRAIL Stockholder Approvals, and therefore, GRAIL expects to receive a number of written consents sufficient to satisfy such approvals.

Treatment of GRAIL Equity Awards (page 179)

Immediately prior to and contingent on the Effective Time, pursuant to the Merger Agreement, a portion of each unvested option to purchase shares of GRAIL Class A Common Stock (a “GRAIL Stock Option”), award of restricted stock units with respect to shares of GRAIL Class A Common Stock (a “GRAIL RSU”) and award of restricted shares of GRAIL Class A Common Stock (a “GRAIL Restricted Stock Award,” and, together with the GRAIL Stock Options and the GRAIL RSUs, the “GRAIL Equity Awards”) will vest as follows:

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in the case of each GRAIL Equity Award subject solely to service-based vesting criteria that is unvested and outstanding as of immediately prior to the Effective Time, such service-based GRAIL Equity Award will vest as to a number of options, shares or units, as applicable, that would have vested under such GRAIL Equity Award on or prior to the third anniversary of the Effective Time if the holder of such service-based GRAIL Equity Award remained in continued employment or service, as applicable, with GRAIL through such third anniversary, with such accelerated vesting applied first to the options, shares or units (as applicable) that have the longest remaining vesting periods (i.e., in reverse chronological order);

•

in the case of each GRAIL Equity Award subject to performance-based vesting criteria that is unvested and outstanding as of immediately prior to the Effective Time, such performance-based GRAIL Equity Award will vest as to a number of options, shares or units, as applicable, set forth in the GRAIL Disclosure Letter, as detailed under the section entitled, “Interests of GRAIL’s Directors and Executive Officers in the Transaction—Accelerated Vesting of Outstanding GRAIL Equity Awards Held by Directors and Executive Officers” elsewhere in this consent solicitation statement/prospectus; and

•

The vested portion of each GRAIL Equity Award, after taking into account the accelerated vesting described above, will, immediately prior to the Effective Time, be canceled in exchange for, at the holder’s election, the CVR Consideration or the Cash & Stock Consideration.

The unvested portion of each GRAIL Equity Award, after taking into account the accelerated vesting described above, will, immediately prior to the Effective Time, be canceled in exchange for an equivalent equity award (i.e., stock option, restricted share or restricted stock unit, as applicable) with respect to shares of Illumina Common Stock. The number of shares of Illumina Common Stock subject to such converted award will be equal to the product (rounded down to the nearest whole share) of (i) the number of shares of GRAIL Stock subject to the unvested portion of the applicable GRAIL Equity Award and (ii) at the holder’s election, the CVR Consideration Award Ratio or the Alternative Consideration Award Ratio (each, as defined below). A holder who elects the CVR Consideration Award Ratio will also receive a number of fully vested CVRs equal to the number of shares of GRAIL Stock subject to the unvested portion of the applicable GRAIL Equity Award. In the case of GRAIL Stock Options, the exercise price of the converted option award will be equal to the exercise price of the GRAIL Stock Option divided by the CVR Consideration Award Ratio or the Alternative Consideration Award Ratio, as applicable (rounded up to the nearest whole cent).

For purposes of this consent solicitation statement/prospectus:

•

the term “CVR Consideration Award Ratio” means a fraction, the numerator of which is the sum of (i) the Cash Consideration and (ii) the product of the Stock Consideration and the Average Illumina Stock Price, and the denominator of which is the Average Illumina Stock Price; and

•

the term “Alternative Consideration Award Ratio” means a fraction, the numerator of which is the sum of (i) the cash portion of the Cash & Stock Consideration and (ii) the product of the stock portion of the Cash & Stock Consideration and the Average Illumina Stock Price, and the denominator of which is the Average Illumina Stock Price.

All converted awards with respect to shares of Illumina Common Stock will continue to be governed by the terms and conditions that applied to the applicable GRAIL Equity Award immediately prior to the Effective Time, including any vesting conditions not deemed satisfied prior to the Effective Time, except that (i) any performance-vesting conditions that are no longer capable of being satisfied following the Effective Time will no longer apply and (ii) all CVRs received will be fully vested.

Election forms will be distributed to holders of GRAIL Equity Awards at the same time as election forms are distributed to GRAIL stockholders. The election form will enable each holder of GRAIL Equity Awards to specify no later than the Election Deadline, for each GRAIL Equity Award, whether the holder elects to (i) receive the CVR Consideration or the Cash & Stock Consideration with respect to the vested portion of each such award and (ii) convert the unvested portion based on the CVR Consideration Award Ratio or the Alternative Consideration Award Ratio. In the event the holder does not make an election with respect to a GRAIL Equity Award, the vested portion of the award will

receive the CVR Consideration and the unvested portion will convert based on the CVR Consideration Award Ratio. Notwithstanding anything in the Merger Agreement or election form to the contrary, with respect to the unvested portion of any GRAIL Stock Option with an exercise price that is greater than or equal to the sum of (x) the Cash Consideration and (y) the product of the Stock Consideration and the Average Illumina Stock Price, the holder will be treated as having elected to convert based on the Alternative Consideration Award Ratio.

For a description of the treatment of GRAIL Equity Awards in the Transaction, see “Interests of GRAIL’s Directors and Executive Officers in the Transaction” elsewhere in this consent solicitation statement/prospectus.

No Solicitation (page 189)

The Merger Agreement provides that GRAIL will not, and that it will cause each of its subsidiaries not to and will direct each of its and its subsidiaries’ representatives not to, directly or indirectly:

•

solicit, initiate, seek or take any other action to facilitate or knowingly encourage the making, submission or announcement of any proposal that constitutes, or would be reasonably be expected to lead to any Competing Proposal (as defined under “The Merger Agreement—Covenants and Agreements—No Solicitation by GRAIL”);

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enter into, maintain, continue or participate in any discussions or negotiations with any person or entity in furtherance of, or furnish to any person any information or otherwise cooperate in any way with respect to, any Competing Proposal;

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agree to, approve, endorse, recommend or consummate any Competing Proposal;

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enter into, or propose to enter into, any contract or agreement which would reasonably be expected to lead to any Competing Proposal (other than an acceptable confidentiality agreement); or

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resolve, propose or agree, or authorize or permit any representative, to do any of the foregoing.

GRAIL is required to promptly (and in any event within 24 hours of receipt) advise Illumina in writing of any Competing Proposal, including the material terms and conditions of any such Competing Proposal and the identity of the person making any such Competing Proposal, to keep Illumina reasonably informed of the status and material details of any such Competing Proposal and provide Illumina, as soon as practicable after receipt or delivery thereof (and in any event within 24 hours of such receipt or delivery), copies of all correspondence and other written material versions of agreements relating to any such Competing Proposal exchanged between GRAIL or any of its subsidiaries, on the one hand, and the person making the Competing Proposal (or its representatives), on the other hand.

Notwithstanding the above, GRAIL may, subject to compliance with the terms of the Merger Agreement, furnish information to, and enter into discussions with, a person who has made, after the date of the Merger Agreement, an unsolicited, written, bona fide Competing Proposal, so long as such Competing Proposal did not result from a breach of the Merger Agreement and prior to furnishing such information and entering into such discussions, the GRAIL Board:

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reasonably determines, in its good faith judgment (after receiving the advice of a financial advisor of nationally recognized reputation and outside legal counsel) that such Competing Proposal constitutes, or could reasonably be expected to lead to, a Superior Proposal (as defined under “The Merger Agreement—Covenants and Agreements—No Solicitation by

GRAIL”) and the failure to furnish such information to, or enter into such discussions with, the person who made such Competing Proposal would be inconsistent with the GRAIL Board’s fiduciary duties to GRAIL and its stockholders under applicable law;

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provides such information to Illumina (or provides such information to Illumina substantially concurrent with the time it is provided to such person); and

•

obtains from such person a confidentiality agreement that contains terms no less favorable to GRAIL than those contained in the existing confidentiality agreement between GRAIL and Illumina.

Change in the GRAIL Recommendation (page 191)

The GRAIL Board has recommended that the GRAIL stockholders adopt and approve the Merger Agreement (the “GRAIL Recommendation”). The Merger Agreement provides that, subject to the exceptions described below, GRAIL will not make a Change in the GRAIL Recommendation (as defined under “The Merger Agreement—Covenants and Agreements—Change in the GRAIL Recommendation”).

Notwithstanding the foregoing, prior to the receipt of the GRAIL Stockholder Approvals, the GRAIL Board may make a Change in the GRAIL Recommendation if the GRAIL Board determines in its good-faith judgment (after having received the advice of a financial advisor of nationally recognized reputation and outside legal counsel) that its failure to make a Change in the GRAIL Recommendation would be inconsistent with the GRAIL Board’s fiduciary duties to GRAIL and its stockholders under applicable law; provided, however, that no such action may be taken unless:

•

if the GRAIL Board is making a Change in the GRAIL Recommendation relating to a Competing Proposal, such Competing Proposal is a Superior Proposal;

•

GRAIL provides written notice to Illumina that the GRAIL Board intends to make a Change in the GRAIL Recommendation, specifies the reasons therefor, including the terms and conditions of any Superior Proposal, and includes an unredacted copy of any proposed agreement relating to such Superior Proposal;

•

GRAIL provides a period of four business days following Illumina’s receipt of such notice during which GRAIL will negotiate in good faith with Illumina and its representatives regarding any revisions to the terms of the Merger Agreement proposed by Illumina (provided that any subsequent amendments to the financial terms or any other material term of such Superior Proposal will require a new notice period of three business days); and

•

at the end of such notice period, the GRAIL Board again makes a determination in good faith after consultation with its outside legal counsel and financial advisors (and taking into account any adjustment or modification of the terms of the Merger Agreement proposed by Illumina) that the Competing Proposal continues to be a Superior Proposal and that the Change in the GRAIL Recommendation is required to comply with the GRAIL Board’s fiduciary duties to GRAIL and its stockholders under applicable law.

Conditions to Completion of the Transaction (page 199)

As more fully described in this consent solicitation statement/prospectus and in the Merger Agreement, the respective obligations of each party to consummate the Transaction are subject to the satisfaction or waiver (where permissible under applicable law) at or prior to the Effective Time of the following conditions:

•

the effectiveness of the registration statement of which this consent solicitation statement/prospectus forms a part and the absence of any stop order suspending that effectiveness issued by the SEC;

•

the receipt of the GRAIL Stockholder Approvals in accordance with the DGCL and GRAIL’s certificate of incorporation and bylaws;

•

the absence of any law or order (a “Restraint”) enacted, issued, promulgated, enforced or entered, whether temporary, preliminary or permanent, which is then in effect and has the effect of enjoining, restraining, prohibiting or otherwise preventing the consummation of the Transaction;

•

the expiration or termination of any waiting period (and any extension thereof) applicable to the Transaction under the HSR Act and the receipt of any approval or the termination or expiration of any waiting period with respect to any applicable Antitrust Laws of certain other specified jurisdictions; and

•

the authorization for listing on the NASDAQ of the shares of Illumina Common Stock issuable to GRAIL stockholders in connection with the Transaction, subject to official notice of issuance.

The obligations of Illumina, First Merger Sub and Second Merger Sub to consummate the Transaction are further subject to the satisfaction or waiver (where permissible under applicable law) at or prior to the Effective Time of the following conditions:

•

the accuracy of the representations and warranties made in the Merger Agreement by GRAIL as of the date of the Merger Agreement and as of the Closing Date, subject to certain materiality thresholds;

•

performance or compliance in all material respects by GRAIL with the agreements and covenants required by the Merger Agreement to be performed by it or complied with at or prior to the Effective Time;

•

the receipt by Illumina of a certificate, dated the Closing Date, signed by the Chief Executive Officer or Chief Financial Officer of GRAIL, certifying that the conditions in the preceding two bullet points are satisfied;

•

the absence of any Restraint under any Antitrust Law which imposes any remedies on Illumina or its subsidiaries other than Permitted Restrictions, unless such Restraint is part of an agreement between Illumina and its subsidiaries and a governmental authority; and

•

the execution and delivery by the Selling Investors to Illumina, First Merger Sub or Second Merger Sub of the Selling Investor Support Agreement and Drag-Along Consent.

The obligations of GRAIL to consummate the Transaction are further subject to the satisfaction or waiver (where permissible under applicable law) at or prior to the Effective Time of the following conditions:

•

the accuracy of the representations and warranties made in the Merger Agreement by Illumina, First Merger Sub and Second Merger Sub as of the date of the Merger Agreement and as of the Closing Date, subject to certain materiality thresholds;

•

performance or compliance in all material respects by Illumina, First Merger Sub and Second Merger Sub with the agreements and covenants required by the Merger Agreement to be performed by them or complied with at or prior to the Effective Time;

•

the receipt by GRAIL of a certificate, dated the Closing Date, signed by the Chief Executive Officer or Chief Financial Officer of Illumina, certifying that the conditions in the preceding two bullet points are satisfied; and

•

the effectiveness of the CVR Agreement at or prior to the Effective Time.

Termination of the Merger Agreement (page 200)

The Merger Agreement may be terminated and the Transaction may be abandoned at any time before the Effective Time as follows:

•

by mutual written consent of Illumina and GRAIL, duly authorized by the board of directors of Illumina (the “Illumina Board”) and the GRAIL Board, respectively;

•

by either Illumina or GRAIL, if the Effective Time has not occurred on or before the Outside Date (as defined in, and subject to extension as described in, “The Merger Agreement—Termination of the Merger Agreement”) (provided that the right to terminate the Merger Agreement pursuant to this bullet point will not be available to any party whose breach of any provision of the Merger Agreement has been the proximate cause of, or resulted in, the failure of the Effective Time to occur on or before such time);

•

by either Illumina or GRAIL, if any Restraint that has the effect of enjoining, restraining, prohibiting or otherwise preventing the consummation of the Transaction has become final and nonappealable (provided that the party seeking to terminate the Merger Agreement pursuant to this bullet point has complied in all material respects with its covenants and agreements under the Merger Agreement regarding the use of efforts to consummate the Transaction (the “Efforts Provision”));

•

by Illumina, upon a breach by GRAIL, or a failure by GRAIL to perform, any representation, warranty, covenant or agreement set forth in the Merger Agreement such that the related closing conditions would not be satisfied, and such breach or failure is incapable of being cured by the Outside Date or, if curable by the Outside Date, is not cured within 30 days of receipt by GRAIL of written notice of such breach or failure (provided that Illumina will not have the right to terminate the Merger Agreement pursuant to this bullet point if Illumina is in breach of its representations, warranties or covenants such that the related closing conditions would not be satisfied);

•

by Illumina, if any Restraint that imposes any remedies on Illumina or its subsidiaries other than Permitted Restrictions, unless such Restraint is part of an agreement between Illumina and its subsidiaries and a governmental authority, has become final and nonappealable (provided that Illumina has complied in all material respects with its covenants and agreements under the Efforts Provision); or

•

by GRAIL, upon a breach by any of Illumina, First Merger Sub or Second Merger Sub, or a failure by any of Illumina, First Merger Sub or Second Merger Sub to perform, any representation, warranty, covenant or agreement set forth in the Merger Agreement such that the related closing conditions would not be satisfied, and such breach or failure is incapable of being cured by the Outside Date or, if curable by the Outside Date, is not cured within 30 days of receipt by Illumina, First Merger Sub or Second Merger Sub, as applicable, of written notice of such breach or failure (provided that GRAIL will not have the right to terminate the Merger Agreement pursuant to this bullet point if GRAIL is in breach of its representations, warranties or covenants such that the related closing conditions would not be satisfied).

For purposes of bullet points three and five, an Initial Enforcement Order made by the Competition and Markets Authority pursuant to section 72(2) of the UK Enterprise Act 2002 is not considered a Restraint.

In addition, the Merger Agreement may be terminated by Illumina if the Selling Investors fail to duly execute and deliver, or cause to be delivered, to Illumina, First Merger Sub or Second Merger Sub the Selling Investor Support Agreement and the Drag-Along Consent within 24 hours following the execution and delivery of the Merger Agreement. The Selling Investors have delivered to Illumina the Selling Investor Support Agreement and the Drag-Along Consent within 24 hours following the execution and delivery of the Merger Agreement.

Expenses and Termination Fee (page 202)

Expenses

All expenses incurred in connection with the Merger Agreement and the Transaction will be paid by the party incurring such expenses, whether or not the Mergers or any other transaction is consummated, except that expenses incurred in connection with filing, printing and mailing of this consent solicitation statement/prospectus and the registration statement of which this consent solicitation statement/prospectus forms a part will be borne by Illumina, whether or not the Mergers or any other transaction is completed.

Termination Fee

The Merger Agreement requires Illumina to pay GRAIL an amount equal to $300,000,000 (the “Regulatory Termination Fee”), if:

•

either Illumina or GRAIL terminates the Merger Agreement because the Effective Time has not occurred on or before the Outside Date, as it may be extended, and, at the time of such termination, one or more of the conditions to closing relating to antitrust approval, the absence of any Restraint prohibiting the completion of the Transaction or the absence of any Restraint under any Antitrust Law which imposes any remedies on Illumina or its subsidiaries other than Permitted Restrictions has not been satisfied or waived;

•

either Illumina or GRAIL terminates the Merger Agreement pursuant to a final and nonappealable Restraint arising under Antitrust Laws; or

•

Illumina terminates the Merger Agreement pursuant to a final and nonappealable Restraint arising under Antitrust Laws that is not a Permitted Restriction and is not part of an agreement between Illumina and its subsidiaries and a governmental authority; and

•

in each of the above three circumstances, both of the following requirements are satisfied:

•

at the time of such termination, all of the other conditions to the respective obligations of each party to effect the Transaction have been satisfied or waived (except for those conditions that by their terms must be satisfied at the Closing, provided that such conditions would have been so satisfied if the Closing would have occurred); and

•

GRAIL and the Selling Investors are not in breach in any material respect of their obligations under the Merger Agreement or Selling Investor Support Agreement, as applicable, in any manner that is the proximate cause of the failure of any of the conditions referred to above or the imposition of any Restraint or remedies (x) other than Permitted Restrictions or (y) unless such remedy is part of an agreement between Illumina and its subsidiaries and a governmental authority.

In the event that the Merger Agreement is terminated in a circumstance where the Regulatory Termination Fee becomes payable by Illumina, GRAIL may require Illumina to make an additional $300,000,000 payment to GRAIL in exchange for shares of non-voting GRAIL preferred stock. See “The Merger Agreement—Continuation Payments; Additional Termination Payment; Equity Issuance.”

Description of the CVRs (page 210)

The CVRs will be issued in connection with the Closing pursuant to the CVR Agreement. A copy of the form of CVR Agreement is attached as Annex B to this consent solicitation statement/prospectus.

The CVR Agreement will be qualified under the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”). The terms of the CVRs include those stated in the CVR Agreement and those made part of the CVR Agreement by reference to the applicable provisions of the Trust Indenture Act.

Subject to certain reductions described below and in the CVR Agreement, each holder of a CVR will be entitled to receive a pro rata portion of 2.5% of Covered Revenues, if any, up to and including $1 billion plus 9.0% of Covered Revenues, if any, in excess of $1 billion, with such $1 billion threshold measured over an annual period to correspond with Illumina’s fiscal year, in each case, multiplied by a fraction, the numerator of which is the aggregate number of CVRs outstanding as of the applicable payment date, and the denominator of which is the Total Equity Count, subject to certain deductions and pro-rations described in “Description of the CVRs.” Such payments, if any, will be made on a quarterly basis over a 12-year period.

There are numerous risks associated with the CVRs, including whether Covered Revenues will be generated to require Illumina to make any payments under the CVRs. See “Description of the CVRs” and “Risk Factors” for more information.

Interests of GRAIL’s Directors and Executive Officers in the Transaction (page 229)

In considering the recommendation of the GRAIL Board that GRAIL stockholders approve and adopt the Merger Agreement and the Transaction, including the Mergers, GRAIL stockholders should be aware and take into account the fact that certain GRAIL directors and executive officers have interests in the Transaction that may be different from, or in addition to, the interests of GRAIL stockholders generally.

These interests include, among other things, the payment of Illumina Common Stock and cash in respect of certain GRAIL Equity Awards promptly following the Closing, the conversion of certain other GRAIL Equity Awards into Illumina equity-based awards, arrangements that provide for severance benefits in the event certain executives’ employment is terminated under certain circumstances following completion of the Transaction and rights to indemnification and directors and officers liability insurance that will survive the Transaction.

The GRAIL Board was aware of and considered these interests, among other matters, in evaluating the terms and structure, and in overseeing the negotiation, of the Transaction, in approving the Merger Agreement and the Transaction and in making the GRAIL Board Recommendation.

For additional information, see, “Interests of GRAIL’s Directors and Executive Officers in the Transaction.”

Accounting Treatment (page 176)

Illumina and GRAIL prepare their financial statements in accordance with United States generally accepted accounting principles (“GAAP”). The Transaction will be accounted for in accordance with FASB ASC Topic 805, Business Combinations, with Illumina considered as the accounting acquirer and GRAIL as the accounting acquiree. Accordingly, Illumina will measure the assets acquired and liabilities assumed at their fair values including net tangible and identifiable intangible assets acquired and liabilities assumed as of the Closing Date, with any excess purchase price over those fair values being recorded as goodwill.

Material U.S. Federal Income Tax Considerations (page 236)

It is intended that, for U.S. federal income tax purposes, the First Merger and the Second Merger, taken together, will constitute a “reorganization” within the meaning of Section 368(a) of the Code, which is referred to as the Intended Tax Treatment. However, the completion of the Transaction is not conditioned on the Transaction qualifying for the Intended Tax Treatment or upon the receipt of an opinion from counsel to that effect, and whether or not the Transaction will qualify for the Intended Tax Treatment depends on facts that will not be known until the Transaction is completed. In particular, the Intended Tax Treatment requires that the value of the shares of Illumina Common Stock issued to holders of GRAIL Stock in the Transaction, determined as of completion of the Transaction, represents at least a minimum percentage of the total consideration paid to holders of GRAIL Stock in the Transaction. While there is no specific guidance as to precisely what minimum percentage is necessary to satisfy this requirement, it would be satisfied if the Illumina Common Stock (valued as of completion of the Transaction) represents at least 40% of the total consideration. In addition, although the treatment of the Continuation Payments is uncertain, it is possible that the Continuation Payments will be treated as included in such total consideration for purposes of calculating this percentage. Whether this test will be satisfied depends on a number of factors that cannot currently be known with certainty, including the value of Illumina Common Stock as of the completion of the Transaction, the number of holders of GRAIL Stock that elect to receive the CVR Consideration rather than the Cash & Stock Consideration, the fair market value of a CVR as of the completion of the Transaction, the total amount of Continuation Payments made, and the total value of consideration received by dissenting holders of GRAIL Stock, if any. Accordingly, no assurance can be given that the Transaction will qualify for the Intended Tax Treatment. Finally, neither Illumina nor GRAIL intends to request a ruling from the Internal Revenue Service regarding the U.S. federal income tax consequences of the Transaction. Therefore, even if Illumina and GRAIL conclude that the Transaction qualifies for the Intended Tax Treatment, no assurance can be given that the Internal Revenue Service will not challenge that conclusion or that a court would not sustain such a challenge.

Assuming the Transaction qualifies for the Intended Tax Treatment, subject to the limitations and qualifications described in “Material U.S. Federal Income Tax Considerations”, a holder of GRAIL Stock whose shares of GRAIL Stock are exchanged in the Transaction for the Cash & Stock Consideration will recognize capital gain (but not loss) realized on the exchange in an amount not exceeding the amount of cash received by the holder (excluding any cash received in lieu of a fractional share of Illumina Common Stock, as discussed in “Material U.S. Federal Income Tax Considerations—Cash Received Instead of a Fractional Share of Illumina Common Stock”).

If the Transaction fails to qualify for the Intended Tax Treatment, a holder of GRAIL Stock that receives the Cash & Stock Consideration generally would recognize gain or loss in an amount equal to

the difference between (1) the fair market value of the shares of Illumina Common Stock and the amount of cash received in the Transaction by the holder (including cash received in lieu of a fractional share of Illumina Common Stock) and (2) the holder’s basis in the GRAIL Stock surrendered.

The treatment of holders of GRAIL Stock who receive the CVR consideration is complex and subject to uncertainties, as described in more detail below in “Material U.S. Federal Income Tax Considerations.”

For a more detailed discussion of the material U.S. federal income tax consequences of the Transaction, please see “Material U.S. Federal Income Tax Considerations.”

Comparison of Stockholders’ Rights (page 245)

Both Illumina and GRAIL are incorporated under the laws of the State of Delaware and, accordingly, the rights of the stockholders of each are currently, and will continue to be, governed by the DGCL. However, Illumina stockholders and GRAIL stockholders have different rights pursuant to the constituent documents of each of Illumina and GRAIL. Upon the completion of the Transaction, GRAIL stockholders will become Illumina stockholders and will have rights different from those they currently have as GRAIL stockholders. Certain differences between the constituent documents of Illumina and GRAIL are described in “Comparison of Stockholders’ Rights.”

Appraisal Rights (page 266)

Pursuant to Section 262 of the DGCL, GRAIL stockholders who do not execute and deliver a written consent approving the Merger Agreement and who otherwise strictly comply with the procedures set forth in Section 262 of the DGCL have the right to seek appraisal of the fair value of their shares of GRAIL Stock, as determined by the Delaware Court of Chancery, if the First Merger is completed. The “fair value” of shares of GRAIL Stock as determined by the Delaware Court of Chancery could be more or less than, or the same as, the value of the consideration that a GRAIL stockholder would otherwise be entitled to receive under the terms of the Merger Agreement.

GRAIL stockholders that are party to the GRAIL Voting Agreement are obligated, among other things, to execute and deliver written consents approving and adopting the Merger Agreement Proposal and refrain from exercising any dissenters’ rights or rights of appraisal under applicable law in connection with the Transaction, including the Mergers.

To exercise appraisal rights, GRAIL stockholders must strictly comply with the procedures prescribed by Delaware law. These procedures are summarized in “Appraisal Rights.” Failure to strictly comply with these provisions will result in a loss of the right of appraisal.

Risk Factors (pages 34 and 36)

In evaluating the Merger Agreement and Transaction, you should carefully read this consent solicitation statement/prospectus and the documents incorporated by reference herein and the Annexes attached hereto. In particular, you should consider the factors discussed in “Risk Factors Summary” and “Risk Factors.”

RISK FACTORS SUMMARY

The Transaction described in this consent solicitation statement/prospectus involves various risks, and you should carefully read and consider the matters discussed under “Risk Factors.” The following is a summary of some of these risks.

•

There is no assurance if or when the Transaction will be completed, and failure to complete the Transaction could negatively impact the stock price of Illumina and the future business and financial results of Illumina and GRAIL.

•

GRAIL stockholders cannot be sure of the number or value of shares of Illumina Common Stock they will receive in the Transaction until the Effective Time.

•

There has been no public market for GRAIL Stock and the lack of a public market may make it more difficult to determine the fair market value of GRAIL than if there were such a public market.

•

The Alternative Consideration will be set by Illumina in its sole discretion, and the value of the Alternative Consideration may be greater than or less than the value of a CVR or the corresponding pro rata portion of Covered Revenues expected to be received by a CVR holder.

•

GRAIL’s directors and executive officers have interests in the Transaction that may be different from, or in addition to, the interests of GRAIL stockholders generally.

•

The completion of the Transaction is not conditioned on the receipt of an opinion of counsel to the effect that the Transaction will qualify for the Intended Tax Treatment, and neither Illumina nor GRAIL intends to request a ruling from the Internal Revenue Service regarding the U.S. federal income tax consequences of the Transaction.

•

Illumina and GRAIL are subject to various uncertainties while the Transaction is pending that could adversely affect their businesses, financial condition and results of operations.

•

Litigation relating to the Transaction may be filed against the GRAIL Board and/or the Illumina Board that could result in substantial costs or delay or prevent the completion of the Transaction.

•

The Merger Agreement and Selling Investor Support Agreement contain provisions that restrict the ability of GRAIL to pursue alternatives to the Transaction.

•

Certain stockholders of GRAIL have executed the Selling Investor Support Agreement, which will constitute approval of the Transaction by GRAIL stockholders, even if the GRAIL Board changes its recommendation.

•

Illumina may encounter difficulty or high costs associated with financing the Cash Consideration.

•

The unaudited forecasted financial information of GRAIL included in this consent solicitation statement/prospectus does not represent the actual financial position or results of operations of GRAIL prior to the Transaction or that of the combined company following the Transaction.

•

The opinion of GRAIL’s financial advisor does not reflect changes in circumstances that may have occurred or that may occur between the signing of the Merger Agreement and the completion of the Transaction.

•

You may not receive any payment on the CVRs.

•

Illumina’s decisions regarding the operation of its business may adversely affect the amount of payments due under the CVRs.

•

An active trading market for the CVRs may not develop, the CVRs may trade at low volumes, and the CVRs are subject to transfer restrictions, all of which could have an adverse effect on the resale price, if any, of the CVRs.

•

Illumina may repurchase or redeem the CVRs, and the price offered and paid in any such repurchases or redemptions may differ materially from the amount and/or form of the Alternative Consideration, from the expectations of holders of CVRs and from the amount and/or form of the consideration offered in any other such actual or potential repurchases or redemptions.

•

You will not be able to determine the amount of cash to be received under the CVRs until after the conclusion of each quarterly measuring period after the Commencement Date (as defined in “Description of the CVRs—CVR Payments”), which makes it difficult to value the CVRs.

•

Illumina may accept conditions to obtain regulatory approval of the Transaction that could affect the value of the CVRs you receive in the Transaction.

•

The U.S. federal income tax treatment of the CVRs is uncertain.

•

There are a number of risks related to GRAIL’s business. See “Risk Factors—Risks Related to GRAIL’s Business and Industry.”

RISK FACTORS

In reviewing the Transaction described in this consent solicitation statement/prospectus, you should consider carefully the following risk factors, together with general investment risks and all of the other information included in, or incorporated by reference into, this consent solicitation statement/prospectus. This consent solicitation statement/prospectus also contains forward-looking statements that involve risks and uncertainties. Please read “Special Note Regarding Forward-Looking Statements.”

The risks described below are certain material risks, although not the only risks, relating to the Transaction and each of Illumina, GRAIL and the surviving company in relation to the Transaction. The risks described below are not the only risks that Illumina or GRAIL currently faces or that Illumina or the surviving company will face after the completion of the Transaction. Additional risks and uncertainties not currently known or that are currently expected to be immaterial may also materially and adversely affect the business, financial condition and results of operations of Illumina or the surviving company or the market price of Illumina Common Stock following the completion of the Transaction.

If any of the following risks and uncertainties develop into actual events, these events could have a material adverse effect on the business, financial condition and results of operations of Illumina, GRAIL and/or the surviving company. In addition, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.

Risks Related to the Transaction

There is no assurance when or if the Transaction will be completed.

The completion of the Transaction is subject to the satisfaction or waiver of a number of conditions as set forth in the Merger Agreement, including, among others, the expiration or termination of the applicable waiting periods under the HSR Act, the approval of antitrust authorities in certain other specified jurisdictions, if applicable, no law having been enacted, issued, promulgated, enforced or entered, whether temporary, preliminary or permanent, which is then in effect and has the effect of enjoining, restraining, prohibiting or otherwise preventing consummation of the Transaction or imposes any remedies on Illumina or its subsidiaries other than Permitted Restrictions, the receipt of the GRAIL Stockholder Approvals, the effectiveness of the registration statement of which this consent solicitation statement/prospectus forms a part and the approval for listing on NASDAQ of the shares of Illumina Common Stock to be issued in connection with the Transaction. There can be no assurance that the expiration or termination of the applicable waiting periods under the HSR Act or the other conditions to the obligations of the parties to effect the Transaction will be satisfied or waived. In particular, foreign, federal, state or local governmental or regulatory authorities and, in certain instances, private parties may seek to challenge the Transaction and/or impose conditions on Illumina, GRAIL and/or the surviving company as a condition to completion of the Transaction under applicable antitrust or other laws. In addition, there can be no assurance that any consents, clearances or approvals necessary or advisable to be obtained in connection with the Transaction will be obtained in a timely manner or at all, or whether they will be subject to actions, conditions, limitations or restrictions that may jeopardize or delay the completion of the Transaction, materially reduce or delay the anticipated benefits of the Transaction or allow the parties to terminate the Merger Agreement. Under the terms of the Merger Agreement, Illumina and its subsidiaries may be required to offer and agree to undertake certain specified behavioral remedies. However, neither Illumina nor any of its subsidiaries is obligated to agree to or accept (i) any commitment, undertaking or order to divest, hold separate or otherwise dispose of any portion of its or their respective businesses or assets, including after giving effect to the

Transaction, or (ii) any limitation on the ability of Illumina or its subsidiaries to acquire or hold or exercise full rights of ownership of any capital stock of GRAIL or its subsidiaries, including after giving effect to the Transaction. Further, in no event will GRAIL or any of its subsidiaries be permitted to commit or agree to any remedy without Illumina’s prior written consent. For a discussion of the conditions to the completion of the Transaction, see “The Merger Agreement—Conditions to Completion of the Transaction.” If the Transaction, or the integration of the companies’ respective businesses, is not completed within the expected time frame, such delay may materially and adversely affect the synergies and other benefits that Illumina and GRAIL expect to achieve as a result of the Transaction and could result in additional costs or liabilities, loss of revenue and other adverse effects on Illumina’s and the surviving company’s business, financial condition and results of operations.

The Merger Agreement may be terminated in certain circumstances, including, among others, if the Transaction has not been completed by the outside date of September 20, 2021 (subject to a three-month extension as described in “The Merger Agreement—Termination of the Merger Agreement”) or if a governmental entity of competent jurisdiction has issued or granted an order, judgment, decree, ruling or injunction that results in a permanent restraint that has become final and nonappealable or imposes, as a final and nonappealable condition, restrictions on Illumina or any of its subsidiaries that are not Permitted Restrictions. Illumina and GRAIL can also mutually agree to terminate the Merger Agreement at any time prior to the Effective Time. Upon termination of the Merger Agreement under specified circumstances, GRAIL may require Illumina to pay GRAIL a termination fee of $300,000,000 and make an additional $300,000,000 payment to GRAIL in exchange for shares of non-voting GRAIL preferred stock. The Merger Agreement may also be terminated in circumstances in which such fee will not be payable and such investment will not be required. As a result of the Transaction not being completed by December 20, 2020, on December 21, 2020, Illumina began making the monthly Continuation Payments to GRAIL. Illumina will continue making the monthly Continuation Payments to GRAIL until the Transaction is completed or terminated, subject to terms and conditions set forth in the Merger Agreement. In the event that the Merger Agreement is terminated, Illumina will receive shares of non-voting GRAIL preferred stock in respect of all Continuation Payments in excess of $315,000,000, subject to certain terms and conditions. In the event that the Merger Agreement is terminated, the strategic alternatives available to GRAIL, including remaining an independent company, and the opportunities available to GRAIL to raise capital, including through a private or public equity issuance, may not be as favorable as they would have been in the absence of the Transaction and/or may not be as favorable to GRAIL and its stockholders as the Transaction. See “The Merger Agreement—Termination of the Merger Agreement” and “The Merger Agreement—Continuation Payments; Additional Termination Payment; Equity Issuance.”

The number of shares of Illumina Common Stock to be received for each share of GRAIL Stock may fluctuate with the market price of the Illumina Common Stock and will, subject to the collar, be determined based on the Average Illumina Stock Price. Because the market price of Illumina Common Stock will fluctuate, GRAIL stockholders cannot be sure of the number or value of shares of Illumina Common Stock they will receive in the Transaction.

As a result of the First Merger, each share of GRAIL Stock issued and outstanding immediately prior to the Effective Time (other than cancelled shares or dissenting shares) will be automatically converted into, at the holder’s election, the right to receive, in accordance with the terms of the Merger Agreement, either (i) the Cash Consideration, plus the Stock Consideration, plus one CVR issued by Illumina, subject to and in accordance with the CVR Agreement; or (ii) the Cash Consideration, plus the Stock Consideration, plus the Alternative Consideration. The Stock Consideration, in the aggregate, will be determined pursuant to a collar as follows: (i) if the Average Illumina Stock Price is greater than $399, the Aggregate Stock Consideration shall be 11,278,195 shares of Illumina Common Stock, (ii) if the Average Illumina Stock Price is between (or equal to) $295 and $399, the Aggregate Stock Consideration shall be a number of shares of Illumina Common Stock equal to the quotient

obtained by dividing (x) $4,500,000,000 by (y) the Average Illumina Stock Price, or (iii) if the Average Illumina Stock Price is less than $295, the Aggregate Stock Consideration shall be 15,254,237 shares of Illumina Common Stock. Therefore, the actual number of shares and the value of the merger consideration delivered to GRAIL stockholders will fluctuate depending on the Average Illumina Stock Price. The Average Illumina Stock Price may be greater than, less than or equal to the price of Illumina Common Stock as of the date of the Merger Agreement, the date of this consent solicitation statement/prospectus or the Election Deadline and the value of the Aggregate Stock Consideration may be greater than, less than or equal to $4,500,000,000. Accordingly, GRAIL stockholders cannot be certain of the number or value of the shares of Illumina Common Stock to be delivered upon consummation of the Transaction.

The market price of Illumina Common Stock is subject to general price fluctuations in the market for publicly traded equity securities and has experienced volatility in the past. Stock price changes may result from a variety of factors, including, among others, general market and economic conditions, changes in the businesses, operations and prospects of Illumina, the effects of the novel coronavirus (“COVID-19”) pandemic and an evolving regulatory landscape. Market assessments of the benefits of the Transaction and the likelihood that the Transaction will be completed, as well as general and industry specific market and economic conditions, may also impact the market price of Illumina Common Stock. Many of these factors are beyond Illumina’s and GRAIL’s control. You are encouraged to obtain current market price quotations for Illumina Common Stock before you determine how to vote on the Merger Agreement Proposal set forth in this consent solicitation statement/prospectus; however, as noted above, the prices at the Effective Time may be greater or less than, or the same as, such price quotations. See “The Transaction—The Merger Consideration—Stock Consideration Sensitivity Analysis.”

There has been no public market for GRAIL Stock and the lack of a public market may make it more difficult to determine the fair market value of GRAIL than if there were such a public market.

The outstanding shares of GRAIL Stock are privately held and are not traded on any public market. The lack of a public market may make it more difficult to determine the fair market value of GRAIL than if the outstanding shares of GRAIL Stock were traded publicly. The value ascribed to GRAIL’s securities in other contexts, including in private valuations or financings, may not be indicative of the price at which the outstanding shares of GRAIL Stock may have traded on a public market. The consideration to be paid to GRAIL stockholders in the First Merger was determined based on negotiations between the parties and likewise may not be indicative of the price at which the outstanding shares of GRAIL Stock may have traded on a public market.

Subject to the terms and conditions set forth in the Merger Agreement, the holders of issued and outstanding GRAIL Stock as of the Effective Time may elect to receive the Alternative Consideration in lieu of receiving one or more CVRs (subject to and in accordance with the CVR Agreement). The number of shares of Illumina Common Stock and/or the amount of cash selected as the Alternative Consideration will be determined by Illumina in its sole discretion, and Illumina may take into account a number of factors when making such determination, including, among others, factors relating to Illumina’s and GRAIL’s industry, business, financial condition, liquidity, capacity to issue stock as consideration, or otherwise. Illumina is under no obligation to set the type and amount of the Alternative Consideration within any valuation range or at a valuation that approximates or exceeds any expected value of the CVRs. Accordingly, the value of the Alternative Consideration may differ

materially from the expectations of Illumina, GRAIL or the holders of GRAIL Stock entitled to elect to receive the Alternative Consideration regarding the value of a CVR or the pro rata portion of Covered Revenues to be received by a CVR holder, the valuation of the CVRs that may be implied by GRAIL’s forecasts of its future financial performance described elsewhere in this consent solicitation statement/prospectus and the valuation of the CVRs as reflected in Illumina’s financial statements at the Closing. Illumina may determine to set the Alternative Consideration at a nominal amount. The election form to be distributed to GRAIL stockholders will contain further information regarding the type and amount of the Alternative Consideration.

GRAIL’s directors and executive officers have interests in the Transaction that may be different from, or in addition to, the interests of GRAIL stockholders generally.

Certain of GRAIL’s directors and executive officers negotiated the terms of the Merger Agreement. Certain GRAIL directors and executive officers have interests in the Transaction that may be different from, or in addition to, those of GRAIL stockholders. These interests include, but are not limited to, the continued employment of certain executive officers of GRAIL by Illumina following the completion of the Transaction, the treatment in the Transaction of GRAIL Equity Awards and the severance, indemnification and other rights, as applicable, of GRAIL’s directors and executive officers. GRAIL stockholders should be aware of these interests when they consider the GRAIL Recommendation.

The members of the GRAIL Board were aware of and considered these interests, among other matters, in evaluating the Merger Agreement and the Transaction, and in making the GRAIL Recommendation. The interests of GRAIL’s directors and executive officers are described in more detail in “Interests of GRAIL’s Directors and Executive Officers in the Transaction.”

It is intended that, for U.S. federal income tax purposes, the Mergers, taken together, will constitute the Intended Tax Treatment. However, the completion of the Transaction is not conditioned on the Transaction qualifying for the Intended Tax Treatment or upon the receipt of an opinion from counsel to that effect, and whether or not the Transaction will qualify for the Intended Tax Treatment depends on facts that will not be known until the Transaction is completed. In particular, the Intended Tax Treatment requires that the value of the shares of Illumina Common Stock issued to holders of GRAIL Stock in the Transaction, determined as of completion of the transaction, represents at least a minimum percentage of the total consideration paid to holders of GRAIL Stock in the Transaction. While there is no specific guidance as to precisely what minimum percentage is necessary to satisfy this requirement, it would be satisfied if the Illumina Common Stock (valued as of completion of the Transaction) represents at least 40% of the total consideration. In addition, although the treatment of the Continuation Payments is uncertain, it is possible that the Continuation Payments will be treated as included in such total consideration for purposes of calculating this percentage. Whether this test will be satisfied depends on a number of factors that cannot currently be known with certainty, including the value of Illumina Common Stock as of the completion of the Transaction, the number of holders of GRAIL Stock that elect to receive the CVR Consideration rather than the Cash & Stock Consideration, the fair market value of a CVR as of the completion of the Transaction, the total amount of Continuation Payments made, and the total value of consideration received by dissenting holders of GRAIL Stock, if any. Accordingly, no assurance can be given that the Transaction will qualify for the Intended Tax Treatment. Finally, neither Illumina nor GRAIL intends to request a ruling from the Internal Revenue Service regarding the U.S. federal income tax consequences of the Transaction. Therefore, even if Illumina and GRAIL conclude that the Transaction qualifies for the Intended Tax

Treatment, no assurance can be given that the Internal Revenue Service will not challenge that conclusion or that a court would not sustain such a challenge.

You should read “Material U.S. Federal Income Tax Considerations” and consult your own tax advisors regarding the U.S. federal income tax consequences of the Transaction to you in your particular circumstances.

Illumina and GRAIL are subject to various uncertainties, including contractual restrictions and requirements while the Transaction is pending, that could adversely affect their businesses, financial condition and results of operations.

During the pendency of the Transaction, it is possible that customers, suppliers, commercial partners and/or other persons with whom Illumina or GRAIL has a business relationship may elect to delay or defer certain business decisions or decide to seek to terminate, change or renegotiate their relationships with Illumina or GRAIL, as the case may be, as a result of the Transaction, which could significantly reduce the expected benefits of the Transaction and/or negatively affect Illumina’s or GRAIL’s revenues, earnings and cash flows, GRAIL’s plans for commercialization and approval of its products and the market price of Illumina Common Stock, regardless of whether the Transaction is completed. Uncertainty about the effects of the Transaction on employees may impair the ability to attract, retain and motivate key personnel during the pendency of the Transaction and, if the Transaction is completed, for a period of time thereafter. If key employees depart because of issues related to the uncertainty and difficulty of integration or a desire not to remain with Illumina or GRAIL following the completion of the Transaction, Illumina and GRAIL may have to incur significant costs in identifying, hiring and retaining replacements for departing employees and may lose significant expertise and talent. Matters relating to the Transaction (including integration planning) will require substantial commitments of time and resources by Illumina and GRAIL management, which would otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to either Illumina or GRAIL as an independent company. Illumina and GRAIL will also incur significant costs related to the Transaction, some of which must be paid even if the Transaction is not completed. These costs are substantial and include financial advisory, legal and accounting costs.

Under the terms of the Merger Agreement, GRAIL is also subject to certain restrictions on the conduct of its business prior to the completion of the Transaction, which may adversely affect its ability to execute certain of its business strategies, including, among other things, the ability in certain cases to incur indebtedness, make investments or capital expenditures, enter into, amend or terminate certain material contracts, settle litigation, acquire or dispose of assets or make changes with respect to employee matters, including compensation and benefits matters. Such limitations could adversely affect GRAIL’s business, strategy, operations and prospects prior to the completion of the Transaction.

Under the terms of the Merger Agreement, Illumina is also subject to a more limited set of restrictions on the conduct of its business prior to the completion of the Transaction, which may adversely affect its ability to execute certain of its business strategies, including the ability in certain cases to amend its organizational documents or pay dividends or distributions. Such limitations could adversely affect Illumina’s business, strategy, operations and prospects prior to the completion of the Transaction.

Also pursuant to the Merger Agreement, as a result of the Transaction not being completed by December 20, 2020, on December 21, 2020, Illumina began making monthly Continuation Payments to GRAIL of $35,000,000, and will continue making such monthly Continuation Payments until the earlier of the Closing Date or the termination of the Merger Agreement. However, such interim payments may not be sufficient to meet GRAIL’s cash needs. In addition, in the event that the Merger Agreement is terminated, Illumina will receive shares of non-voting GRAIL preferred stock in respect of all

Continuation Payments in excess of $315,000,000, subject to the terms and conditions set forth in the Merger Agreement. See “The Merger Agreement—Continuation Payments; Additional Termination Payment; Equity Issuance.”

Each of the risks described above may be exacerbated by delays or other adverse developments with respect to the completion of the Transaction.

Litigation relating to the Transaction may be filed against the GRAIL Board and/or the Illumina Board that could result in substantial costs or delay or prevent the completion of the Transaction.

In connection with the Transaction, it is possible that stockholders of GRAIL and/or Illumina may file lawsuits against the GRAIL Board and/or the Illumina Board. Among other remedies, these stockholders could seek damages and/or to enjoin the Transaction. The outcome of any litigation is uncertain and any such potential lawsuits could prevent or delay the completion of the Transaction and/or result in substantial costs. Any such actions may create uncertainty relating to the Transaction and may be distracting to management. Further, the defense or settlement of any lawsuit or claim that remains unresolved at the time the Transaction is completed may adversely affect Illumina’s business, financial condition and results of operations following the completion of the Transaction.

Certain stockholders of GRAIL have executed a Selling Investor Support Agreement that requires each such stockholder to deliver a written consent in favor of the adoption of the Merger Agreement, which will constitute approval of the Transaction by GRAIL stockholders, even if the GRAIL Board changes its recommendation. Certain stockholders of GRAIL have also executed a written agreement to exercise their contractual “drag-along” right to require certain other GRAIL stockholders to vote their shares of GRAIL Stock in favor of the Transaction.

Subsequent to the execution of the Merger Agreement, the Selling Investors entered into the Selling Investor Support Agreement with Illumina, pursuant to which each of the Selling Investors has agreed, promptly (and in any event within five business days) after the registration statement of which this consent solicitation statement/prospectus forms a part is declared effective under the Securities Act by the SEC, to execute and deliver a written consent approving and adopting the Merger Agreement and the Transaction, including the Mergers, and related matters with respect to all of their shares of GRAIL Stock entitled to act by written consent with respect thereto. The Selling Investors are required to deliver such written consents even if the GRAIL Board changes its recommendation that GRAIL stockholders approve the Transaction. The execution and delivery of written consents by all of the Selling Investors will constitute the GRAIL Stockholder Approvals and, therefore, GRAIL expects to receive a number of written consents sufficient to satisfy such approval.

Additionally, subsequent to the execution of the Merger Agreement, the Selling Investors delivered the Drag-Along Consent to exercise their contractual “drag-along” right under the GRAIL Voting Agreement, to require certain other stockholders party to the GRAIL Voting Agreement to vote their shares of GRAIL Stock in favor of, and to adopt, the Merger Agreement and the Transaction, including the Mergers. Further, the Selling Investors consented, pursuant to the Drag-Along Consent, to the appointment of Illumina as the Selling Investors’ designee to hold and have the sole power to exercise, on behalf of all GRAIL stockholders party to the GRAIL Voting Agreement, the proxy and power of attorney contemplated by the GRAIL Voting Agreement in connection with the Transaction.

Following the execution of the Drag-Along Consent by the Selling Investors, which occurred simultaneously with the execution of the Selling Investor Support Agreement, GRAIL stockholders that are party to the GRAIL Voting Agreement became obligated thereunder to, among other things, vote all shares of GRAIL Stock held by such party in favor of, and to adopt, the Merger Agreement and the

Transaction, including the Mergers, and in opposition to any and all other proposals that could delay or impair GRAIL’s ability to consummate the Transaction, even if a Superior Proposal is made by a third party or the GRAIL stockholder considers the merger consideration to be inadequate. See “The Selling Investor Support Agreement.”

The Merger Agreement and the Selling Investor Support Agreement contain provisions that restrict the ability of GRAIL to pursue alternatives to the Transaction.

The Selling Investor Support Agreement also contains provisions that could deter a potential Competing Proposal. Pursuant to the Selling Investor Support Agreement, each Selling Investor has agreed, subject to the terms and conditions of the Selling Investor Support Agreement, to execute and deliver a written consent approving and adopting the Merger Agreement and the Transaction, including the Mergers, and related matters with respect to all of its shares of GRAIL Stock entitled to act by written consent with respect thereto, which represent in the aggregate approximately 96.0% of the voting power of GRAIL Stock as of January 31, 2021.

Under the Selling Investor Support Agreement, each Selling Investor further agreed to execute and deliver the Drag-Along Consent to exercise their contractual “drag-along” right under the GRAIL Voting Agreement. Following the execution of the Drag-Along Consent by the Selling Investors, which occurred simultaneously with the execution of the Selling Investor Support Agreement, GRAIL stockholders that are party to the GRAIL Voting Agreement became obligated thereunder to, among other things, vote all shares of GRAIL Stock held by such party in favor of, and to adopt, the Merger Agreement and the Transaction, including the Mergers, and in opposition to any and all other proposals that could delay or impair GRAIL’s ability to consummate the Transaction. See “The Selling Investor Support Agreement.”

These restrictions and commitments could discourage a third party that has an interest in acquiring all or a significant part of GRAIL from considering or proposing that acquisition, even if that party were prepared to pay consideration with a higher value per share of the GRAIL Stock than the value proposed to be received or realized in the Transaction.

Illumina may encounter difficulty or high costs associated with financing the Cash Consideration.

Illumina expects to fund the aggregate Cash Consideration (approximately $3,500,000,000) upon completion of the Transaction through the Permanent Financing. If such Permanent Financing is unavailable prior to or upon completion, a 364-day senior unsecured bridge term loan facility will be provided by Goldman Sachs USA totaling $1,000,000,000. Illumina’s ability to obtain additional debt financing will be subject to various factors, including market conditions, operating performance and Illumina’s ability to incur additional debt. Depending on these factors, the terms upon which debt financing or debt offerings are available to Illumina may be less favorable to Illumina than the terms assumed for purposes of preparing the unaudited pro forma condensed combined financial information included in this consent solicitation statement/prospectus. The receipt of financing by Illumina is not a

condition to completion of the Transaction and, accordingly, Illumina will be required to complete the Transaction (assuming that all of the conditions to its obligations under Merger Agreement are satisfied) whether or not debt financing is available at all or on acceptable terms.

If a GRAIL stockholder fails to make an election with respect to any shares of GRAIL Stock, it will receive the CVR Consideration.

Election forms will be distributed to GRAIL stockholders not less than 30 days prior to the anticipated closing date of the First Merger, along with a letter of transmittal and instructions for effecting the surrender of the certificates or transfer of book-entry shares of GRAIL Stock pursuant to such letter of transmittal. The election form will enable each GRAIL stockholder to specify the number of shares of GRAIL Stock with respect to which the stockholder elects to receive the CVR Consideration, the number of shares of GRAIL Stock with respect to which the stockholder elects to receive the Cash & Stock Consideration, or that the stockholder makes no election with respect to such stockholder’s shares of GRAIL Stock. GRAIL stockholders will have until 5:00 p.m., Eastern time, on the Election Deadline (as defined under “The Merger Agreement—Consideration; Effect of the Transaction on Capital Stock—Election Procedures”) to submit election forms. Any election will have been properly made only if the Exchange Agent (as defined herein) will have actually received a properly completed election form by the Election Deadline.

Any shares of GRAIL Stock with respect to which the Exchange Agent does not receive a properly completed election form prior to the Election Deadline will be converted into the right to receive the CVR Consideration.

If you deliver shares of GRAIL Stock to make an election, you will not be able to sell those shares unless you revoke your election prior to the Election Deadline.

If you are a GRAIL stockholder and want to elect to receive the CVR Consideration or Cash & Stock Consideration in exchange for your GRAIL Stock, you must deliver to the Exchange Agent by the Election Deadline a properly completed election form. Following the delivery of a completed election form, you will not be able to transfer such shares unless you revoke your election before the Election Deadline by providing written notice to the Exchange Agent. If you do not revoke your election before the Election Deadline, you will not be able to liquidate your investment in GRAIL shares for any reason until you receive the merger consideration.

The GRAIL Board has not obtained an updated opinion from its financial advisor as of the date of this consent solicitation statement/prospectus, nor does it expect to receive an updated, revised or reaffirmed opinion prior to the completion of the Transaction. Changes in the operations and prospects of Illumina or GRAIL, general market and economic conditions and other factors that may be beyond the control of Illumina or GRAIL, and on which GRAIL’s financial advisor’s opinion was based, may significantly alter the value of GRAIL or the share price of Illumina Common Stock by the time the Transaction is completed. The opinion does not speak as of the time the Transaction will be completed or as of any date other than the date of such opinion. Because GRAIL’s financial advisor will not be updating its opinion, the opinion will not address the fairness of the merger consideration from a financial point of view at the time the Transaction is completed. The GRAIL Board’s recommendation that GRAIL stockholders approve the Transaction, however, is made as of the date of this consent solicitation statement/prospectus. For a description of the opinion that the GRAIL Board received from its financial advisor, see “The Transaction—Opinion of Financial Advisor to the GRAIL Board.”

Risks Related to Illumina and the Surviving Company after Completion of the Transaction

Illumina may not be able to integrate the surviving company successfully or manage the combined business effectively, and many of the anticipated synergies and other benefits of acquiring GRAIL may not be realized or may not be realized within the expected time frame.

Illumina and GRAIL entered into the Merger Agreement with the expectation that the Transaction would result in various benefits, including, among other things, operating efficiencies, synergies and cost savings. Achieving the anticipated benefits of the Transaction is subject to a number of uncertainties, including whether the businesses of Illumina and GRAIL can be integrated in an efficient and effective manner.

It is possible that the integration process could take longer than anticipated or that the management of the combined business could be more difficult than expected, and could result in the loss of valuable employees, the disruption of ongoing businesses, processes, systems and business relationships, inconsistencies in standards, controls, procedures, practices, policies and compensation arrangements, higher than expected costs or difficulties in achieving anticipated synergies, business opportunities and growth prospects from the Transaction, any of which could adversely affect Illumina’s ability to achieve the anticipated benefits of the Transaction. Illumina’s results of operations could also be adversely affected by any issues attributable to either company’s operations that arise or are based on events or actions that occur before the Closing. The integration process is subject to a number of risks and uncertainties, and no assurance can be given that the anticipated benefits of the Transaction will be realized or, if realized, the timing of their realization. Failure to achieve these anticipated benefits could adversely affect Illumina and the surviving company’s future businesses, financial condition, results of operations and prospects.

The COVID-19 pandemic and the impact of actions taken to mitigate the pandemic has adversely affected the businesses, financial condition and results of operations of each of Illumina and GRAIL, and may continue to adversely affect the businesses, financial condition and results of operations of Illumina and the surviving company following the completion of the Transaction.

The COVID-19 pandemic caused by the SARS-CoV-2 virus and international efforts to control its spread have significantly curtailed the movement of people, goods and services worldwide, including in the regions in which each of Illumina and GRAIL conduct its business operations. It is not possible to accurately predict the full impact of the COVID-19 pandemic on the business, financial condition and results of operations of Illumina, GRAIL or the surviving company due to the evolving nature of the COVID-19 pandemic and the extent of its impact across industries and geographies and numerous other uncertainties, including the duration and spread of the outbreak, additional actions that may be taken by governmental entities, and other factors. A recession or market correction resulting from the spread of COVID-19 could impact funding for healthcare globally and could delay or impede the ability to conduct clinical trials, which may negatively impact the business, financial condition and results of operations of Illumina, GRAIL or the surviving company. There can be no assurance that any efforts taken by Illumina, GRAIL or the surviving company to address the adverse impacts of the COVID-19 pandemic or actions taken to contain the COVID-19 pandemic or its impact will be effective or will not result in significant additional costs. If Illumina or GRAIL is unable to recover from a business disruption on a timely basis or otherwise mitigate the adverse effects of the COVID-19 pandemic, the businesses, financial condition and results of operations of Illumina, GRAIL and the surviving company following the completion of the Transaction could be materially and adversely affected, and the Transaction and efforts to integrate the businesses of the two companies may be delayed or become more costly or difficult.

Uncertainties associated with the Transaction may cause a loss of management personnel and other key employees, and Illumina and the surviving company may have difficulty attracting and motivating management personnel and other key employees, which could adversely affect the future businesses and operations of Illumina and the surviving company.

Illumina and GRAIL are dependent on the experience and industry knowledge of their respective management personnel and other key employees to execute their business plans. Illumina’s success after the completion of the Transaction will depend in part upon the ability of Illumina to attract, motivate and retain key management personnel and other key employees of Illumina and GRAIL. Prior to completion of the Transaction, current and prospective employees of Illumina and GRAIL may experience uncertainty about their roles following the completion of the Transaction, which may have an adverse effect on the ability of each of Illumina and GRAIL to attract, motivate or retain management personnel and other key employees. In addition, no assurance can be given that Illumina will be able to attract, motivate or retain management personnel and other key employees of Illumina and GRAIL to the same extent that Illumina and GRAIL have previously been able to attract or retain their respective employees. If management personnel or other key employees terminate their employment, Illumina’s and the surviving company’s business activities may be adversely affected and management’s attention may be diverted from successfully integrating Illumina and GRAIL to hiring suitable replacements, all of which may cause Illumina’s and the surviving company’s businesses and operations following the completion of the Transaction to suffer.

Completion of the Transaction may trigger change in control, assignment or other provisions in certain agreements to which GRAIL is a party, which may have an adverse impact on the surviving company’s business and results of operations.

The completion of the Transaction may trigger change in control, assignment and other provisions in certain agreements to which GRAIL is a party. If Illumina and GRAIL are unable to negotiate waivers of or consents under those provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages or other remedies. Even if Illumina and GRAIL are able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to Illumina or the surviving company. Any of the foregoing or similar developments may have an adverse impact on the businesses, financial condition and results of operations of Illumina and the surviving company following the completion of the Transaction, or the ability to successfully integrate their respective businesses and/or execute their respective strategies.

Following the Transaction, the market price of Illumina Common Stock may be affected by factors different from those affecting the shares of Illumina Common Stock or GRAIL Stock currently, and GRAIL stockholders will hold an interest in a company with a different mix of assets, risks and liabilities, and a different financial profile and other characteristics, than the company in which they currently hold an interest.

The market price of Illumina Common Stock after the Transaction may be affected by factors different from those affecting the shares of Illumina Common Stock or GRAIL Stock currently. In the First Merger, holders of GRAIL Stock will become holders of Illumina Common Stock. Illumina’s business and financial position differs from that of GRAIL in important respects. Accordingly, the results of operations of Illumina, including the surviving company, and the market price of Illumina Common Stock after the completion of the Transaction may be affected by factors different from those currently affecting the results of operations of each of Illumina and GRAIL or the shares of Illumina Common Stock or GRAIL Stock on a standalone basis, and GRAIL stockholders will hold an interest in a company with a different mix of assets, risks and liabilities, and a different financial profile and other characteristics, than the company in which they currently hold an interest. For a discussion of the

business of Illumina and of certain factors to consider in connection with that business, see the documents incorporated by reference in this consent solicitation statement/prospectus and referred to under “Where You Can Find More Information.”

The Transaction may not be accretive, and may be dilutive, to Illumina’s earnings per share, which may negatively affect the market price of Illumina Common Stock.

The Transaction may not be accretive, and may be dilutive, to Illumina’s earnings per share. Earnings per share in the future is based on preliminary estimates that may materially change. In addition, Illumina could fail to realize all the benefits anticipated in the Transaction or experience delays or inefficiencies in realizing such benefits. Such factors could, combined with the issuance of shares of Illumina Common Stock in the First Merger, decrease or delay any accretion, result in dilution or cause greater dilution than is currently expected. Any dilution of, or decrease or delay of any accretion to, Illumina’s earnings per share could cause the price of Illumina Common Stock to decline.

GRAIL stockholders will have a significantly lower ownership and voting interest in Illumina following the Transaction than they currently have in GRAIL and will exercise less influence over management.

Based on the consideration payable to holders of GRAIL Stock pursuant to the Merger Agreement and the number of shares of Illumina Common Stock outstanding as of September 27, 2020, immediately after the Closing, it is expected that GRAIL stockholders will own approximately 8% of the outstanding Illumina Common Stock (assuming the number of shares issued in the Transaction is determined based on the mid-point of the range of the collar, that all holders of GRAIL Stock elect to receive the CVR Consideration and that the holders of all GRAIL Equity Awards being paid out in the Transaction elect to receive solely the CVR Consideration in payment for their awards). See “The Transaction—The Merger Consideration” for further information regarding the shares of Illumina Common Stock payable to holders of GRAIL Stock as consideration, including calculations of the Aggregate Stock Consideration payable to holders of GRAIL Stock using different assumptions.

GRAIL stockholders will have a significantly lower ownership and voting interest in Illumina following the Transaction than they currently have in GRAIL. Consequently, former GRAIL stockholders will have less influence over the management and policies of Illumina than they currently have over the management and policies of GRAIL.

The shares of Illumina Common Stock to be received by GRAIL stockholders upon completion of the Transaction will have different rights from shares of GRAIL Stock.

Upon completion of the Transaction, GRAIL stockholders will no longer be stockholders of GRAIL, but will instead become stockholders of Illumina, and their rights as Illumina stockholders will be governed by the terms of Illumina’s amended and restated certificate of incorporation (the “Illumina Certificate”) and Illumina’s amended and restated bylaws (the “Illumina Bylaws”). The terms of the Illumina Certificate and the Illumina Bylaws are in some respects materially different from the terms of the GRAIL restated certificate of incorporation (the “GRAIL Certificate”) and GRAIL’s amended and restated bylaws (the “GRAIL Bylaws”), which, together with the following agreements, currently govern the rights of GRAIL stockholders:

•

Amended and Restated Investors’ Rights Agreement dated as of November 27, 2019 (the “Investors’ Rights Agreement”), by and among GRAIL and certain GRAIL stockholders party thereto;

•

the GRAIL Voting Agreement; and

•

the Amended Right of First Refusal and Co-Sale Agreement dated November 27, 2019, by and among GRAIL and certain GRAIL stockholders party thereto (the “ROFR and Co-Sale Agreement”).

For a discussion of the different rights associated with shares of GRAIL Stock and shares of Illumina Common Stock, see “Comparison of Stockholders’ Rights.”

Illumina will incur significant transaction and integration-related costs in connection with the Transaction, which could adversely affect Illumina’s ability to execute its integration plan and achieve the anticipated benefits of the Transaction.

Illumina expects to incur a number of non-recurring costs associated with the Transaction and combining the operations of the two companies. Illumina continues to assess the magnitude of these Transaction and integration-related costs, and additional unanticipated costs may also be incurred. Although Illumina expects that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses of Illumina and GRAIL, should allow GRAIL to offset integration-related costs over time, this net benefit may not be achieved in the near term or at all.

The market price of Illumina Common Stock may decline as a result of the Transaction and the issuance of shares of Illumina Common Stock to GRAIL stockholders in the Transaction may have a negative impact on Illumina’s financial results, including earnings per share.

The market price of Illumina Common Stock may decline as a result of the Transaction, and holders of Illumina Common Stock (including holders of GRAIL Stock and GRAIL Equity Awards who receive Illumina Common Stock in the First Merger) could see a decrease in the value of their investment in Illumina Common Stock, if, among other things, Illumina and the surviving company are unable to achieve the expected growth in earnings, or if the anticipated benefits, including synergies, cost savings, innovation and operational efficiencies, from the Transaction are not realized, or if the Transaction and integration-related costs related to the Transaction are greater than expected. The market price of Illumina Common Stock may also decline if Illumina does not achieve the anticipated benefits of the Transaction as rapidly or to the extent expected by financial or industry analysts or if the effects of the Transaction on Illumina’s financial position, results of operations or cash flows are not otherwise consistent with the expectations of financial or industry analysts. The issuance of shares of Illumina Common Stock in the Transaction could on its own have the effect of depressing the market price for Illumina Common Stock. In addition, some GRAIL stockholders may decide not to continue to hold the shares of Illumina Common Stock they receive as a result of the Transaction, and any such sales of Illumina Common Stock could have the effect of depressing the market price for Illumina Common Stock. Moreover, general fluctuations in stock markets could have a material adverse effect on the market for, or liquidity of, Illumina Common Stock, regardless of the actual operating performance of Illumina or the surviving company following the completion of the Transaction.

If the First Merger is completed, approximately 12,968,300 shares of Illumina Common Stock are estimated to be issuable to GRAIL stockholders and holders of GRAIL Equity Awards pursuant to the Merger Agreement (assuming the number of shares issued in the First Merger is determined based on the mid-point of the range of the collar, that all holders of GRAIL Stock elect to receive the CVR Consideration and that the holders of all GRAIL Equity Awards being paid out in the First Merger elect to receive solely the CVR Consideration in payment for their awards). This represents approximately 8% of the number of shares of Illumina Common Stock outstanding as of September 27, 2020. Following the issuance of shares of Illumina Common Stock in the First Merger, Illumina’s earnings per share may be lower than would have been reported by Illumina in the absence of the Transaction. There can be no assurance that any increase in Illumina’s earnings per share as compared to Illumina’s earnings per share prior to the Transaction, will occur, even in the long term. Any increase in

Illumina’s earnings per share as a result of the Transaction requires, among other things, Illumina to successfully manage the operations of GRAIL and increase the consolidated earnings of Illumina after the Transaction, which is subject to significant risks and uncertainties, as described elsewhere in “Risk Factors”.

The unaudited pro forma combined financial information included in this consent solicitation statement/prospectus are presented for illustrative purposes only and do not represent the actual financial position or results of operations of the combined company following completion of the Transaction.

The unaudited pro forma combined financial information contained in this consent solicitation statement/prospectus is presented for illustrative purposes only, contains a variety of adjustments, assumptions and preliminary estimates and does not represent the actual financial position or results of operations of Illumina and GRAIL prior to the Transaction or that of the surviving company following the Transaction for several reasons. Among other things, the unaudited pro forma combined financial information does not reflect the effect of the projected realization of cost savings following completion of the Transaction or any changes in applicable law (including applicable tax law) after the date of this consent solicitation statement/prospectus. See “Unaudited Pro Forma Condensed Combined Financial Information,” and “Comparative Historical and Unaudited Pro Forma Combined Per Share Data” elsewhere in this consent solicitation statement/prospectus. The actual financial positions and results of operations of Illumina and GRAIL prior to the Transaction and that of the surviving company following the Transaction may not be consistent with, or evident from, the unaudited pro forma combined financial information included in this consent solicitation statement/prospectus. In addition, the assumptions used in preparing the unaudited pro forma combined financial information included in this consent solicitation statement/prospectus may not be realized and may be affected by other factors, which could lead to material changes to the surviving company’s business that are not reflected in the unaudited pro forma combined financial information. Any significant changes in the market price of shares of Illumina Common Stock may cause a significant change in the purchase price used for Illumina’s accounting purposes and the pro forma combined financial information contained in this consent solicitation statement/prospectus.

The unaudited forecasted financial information of GRAIL included in this consent solicitation statement/prospectus is presented for illustrative purposes only and does not represent the actual financial position or results of operations of the combined company following the Transaction.

The unaudited forecasted financial information of GRAIL contained in this consent solicitation statement/prospectus is presented for illustrative purposes only, contains a variety of adjustments, assumptions and preliminary estimates and does not represent the actual financial position or results of operations of GRAIL prior to the Transaction or that of the combined company following the Transaction. In addition, the Transaction and post-Transaction integration process may give rise to unexpected liabilities and costs, including costs associated with the defense and resolution of Transaction-related litigation or other claims. Unexpected delays in completing the Transaction or in connection with the post-Transaction integration process may significantly increase the related costs and expenses incurred by GRAIL. The actual financial position and results of operations of GRAIL prior to the Transaction and that of the combined company following the Transaction may be different, possibly materially, from the unaudited forecasted financial information included in this consent solicitation statement/prospectus. In addition, the assumptions used in preparing the unaudited forecasted financial information included in this consent solicitation statement/prospectus may not prove to be accurate and may be affected by other factors.

Risks Related to the CVRs

You may not receive any payment on the CVRs.

Your right to receive any future payments on the CVRs will be contingent upon the recognition of certain revenues by Illumina (calculated in accordance with the CVR Agreement). If those revenues are not recognized for any reason as calculated in accordance with the CVR Agreement, no payment will be made under the CVRs and the CVRs will expire valueless. Accordingly, the value, if any, of the CVRs is speculative, and the CVRs may ultimately have no value.

Illumina management’s business, financial and operational decision-making may adversely affect the amount of payments to be made under the CVRs.

Other than to the extent it would breach any provisions of the CVR Agreement, including its agreement to operate in good faith (see “Description of the CVRs” for more information), Illumina may make decisions regarding the operation of the businesses of Illumina and its subsidiaries, including the investment and allocation of resources, on the basis of the strategic objectives of Illumina and its affiliates taking into account any relevant factors (including technical, commercial, legal, scientific and/or medical factors). Furthermore, Illumina’s present intention is to operate the GRAIL business as a stand-alone division within Illumina and Illumina may in its discretion develop, package, distribute and sell products and services separately. Each of the foregoing may adversely affect the amount of payments due under the CVRs.

The CVRs are a new security for which there is currently no trading market, and the CVR Agreement does not require the CVRs to be listed on a securities exchange. A trading market for the CVRs may not develop or be sustained. Furthermore, the CVRs may not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, other than through certain permitted transfers as described in the CVR Agreement, which may affect the liquidity of the CVRs. Even if an active trading market develops, there may be little or no market demand for the CVRs, making it difficult or impossible to resell the CVRs, which would have an adverse effect on the resale price, if any, of the CVRs. In addition, the market price of the CVRs could fluctuate significantly for many reasons, including, without limitation, as a result of the risk factors listed in this consent solicitation statement/prospectus, actual or anticipated fluctuations in the operating results of Illumina, for reasons unrelated to operating performance, such as reports by industry analysts, investor perceptions, or negative announcements by customers or competitors regarding their own performance, regulatory changes that could impact Illumina’s business and general economic, industry or market conditions. Neither Illumina nor GRAIL can predict the price, if any, at which the CVRs will trade, or whether the market price of the CVRs will be volatile, following the Closing.

Illumina may repurchase and, under certain circumstances, redeem the CVRs and the price offered and paid in any such repurchases or redemptions may differ materially from the amount and/or form of the Alternative Consideration, from the expectations of holders of CVRs and from the amount and/or form of the consideration offered in any other such actual or potential repurchases or redemptions.

Illumina or any of its affiliates are permitted under the CVR Agreement to from time to time offer to acquire and acquire the CVRs in private transactions or otherwise, including tender offers and privately negotiated repurchases from one or more holders of CVRs. Illumina anticipates that any time after the

Closing, it may make offers to acquire the CVRs through tender offers or privately negotiated transactions with individual holders of CVRs. Illumina’s decision to make any such offers, the timing thereof and the price and form of consideration offered therein will be based on facts and circumstances at the time of such decision, and may take into account, among other things, (i) the trading price of the CVRs, if any, (ii) Illumina’s valuation of the CVRs and its expectations of the amount of Covered Revenues to be generated and the resulting payments to be made to holders of CVRs pursuant to the CVR Agreement, (iii) Illumina’s views and analysis of the profile of holders and potential purchasers of the CVRs, and any potential offers thereafter and (iv) other factors relating to Illumina’s and GRAIL’s industry, business, financial condition, liquidity, capacity to issue stock as consideration, or otherwise. The price offered by Illumina in such repurchase transactions will be determined in Illumina’s sole discretion and may differ materially from the amount and/or form of the Alternative Consideration and the consideration offered or paid in any other actual or potential repurchases, the expectations of the holders of the CVRs, the price that may be implied by GRAIL’s forecasts of its future financial performance described elsewhere in this consent solicitation statement/prospectus and the valuation of the CVRs as reflected in Illumina’s financial statements at the Closing or at the time of such repurchase or otherwise. Such repurchase offers may be made at any time after the issuance of the CVRs, including prior to the Commencement Date or prior to the generation of a significant amount of Covered Revenues.

In addition, pursuant to the terms of the CVR Agreement, subject to certain notice requirements, Illumina may, at any time on and after the Redemption Eligibility Date (as defined below), redeem all, but not less than all, of the outstanding CVRs at a redemption price as described in the CVR Agreement. Pursuant to the CVR Agreement, the redemption price will be the fair market value of the CVRs as determined by an independent nationally recognized valuation firm mutually acceptable to Illumina and the Holder Representative (as defined below) or, in the event that third-party holders of more than 50% of the outstanding CVRs accept a tender offer by Illumina after the date Illumina is able to redeem the CVRs, the price accepted in such tender offer. Neither Illumina nor GRAIL can predict the price at which the CVRs may be redeemed by Illumina in the future pursuant to these rights, if at all.

You will not be able to determine the amount of cash to be received under the CVRs until after the conclusion of each quarterly measuring period after the Commencement Date, which makes it difficult to value the CVRs.

If any payment is made on the CVR, it will not be made until after the conclusion of the first quarterly measuring period after the Commencement Date, and the amount of any payment will not be paid until 15 days after the date Illumina is required to provide the Covered Revenues Statement (as defined below) for the quarterly measuring period in respect of which a CVR payment is due. As such, it may be difficult to value the CVRs, and accordingly it may be difficult or impossible for you to resell your CVRs.

Regulatory agencies must approve the Transaction and Illumina may accept conditions to obtain such approval that could affect the value of the CVRs you receive in the Transaction.

The Transaction is subject to review by regulatory agencies. Illumina may accept certain conditions in order to obtain such regulatory agencies’ approval or consent to the Transaction. The value of the CVRs depends on the ability of Illumina to generate certain revenues and such conditions could affect Illumina’s ability to generate such revenues, which could reduce the amount of any payments due under the CVRs or could result in no payment being made on the CVRs.

Any payments in respect of the CVRs will be effectively subordinated to Illumina’s secured obligations and obligations of Illumina’s subsidiaries.

The CVRs will be effectively subordinated in right of payment to all of Illumina’s secured obligations to the extent of the collateral securing such obligations. Additionally, the CVRs will be effectively subordinated to all existing and future indebtedness and other liabilities, including trade payables, of Illumina’s subsidiaries.

As of September 27, 2020, on a combined basis (aggregating Illumina and GRAIL and excluding any purchase price financing) Illumina would have had no secured indebtedness and Illumina’s subsidiaries would have had no indebtedness.

The U.S. federal income tax treatment of the CVRs is uncertain.

There is no legal authority directly addressing the U.S. federal income tax treatment of the CVRs or the treatment of payments that may be received pursuant to the CVRs. Accordingly, the amount, timing and character of any gain, income or loss with respect to the CVRs are uncertain. For a more detailed summary of the material U.S. federal income tax consequences of the Transaction, see “Material U.S. Federal Income Tax Considerations.”

Risks Related to Illumina’s Business

You should read and consider the risk factors specific to Illumina’s business that will also affect the surviving company after the completion of the Transaction. These risks are described in the section of Illumina’s Annual Report on Form 10-K for the fiscal year ended December 29, 2019, and the sections of Illumina’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 29, June 28, and September 27, 2020 entitled “Risk Factors,” and in other documents that are incorporated by reference into this consent solicitation statement/prospectus. See “Where You Can Find More Information.”

Risks Related to GRAIL’s Business and Industry

GRAIL is a pre-commercial stage healthcare company operating in a rapidly evolving field and has a limited operating history, which makes it difficult to evaluate GRAIL’s current business and predict GRAIL’s future performance.

GRAIL is a pre-commercial stage healthcare company operating in a rapidly evolving field and, having commenced operations in January 2016, has a limited operating history. GRAIL does not currently have a commercial product for sale. GRAIL has funded its operations to date primarily with the proceeds from the sale of equity securities and has never generated any revenue. GRAIL’s short operating history as a company makes any assessment of current business or GRAIL’s future success and viability subject to significant uncertainty. GRAIL expects to encounter risks and difficulties, including those frequently experienced by early-stage companies in rapidly evolving fields. If GRAIL does not address these risks and difficulties successfully, its business will suffer.

GRAIL has incurred significant net losses in each period since its inception and anticipates that it will continue to incur net losses for the foreseeable future.

Since GRAIL’s inception, it has not generated any revenue and has incurred significant net losses. GRAIL’s net losses were $275.7 million and $244.9 million for the years ended December 31, 2018 and 2019, respectively, and $216.8 million for the nine months ended September 30, 2020. Substantially all of GRAIL’s net losses since inception have resulted from GRAIL’s research and development programs, and general and administrative costs associated with its operations, as well as costs incurred in connection with the acquisition of Cirina Limited in 2017. As of September 30, 2020, GRAIL had an accumulated deficit of $1.5 billion.

GRAIL has invested significant financial resources in research and development activities, including to develop its technology, develop its investigational products, including its multi-cancer test, Galleri, and diagnostic aid for cancer test (“DAC”), and plan for commercial launch. The amount of GRAIL’s future net losses will depend, in part, on the level of GRAIL’s future expenditures and its ability to generate revenue. Moreover, GRAIL’s net losses may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of GRAIL’s results of operations may not be a good indication of GRAIL’s future performance.

GRAIL expects to continue to incur significant expenses and operating losses for the foreseeable future if and as it:

•

attracts, hires, and retains qualified personnel;

•

continues its research and development activities;

•

conducts its existing clinical studies and initiates and conducts additional clinical studies to support the development and commercialization of its products;

•

expands its laboratory capacity and operating capabilities as GRAIL prepares for commercial scale;

•

seeks regulatory approvals and any other marketing authorizations or clearances that may be necessary or desired for its products;

•

establishes sales, marketing, and distribution infrastructure to commercialize its products;

•

acquires or in-licenses additional intellectual property and technologies;

•

makes milestone, royalty, or other payments due under any license or collaboration agreements;

•

obtains, maintains, protects, and enforces its intellectual property portfolio, including intellectual property obtained through license agreements;

•

provides additional infrastructure to support its continued research and development operations and any planned commercialization efforts in the future;

•

meets the requirements and demands of being a public company; and

•

defends against any product liability claims or other lawsuits related to its products.

GRAIL’s products may not perform as expected, and the results of its clinical studies, some of which for Galleri were conducted on an earlier version than the version GRAIL plans to initially launch, may not support the launch or use of GRAIL’s products and may not comply with the requirements, or be replicated in later studies, required for any necessary or desirable regulatory clearances or approvals. This could materially and adversely affect GRAIL’s business, financial condition, results of operations, and growth prospects.

GRAIL does not currently have a commercial product. GRAIL’s success depends on the market’s confidence that it can provide reliable, high-quality products, as well as its ability to complete clinical studies and comply with applicable regulatory requirements that would allow it to commercially launch its products. Assuming successful launch, GRAIL’s products, including Galleri and DAC, may not perform as expected, and the results obtained from GRAIL’s ongoing or future studies may be inconsistent with certain results obtained from GRAIL’s previous studies. If this were to occur, either before or after launch, GRAIL’s business, financial condition, results of operations, and growth prospects would suffer.

GRAIL’s products require a number of complex and sophisticated biochemical and bioinformatics processes, many of which are highly sensitive to external factors. An operational or technological

failure in one of these complex processes or fluctuations in external variables may result in sensitivity and specificity rates that are lower than GRAIL anticipates or that vary between test runs or in a higher than anticipated number of tests that fail to produce consistent results. In addition, GRAIL regularly evaluates and refines its algorithms and other processes under development. These refinements may inadvertently result in unanticipated issues that may reduce GRAIL’s sensitivity and specificity rates or otherwise adversely affect the performance of GRAIL’s test and its results.

Additionally, many of the studies GRAIL has performed on Galleri were performed on an earlier version of the test than the version GRAIL plans to launch as a laboratory developed test (“LDT”). If the version of Galleri GRAIL plans to launch as an LDT does not have comparable performance to the earlier version of the test, GRAIL may be unable to launch that version, may have to narrow or change the intended use or claims, and/or GRAIL may find its commercial profile to be different than expected. Additionally, following the launch of Galleri as an LDT, GRAIL currently intends to seek clearance or approval from the U.S. Food and Drug Administration (“FDA”), and after the launch of DAC as an LDT, GRAIL may seek clearance or approval from FDA. FDA and other regulators may require that GRAIL generate additional clinical data to support clearance or approval, which could result in delays, increased costs, or other limitations on GRAIL’s ability to receive such clearance or approval. For additional information, see “—GRAIL’s multi-cancer detection tests are a new approach to cancer screening, which present a number of novel and complex issues for FDA review. Because FDA has never cleared or approved a multi-cancer detection test, it is difficult to predict what information GRAIL will need to submit a premarket approval application (“PMA”) to obtain approval from FDA for a proposed intended use, or if GRAIL will be able to obtain such approval on a timely basis or at all.”

Further, GRAIL plans to iterate and improve, enhancing product performance, offerings, scalability, and/or cost of goods. However, GRAIL may not be successful in transitioning its products to a new or enhanced version or iteration. Product development involves a lengthy and complex process and GRAIL may be unable to commercialize, validate, or improve performance of any of its products on a timely basis, or at all. GRAIL’s failure to successfully develop new and/or improved products (including new versions of existing products) on a timely basis could have a material adverse effect on GRAIL’s results of operation and business.

Finally, generating the clinical data necessary to validate and support the initial launch of GRAIL’s products as LDTs and new versions of products and subsequently obtain regulatory clearance or approval, is time-consuming and carries with it the risk of not yielding the desired results. The performance achieved in published studies may not be replicated in later studies that may be required to obtain or maintain premarket clearance or approval. Limited results from earlier-stage verification studies may not predict results from studies in larger numbers of participants drawn from more diverse populations over a longer period of time. Unfavorable results from ongoing clinical studies could result in delays, modifications, or abandonment of ongoing or future clinical studies, or abandonment of a product development program, or may delay, limit, or prevent regulatory clearances or approvals or commercialization of GRAIL’s products.

Clinical trials are necessary to validate GRAIL’s investigational products to launch them as LDTs and to support future product submissions to FDA. The clinical trial process is lengthy and expensive with uncertain outcomes, and often requires the enrollment of large numbers of patients, and suitable patients may be difficult to identify and recruit. GRAIL has encountered delays and may encounter substantial delays in its clinical studies, including due to COVID-19, and may therefore be unable to complete its clinical studies on the timelines it expects, if at all, which could materially and adversely impact its ability to launch its products and seek regulatory clearance or approval.

Clinical testing is expensive, time-consuming, and subject to uncertainty. Initiating and completing clinical trials necessary to validate and support the launch of Galleri or DAC as LDTs, and to support

any future submissions to FDA for regulatory clearance or approval for GRAIL’s products, will be time-consuming and expensive and the outcomes uncertain. Clinical trials must be conducted in accordance with the laws and regulations of FDA and other applicable regulatory authorities’ legal requirements and regulations, and are subject to oversight by these governmental agencies and IRBs at the medical institutions where the clinical trials are conducted.

GRAIL cannot guarantee that any clinical studies will be conducted as planned or completed on schedule, if at all. The timely completion of clinical studies in accordance with their protocols depends, among other things, on GRAIL’s ability to enroll a sufficient number of participants who remain in the study until its conclusion. Many of GRAIL’s clinical studies require enrolling a large number of participants without cancer who may not see value in enrollment. Additionally, GRAIL may encounter delays as a result of the administrative complexities in managing and recruiting for studies of this scope and size. If GRAIL is unable to recruit sufficient participants for its clinical studies, including SUMMIT, or maintain sufficient participation of enrolled participants, GRAIL’s product development, commercialization activities and its ability to seek regulatory clearance or approval for its products could be delayed, modified, or prevented.

For example, the launch of Galleri as an LDT will require validation of data from GRAIL’s clinical studies, including certain data from its ongoing PATHFINDER study, which it is conducting under an approved Investigational Device Exemption (“IDE”) application. GRAIL may encounter difficulties completing diagnostic workup on a sufficient number of PATHFINDER participants. The ongoing COVID-19 pandemic delayed completion of GRAIL’s PATHFINDER study as GRAIL had to suspend enrollment of the study during the second quarter of 2020. Federal, state and local governmental policies and initiatives designed to reduce the transmission of COVID-19, as well as the burden on hospitals and medical personnel, have resulted in the cancellation of non-essential medical procedures, which also contributed to a delay of achieving diagnostic resolutions for participants in the study. Further delays in GRAIL’s PATHFINDER study could cause GRAIL to delay the launch of Galleri, which would negatively impact GRAIL’s financial condition and results of operations. For additional information, see “—GRAIL’s business is subject to risks arising from epidemic diseases, such as the recent global outbreak of COVID-19.”

In addition, GRAIL intends to launch Galleri as an LDT. Although LDTs are classified as medical devices, FDA has historically exercised enforcement discretion and has not enforced certain FDA requirements with respect to such products, including premarket review, though such practices may not continue in the future. GRAIL intends to launch Galleri as an LDT after validating GRAIL’s product, including on a sufficient number of PATHFINDER participants.

Moreover, there is risk that the clinical validation data from PATHFINDER, along with other available clinical validation data, may be insufficient to support the launch of Galleri as an LDT for its proposed intended use. Further, FDA may determine that the launch of Galleri as an LDT for its proposed intended use is not permitted while the PATHFINDER study continues to be conducted under an approved IDE. A delay in the launch of Galleri, or inability to launch altogether, as well as a narrowing of the proposed intended use of the product, may negatively impact GRAIL’s financial condition and results of operations.

Moreover, additional issues may arise that could result in the delay, suspension, clinical hold, or termination of such clinical studies. Other events that may prevent successful or timely initiation or completion of clinical studies, or the ability to use data from clinical studies in support of launch as an LDT or for regulatory submissions or otherwise, include:

•

the inability to generate sufficient data to support the initiation or continuation of clinical studies or to validate Galleri or DAC in GRAIL’s intended use populations or at all;

•

the inability to rely on previously-collected data on earlier versions of Galleri and DAC in support of the launch or submission for marketing authorization of the later versions of GRAIL’s products;

•

the potential requirement to submit an additional IDE application to FDA, which must become effective prior to commencing certain human clinical trials of medical devices, and which FDA may disapprove;

•

the potential that FDA may modify, withdraw or impose a clinical hold on GRAIL’s current IDE approval pursuant to which GRAIL is conducting the PATHFINDER study, and notify GRAIL that GRAIL may not begin or must discontinue other clinical trials;

•

delays caused by participants withdrawing from clinical studies or failing to return for follow-up or by institutions failing to submit data, including follow-up data, to GRAIL;

•

delays or failure in reaching a consensus or agreement, if required, with regulatory agencies on study design or feedback from regulatory agencies necessitating changes to ongoing or planned clinical study design;

•

delays or failure in reaching agreement on acceptable terms with prospective contract research organizations (“CROs”), service providers, and clinical study sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical study sites;

•

delays or failure in obtaining any required Institutional Review Board (“IRB”) approval or ethics committee approval for GRAIL’s clinical study sites;

•

delays in amending, or the inability to amend, GRAIL’s IRB-approved protocols at clinical study sites when necessary or desired;

•

difficulty or delays in collaborating with sites, institutions, and investigators;

•

failure by GRAIL, investigators, sites, or participants to comply with the applicable study protocol or applicable regulatory requirements and standards for data collection, reporting, records maintenance, or data integrity;

•

failure by GRAIL or any CROs or other third parties to adhere to clinical study requirements, including the applicable protocol;

•

failure to perform in accordance with good clinical practice (“GCP”) and good laboratory practice (“GLP”) requirements, and/or other applicable regulations and requirements of FDA or other applicable governmental authorities;

•

failure to comply with applicable data privacy and security laws related to clinical trials, including the European Union’s General Data Protection Regulation (“GDPR”);

•

failure of GRAIL’s products to achieve acceptable sensitivity, specificity, or PPV, and safety endpoints;

•

unacceptable safety findings, including findings related to the risk of the false positive tests (which could lead to unnecessary biopsy or anxiety) or false negative tests (which could lead to a delay in diagnosis or disease progression);

•

termination or suspension of a study or site by GRAIL or the data safety monitoring board, suspension or termination of a study or site by an IRB, ethics committee, or institution, or clinical hold or termination of a study or site by a regulatory authority, including FDA;

•

disqualification, termination, or suspension of a clinical investigator;

•

adverse inspection results by any applicable regulatory authority, including FDA or MHRA;

•

changes in statutory or regulatory requirements or guidance, or clinical guidelines, that require amending existing or designing new clinical protocols, obtaining new IRB or ethics committee approvals, modifying GRAIL’s clinical studies, modifying GRAIL’s consent process or obtaining additional consent from study participants, or altering the pathway to clearance or approval of GRAIL’s products;

•

changes in the standard of care on which a clinical development plan was based, which may require new or additional clinical studies;

•

the cost of clinical studies of GRAIL’s products being greater than it anticipates;

•

destruction or compromise of, or other inability to access or receive, clinical study samples processed, stored, or managed at a third-party site or otherwise in the control of a third party;

•

clinical studies of GRAIL’s products producing negative or inconclusive results, which may result in GRAIL’s deciding, or regulators requiring GRAIL, to conduct additional clinical studies or abandon product development programs; and

•

lack of adequate funding.

GRAIL depends on its collaborators and on medical institutions and CROs to conduct its clinical trials in compliance with applicable GCP requirements. To the extent GRAIL’s collaborators or the CROs fail to enroll participants for GRAIL’s clinical trials, fail to conduct the study to GCP requirements or are delayed for a significant time in the execution of trials, including achieving full enrollment, GRAIL may be affected by increased costs, program delays, and/or enforcement actions. In addition, clinical trials that are conducted in countries outside the United States may subject GRAIL to further delays and expenses.

Any inability to initiate or complete clinical studies successfully could result in additional costs to GRAIL, slow down or prevent GRAIL’s product development, or impair GRAIL’s ability to generate revenue. Delays in initiating or completing GRAIL’s planned clinical studies could also allow GRAIL’s competitors to bring competing products to market before GRAIL does or sooner than expected, which could impair GRAIL’s ability to successfully commercialize Galleri, DAC, or other future products and may harm GRAIL’s business, financial condition, and results of operations. In addition, many of the factors that may cause, or lead to, a delay in initiation or completion of clinical studies may also ultimately lead to the delay or the narrowing or denial of any regulatory clearance or approval GRAIL may seek with respect to GRAIL’s products. Delays in the initiation or completion of any clinical study of GRAIL’s products in development will increase its costs, slow down or jeopardize its product development and regulatory clearance or approval process, and delay or potentially jeopardize its ability to commence product sales and generate revenue.

Even if GRAIL commercially launch GRAIL’s products, they may fail to achieve the degree of market acceptance necessary for commercial success.

The commercial success of GRAIL’s products, including Galleri, DAC, and any future product GRAIL may develop, will depend upon the degree of market acceptance by consumers, including self-insured employers, integrated health systems, healthcare providers, patients, and, over the longer-term, third-party payors. The degree of market acceptance of GRAIL’s products will depend on a number of factors, including:

•

the performance and clinical utility of such products as demonstrated in clinical studies and published in peer-reviewed journals;

•

GRAIL’s ability to demonstrate the clinical utility of GRAIL’s products and their potential advantages to the medical community;

•

the ability of GRAIL’s products to demonstrate the same performance in real-world intended use populations as in clinical studies;

•

the willingness of consumers, including self-insured employers, integrated health systems, healthcare providers, patients and others in the medical community to utilize GRAIL’s products;

•

the willingness of commercial third-party payors and government payors to cover and reimburse for GRAIL’s products, the scope and amount of which will affect an individual’s willingness or ability to pay for GRAIL’s products and likely heavily influence healthcare providers’ decisions to recommend GRAIL’s products;

•

with respect to Galleri, which GRAIL intends to launch for use in a broad asymptomatic population, the concern that the product could lead to over-diagnosis or a high false-positive rate and unnecessary medical procedures and costs;

•

the introduction of competing products, including the expansion of the capabilities of existing products;

•

the market acceptance of existing competitive products, including tests that are currently reimbursed;

•

publicity concerning GRAIL’s products or competing products; and

•

the strength of GRAIL’s marketing and distribution support.

The failure of GRAIL’s products, once introduced, to be listed in physician guidelines or of its studies to produce favorable results or to be published in peer-reviewed journals could limit the adoption of GRAIL’s products. In addition, healthcare providers and third-party payors, including Medicare, may rely on physician guidelines issued by industry groups, medical societies, and other key organizations, such as the U.S. Preventive Services Task Force (“USPSTF”), before utilizing or reimbursing the cost of any diagnostic or screening test. Although GRAIL has a number of clinical studies underway designed to demonstrate the clinical validity of Galleri, GRAIL’s product is not yet, and may never be, listed in any such guidelines.

Further, if GRAIL’s products or the technology underlying them do not receive sufficient favorable exposure in peer-reviewed publications, the rate of physician and market acceptance of GRAIL’s products and positive reimbursement coverage decisions for GRAIL’s products could be negatively affected. The publication of clinical data in peer-reviewed journals is a crucial step in commercializing and obtaining reimbursement for products, such as Galleri or DAC, and GRAIL’s inability to control when, if ever, results are published may delay or limit GRAIL’s ability to derive sufficient revenues from any product that is developed using data from a clinical study.

Failure to achieve broad market acceptance of GRAIL’s products, including Galleri and DAC, would materially harm GRAIL’s business, financial condition, and results of operations.

GRAIL has never generated revenue from product sales, does not expect any near-term revenue to offset GRAIL’s ongoing operating expenses, and may never be profitable.

GRAIL’s ability to generate revenue from product sales and achieve profitability depends on its ability to commercialize its products. While GRAIL plans to commercially launch both Galleri and DAC in the United States in 2021 as LDTs, GRAIL cannot assure you that it will successfully be able to do so as planned, if at all, and GRAIL’s failure to do so would prevent GRAIL from generating revenue. Furthermore, even if GRAIL is able to launch these products in a timely manner, GRAIL may not be

able to generate sufficient revenue to offset its costs and achieve profitability. GRAIL’s ability to generate future revenue from product sales depends heavily on its success in:

•

completing clinical development and validation of GRAIL’s products and continuing to improve product performance and expand product features over time;

•

seeking, obtaining, and maintaining marketing approvals, clearances, licenses, or exemptions that may be necessary or desired for Galleri, DAC, and any future products that GRAIL develops;

•

launching and commercializing Galleri and DAC by establishing a sales force, marketing, medical affairs and distribution infrastructure or, alternatively, collaborating with a commercialization partner;

•

obtaining market acceptance by consumers, including self-insured employers, integrated health systems, healthcare providers, patients and third-party payors;

•

establishing and maintaining supply and manufacturing relationships with third parties that can timely and consistently provide adequate, in both amount and quality, products and services to support clinical development and the market demand for Galleri and DAC;

•

achieving adequate coverage and reimbursement recognition from governments, health insurance organizations, and other third-party payors for products that GRAIL launches;

•

addressing any technological and market developments, including competing products;

•

negotiating favorable terms in any collaboration, licensing, or other arrangements into which GRAIL may enter and maintaining such existing or future arrangements;

•

maintaining, protecting and expanding GRAIL’s portfolio of intellectual property rights, including patents, trade secrets, know-how, and trademarks;

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defending against third-party interference or infringement claims, if any; and

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attracting, hiring and retaining qualified personnel.

GRAIL anticipates incurring significant costs to commercialize GRAIL’s products. GRAIL’s expenses could increase beyond expectations if it is required by FDA or other regulatory agencies to delay its launch, narrow or change its intended use or product claims, modify or expand its clinical studies or to perform additional clinical trials or studies, either pre- or post-approval, in addition to those that it currently anticipates. Additionally, it may be difficult for GRAIL to offset the costs of the high-single-digit royalties that it will be required to pay under its agreement with Illumina. See “Material Contracts and Arrangements Between the Parties” and “GRAIL’s Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Commitments” for more information. Even if GRAIL is able to generate revenue from the sale of any products, GRAIL may not become profitable and may need to obtain additional funding to continue operations.

GRAIL may be unable to develop and commercialize new products.

GRAIL continues to expand its research and development efforts to use its proprietary platform and its large clinical and genomic datasets to develop enhanced versions of its products and additional products, including in disease areas beyond cancer. The commercialization of any new products will require the completion of certain clinical development activities, regulatory activities and the expenditure of additional cash resources. GRAIL cannot assure you that it can successfully complete the clinical development of any such products.

GRAIL expects its operating costs to continue to exceed its revenue, if any, for the foreseeable future. GRAIL also cannot assure you that it will be able to reduce its expenditures sufficiently,

generate sufficient revenue from products that it successfully commercializes or otherwise mitigate the risks associated with its business to raise enough capital to develop and commercialize new products. In addition, once GRAIL’s development efforts for a product are completed, commercialization efforts, including allocation of resources necessary to comply with applicable laws and regulations, will require significant expenditures. Any failure to develop and commercialize new products could have a material adverse effect on GRAIL’s ability to implement its strategy and grow its business.

One of the key elements of GRAIL’s strategy is to expand access to its tests by pursuing reimbursement and coverage from third-party payors. If GRAIL’s products do not receive adequate coverage and reimbursement from third-party payors, its ability to expand access to its tests beyond its initial sales channels will be limited and its overall commercial success will be limited.

GRAIL anticipates that it will not have broad-based coverage and reimbursement at the initial commercial launch for Galleri. However, a key element to GRAIL’s strategy is to expand access to its tests by pursuing coverage and reimbursement by third-party payors, including government payors. Coverage and reimbursement by third-party payors, including managed care organizations, private health insurers, and government healthcare programs, such as Medicare and Medicaid in the United States and similar programs in other countries, for the types of early detection tests GRAIL performs, can be limited and uncertain. Healthcare providers may not order GRAIL’s products unless third-party payors cover and provide adequate reimbursement for a substantial portion of the price of GRAIL’s products. If GRAIL is not able to obtain adequate coverage and an acceptable level of reimbursement for its products from third-party payors, there could be a greater co-insurance or co-payment obligation for any individual for whom a test is ordered. The individual may be forced to pay the entire cost of a test out-of-pocket, which could dissuade physicians from ordering GRAIL’s products and, if ordered, could result in delay in or decreased likelihood of GRAIL’s collection of payment. GRAIL believes its revenue and revenue growth will depend on its success in achieving broad coverage and adequate reimbursement for its products from third-party payors.

Medicare is the single largest U.S. payor and a particularly important payor for many cancer-related laboratory services given the demographics of the Medicare population. Generally, traditional Medicare fee-for-service will not cover screening tests that are performed in the absence of signs, symptoms, complaints, personal history of disease, or injury except when there is a statutory provision that explicitly covers the test. Galleri could be considered a screening test under Medicare and, accordingly, may not be eligible for traditional Medicare fee-for-service coverage and reimbursement unless GRAIL pursues substantial additional measures, which would require significant investments, and may ultimately be unsuccessful or may take several years to achieve.

Further, with respect to Galleri and other products GRAIL is developing to help detect other diseases, the U.S. Medicare Improvements for Patients and Providers Act of 2008 authorizes the Centers for Medicare and Medicaid Services (“CMS”) to cover additional preventive services that are not expressly covered by the statute if the service is (a) reasonable and necessary for the prevention or early detection of an illness or disability; (b) recommended with a grade of A or B by the USPSTF, an independent, volunteer panel of experts in the field of prevention, evidence-based medicine and primary care and (c) appropriate for Medicare beneficiaries under Part A or Part B. CMS establishes coverage through a national coverage determination (“NCD”) process. In its discretion, the USPSTF generally waits for FDA clearance or approval before it considers undertaking review of novel technology. Because multi-cancer early detection is not expressly authorized for coverage by the Medicare statute, a possible pathway for reimbursement is to first obtain FDA clearance or approval, and then seek a grade of A or B from USPSTF, to enable CMS to issue an NCD. If the USPSTF does not provide GRAIL’s products a grade of A or B or CMS declines to initiate an NCD, or the decision regarding an NCD is negative, GRAIL’s product would not be eligible for fee-for-service Medicare

coverage in the absence of a new statutory provision providing for coverage. Even if the USPSTF were to recommend Galleri or other products GRAIL is developing, the USPSTF review process and the ensuing NCD process by CMS could take several years to complete, and coverage for GRAIL’s products would be delayed while review is ongoing. The Affordable Care Act (“ACA”) mandates that many private insurance plans cover, among other preventive health services, evidence-based items or services recommended by USPSTF with a grade of A or B, with certain prohibitions on cost-sharing requirements. Accordingly, if USPSTF does not recommend use of Galleri or other products GRAIL is developing or requires a substantial amount of time to review such products, GRAIL’s business and the results of its operations would be harmed. Coverage and adequate reimbursement under Medicare Advantage are also uncertain. DAC is intended to be a diagnostic product, and GRAIL believes it could obtain Medicare coverage and reimbursement in the next several years, although there can be no assurances that GRAIL will be successful in doing so.

If eligible for reimbursement, laboratory tests such as GRAIL’s generally are classified for reimbursement purposes under CMS’s Healthcare Common Procedure Coding System (“HCPCS”) and the American Medical Association’s (“AMA”) Current Procedural Terminology (“CPT”) coding systems. GRAIL and payors must use those coding systems to bill and pay for GRAIL’s diagnostic tests, respectively. These HCPCS and CPT codes are associated with the particular product or service that is provided to the individual. Accordingly, without an HCPCS or CPT code applicable to GRAIL’s products, the submission of claims would be a significant challenge. Once CMS creates an HCPCS code or the AMA establishes a CPT code, CMS establishes payment rates and coverage rules under traditional Medicare, and private payors establish rates and coverage rules independently. Under Medicare, payment for laboratory tests is generally made under the Clinical Laboratory Fee Schedule (“CLFS”) with payment amounts assigned to specific HCPCS and CPT codes. In addition, effective January 1, 2018, a new Medicare payment methodology went into effect for clinical laboratory tests, under which laboratory-reported private payor rates are used to establish Medicare payment rates for tests reimbursed via the Medicare Clinical Laboratory Fee Schedule. The new methodology implements Section 216 of the Protecting Access to Medicare Act of 2014 (“PAMA”) and requires laboratories that meet certain requirements related to volume and type of Medicare revenues to report to CMS their private payor payment rates for each test they perform, the volume of tests paid at each rate, and the HCPCS code associated with the test. CMS uses the reported information to set the payment rate for each test at the weighted median private payor rate. Most affected tests are revalued every three years, with the exception of the reporting period between January 1, 2020 and March 31, 2020, which must now be reported between January 1, 2021 and March 31, 2021, and certain advanced diagnostic laboratory tests that are offered by a single laboratory and meet certain other criteria are revalued every year. The full impact of the PAMA rate-setting methodology and its applicability to GRAIL’s products remains uncertain at this time.

Coverage and reimbursement by a third-party payor may depend on a number of factors, including a payor’s determination that a product is appropriate, medically necessary, and cost-effective. Each payor will make its own decision as to whether to establish a policy or enter into a contract to cover GRAIL’s products and the amount it will reimburse for such products. Any determination by a payor to cover and the amount it will reimburse for GRAIL’s products would likely be made on an indication-by-indication basis. For example, because with Galleri GRAIL intends to cover a broad asymptomatic population and could potentially generate a significant number of false-positive results on an absolute basis, GRAIL may face additional scrutiny in obtaining reimbursement from third-party payors given the additional costs of further diagnostic workup. As a result, obtaining approvals from third-party payors to cover GRAIL’s products and establishing adequate coding recognition and reimbursement levels is an unpredictable, challenging, time-consuming, and costly process and GRAIL may never be successful. If third-party payors do not provide adequate coverage and reimbursement for GRAIL’s products, GRAIL’s ability to succeed commercially will be limited.

Even if GRAIL establishes relationships with payors to provide its products at negotiated rates, such agreements would not obligate any healthcare providers to order its products or guarantee that it would receive reimbursement for its products from these or any other payors at adequate levels. Thus, these payor relationships, or any similar relationships, may not result in acceptable levels of coverage and reimbursement for GRAIL’s products, including Galleri and DAC, or meaningful increases in the number of billable tests it sells to healthcare providers. GRAIL believes it may take several years to achieve coverage and adequate reimbursement with a majority of third-party payors, including with those payors offering negotiated rates. In addition, GRAIL cannot predict whether, under what circumstances, or at what payment levels payors will cover and reimburse for its products. Although GRAIL does not expect Galleri to have Medicare or other third-party coverage or reimbursement in the near term, GRAIL plans to market its product to large self-insured employers, certain physician directed channels, including self-insured employers, concierge medicine and executive health programs and innovative health systems. If GRAIL fails to establish and maintain broad-based coverage and reimbursement for its products, its ability to expand access to its products, generate increased revenue, and grow its test volume and customer base will be limited and its overall commercial success will be limited.

If GRAIL’s competitors’ products do not perform as intended, the market for its products could be impaired.

Many companies are developing competing cancer detection tests and technologies focused on improving cancer care with cancer detection tests and post-diagnostic products. If any tests marketed or being developed by GRAIL’s competitors similar to its products do not perform to expectations or cause harm or injury to patients, it may result in lower confidence in early disease detection and post-diagnosis tests in general, which could potentially adversely affect confidence in its products. As a result, the failure of GRAIL’s products or GRAIL’s competitors’ products to perform as expected could significantly impair GRAIL’s operating results and its reputation.

GRAIL will require additional financing in order to expand its commercialization efforts with respect to Galleri and DAC and develop additional products.

GRAIL’s operations have required substantial amounts of cash since inception. To date, GRAIL has financed its operations primarily through the sale of equity securities. GRAIL’s product development and clinical trial activities are expensive, and GRAIL expects to continue to spend substantial amounts as it prepares for the launch and commercialization of Galleri and DAC, continue to enhance its core technology platform, broaden the applications of its technology platform and develop new products. In addition, obtaining any necessary or desirable regulatory approvals and clearances for GRAIL’s products will require substantial additional funding.

As of September 30, 2020, GRAIL had $634.6 million in cash, cash equivalents, and marketable securities. GRAIL believes that its existing cash, cash equivalents, and marketable securities will be sufficient to fund its projected operations for at least the next 12 months. GRAIL’s estimate as to how long it expects its existing cash, cash equivalents, and marketable securities to be available to fund its operations is based on assumptions that may prove to be inaccurate, and GRAIL could use its available capital resources sooner than it currently expects. In addition, changing circumstances may cause GRAIL to increase its spending significantly faster than it currently anticipates, and GRAIL may need to spend more money than currently expected because of circumstances beyond its control. GRAIL may need to raise additional funds sooner than it anticipates.

GRAIL will require additional capital for the development and commercialization of Galleri and DAC, and development of additional products. GRAIL’s future capital requirements depend on many additional factors, including:

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the cost of development and commercialization activities for GRAIL’s products, including Galleri and DAC, including marketing, sales and distribution costs;

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the cost related to scaling operations to support demand for GRAIL’s products, including the cost of construction of a new laboratory in Durham, North Carolina;

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the timing of, and the costs involved in, obtaining any required or desired regulatory approvals and clearances for GRAIL’s products;

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the timing, scope, progress, results and costs of developing additional products, and of conducting clinical studies;

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the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending, and enforcing patent and other intellectual property rights and claims, including litigation costs and the outcome of such litigation;

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the timing and amount of sales of GRAIL’s products, if any, and collection of related receivables;

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the extent to which GRAIL’s products are eligible for coverage and reimbursement from third-party payors;

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the emergence of new technologies or any competing tests, products, or services and other adverse market developments; and

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other potential adverse developments.

If GRAIL’s products result in direct or indirect participant harm or injury, GRAIL could be subject to significant reputational and liability risks, and its operating results, reputation, and business could suffer.

GRAIL’s success will depend on the market’s confidence that its products, including Galleri and DAC, can provide reliable, high-quality results, once such products are launched. GRAIL believes that patients, physicians, and regulators are likely to be particularly sensitive to errors in the use of its products or failure of its products to perform as described, and there can be no guarantee that its products will meet their expectations. Galleri is intended to be used to detect a cancer signal in individuals, but its results are not diagnostic. If a cancer signal is detected, the product would be used to localize the origin of the cancer signal; a “cancer signal detected” test result would need to be followed up by appropriate diagnostic methods. Because the product cannot detect all cancer signals, and may not detect signals for all cancer types, a negative test would not rule out the presence of cancer. Additionally, an individual undergoing unnecessary diagnostic tests on the basis of a false-positive result or an erroneous location of cancer signal result could expose GRAIL to significant liability and reputational risks. Similarly, an individual who receives a cancer diagnosis shortly following a “no cancer signal detected” test result may create negative publicity about GRAIL’s product, which would discourage adoption. Performance failures could establish a negative perception of GRAIL’s products among physicians, patients, and regulators, jeopardize GRAIL’s ability to successfully commercialize its products, impair GRAIL’s ability to obtain regulatory approvals or secure favorable coverage and reimbursement, or otherwise result in reputational harm. In addition, GRAIL may be subject to legal claims arising from any errors in the use, manufacture, design, labeling or performance of its products, including any false-positive or false-negative results.

GRAIL relies on Illumina as a sole supplier for GRAIL’s next-generation sequencers and associated reagents, Streck, Inc. as a sole supplier of GRAIL’s blood collection tubes, and Twist Bioscience Corporation as a sole supplier of GRAIL’s DNA panels. Additionally, GRAIL relies on a limited number of suppliers for some of its laboratory instruments and reagents, and it may not be able to find replacements or immediately transition to alternative suppliers if necessary.

GRAIL relies on Illumina as the sole supplier of the next-generation sequencers and associated reagents GRAIL uses to perform its genomic tests and as the sole provider of maintenance and repair services for these sequencers. Any disruption in Illumina’s operations or breach of GRAIL’s supply-related agreements would impact GRAIL’s supply chain and laboratory operations as well as GRAIL’s ability to develop and commercialize its products, including Galleri and DAC. GRAIL also relies on Streck, Inc. (“Streck”) as the sole supplier of GRAIL’s blood collection tubes and Twist Bioscience Corporation (“Twist”) as the sole supplier of GRAIL’s DNA panels. Any interruption in supply from these vendors would delay GRAIL’s ability to develop and commercialize its products.

Further, following GRAIL’s proposed launch of Galleri as an LDT, GRAIL is planning to submit a PMA to FDA. GRAIL may seek FDA premarket clearance or approval for DAC. For products supplied to GRAIL by Illumina, GRAIL has not negotiated the use of their products in any FDA-approved or cleared products. GRAIL is cooperating with Streck to obtain FDA clearance or approval for their blood collection tubes. In some cases, use of these third-party products in any FDA-cleared or approved product GRAIL may seek to commercialize will be conditioned on these suppliers having obtained FDA clearance or approval for their products. Before GRAIL pursues clearance or approval for its products that incorporate or use materials supplied to GRAIL by these suppliers, GRAIL will need to negotiate and execute agreements with these parties and in some cases may need to ensure these products have obtained the requisite clearances or approvals. Any failures or delays in negotiating agreements with GRAIL’s suppliers on reasonable terms, or their inability to obtain any required clearances or approvals, may increase GRAIL’s costs or delay or prevent GRAIL from obtaining clearance or approval of, and thus commercializing, Galleri or DAC. Further, if FDA were to take enforcement action against GRAIL or its suppliers for GRAIL’s use of RUO products in connection with GRAIL’s products that it intends to use for diagnostic purposes, including GRAIL’s launch of LDTs, such action could require GRAIL to seek alternative suppliers and thus materially and adversely affect its ability to provide timely testing results to its customers and could significantly increase its costs of conducting business. Products for FDA approved or cleared in vitro diagnostic use generally have significantly higher costs than LDT uses, which, in turn, are more costly than products intended for RUO.

GRAIL’s current suppliers, including Illumina, Streck or Twist, may also discontinue or substantially change the specification of products that GRAIL utilizes in its products. GRAIL believes there are only a few other manufacturers that are currently capable of supplying and servicing the other equipment and materials necessary for its laboratory operations, including certain instruments, components, consumables, and reagents. Transitioning to a new supplier for this equipment or these materials would be time-consuming and expensive, could result in interruptions in or otherwise affect the performance specifications of GRAIL’s laboratory operations and sample processing or could require that it revalidate its products and, if it receives FDA clearance or approval for its products, could require a new submission to FDA and other regulatory bodies to approve or clear such changes. In addition, GRAIL purchases certain products on a purchase order basis and cannot guarantee a consistent source of supply. The use of equipment or materials provided by a replacement supplier could require GRAIL to alter its laboratory operations and sample collection and processing and related procedures. In the case of attempting to obtain an alternative supplier for Illumina, Streck, or Twist, replacement instruments and associated reagents, tubes, and panels that meet GRAIL’s quality control and performance requirements may not be available at all, or may not be available on reasonable terms or in a timely manner. If GRAIL encounters delays or difficulties in securing, reconfiguring or

revalidating the equipment, reagents and other materials that it requires for its laboratory operations and sample collection and processing, GRAIL would likely face significant delays in commercializing its products and its business, financial condition, results of operations, and growth prospects would be adversely affected.

If GRAIL’s facilities or those of its third-party collaborators become inoperable, GRAIL’s ability to provide its products will be significantly impaired and its business will be harmed.

GRAIL currently performs all research and development, and anticipates that in the near term it will conduct commercial testing work, for its products, including Galleri and DAC when launched, in GRAIL’s laboratory located in Menlo Park, California. The facility may be harmed, rendered inoperable by physical damage or otherwise become partially or completely unusable due to fire, floods, earthquakes, power loss, telecommunications failures, break-ins, accidents, pandemics and similar events, which may render it difficult or impossible for GRAIL to provide its products for some period of time. GRAIL’s laboratory and the equipment it uses to perform its research and development or commercialization work could be unavailable or costly and time-consuming to repair or replace. It would be difficult, time-consuming, and expensive to rebuild GRAIL’s facility, particularly in light of the licensure, permits, and accreditation requirements for a clinical laboratory like GRAIL’s. Although GRAIL carries insurance for damage to its properties and the disruption of its business, this insurance may not be sufficient to cover all of its potential losses and may not continue to be available to it on acceptable terms, or at all.

In June 2020, GRAIL entered into an agreement to lease space in Durham, North Carolina, and is in the process of constructing a new laboratory facility to help it increase its product development and operations capacity as it anticipates the commercial launch of Galleri and DAC in 2021. Construction requires significant resources and GRAIL may encounter difficulties and delays in construction as well as obtaining necessary validation, permits, licenses, certifications (including Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) and College of American Pathologists (“CAP”) accreditation) for this forthcoming facility. For example, as circumstances around the COVID-19 pandemic are evolving, government-imposed quarantines and restrictions may also require GRAIL to temporarily halt construction or validation activities in North Carolina. If GRAIL is unable to complete construction in a timely and satisfactory manner and obtain necessary permits, licenses, certificates, and accreditations within its currently anticipated timelines, GRAIL may be unable to meet demand for its products at its Menlo Park facility alone, on a timely basis or at all, which would negatively impact GRAIL’s reputation and commercial plans. GRAIL may be unable to regain those customers or repair its reputation in the future, which would negatively impact its business and result of operations.

GRAIL also relies on its third-party collaborators, consultants, contractors, vendors, suppliers, and service providers. The facilities of these partners could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, tornadoes, hurricanes, fires, extreme weather conditions, medical epidemics, pandemics and other natural or man-made disasters or business interruptions. In addition, they may be affected by government shutdowns, changes to applicable laws, regulations, and policies, or withdrawn funding. The occurrence of any of these business disruptions could seriously harm their ability to complete their contracted services to GRAIL, which may adversely impact its operations and financial condition.

Failure of, or defects in, GRAIL’s machine learning and cloud-based computing infrastructure, or increased regulation in the machine learning space, could impair GRAIL’s ability to process its data, develop products, or provide test results, and harm its business and results of operations.

The design, development, maintenance, and operation of GRAIL’s technology over time is expensive and complex, and may involve unforeseen difficulties including material performance

problems, undetected defects, or errors. Overcoming technical obstacles and correcting defects or errors could prove to be impossible or impracticable, and the costs incurred may be substantial and adversely affect GRAIL’s results of operations. Additionally, regulation in the machine learning space is constantly evolving and may make it difficult for GRAIL to continue using its machine learning approach. If GRAIL’s technology does not function reliably, fails to meet expectations in terms of performance, or cannot be fully utilized due to increasing regulation, GRAIL may be unable to provide or its customers may stop using its products.

GRAIL currently hosts all of its data on, and conducts its data analysis through, Amazon Web Services (“AWS”) cloud-based hosting facilities. Any technical problems or outages that may arise in connection with AWS’s data center hosting facilities could result in loss of GRAIL’s data or delayed or ineffective data processing. A variety of factors, including infrastructure changes, human or software errors, viruses, malware, security attacks, fraud, spikes in customer usage, or denial of service issues could cause interruptions in GRAIL’s service. Such service interruptions may reduce or inhibit GRAIL’s ability to provide its products, delay its clinical studies, and damage its relationships with its customers. GRAIL could also be exposed to potential lawsuits, liability claims or regulatory actions, for example if AWS experienced a data privacy breach. If GRAIL was required to transfer its data to an alternative hosting provider, the transfer and acclimation to the new provider could result in significant business delays and require additional resources.

If GRAIL is unable to scale its operations successfully to support demand for its products, its business could suffer.

As and to the extent test volumes grow, GRAIL will need to continue to ramp up laboratory capacity, including moving the processing of Galleri to GRAIL’s new Durham, North Carolina facility over time, as GRAIL’s Menlo Park laboratory may not support the capacity for the anticipated development and commercialization testing in the future. In addition, GRAIL will need to implement new infrastructure, data processing capabilities, customer service, billing and systems processes, and expand GRAIL’s internal quality assurance program and technology to support testing on a larger scale. GRAIL will also need additional equipment, and certified and licensed laboratory personnel to process higher volumes of tests. GRAIL cannot assure you that it will complete construction of its North Carolina facility and obtain necessary certifications, permits, licenses, and accreditations in a timely manner or at all; therefore, GRAIL may be unable to move the processing of Galleri to this new laboratory, and GRAIL may be unable to complete required development and commercial test processing activities. Because GRAIL intends to launch Galleri and DAC initially as LDTs under FDA’s current policy of enforcement discretion, GRAIL will need to ensure that any commercialization of the products at the North Carolina facility comply with the requirements applicable to LDTs. According to FDA, an LDT is defined as an in vitro diagnostic test intended for clinical use and designed, manufactured and used within a single laboratory. Failure to comply with FDA requirements regarding the use of a single laboratory could result in FDA determining that its policy of enforcement discretion does not apply and that such products must comply with certain FDA requirements for medical devices, including premarket review. If FDA were to take this position, GRAIL and its products could be subject to enforcement action. Further, GRAIL may face difficulties increasing the scale of its operations, including implementing changes in infrastructure or programs or acquiring additional equipment or personnel. As GRAIL refines its products and develops additional products, GRAIL may need to bring new equipment on-line, implement new systems, technology, controls and procedures, and hire personnel with different qualifications, licenses, or certifications.

The value of Galleri and DAC will depend, in part, on GRAIL’s ability to perform tests and return results to providers on a timely basis and at an appropriate quality standard, and on GRAIL’s reputation for such timeliness and quality. Failure to implement necessary procedures, to transition to new equipment or processes, or to hire the appropriate, qualified personnel could result in higher costs

of processing, longer turnaround times or an inability to meet market demand. There can be no assurance that GRAIL will be able to perform tests on a timely basis at a level consistent with demand, that GRAIL will be able to maintain the quality of its test results as GRAIL scales its commercial operations, or that GRAIL will be successful in responding to the growing complexity of GRAIL’s laboratory operations, including the related data analysis requirements.

In addition, GRAIL’s growth may place a significant strain on its management, operating and financial systems, research and development, and its sales, marketing, and administrative resources. As a result of GRAIL’s growth, its operating costs may escalate even faster than planned, and some of its internal systems may need to be enhanced or replaced. If GRAIL cannot effectively manage its expanding operations and its costs, GRAIL may not be able to grow successfully or it may grow at a slower pace, and its business could be adversely affected.

GRAIL’s business and results of operations will suffer if it fails to compete effectively.

The testing and diagnostic products industry is intensely competitive. GRAIL has competitors both in the United States and abroad, including AnchorDx, Burning Rock Biotech Limited, Exact Sciences Corporation, Freenome, Inc., Guardant Health, Inc., Invitae Corp., Laboratory for Advanced Medicine, PapGene, Inc. and Singlera Genomics, Inc. that have stated that they are developing tests designed to detect cancer, including some that will use cfNA analyses like GRAIL’s. GRAIL’s competitors have or may have substantially greater financial, technical, and other resources, such as larger research and development staff and well-established marketing and sales forces, or may operate in jurisdictions where lower standards of evidence are required to bring products to market. GRAIL’s competitors may succeed in developing, acquiring, or licensing, on an exclusive basis or otherwise, tests or services that are more effective or less costly than GRAIL’s products. In addition, established medical technology, biotechnology, or pharmaceutical companies may invest heavily to accelerate discovery and development of tests that could make GRAIL’s products less competitive than GRAIL anticipates.

GRAIL’s ability to compete successfully will depend largely on its ability to:

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successfully commercialize its products;

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demonstrate compelling advantages in the performance and convenience of its products, including on a cost competitive basis;

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achieve market acceptance of its products by healthcare providers and patients;

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achieve adequate coverage and reimbursement by third-party payors for its products;

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differentiate its product from the other tests and products of current and potential competitors;

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attract qualified scientific, data science, clinical development, product development, and commercial personnel;

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obtain, maintain, defend, and enforce patent and other proprietary protection as necessary for its products;

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obtain and maintain any necessary or desirable clearance or approval from regulators in the United States and other jurisdictions;

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successfully collaborate with institutions in the discovery, development, and commercialization of its products; and

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successfully expand its operations and implement a successful sales and marketing strategy to support commercialization.

GRAIL may not be able to compete effectively if GRAIL is unable to accomplish one or more of these or similar objectives.

GRAIL’s business is subject to risks arising from epidemic diseases, such as the recent global outbreak of COVID-19.

The recent outbreak of COVID-19, which has been declared by the World Health Organization to be a pandemic, has spread across the globe and is impacting worldwide economic activity. A pandemic, including COVID-19 or other public health epidemic, poses the risk that GRAIL, its personnel, courier delivery services, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities. A recession or market correction resulting from the spread of COVID-19 could impact funding for healthcare globally, which may negatively impact GRAIL’s business. While it is not possible at this time to estimate the impact that COVID-19 could have on GRAIL’s business, the COVID-19 pandemic and mitigation measures have had and may continue to have an adverse impact on global economic conditions, which could have an adverse effect on GRAIL’s business, results of operations, cash flows, and financial condition, including impairing the ability to raise capital when needed.

The COVID-19 pandemic has delayed anticipated completion of GRAIL’s PATHFINDER and SUMMIT studies, as GRAIL had to suspend enrollment of the studies during the second quarter of 2020. While study sites have resumed enrollment, GRAIL may need to suspend enrollment again in the future. There is a risk that changing circumstances relating to the COVID-19 pandemic may not allow GRAIL’s healthcare clinical trial investigators, their healthcare facilities or other necessary parties to continue to participate in GRAIL’s clinical studies through completion or may delay the initiation of planned clinical studies. Additionally, if GRAIL’s trial participants are unable to travel to its clinical study sites as a result of quarantines or other restrictions resulting from the COVID-19 pandemic, GRAIL may experience higher drop-out rates or delays in its clinical studies. Government-imposed quarantines and restrictions may also require GRAIL to temporarily terminate its clinical sites. Furthermore, if GRAIL determines that its trial participants may suffer from exposure to COVID-19 as a result of their participation in its clinical studies, GRAIL may voluntarily terminate certain clinical sites as a safety measure until GRAIL reasonably believes that the likelihood of exposure has subsided. As a result, GRAIL’s expected regulatory submissions and development timelines for its products have been and may be further negatively impacted. GRAIL cannot predict the ultimate impact of the COVID-19 pandemic as consequences of such an event are highly uncertain and subject to change. GRAIL does not yet know the full extent of potential delays or impacts on its business, its clinical trials or as a whole; however, the COVID-19 outbreak may materially disrupt or delay GRAIL’s business operations, further divert the attention and efforts of the medical community to coping with COVID-19, reduce the number of patients getting physicals and physicians potentially ordering GRAIL’s products, disrupt the clinical sites on which GRAIL depends, and/or have a material adverse effect on its operations.

If GRAIL cannot maintain its current collaborations and enter into new collaborations in a timely manner and on acceptable terms, its efforts to develop and commercialize its products could be delayed or adversely affected.

GRAIL relies, and expects to continue to rely, on collaborative partners to help it develop its products. For example, GRAIL currently collaborates with pharmaceutical companies and research institutions, including The Chinese University of Hong Kong and Hebrew University of Jerusalem, among others, to enhance GRAIL’s research efforts. Under GRAIL’s Contract Research Agreement with the Chinese University of Hong Kong, GRAIL has exclusive rights to certain intellectual property developed by the Chinese University of Hong Kong. After the Contract Research Agreement expires in August 2021, there is potential that the Chinese University of Hong Kong could develop intellectual property applicable to GRAIL’s business that GRAIL may be interested in, and if so, GRAIL would need to negotiate for rights to such intellectual property. GRAIL’s reliance on these third parties reduces its

control over its product development activities. If any of GRAIL’s collaborators were to breach or terminate its agreement with GRAIL or otherwise fail to conduct the contracted activities successfully and in a timely manner, the research, development or commercialization activities of GRAIL’s products could be delayed or terminated. Further, GRAIL’s collaborators may fail to properly protect GRAIL’s intellectual property rights, may infringe the intellectual property rights of third parties, may misappropriate GRAIL’s trade secrets, or may use GRAIL’s proprietary information or others’ in such a way as to expose GRAIL to litigation and potential liability. Disagreements or disputes with GRAIL’s collaborators, including disagreements over proprietary rights, funding, or contract interpretation, might cause delays or termination of the research, development or commercialization of GRAIL’s products, might lead to additional responsibilities for GRAIL with respect to these products or activities or might result in litigation or arbitration, any of which would divert management attention and resources and be time-consuming and expensive. GRAIL may not be able to renew its current agreements with collaborators or negotiate additional collaboration agreements on acceptable terms, if at all, and these collaborations may not be successful. Any transition from a current collaborator to a new collaborator could be costly and result in significant product development delays.

From time to time, GRAIL expects to engage in discussions with potential development and/or commercial collaborators that may or may not lead to collaborations. However, GRAIL cannot guarantee that any discussions will result in development or commercial collaborations. Further, once news of discussions regarding possible collaborations are known in the general public, regardless of whether the news is accurate, failure to announce a collaboration agreement, or the entity’s announcement of a collaboration with an entity other than GRAIL, could result in adverse speculation about GRAIL, its products or its technology, resulting in harm to its reputation and its business. In addition, establishing collaborations is difficult, time-consuming and may require GRAIL’s significant financial investment. Potential collaborators may elect not to work with GRAIL based on their assessment of its financial, regulatory, or intellectual property position. Even if GRAIL establishes new collaborations, they may not result in the successful development or commercialization of its products or technology.

If GRAIL is unable to establish sales and marketing capabilities, it may not be successful in commercializing GRAIL’s products.

GRAIL has only limited sales and marketing infrastructures and no experience as a company in the sale, marketing, and distribution of screening or diagnostic tests. In preparation of the commercial launch of Galleri and DAC, GRAIL is rapidly hiring additional personnel in GRAIL’s sales and marketing organization.

Factors that may inhibit GRAIL’s efforts to commercialize any of its products include:

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its inability to recruit and retain adequate numbers of effective sales, marketing, reimbursement, customer service, medical affairs, and other support personnel;

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the inability of sales personnel to persuade adequate numbers of customers, including healthcare systems and healthcare providers, to use its products;

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the inability to price its products at a sufficient price point to ensure an adequate and attractive level of profitability;

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its inability to effectively market to, collaborate with, and secure coverage and reimbursement from third-party payors;

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its failure to comply with applicable regulatory requirements governing the sale, marketing, reimbursement, and commercialization of its products; and

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unforeseen costs and expenses associated with creating an independent commercialization organization.

GRAIL relies on third parties to conduct portions of its clinical studies. These third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such studies.

GRAIL currently relies on and expects to continue relying on third parties, such as CROs and other service providers, medical institutions, and clinical investigators, to conduct some aspects of its clinical studies. Any of these third parties may terminate their engagements with GRAIL, be unable to fulfill their contractual obligations or fail to meet applicable regulatory requirements. If GRAIL needs to enter into alternative arrangements, its product development activities could be delayed.

GRAIL’s reliance on third parties for clinical study-related activities reduces its control over such activities but does not relieve it of its responsibilities. For example, GRAIL remains responsible for ensuring that each of its clinical studies is conducted in accordance with the general investigational plan, protocol, consent form, IRB approval, and applicable requirements. Moreover, FDA requires compliance with applicable GCP requirements for sponsoring clinical studies to assure that data and reported results are credible, reproducible and accurate and that the rights, welfare, and safety of study participants are protected for data used in support of a regulatory submission. GRAIL also is required to register applicable clinical studies and post certain results on a government-sponsored database within certain timeframes. Failure to do so can result in fines, adverse publicity, and civil and criminal sanctions.

If the third parties GRAIL relies on do not successfully carry out their contractual duties, meet expected deadlines, or conduct its clinical studies in accordance with regulatory requirements or IRB- or ethics committee-approved protocols, GRAIL will not be able to obtain, or may be delayed in obtaining, any necessary or desirable marketing authorizations for its products and will not be able to, or may be delayed in GRAIL’s efforts to, successfully commercialize its products.

GRAIL depends on its information technology and telecommunications systems and those of third parties, any failure or disruption of these systems could harm its business.

GRAIL depends on information technology and telecommunications systems, including those provided by third parties and their vendors, for significant elements of its operations, such as its laboratory information management systems, including test validation, specimen tracking, and quality control; personal information collection, storage, maintenance, and transmission; its report production systems; and its billing and reimbursement, research and development, scientific and medical data analysis, and general administrative activities. In addition, GRAIL’s third-party service providers depend upon technology and telecommunications systems provided by outside vendors. In connection with becoming a public company, GRAIL expects to expand and strengthen a number of enterprise software systems that affect a broad range of business processes and functions, including, for example, systems handling human resources, financial controls and reporting, customer relationship management, regulatory compliance, security controls, and other infrastructure operations. These expansions may prove more difficult than GRAIL expects and could cause disruptions in its operations or additional expense.

Information technology and telecommunications systems are vulnerable to damage from a variety of sources, including telecommunications or network failures, malicious human acts and natural disasters. Moreover, despite network security and back-up measures, some of GRAIL’s servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive events. Despite the precautionary measures GRAIL has taken to detect and prevent or solve problems that could affect its information technology and telecommunications systems, failures or significant downtime of these systems or those used by its third-party service providers and their vendors could prevent GRAIL from conducting tests, preparing and providing reports to future customers, billing

payors, conducting research and development activities, maintaining its financial controls and other reporting functions, and managing the administrative aspects of its business. Any disruption or loss of information technology or telecommunications systems on which critical aspects of GRAIL’s operations depend could have an adverse effect on its business.

GRAIL is highly dependent on its key personnel. If GRAIL is not successful in attracting, motivating, and retaining highly qualified personnel, it may not be able to successfully implement its business strategy.

GRAIL’s ability to compete in the highly competitive biotechnology industry depends upon its ability to attract, motivate, and retain highly qualified personnel. GRAIL is highly dependent on its executive management team and its scientific, medical, technological, and engineering personnel, all of whom have been working together as a group for only a limited period of time. The loss of the services provided by any of GRAIL’s executive officers, other key employees, and other scientific and medical advisors, and GRAIL’s inability to find suitable replacements, could result in delays in commercialization of its products and harm its business. GRAIL does not maintain “key person” insurance policies on the lives of these individuals or the lives of any of its other employees.

GRAIL is headquartered in Menlo Park, California, a region in which many other healthcare companies, technology companies and academic and research institutions are headquartered. In addition, GRAIL is constructing a new laboratory facility in Durham, North Carolina, where there is also demand for skilled personnel. Competition for personnel is intense and the turnover rate can be high, which may limit GRAIL’s ability to hire and retain highly qualified personnel on acceptable terms or at all. GRAIL expects that it may need to recruit talent from outside of its region, and doing so may be costly and difficult.

To induce valuable employees to remain at GRAIL, in addition to salary and cash incentives, GRAIL has generally provided stock option grants that vest over time. The value to employees of these equity grants that vest over time may be significantly affected by movements in the value of GRAIL’s stock that are beyond GRAIL’s control, and may at any time be insufficient to counteract more lucrative offers from other companies. Although GRAIL has employment agreements with certain key employees, these employment agreements provide for at-will employment, which means that any of GRAIL’s employees could leave its employment at any time, with or without notice. If GRAIL is unable to attract and incentivize highly qualified personnel on acceptable terms, or at all, its business and results of operations may suffer.

GRAIL will need to grow the size and capabilities of its organization, and it may experience difficulties in managing this growth.

As of December 31, 2020, GRAIL had 494 employees, substantially all of whom were full-time. As GRAIL’s development plans and strategies develop, it must add a significant number of additional managerial, operational, financial, and other personnel. Future growth will impose significant added responsibilities on members of management, including:

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identifying, recruiting, integrating, retaining, and motivating additional employees;

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managing its internal development efforts effectively, including creating compliant programs and processes, such as a compliant laboratory and manufacturing quality system, and managing the regulatory requirements for its products, while complying with its contractual obligations to contractors and other third parties;

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expanding its operational, financial and management controls, reporting systems, and procedures; and

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managing the increasing complexity associated with a larger organization and expanded operations.

GRAIL’s future financial performance and its ability to commercialize its products will depend, in part, on its ability to effectively manage any future growth. GRAIL’s management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to manage these growth activities. GRAIL’s ability to successfully manage its expected growth is uncertain given the fact that GRAIL has been in operation as an independent company only since early 2016. GRAIL’s executive management team’s lack of long-term experience working together may adversely impact their ability to effectively manage its business and growth.

If GRAIL is not able to effectively expand its organization by hiring new employees, it may not be able to successfully implement the tasks necessary to commercialize its products, which would have a negative impact on GRAIL’s business and result of operations.

GRAIL’s business is subject to economic, political, regulatory, and other risks associated with international operations.

GRAIL’s business is subject to risks associated with conducting business internationally. For example, some of GRAIL’s suppliers and parties with whom it has collaborative relationships are located outside the United States, including in the United Kingdom, China, and Hong Kong. Accordingly, GRAIL’s future results could be harmed by a variety of factors, including:

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economic weakness, including inflation, or political instability in particular non-U.S. economies and markets;

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challenges enforcing its contractual and intellectual property rights, especially in those foreign jurisdictions that do not respect and protect intellectual property rights to the same extent as the United States;

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trade protection measures, import or export controls and licensing requirements (including possible restrictions on licensing intellectual property to certain non-U.S. persons) or other restrictive actions by U.S. or non-U.S. governments;

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changes in non-U.S. laws, regulations and customs, tariffs, and trade barriers;

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exchange rate risk it may face from denominating a portion of its transactions in currencies other than the U.S. dollar;

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changes in a specific country’s or region’s political or economic environment;

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negative consequences from changes in tax laws;

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negative consequences from changes in U.S. national security laws, including those governing non-U.S. investors’ ownership of U.S. biotech and other technology companies and U.S. companies’ ability to enter into joint ventures with non-U.S. entities;

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compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad;

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workforce uncertainty in countries where labor unrest is more common than in the United States;

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difficulties associated with staffing and managing international operations, including differing labor relations;

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potential liability under the Foreign Corrupt Practices Act (“FCPA”) or comparable foreign laws; and

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business interruptions resulting from geo-political actions, including war and terrorism, pandemics, or natural disasters, including earthquakes, typhoons, floods, and fires.

The continued spread of COVID-19 and the measures taken by the governments of countries affected could disrupt the supply chain of material needed for GRAIL’s products, some of which it sources from China and other countries outside the United States, and has delayed and could further delay clinical trial activities, which has delayed and may further delay product launch, all of which could have a material adverse effect on its business, financial condition and results of operations. For additional information, see “—GRAIL’s business is subject to risks arising from epidemic diseases, such as the recent global outbreak of COVID-19.”

In addition, the U.S. government has recently implemented various changes to trade policies affecting U.S. trade relations with other countries. For example, the Unites States has imposed supplemental tariffs on certain goods imported from China, and these measures have, in turn, resulted in China’s assessment of retaliatory tariffs on certain products imported from the United States. While at this time many healthcare-related products remain exempt from or temporarily excluded from the application of such tariffs, international trade policy in this area continues to evolve and additional products such as GRAIL’s could become subject to tariffs, which could adversely affect their marketability and GRAIL’s results of operations. It is unclear at this point how, if at all, such actions or other potential actions would impact GRAIL’s business or operations, but the uncertainty surrounding these matters could create difficulties in GRAIL’s efforts to partner with healthcare providers, suppliers, and insurance carriers. These and other risks associated with GRAIL’s planned international operations may materially and adversely affect its business and growth prospects.

GRAIL is also subject to a number of risks related to regulations and legal compliance. For additional information, see “—Risks Related to Regulation and Legal Compliance.”

GRAIL’s internal computer systems, or those used by its third-party research institution collaborators or other contractors or consultants, may fail or suffer security breaches.

Despite the implementation of security and back-up measures, GRAIL’s internal computer, server, and other information technology systems as well as those of its third-party collaborators, consultants, contractors, suppliers, and service providers, including AWS, may be vulnerable to damage from physical or electronic break-ins, computer viruses, malware, ransomware, denial of service and other cyber-attacks or disruptive incidents that could result in unauthorized access to, use or disclosure of, corruption of, or loss of sensitive, and/or proprietary data, including personal and health information, and could subject GRAIL to significant liabilities and regulatory and enforcement actions, and reputational damage. For example, one of GRAIL’s research partners disclosed to one of its software vendors certain protected health information of participants who were recruited into one of GRAIL’s clinical studies. After conducting a breach analysis, this research partner informed the affected individuals of the incident. Although GRAIL believes this was an isolated incident, if it or any of its third-party collaborators were to experience any material failure or security breach in the future, it could result in a material disruption of GRAIL’s development programs, reputation, and business operations. For example, the loss of clinical study data from completed or ongoing clinical studies could result in delays in any regulatory clearance or approval efforts and significantly increase GRAIL’s costs to recover or reproduce the data, and subsequently commercialize its products. If GRAIL or its third-party collaborators, consultants, contractors, suppliers, or service providers were to suffer an attack or breach, for example, that resulted in the unauthorized access to or use or disclosure of personal or health information, GRAIL may have to notify physicians, patients, partners, collaborators, government authorities, and the media, and may be subject to investigations, civil penalties, administrative and enforcement actions, and litigation, any of which could harm GRAIL’s business and reputation. Likewise, GRAIL relies on its third-party research institution collaborators and other third parties to conduct clinical studies, and similar events relating to their computer systems could also have a material adverse effect on GRAIL’s business. The COVID-19 pandemic is generally increasing the attack surface available to criminals, as more companies and individuals work online and work

remotely, and as such, the risk of a cybersecurity incident potentially occurring, and GRAIL’s investment in risk mitigations against such an incident, is increasing. For example, there has been an increase in phishing and spam emails as well as social engineering attempts from “hackers” hoping to use the recent COVID-19 pandemic to their advantage. To the extent that any disruption or security breach were to result in a loss of, or damage to, GRAIL’s data or systems, or inappropriate or unauthorized access to or disclosure or use of confidential, proprietary, or other sensitive, personal, or health information, GRAIL could incur liability and suffer reputational harm, and the development and commercialization of its products could be delayed.

GRAIL’s insurance policies may not be adequate to compensate it for the potential losses arising from such disruptions, failure, or security breach. In addition, such insurance may not be available to GRAIL in the future on economically reasonable terms, or at all. Further, GRAIL’s insurance may not cover all claims made against it and defending a suit, regardless of its merit, could be costly, divert management attention, and harm GRAIL’s reputation.

GRAIL relies on third-party services to collect, process, transport, and store its samples in a secure and cost-efficient manner. If these services were disrupted, GRAIL’s business would be harmed.

GRAIL’s business depends on its ability to reliably sequence blood samples that GRAIL collects, which are transported to its facility for analysis. GRAIL’s samples are initially collected, processed, frozen, and stored at several off-site facilities in the United States and Germany. Any disruption to the operations of these facilities could compromise the integrity of GRAIL’s samples and impede its ability to accurately sequence the data. For example, BioStorage Technologies, Inc. currently holds GRAIL’s STRIVE clinical samples in its long-term storage facility. If any natural or man-made disaster, accident, or break-in were to affect its facility, GRAIL’s STRIVE samples could be lost, destroyed, compromised, or otherwise adversely affected. In addition, GRAIL maintains samples from its clinical trials for several years. It is possible that the long-term stability of these samples may not be maintained with the passage of time, which could negatively impact GRAIL’s ability to use such samples to validate its products. Further, interruptions in collection, processing, freezing, or transportation of samples performed by third parties, whether due to labor disruptions, bad weather, natural disaster, terrorist acts, threats, or for other reasons could adversely affect the samples and GRAIL’s ability to process the samples in a timely manner, which could negatively affect its ongoing research studies and harm its business.

If GRAIL is sued for product or professional liability, it could face substantial liabilities that exceed its resources.

GRAIL’s business depends upon its ability to provide reliable and accurate test results that incorporate rapidly evolving understanding of how to interpret minute signals detected by GRAIL’s assays as indications of potential presence of disease. Actual or perceived errors resulting from laboratory or reporting errors, false positive or false negative test results, or the manufacture, design, or labeling of GRAIL’s products, could subject GRAIL to product liability or professional liability claims. A product liability or professional liability claim against GRAIL could result in substantial damages and be costly and time-consuming to defend. Although GRAIL maintains liability insurance, including for errors and omissions, its insurance may not fully protect it from the financial impact of defending against these types of claims or any judgments, fines, or settlement costs arising out of any such claims. Any liability claim brought against GRAIL, with or without merit, could increase its insurance rates or prevent it from securing insurance coverage in the future. Additionally, any liability lawsuit could damage GRAIL’s reputation or force it to suspend sales of its products. The occurrence of any of these events could have a material adverse effect on GRAIL’s business, results of operations, financial condition, and prospects.

GRAIL’s ability to use its net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, 2019, GRAIL had federal and state net operating loss (“NOL”) carryforwards of $202.5 million and $279.4 million, respectively, and federal and state research and development credit carryforwards of $22.2 million and $18.2 million, respectively. Certain of these NOL and research and development credit carryforwards will begin to expire, if not utilized, in various years beginning in 2036. Federal NOLs generated after December 31, 2017 may be carried forward indefinitely subject to the 80% deduction limitation based upon pre-NOL deduction taxable income. GRAIL’s ability to utilize such carryforwards is subject to certain conditions and may be subject to certain limitations due to prior or future ownership changes, if any, as defined in Section 382 of the Code. As such, there can be no assurance that GRAIL will be able to utilize such carryforwards. GRAIL has experienced a history of losses and a lack of future taxable income would adversely affect its ability to utilize these NOL and research and development credit carryforwards. GRAIL has established valuation allowances against its NOLs and research and development credits due to the uncertainty surrounding the realization of such assets.

GRAIL’s quarterly results of operations may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause GRAIL’s stock price to fluctuate or decline.

GRAIL expects its results of operations to be subject to quarterly fluctuations. GRAIL’s net loss and other operating results will be affected by numerous factors, including:

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GRAIL’s ability to successfully develop, market, and sell its products, including Galleri and DAC;

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the prices at which GRAIL is able to sell its products;

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the impact of competitive developments or GRAIL’s response thereto;

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disruptions in GRAIL’s business due to manufacturing, supply, security breaches, outages, or other issues;

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the cost of performing next-generation sequencing (“NGS”);

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the extent to which GRAIL’s product is deemed eligible or ineligible for coverage and reimbursement from third-party payors;

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changes in coverage and reimbursement or in reimbursement-related laws directly affecting GRAIL’s business;

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regulatory developments affecting GRAIL’s products or competing products;

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timing of expenditures in connection with GRAIL’s clinical studies; and

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non-routine cash and non-cash expenses and write-offs, whether associated with acquisitions, restructuring activities, litigation, investigations, or otherwise.

If GRAIL’s quarterly results of operations fall below the expectations of investors or securities analysts, the value of GRAIL Common Stock could decline substantially. Furthermore, any quarterly fluctuations in GRAIL’s results of operations may, in turn, cause the value of GRAIL Common Stock to fluctuate substantially. GRAIL believes that quarterly comparisons of its financial results are not necessarily meaningful and should not be relied upon as an indication of its future performance.

Acquisitions or other strategic transactions may increase GRAIL’s capital requirements, dilute its stockholders, cause it to incur debt or assume contingent liabilities, and subject it to other risks.

GRAIL has in the past engaged in acquisitions, including its acquisition of Cirina Limited, and it may engage in various acquisitions and strategic partnerships in the future, including licensing or acquiring complementary intellectual property rights, technologies, or businesses. Any acquisition or strategic partnership may entail numerous risks, including:

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increased operating expenses and cash requirements;

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the assumption of indebtedness or contingent liabilities;

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the issuance of GRAIL’s equity securities that would result in dilution to its stockholders;

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assimilation of operations, intellectual property, and products of an acquired company;

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difficulties associated with integrating new personnel;

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retention of key employees, the loss of key personnel, and uncertainties in GRAIL’s ability to maintain key business relationships;

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the diversion of GRAIL’s management’s attention from GRAIL’s existing product programs and initiatives in pursuing such an acquisition or strategic partnership;

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risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or product candidates and regulatory approvals, and the validity and enforceability of their intellectual property;

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inability to consummate acquisitions on which GRAIL spends a significant amount of time and resources;

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possible write-offs or impairment charges relating to acquired businesses; and

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GRAIL’s inability to generate revenue from acquired intellectual property, technology, or tests sufficient to meet its objectives or offset the associated transaction costs.

In addition, as GRAIL’s strategy evolves, it may opt to discontinue, deprioritize, or dispose of assets, technologies, or acquired businesses. For example, in 2019, GRAIL made a decision not to commercialize a stand-alone nasopharyngeal cancer test it was developing and sublicensed the related technology to a third party. GRAIL may take similar actions with other products in the future.

Risks Related to Regulation and Legal Compliance

GRAIL plans to initially launch its products as LDTs, and if FDA were to end or modify its current policy of enforcement discretion on LDTs, or if Congress enacts legislation that changes the current requirements for LDTs, GRAIL may lose the ability to commercialize Galleri and DAC without FDA premarket clearance or approval, which could require it to incur substantial costs and delays.

While GRAIL currently anticipates that it will eventually seek regulatory clearance or approval from FDA for Galleri and DAC, it intends to initially launch Galleri and DAC in the United States as LDTs. LDTs are in vitro diagnostic tests that are intended for clinical use and are designed, manufactured, and used within a single laboratory. Although LDTs are classified as medical devices and FDA has statutory authority to ensure that medical devices are safe and effective for their intended uses, FDA has historically exercised enforcement discretion and has not enforced certain applicable FDA requirements, including premarket review, with respect to LDTs, though such practices may not continue in the future.

Even under its current enforcement discretion policy, FDA has issued warning letters to and safety communications about in vitro diagnostic device manufacturers for commercializing laboratory tests that were purported to be LDTs but that FDA alleged failed to meet the definition of an LDT or otherwise were not subject to FDA’s policy on enforcement discretion because they presented a potential safety risk. Additionally, FDA could modify its current approach to LDTs in a way that could subject GRAIL’s products that it plans to market as LDTs to the enforcement of additional regulatory requirements. In recent years, FDA has stated its intention to modify its enforcement discretion policy with respect to LDTs. Specifically, on July 31, 2014, FDA notified Congress of its intent to modify, in a risk-based manner, its policy of enforcement discretion with respect to LDTs. On October 3, 2014, FDA issued two draft guidance documents entitled “Framework for Regulatory Oversight of Laboratory Developed Tests (LDTs),” or the Framework Guidance, and “FDA Notification and Medical Device Reporting for Laboratory Developed Tests (LDTs),” or the Reporting Guidance. Moreover, even if FDA does not modify its policy of enforcement discretion, FDA may disagree that GRAIL is marketing GRAIL’s LDTs within the scope of its policy of enforcement discretion and may impose significant regulatory requirements or take enforcement actions. FDA may request that GRAIL provide additional analyses and information beyond that which GRAIL intends to produce based on the designs of GRAIL’s current and planned clinical studies, or that GRAIL modify or narrow its intended use or product claims. In addition, FDA may choose not to exercise enforcement discretion with respect to GRAIL’s launch of its products as LDTs. As a result, it is possible that FDA may disagree with GRAIL’s interpretation of data from clinical studies to support GRAIL’s LDT launches for its proposed intended uses. If GRAIL is required to provide additional analyses or additional data or perform additional clinical studies or research, GRAIL’s commercial launch of Galleri or DAC would be delayed or the indicated uses may be significantly narrowed or modified. A delay in the launch of GRAIL’s products, or significantly narrowing their intended uses, could negatively impact its financial condition and results of operations.

In addition, FDA and Congress have, for over the past decade, considered a number of proposals to change FDA’s enforcement discretion policy for LDTs and subject LDTs to additional regulatory requirements. For example, Congress has recently been working on legislation to create an LDT and in vitro diagnostic regulatory framework for all in vitro clinical tests (“IVCTs”) that would be separate and distinct from the existing medical device regulatory framework. In March 2020, Members of Congress introduced the Verifying Accurate Leading-edge IVCT Development Act of 2020 (the “VALID Act”). If passed in its current form, the VALID Act would create a new category of medical products separate from medical devices for IVCTs. As proposed, the bill would establish a risk-based approach to imposing requirements related to premarket review, quality systems, and labeling requirements on all IVCTs, including LDTs, but would create exemptions for certain LDTs marketed before the effective date of the bill (though other regulation requirements may apply, for example, registration and notification, adverse event reporting). It is unclear whether the VALID Act or any other legislative proposals (including any proposals to reduce FDA oversight of LDTs) would be passed by Congress or signed into law by the President. Depending on the approach adopted under any potential legislation, certain LDTs (likely those of higher risk) may be required to undergo some form of premarket review, potentially with a transition period for compliance and a grandfathering provision.

Although FDA halted finalization of the guidance in November 2016 to allow for further public discussion on an appropriate oversight approach to LDTs and to give congressional authorizing committees the opportunity to develop a legislative solution, and FDA issued a discussion paper on possible approaches to LDT regulation in January 2017, if Congress does not take action in connection with the VALID Act or other LDT legislation, FDA could modify its current approach to LDTs in a way that could require that GRAIL’s products that it anticipates marketing as LDTs comply with additional FDA requirements. On August 19, 2020, the U.S. Department of Health and Human Services announced that FDA will not require premarket review of LDTs absent notice-and-comment rulemaking.

If FDA changes its policy of enforcement discretion for LDTs, GRAIL may be required to obtain premarket clearance or approval for its products from FDA or do so earlier than anticipated. The process for submitting a premarket notification and receiving FDA clearance usually takes from three to twelve months, depending on the type of submission, but it can take significantly longer and clearance is never guaranteed. The process for submitting and obtaining FDA clearance or approval is costly and uncertain. Moreover, there can be no assurance that any cleared or approved labeling claims will be consistent with the claims GRAIL would make about its products when launched as LDTs, or that such claims will be adequate to support continued adoption of and reimbursement for GRAIL’s products. If premarket review is required for some or all of GRAIL’s products, FDA may require GRAIL to stop selling its products pending clearance or approval, which would negatively impact GRAIL’s business. Even if GRAIL’s products are allowed to remain on the market prior to required clearance or approval, demand or reimbursement for GRAIL’s products may decline if there is uncertainty about its products, if GRAIL is required to label its products as investigational by FDA, or if FDA limits the labeling claims GRAIL is permitted to make for its products. As a result, GRAIL could experience significantly increased development costs and a delay in generating additional revenue from its products, or from other products now in development.

If FDA changes its enforcement discretion policy or imposes significant changes to the regulation of LDTs, either generally or to GRAIL’s LDT products in particular, it could reduce GRAIL’s revenues or increase its costs and adversely affect its business, prospects, results of operations or financial condition.

The regulatory clearance or approval processes of FDA and comparable foreign regulatory authorities are lengthy, time-consuming, and unpredictable. If GRAIL is ultimately unable to obtain any necessary or desirable regulatory approvals or clearances, or if such approvals or clearances are significantly delayed, its business will be substantially harmed.

Following GRAIL’s planned initial launch of Galleri as an LDT, GRAIL currently anticipates seeking PMA approval from FDA for a version of Galleri. GRAIL may seek FDA premarket clearance or approval for a version of DAC after its LDT launch. Accordingly, GRAIL would be subject to FDA’s regulatory review processes. The time required and ability to obtain clearance or approval by FDA and comparable foreign regulatory authorities is unpredictable, typically takes several years following the commencement of clinical studies, and depends upon numerous factors, including the type, complexity, and novelty of GRAIL’s products. In addition, policies, laws, regulations, or the type and amount of clinical data necessary to gain clearance or approval may change during the course of a test’s clinical development and may vary among jurisdictions, which may cause delays in the clearance or approval of, or the decision not to approve, an application. Regulatory authorities have substantial discretion in the premarket review process and may refuse to accept any application, decide that GRAIL’s data are insufficient for clearance or approval, require additional clinical or other data, or determine that its manufacturing and quality systems are insufficient or in violation of applicable requirements. Even if GRAIL believes its data is sufficient to support regulatory approval, regulatory authorities may disagree that approval is warranted, or may require the generation and submission of additional data or data analyses and significantly delay approval.

Before a new medical device, or a new intended use of, claim for, or significant modification to an existing device, can be marketed in the United States, a company must first submit an application for and receive 510(k) clearance pursuant to a premarket notification submitted under Section 510(k) of the Federal Food, Drug, and Cosmetic Act (“FDCA”), de-novo classification, or PMA approval from FDA, unless an exemption applies. The PMA approval pathway, which GRAIL expects to pursue for Galleri following potential launch as an LDT, requires an applicant to demonstrate the safety and effectiveness of the product based, in part, on valid scientific evidence, including, but not limited to, technical, preclinical, and clinical data. The 510(k) pathway requires an FDA finding that the test is

substantially equivalent to a legally marketed predicate device. If no legally marketed predicate can be identified to enable use of the 510(k) pathway, the device is automatically classified under the FDCA into class III, which generally requires PMA approval. However, for low- to moderate-risk devices, FDA allows for the possibility of marketing authorization through the “de novo classification” process rather than requiring the device to be subject to PMA approval.

Products that are approved through a PMA generally need prior FDA approval before modifications can be made that affect safety or effectiveness, and certain modifications to a 510(k)-cleared device may also require FDA premarket review before the modified product can be marketed. GRAIL has not applied for regulatory clearance or approval for any of its products, and it is possible that GRAIL will never obtain regulatory clearance or approval.

FDA or other regulators can delay, limit, or deny premarket clearance or approval of a product for many reasons, including but not limited to the following:

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FDA or comparable foreign regulatory authorities may disagree with the design, implementation, or results of, or interpretation of the data from, GRAIL’s clinical studies;

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FDA or comparable foreign regulatory authorities may determine that GRAIL’s product has not been shown to be safe and effective or has other characteristics that preclude GRAIL from obtaining marketing authorization or prevent or limit its commercial use (for example, a narrowed indication for use claim);

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the population studied in the clinical program may not be sufficiently broad, generalizable, or representative of the intended target population of GRAIL’s product to assure effectiveness and safety in the population for which it seeks authorization or clearance;

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FDA or comparable foreign regulatory authorities may disagree with GRAIL’s interpretation of data from clinical studies or may fail to accept data from clinical studies (or clinical sites), including if GRAIL fails to establish the integrity of its data;

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FDA or comparable foreign regulatory authorities may determine that GRAIL’s clinical studies otherwise fail to comply with applicable regulations;

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serious or unexpected adverse effects or other performance issues are identified with GRAIL’s products;

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FDA or comparable foreign regulatory authorities may determine that GRAIL’s manufacturing or quality system fails to comply with applicable regulations or otherwise fails to meet the standards necessary to support approval; and

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the approval policies or regulations of FDA or comparable foreign regulatory authorities may significantly change in a manner rendering GRAIL’s clinical data insufficient for approval.

GRAIL is engaged in ongoing discussions with FDA regarding the data that will be needed to support a successful PMA for a multi-cancer test for GRAIL’s planned indications, including whether GRAIL would need to provide additional analyses and information beyond that which GRAIL is currently planning to produce based on the designs of GRAIL’s current and planned clinical studies. There can be no assurance that GRAIL’s products for which it may seek clearance or approval will be approved or cleared by FDA or a comparable foreign regulatory authority on a timely basis, if at all, nor can there be assurance that labeling claims will be consistent with GRAIL’s anticipated claims or adequate to support continued adoption of, and reimbursement for, its products. If GRAIL’s products receive clearance or approval but there is uncertainty about its products among providers or payors, or if the approved indication or other labeling claims FDA or a comparable foreign regulatory authority allows GRAIL to make are more limited than GRAIL expects, reimbursement may be adversely affected and GRAIL may not be able to sell its products. Compliance with FDA or comparable foreign

regulatory authority regulations will require substantial costs, and subject GRAIL to heightened scrutiny by regulators and substantial penalties for failure to comply with such requirements or the inability to market its products. The lengthy and unpredictable approval process, as well as the unpredictability of the results of GRAIL’s clinical studies, may result in its failing to obtain regulatory clearance or approval to market its products, which would significantly harm its business, results of operations, reputation, and prospects.

GRAIL’s multi-cancer detection tests are a new approach to cancer screening, which present a number of novel and complex issues for FDA review. Because FDA has never cleared or approved a multi-cancer detection test, it is difficult to predict what information GRAIL will need to submit a PMA to obtain approval from FDA for a proposed intended use, or if GRAIL will be able to obtain such approval on a timely basis or at all.

GRAIL’s multi-cancer detection tests represent a new approach to cancer screening (including the use of pattern recognition of genomic signals), and obtaining FDA approval for Galleri presents a number of novel issues. FDA has never granted marketing authorization for a multi-cancer detection test. Additionally, in March 2020, FDA held a public workshop to discuss the clinical, scientific, and regulatory challenges associated with circulating tumor DNA cancer screening tests, and GRAIL expects FDA to continue to gather input from a variety of industry, academic, and clinical stakeholders to inform its thinking on how to assess these types of tests. As such, the FDA requirements that will govern any multi-cancer detection test GRAIL develops, as well as the breadth and nature of data GRAIL must provide FDA, to support the proposed intended use, may be subject to change.

As part of GRAIL’s ongoing discussions with FDA regarding the data that will be needed to support a PMA for a multi-cancer detection test based on a proposed intended use and consistent with discussions during the March 2020 public workshop, FDA has provided feedback regarding how it plans to assess the safety and effectiveness of Galleri based on potential intended use statements. In particular, in response to certain questions about the STRIVE study statistical analysis plan, FDA has provided feedback regarding the benefit-risk profile for each cancer type as well as comparative performance of GRAIL’s test against and in combination with standard of care screening methods. FDA has indicated that to support the early detection of cancer in individuals with cancer types for which standard of care screening methods are available, GRAIL should provide clinical evidence to demonstrate a favorable benefit-risk profile of Galleri, such as whether Galleri identifies a population of cancer patients that were missed by standard of care screening methods. GRAIL has incorporated certain FDA feedback, and are evaluating incorporation of certain other FDA feedback, into its plans to generate additional clinical evidence, including its ongoing PATHFINDER study. Specifically, GRAIL revised its PATHFINDER study protocol to include as a secondary objective the evaluation of the performance of Galleri using specificity, positive predictive value, and accuracy of tissue of origin predictions. For GRAIL’s SUMMIT study protocol, it included collection of cancer symptoms data from provider records to facilitate analyses. GRAIL is evaluating incorporation of FDA feedback into its design and analysis plan for the STRIVE study, such as the sample size for GRAIL’s planned validation analysis and assessing cancer risk variables to help characterize the cancer risk profiles of the intended cohort. GRAIL also intends to incorporate FDA feedback into one or more additional studies under development and planning. FDA has provided feedback as part of specific pre-submission topics, including on conducting a benefit-risk assessment for each cancer type as well as comparing performance of GRAIL’s test against standard of care cancer screening methods, and in combination with standard of care screening methods. GRAIL’s clinical studies are not designed to establish comparative performance across the studies, but to establish certain performance, safety, and effectiveness data. GRAIL’s studies differ from one another in terms of design, endpoints, and the product version under study, which GRAIL intends to bridge through appropriate testing. FDA has indicated that the sufficiency of GRAIL’s clinical data, including comparative performance data, will be a review issue as part of its review of GRAIL’s PMA for the proposed intended use. While GRAIL plans

to continue discussions with FDA and provide FDA with additional information, the FDA may raise additional questions or request additional information in connection with the submission of a marketing application.

Given the novel nature and complexity of GRAIL’s multi-cancer detection tests, GRAIL cannot be certain whether it will receive FDA marketing authorization for Galleri and whether the studies it has conducted, is currently conducting, or plans to conduct will be sufficient to provide the data that FDA requires to support a proposed intended use. For example, GRAIL recognizes that its STRIVE clinical study alone would not be sufficient for a proposed multi-cancer early detection intended use statement and GRAIL plans on providing evidence from additional clinical studies to support a PMA for Galleri. FDA may require GRAIL to perform new analyses of its clinical data or perform additional clinical trials in addition to those GRAIL is contemplating. GRAIL may be required to undertake significant efforts to address FDA’s requests, which could delay or prevent approval, lead to a more limited intended use statement than the broader intended use statement GRAIL plans to pursue, and/or lead to significant post-approval limitations or restrictions, if approval is obtained at all.

GRAIL’s use and disclosure of personal information, including individually identifiable health information, and biologic samples and related data are subject to federal, state and foreign privacy and security regulation. Data privacy rules are evolving and new legislation concerning privacy and data use may limit its ability to use such data and specimens. GRAIL’s failure to comply with privacy and security requirements or to adequately secure such information could result in significant liability, administrative or governmental penalties, and/or reputational harm and, in turn, substantial harm to GRAIL’s business and results of operations.

GRAIL and its partners may be subject to federal, state, and foreign data protection laws and regulations (i.e., laws and regulations that address data privacy and security). GRAIL receives, stores, processes and uses personal information as part of its business. In the United States, numerous state and federal laws and regulations govern the collection, dissemination, use, disclosure, privacy, confidentiality, security, availability and integrity of personal information, including health related information. GRAIL is currently not a covered entity under the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, or the regulations that implement both laws (collectively, “HIPAA”), but GRAIL expects to be a covered entity in 2021 around the time it commercially launches its LDT when it begins submitting electronic claims. HIPAA establishes a set of national privacy and security standards for the protection of individually identifiable health information, by health plans, healthcare clearinghouses and certain healthcare providers, referred to as covered entities, the business associates with whom such covered entities contract for services that involve creating, receiving, maintaining, or transmitting protected health information, and the subcontractors of such business associates. In addition, GRAIL may obtain health information from third parties (including research institutions from which GRAIL obtains clinical trial data) that are subject to privacy and security requirements under HIPAA. Depending on the facts and circumstances, GRAIL could be subject to criminal penalties if it knowingly obtains, uses, or discloses individually identifiable health information maintained by a HIPAA covered entity in a manner that is not authorized or permitted by HIPAA.

Certain states have also adopted comparable privacy and security laws and regulations, such as the California Confidentiality of Medical Information Act; these laws are not preempted by HIPAA to the extent that they are more stringent than HIPAA. California recently enacted the California Consumer Privacy Act (“CCPA”), which went into effect on January 1, 2020 and limits how companies can collect and use personal data. The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used. The CCPA provides for fines and penalties for violations, as well as a private right of action for data breaches that is expected to increase data

breach litigation. Although there are limited exemptions for certain health-related data, including clinical trial data, the CCPA may increase GRAIL’s compliance costs and potential liability. Other states are also considering similar privacy laws and the federal government may seek to enact a similar federal privacy law. GRAIL could be adversely affected if the CCPA and other state or federal legislation or regulations applicable to it require changes in its business practices or privacy policies, or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect its business, financial condition and results of operations.

Even when HIPAA does not apply, according to the FTC, violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in or affecting commerce in violation of the Federal Trade Commission Act. The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Individually identifiable health information is considered sensitive data that merits stronger safeguards.

Compliance with data protection laws and regulations in the United States could cause GRAIL to incur substantial costs or require it to change its business practices and compliance procedures in a manner adverse to its business. GRAIL strives to comply with applicable laws, regulations, policies and other legal obligations relating to privacy, data protection and information security. However, the various regulatory frameworks for privacy and data protection are, and are likely to remain, uncertain for the foreseeable future, and it is possible that these or other actual or alleged obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules and subject GRAIL’s business practices to uncertainty.

GRAIL seeks to utilize biological samples and data from participants in its clinical studies in accordance with applicable law, IRB stipulations, and participant permissions (through consent forms and HIPAA authorizations). If GRAIL is unable or significantly restricted in using participant samples and data for secondary research purposes, its ability to develop additional products and/or improve or refine existing products will be limited, which may impact its business and prospects.

GRAIL also expects that there will continue to be new laws, regulations, and industry standards concerning privacy, data protection, and information security proposed and enacted in various jurisdictions. For example, European legislators adopted the General Data Protection Regulation (“GDPR”), which became effective on May 25, 2018, and superseded the prior European Union (“EU”) data protection legislation. The GDPR imposes more stringent data protection requirements, and provides for greater penalties for noncompliance. The GDPR is applicable in each EU and European Economic Area (“EEA”) member state and applies to companies established in the EU and EEA as well as companies that collect and use personal data to offer goods or services to, or monitor the behavior of, individuals in the EU and EEA, including, for example, through the conduct of clinical trials. The GDPR imposes stringent data protection obligations for processors and controllers of personal data. Among other things, the GDPR requires the establishment of a lawful basis for the processing of data and includes requirements relating to the consent of the individuals to whom the personal data relates, including detailed notices for clinical trial subjects and investigators, as well as requirements regarding the security of personal data and notification of data processing obligations or security incidents to appropriate data protection authorities or data subjects. GRAIL may face difficulty in fully complying with these regulations and any failure to do so could subject it to significant monetary penalties, liabilities, and adverse publicity. For example, because GRAIL collects personal data from EU data subjects as part of the SUMMIT study, including health data from participants enrolled in its clinical study in the United Kingdom, GRAIL is subject to the GDPR with respect to personal data collected in the study.

The GDPR prohibits, without an appropriate legal basis, the transfer of personal data to countries outside of the EEA, such as the United States, which are not considered by the European Commission to provide an adequate level of data protection. Although there are legal mechanisms to allow for the transfer of personal data from the EEA to the United States, recent legal developments in Europe have created complexity and uncertainty regarding such transfers of personal data. For example, on July 16, 2020, the Court of Justice of the European Union (“CJEU”) invalidated the EU-US Privacy Shield Framework (“Privacy Shield”) under which personal data could be transferred from the EEA to United States entities that had self-certified under the Privacy Shield scheme. While the CJEU upheld the adequacy of the standard contractual clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism, and potential alternative to the Privacy Shield), it made clear that reliance on them alone may not necessarily be sufficient in all circumstances. Use of the standard contractual clauses must now be assessed on a case-by-case basis taking into account the legal regime applicable in the destination country, in particular applicable surveillance laws and rights of individuals and additional measures and/or contractual provisions may need to be put in place; however, the nature of these additional measures is currently uncertain. Additionally, other countries have passed or are considering passing laws requiring local data residency.

Penalties and fines for failure to comply with the GDPR are significant, including fines of up to €20 million or 4% of total worldwide annual revenue, whichever is higher. Additionally, following the United Kingdom’s withdrawal from the European Union, GRAIL will have to comply with both the GDPR and the data protection laws of the United Kingdom, which could be more or less stringent than the GDPR. The relationship between the United Kingdom and the European Union in relation to certain aspects of data protection law remains unclear, for example around how data can lawfully be transferred between each jurisdiction, which exposes GRAIL to further compliance risk. It is currently unclear how the GDPR and the United Kingdom versions of data privacy legislation would inter-operate or what costs or difficulties complying with these two regimes will create for GRAIL or similarly situated companies.

If GRAIL or its partners fail to comply with federal, state, and foreign laboratory and other applicable licensing and registration requirements, GRAIL could be prevented from performing its tests or experience disruptions to its business.

CLIA is a federal law that regulates clinical laboratories that perform testing on specimens derived from humans for the purpose of providing information for the diagnosis, prevention, or treatment of disease, or impairment of, or the assessment of the health of, human beings. CLIA regulations require, among other things, clinical laboratories to obtain a certificate and mandate specific standards in the areas of personnel qualifications, administration, participation in proficiency testing, test management, and quality assurance. CLIA certification is also required for GRAIL to be eligible to bill state and federal healthcare programs, if such reimbursement is otherwise available, as well as many private third-party payors, for GRAIL’s products. To renew these certifications, GRAIL will be subject to routine surveys and inspections. Moreover, CLIA inspectors may make random or “for cause” inspections of GRAIL’s clinical laboratories.

In 2018, GRAIL received a CLIA Certificate of Registration from CMS for its laboratory in Menlo Park, California, to begin conducting moderate and/or high complexity testing, subject to inspection to determine compliance with the CLIA regulations. In 2019, GRAIL obtained College of American Pathologists (“CAP”) accreditation for its Menlo Park facility. While GRAIL has completed validation studies for an earlier version of Galleri, it is continuing its validation efforts for the version of Galleri that it intends to launch as an LDT. GRAIL may not successfully complete such validation. Any addition to GRAIL’s test menu requires notification to the regulatory and accrediting bodies that regulate its laboratory (e.g., CMS, the California Department of Public Health Laboratory Field Services (“CALFS”)

and CAP) that GRAIL is adding a new specialty to its assay offerings. Further, before GRAIL is able to offer any products developed at its Durham, North Carolina laboratory, when and if GRAIL is able to complete construction, GRAIL will also be required to validate the products and provide the required notifications, certifications, permits, and accreditations to the regulatory and accrediting bodies that will regulate its North Carolina laboratory. At their discretion, any regulatory or accrediting body may come on-site to inspect GRAIL’s laboratory at any time. Any failure to pass inspections, maintain GRAIL’s CLIA Certificate of Registration, CAP accreditation, or state licenses, or add new validated products to GRAIL’s laboratory assay offerings could significantly harm its business, results of operations, and prospects.

In addition to obtaining federal certification for a laboratory under CLIA, GRAIL is also required to obtain and maintain state licenses to conduct testing in its laboratories. GRAIL has obtained a Clinical Laboratory Certificate of Deemed Status from the State of California Department of Public Health for its Menlo Park facility. The California licensure law establishes standards for the day-to-day operation of a clinical laboratory, including the training and skills required of personnel and quality control. In addition, California law mandates proficiency testing, which involves testing of specimens that have been specifically prepared for the laboratory. In the future, GRAIL will need to obtain a Clinical Laboratory Certificate of Deemed Status from the State of North Carolina Department of Public Health for its Durham facility. Further, if GRAIL tests specimens originating from other states and returns patient-specific results, its clinical laboratory must satisfy such states’ licensure laws as well to the extent that such laws regulate out-of-state laboratories that test specimens originating in such states. For example, to be able to receive specimens originating from New York, GRAIL must obtain and maintain a New York State Department of Health clinical laboratory permit. Research testing, however, does not require licensure if patient-specific results are not generated and/or returned for diagnostic purposes. GRAIL has applied for a New York State Department of Health clinical laboratory permit for its Menlo Park facility and it intends to apply for such a permit for its Durham facility, which GRAIL will need to obtain prior to accepting and generating for diagnosis or treatment purposes patient-specific results on specimens originating from New York at the applicable facility. Applicable New York laws and regulations establish standards for day-to-day operation of a clinical laboratory, including training and skill levels required of laboratory personnel, physical requirements of a facility, equipment, and validation and quality control. GRAIL believes that relevant New York regulatory authorities may be experiencing delays as a result of COVID-19 related issues, and there can be no assurance that GRAIL will be able to obtain New York clinical laboratory permits, or licenses or permits from any other states where it believes it will be required to be licensed or hold a permit, prior to commercial launch of its products, or at all. Failure to obtain such licenses or permits could expose GRAIL to fines and other penalties, or limit its potential testing population.

In connection with CLIA certification and state laboratory licensing and permitting, GRAIL remains subject to a number of risks in the event of noncompliance. Any sanction imposed under CLIA, its implementing regulations, or state or foreign laws or regulations governing licensure or permitting, or GRAIL’s failure to renew or maintain a CLIA certificate, a state license or permit, or accreditation (including CAP), could have a material adverse effect on GRAIL’s business and reputation. CMS also has the authority to impose a wide range of sanctions, including suspension, limitation, or revocation of the CLIA certification, termination of Medicare and Medicaid participation, civil money penalties, and a bar on the ownership or operation of a CLIA-certified laboratory by any owners or operators of the deficient laboratory. If GRAIL fails to obtain any required state licensure, or lose CLIA certification, CAP accreditation, or licensure once obtained, it would not be able to operate its clinical laboratories and offer its products in full or in particular states, which would adversely impact its business and results of operations. Even if GRAIL were able to bring its laboratory back into compliance, GRAIL could incur significant expenses and potentially lose revenue in doing so.

In addition to state laboratory licensing laws, GRAIL may also be subject to state registration and/or licensing requirements that apply to companies that manufacture medical devices. Certain states may require such registrations or licenses before the products are commercialized, including while manufacturers are evaluating the devices in clinical trials. Violations of these laws may result in the denial, suspension, or revocation of the registration or license, as well as other fines and penalties, including imprisonment.

Data from GRAIL’s clinical trials that GRAIL announces or publishes from time to time before its trials are complete may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, GRAIL may publicly disclose then-available data from its clinical studies before the studies are complete, and the results and related findings and conclusions may be subject to change following the final analysis of the data related to the particular study or trial. This may happen for a number of reasons, including due to the stated protocol or because of the presentation of an abstract at a scientific conference, for example. As a result, the results that GRAIL reports may differ from final results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully analyzed. As a result, such data should be viewed with caution until the final data are available. Additionally, such data from GRAIL’s clinical trials are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment and/or follow-up continues and more patient data become available. Significant adverse differences between initial or interim data and final data could significantly harm GRAIL’s reputation and business prospects.

Further, others, including regulatory agencies, may not accept or agree with GRAIL’s assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, and GRAIL’s ability to receive regulatory clearance or approval or commercialize a particular product and its products in general. In addition, the information GRAIL chooses to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what GRAIL determines is the material or otherwise appropriate information to include in its disclosure, and any information it determines not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding its business. If the data that GRAIL reports differs from final results, or if others, including regulatory authorities, disagree with the conclusions reached, its ability to commercialize or obtain regulatory clearance or approval for its products may be harmed, which could harm its reputation, business, operating results, prospects or financial condition.

Any product for which GRAIL obtains regulatory clearance or approval will be subject to extensive ongoing regulatory requirements, and GRAIL may be subject to penalties if it or its partners fail to comply with regulatory requirements or if it experiences unanticipated problems with its products.

Any product for which GRAIL obtains regulatory clearance or approval from FDA or other regulators, along with the manufacturing processes, post-market surveillance, labeling, packaging, advertising, and promotion, distribution, storage, import, export, reporting, and recordkeeping for such product, will be subject to continued regulatory review, oversight, requirements, and periodic inspections by FDA and comparable foreign regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports; registration and listing requirements; requirements relating to quality control, quality assurance, and corresponding maintenance of records and documents; requirements relating to recalls, removals, and corrections; and requirements relating to product labeling, advertising and promotion, and recordkeeping. The

regulations to which GRAIL is subject are complex and have tended to become more stringent over time. Regulatory changes could result in restrictions on GRAIL’s ability to carry on or expand its operations, higher than anticipated costs or lower than anticipated sales. FDA enforces these regulatory requirements through, among other means, periodic unannounced inspections. GRAIL does not know whether it will be found compliant in connection with any future regulatory inspections.

Regulatory clearance or approval of a test or device may be subject to limitations by the regulatory body as to the indicated uses for which the product may be marketed or to other conditions of clearance or approval. In addition, clearance or approval may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the test or device. After clearance or approval, discovery of problems with GRAIL’s product, suppliers, vendors, or contract manufacturers, or manufacturing processes (including software validation), and/or failure to comply with regulatory requirements, may result in actions such as:

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restrictions on operations of GRAIL’s laboratory;

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restrictions on manufacturing processes;

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restrictions on marketing of a product;

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Untitled or Warning letters;

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withdrawal or recall of the product from the market or seizure of the product;

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refusal to approve applications or supplements to approved applications that GRAIL may submit;

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fines, restitution or disgorgement of profits or revenue;

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suspension, limitation or withdrawal of regulatory approvals or clearances;

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exclusion from participation in U.S. federal or state healthcare programs, such as Medicare and Medicaid;

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safety communications;

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refusal to permit the import or export of GRAIL’s product;

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injunctions; or

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imposition of civil or criminal penalties.

For any of GRAIL’s products that are approved or cleared by FDA, GRAIL will be required to report to FDA certain information about adverse medical events or malfunctions, and if it fails to do so, GRAIL would be subject to sanctions that could harm its reputation, business, financial condition and results of operations. The discovery of serious safety issues with GRAIL’s products, or a recall of its products either voluntarily or at the direction of FDA or another governmental authority, could have a negative impact on GRAIL.

For products for which GRAIL obtains FDA clearance or approval, GRAIL will be subject to FDA’s medical device reporting regulations and similar foreign regulations, which require it to report to FDA when it receives or becomes aware of information that reasonably suggests that one or more of its products may have caused or contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were to recur, it could cause or contribute to a death or serious injury. The timing of GRAIL’s obligation to report is triggered by the date it becomes aware of the adverse event as well as the nature of the event. GRAIL may fail to report adverse events of which it becomes aware within the prescribed timeframe. GRAIL may also fail to recognize that it has become aware of a reportable adverse event, especially if it is not reported to GRAIL as an adverse event or if it is an adverse event

that is unexpected or removed in time from the use of the product. If GRAIL fails to comply with its reporting obligations, FDA could take action, including warning letters, untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of GRAIL’s device clearance or approval, seizure of its products or delay in clearance or approval of future products.

FDA and foreign regulatory bodies have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture of a product or in the event that a product poses an unacceptable risk to health. FDA’s authority to require a recall must be based on a finding that there is reasonable probability that the device could cause serious injury or death. GRAIL may also choose to voluntarily recall a product if any material deficiency is found. A government-mandated or voluntary recall by GRAIL could occur as a result of an unacceptable risk to health, component failures, malfunctions, manufacturing defects, labeling or design deficiencies, packaging defects or other deficiencies or failures to comply with applicable regulations. Product defects or other errors may occur in the future.

Depending on the corrective action GRAIL takes to redress a product’s deficiencies or defects, FDA may require, or GRAIL may decide, that GRAIL will need to obtain new clearances or approvals for the device before it may market or distribute the corrected device. Seeking such clearances or approvals may delay GRAIL’s ability to replace the recalled devices in a timely manner. Moreover, if GRAIL does not adequately address problems associated with its devices, it may face additional regulatory enforcement action, including FDA warning letters, product seizure, injunctions, administrative penalties or civil or criminal fines.

Companies are required to maintain certain records of recalls and corrections, even if they are not reportable to FDA. GRAIL may initiate voluntary withdrawals or corrections for its products in the future that it determines do not require notification of FDA. If FDA disagrees with its determinations, it could require GRAIL to report those actions as recalls and GRAIL may be subject to enforcement action. A future recall announcement could harm GRAIL’s reputation with customers, potentially lead to product liability claims against GRAIL and negatively affect its sales. Any corrective action, whether voluntary or involuntary, as well as defending itself in a lawsuit, will require the dedication of GRAIL’s time and capital, distract management from operating its business and may harm GRAIL’s reputation and financial results.

To obtain and maintain FDA approvals or clearances, GRAIL’s products will need to be manufactured in accordance with federal and state regulations, and GRAIL could be forced to recall its devices or terminate production if it or its partners fail to comply with these regulations.

The methods used in, and the facilities used for, the manufacture of GRAIL’s products must comply with FDA’s QSR, which is a complex regulatory scheme that covers the procedures and documentation of the design, testing, production, process controls, quality assurance, labeling, packaging, handling, storage, distribution, installation, servicing and shipping of medical devices. Furthermore, GRAIL is required to verify that its suppliers maintain facilities, procedures and operations that comply with GRAIL’s quality standards and applicable regulatory requirements. FDA enforces the QSR through periodic announced or unannounced inspections of medical device manufacturing facilities, which may include the facilities of subcontractors. GRAIL’s products are also subject to similar state regulations and various laws and regulations of foreign countries governing manufacturing.

GRAIL’s third-party manufacturers may not take the necessary steps to comply with applicable regulations, which could cause delays in the delivery of its products. In addition, failure to comply with applicable FDA requirements or later discovery of previously unknown problems with GRAIL’s products

or manufacturing processes could result in, among other things: warning letters or untitled letters; fines, injunctions or civil penalties; suspension or withdrawal of approvals; seizures or recalls of GRAIL’s products; total or partial suspension of production or distribution; administrative or judicially imposed sanctions; FDA’s refusal to grant pending or future clearances or approvals for GRAIL’s products; clinical holds; refusal to permit the import or export of GRAIL’s products; and criminal prosecution of GRAIL, its suppliers, or its employees.

Any of these actions could significantly and negatively affect supply of GRAIL’s products. If any of these events occurs, GRAIL’s reputation could be harmed, it could be exposed to product liability claims and it could lose customers and experience reduced sales and increased costs.

Healthcare reform measures, including recently enacted legislation reforming the U.S. healthcare system, and data protection measures, could cause significant harm to GRAIL’s business, operations and financial condition.

Healthcare systems are subject to ongoing reform in the United States and abroad. For example, in the United States, the ACA made a number of substantial changes to the way healthcare is financed both by governmental and private insurers. For example, the ACA contains a number of provisions, including provisions governing enrollment in federal and state healthcare programs, reimbursement matters, and fraud and abuse, which GRAIL expects will influence its industry and its operations in ways that GRAIL cannot currently predict.

Since its enactment, there have been judicial and congressional challenges to certain aspects of the ACA. For example, the Tax Cuts and Jobs Act of 2017 includes a provision that repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” In December 2018, a U.S. district court held that the individual mandate was unconstitutional, which was upheld by the U.S. Court of Appeals for the Fifth Circuit. The Supreme Court of the United States is currently reviewing the case, and the case is expected to be decided by mid-2021, although it is unclear how the Supreme Court will rule. Complying with any new legislation or reversing changes implemented under the ACA could be time-intensive and expensive, resulting in a material adverse effect on GRAIL’s business.

Changes in federal policy and at regulatory agencies occur over time through policy and personnel changes following elections, which lead to changes involving the level of oversight. Healthcare reform and pricing of drugs and medical devices, including clinical laboratory tests, are and will remain a key bipartisan issue. Policies to be pursued in the future may be more aggressive, regardless of which party controls the White House. Uncertainty surrounding future changes may adversely affect GRAIL’s operating environment and therefore its business, financial condition, results of operations and growth prospects.

GRAIL cannot predict which healthcare reform measures will be implemented or the full impact of current or future healthcare reform measures on its business. For instance, a repeal of the ACA or payment reductions imposed by the ACA, as well as the expansion of the federal and state governments’ role in the U.S. healthcare industry generally and the social, governmental and other pressures to reduce healthcare costs while expanding individual benefits, could limit the prices GRAIL will be able to charge or the amount, if any, of available reimbursement for products, which would reduce GRAIL’s potential revenue and have a material adverse effect on its business, financial condition, results of operations, and cash flows.

Obtaining and maintaining regulatory authorization of GRAIL’s products in one jurisdiction does not mean that GRAIL will be successful in obtaining regulatory authorization of its products in other jurisdictions.

Obtaining and maintaining regulatory authorization of products in one jurisdiction does not guarantee that GRAIL will be able to obtain or maintain regulatory authorization in any other jurisdiction, but a failure or delay in obtaining regulatory authorization in one jurisdiction may have a negative effect on the regulatory authorization process in others. For example, even if FDA or a comparable foreign regulatory authority grants clearance or approval of GRAIL’s products, comparable regulatory authorities in foreign jurisdictions may also need to authorize the products in those countries, which may be a de novo review process. Premarket authorization processes vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including additional clinical studies, because clinical studies conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions or the data may not be considered applicable to the jurisdiction’s intended patient population. In some cases, the price that GRAIL intends to charge for its products may also be subject to approval.

Obtaining foreign regulatory authorization and maintaining compliance with foreign regulatory requirements could result in significant delays, difficulties, and costs for GRAIL and could delay or prevent the introduction of its products in certain countries. If GRAIL fails to comply with the regulatory requirements in other jurisdictions, or GRAIL fails to receive necessary or desirable marketing authorizations in other jurisdictions, its target market will be reduced and its ability to realize the full market potential of its products will be harmed.

GRAIL’s employees, independent contractors, consultants, commercial partners, and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

GRAIL is exposed to the risk of fraud, misconduct, or other illegal activity by its employees, independent contractors, consultants, commercial partners, and vendors. Misconduct by these parties could include intentional, reckless and negligent conduct that fails to: comply with the rules and regulations of the CMS, FDA, and other comparable foreign regulatory authorities; provide true, complete and accurate information to such regulatory authorities; comply with manufacturing and clinical laboratory standards; comply with healthcare fraud and abuse laws in the United States and similar foreign fraudulent misconduct laws; or report financial information or data accurately or to disclose unauthorized activities to GRAIL. When GRAIL begins commercializing its products in the United States, its potential exposure under such laws will increase significantly, and its costs associated with compliance with such laws are also likely to increase. In particular, research, sales, marketing, education, and other business arrangements in the healthcare industry are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing, and other abusive practices, as well as off-label product promotion. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, educating, marketing and promotion, sales and commission, certain customer incentive programs, and other business arrangements generally. Activities subject to these laws also involve the improper use of information obtained in the course of participant recruitment for clinical studies, which could result in regulatory sanctions and cause serious harm to GRAIL’s reputation. GRAIL has adopted a code of business conduct and ethics, but it is not always possible to identify and deter misconduct by employees and third parties, and the precautions GRAIL takes to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting GRAIL from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws. If any such actions are instituted against GRAIL, and GRAIL is not successful in defending itself or asserting its rights, those actions could have a significant impact on GRAIL’s business, including the imposition of significant fines or other sanctions. Even if it is later

determined after an action is instituted against GRAIL that GRAIL was not in violation of these laws, GRAIL may be faced with negative publicity, incur significant expenses defending its actions, and have to divert significant management resources from other matters.

If GRAIL fails to comply with healthcare and other applicable laws and regulations, it could face substantial penalties and its business, reputation, and operations and financial condition could be adversely affected.

GRAIL’s operations are subject to various U.S. federal and state fraud and abuse laws. In addition, the commercialization of its products outside the United States would also subject it to foreign equivalents of the healthcare laws described below, among other foreign laws. The laws that may impact GRAIL’s operations include:

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the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering, or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an individual, or the purchase, lease, order or recommendation of any good, facility, item, or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation, and many courts have interpreted that statute as being violated if merely one purpose of any arrangement is to induce referrals or purchases. In 2018, Congress enacted the Eliminating Kickbacks in Recovery Act of 2018 (“EKRA”), which establishes an all-payor anti-kickback prohibition for, among other things, knowingly and willfully paying or offering any remuneration directly or indirectly to induce a referral of an individual to a clinical laboratory. Violations of EKRA may result in fines, imprisonment, or both, for each occurrence;

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the federal physician self-referral prohibition, commonly known as the Stark Law, which, in the absence of an applicable exception, prohibits a physician from making a referral for certain designated health services covered by the Medicare or Medicaid program, including clinical laboratory services, if the physician or an immediate family member of the physician has a financial relationship with the entity providing the designated health services. The Stark Law also prohibits the entity furnishing the designated health services from billing, presenting or causing to be presented a claim for the designated health services furnished pursuant to the prohibited referral;

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federal civil and criminal false claims laws, including the False Claims Act, which impose criminal and civil penalties, including through civil “qui tam” or “whistleblower” actions, against individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid, or other third-party payors that are false or fraudulent. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute or Stark Law constitutes a false or fraudulent claim for purposes of the False Claims Act;

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healthcare fraud and false statements laws, which prohibit, among other things, knowingly making a false statement to improperly avoid, decrease, or conceal an obligation to pay money to the federal government. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of these statutes or specific intent to violate them in order to have committed a violation;

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the federal Civil Monetary Penalties Law, which, subject to certain exceptions, prohibits, among other things, the offer or transfer of remuneration, including waivers of copayments and deductible amounts (or any part thereof), to a Medicare or state healthcare program

beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of services reimbursable by Medicare or a state healthcare program;

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the federal Physician Payment Sunshine Act, created under the ACA, and its implementing regulations, which require manufacturers of drugs, devices, biologicals, and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the U.S. Department of Health and Human Services under the Open Payments Program, information related to payments or other transfers of value made to physicians (as defined by statute) and teaching hospitals and, effective January 1, 2022 for transfers of value made during the prior year to other healthcare practitioners, as well as ownership and investment interests held by such physicians and their immediate family members;

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federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; and

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analogous state and foreign laws and regulations, such as state and foreign anti-kickback, false claims, consumer protection, and unfair competition laws that may apply to GRAIL’s business practices, including but not limited to, research, distribution, sales and marketing arrangements as well as submitting claims involving healthcare items or services reimbursed by any third-party payor, including commercial insurers; state laws that require healthcare companies to comply with the medical device industry’s voluntary compliance guidelines, the relevant compliance guidance promulgated by the federal government that otherwise restricts payments that may be made to healthcare providers, and other potential referral sources or state-specific standards on financial interactions with healthcare providers; state laws that require healthcare companies to file reports with states regarding pricing and marketing information, such as the tracking and reporting of gifts, compensation, and other remuneration and items of value provided to healthcare professionals and entities; and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available and lack of clear guidance, it is possible that some of GRAIL’s business activities could, despite GRAIL’s efforts to comply, be subject to challenge under one or more of such laws. Efforts to ensure that GRAIL’s business arrangements will comply with applicable healthcare and other applicable laws may involve substantial costs. In the future, it is possible that governmental and enforcement authorities will conclude that GRAIL’s business practices may not comply with current or then-existing statutes, regulations, or case law interpreting applicable fraud and abuse or other healthcare or applicable laws and regulations. If any such actions are instituted against GRAIL, and GRAIL is not successful in defending itself or asserting its rights, those actions could have a significant impact on GRAIL’s business, including the imposition of civil, criminal, and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of GRAIL’s operations, any of which could adversely affect GRAIL’s ability to operate its business and its results of operations.

If GRAIL or any contract manufacturers and suppliers it engages fail to comply with environmental, health, and safety laws and regulations, GRAIL could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of its business.

GRAIL and any contract manufacturers and suppliers it engages are subject to numerous federal, state, and local environmental, health, and safety laws, regulations, and permitting requirements, including those governing laboratory procedures; the generation, labeling, handling, use, storage, transport, treatment, and disposal of hazardous and regulated materials and wastes; the emission and discharge of hazardous materials into the ground, air, and water; and employee health and safety. GRAIL generally contracts with third parties for the disposal of these materials and wastes. GRAIL cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from GRAIL’s use of hazardous materials, it could be held liable for any resulting damages, and any liability could exceed its resources. Under certain environmental laws, GRAIL could be held responsible for costs relating to any contamination at its current or past facilities and at third-party facilities. GRAIL also could incur significant costs associated with civil or criminal fines and penalties. If the handling, use, labeling, storage, or transport of hazardous or biohazardous materials by GRAIL or its contract manufacturers or suppliers fail to comply with applicable requirements, GRAIL could incur significant costs, be subject to civil or criminal fines and penalties, experience disruption and delays in its operations, and face destruction of any non-compliant materials, which could include clinical and biological samples.

Compliance with applicable environmental laws and regulations may be expensive, and current or future environmental laws and regulations may impair GRAIL’s research, product development and manufacturing efforts. In addition, GRAIL cannot entirely eliminate the risk of accidental injury or contamination from these materials or wastes. Although GRAIL maintains workers’ compensation insurance to cover it for costs and expenses it may incur due to injuries to its employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. GRAIL does not carry specific biological or hazardous waste insurance coverage. Accordingly, in the event of contamination or injury, GRAIL could be held liable for damages or be penalized with fines in an amount exceeding its resources, and GRAIL’s clinical studies or regulatory approvals could be suspended, which could have a material adverse effect on its business, financial condition, results of operations, and prospects.

Changes in funding or disruptions at FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner or at all, or otherwise prevent those agencies from performing normal business functions on which the operation of GRAIL’s business may rely, which could negatively impact its business.

The ability of FDA to review and clear or approve new products or changes to existing products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, FDA’s ability to hire and retain key personnel and accept the payment of user fees, federal government shutdowns, and other events that may otherwise affect FDA’s ability to perform routine functions. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at FDA and other agencies may also slow the time necessary for new medical devices or modifications to cleared or approved medical devices to be reviewed and/or approved by necessary government agencies, which would adversely affect GRAIL’s business. For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut

down several times and certain regulatory agencies, such as FDA, have had to furlough critical FDA employees and stop critical activities.

Separately, in response to the COVID-19 pandemic, on March 10, 2020, FDA announced its intention to postpone most inspections of foreign manufacturing facilities, and on March 18, 2020, FDA temporarily postponed routine surveillance inspections of domestic manufacturing facilities. Subsequently, on July 10, 2020, FDA announced its intention to resume certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system. FDA intends to use this risk-based assessment system to identify the categories of regulatory activity that can occur within a given geographic area, ranging from mission critical inspections to resumption of all regulatory activities. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic. If a prolonged government shutdown occurs, or if global health concerns continue to prevent or delay FDA or other regulatory authorities from conducting, at all or in a timely manner, their regular inspections, reviews, or other regulatory activities (including pre-submission engagements), it could significantly impact the ability of FDA or other regulatory authorities to timely review and process GRAIL’s regulatory submissions, which could have a material adverse effect on its business.

GRAIL’s business activities are subject to the FCPA and similar anti-bribery and anti-corruption laws.

GRAIL’s business activities are subject to the FCPA and similar anti-bribery or anti-corruption laws, regulations, or rules of other countries in which GRAIL operates, including the U.K. Bribery Act. The FCPA generally prohibits offering, promising, giving, or authorizing others to give anything of value, either directly or indirectly, to a non-U.S. government official in order to influence official action, or otherwise obtain or retain business. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. GRAIL’s business is heavily regulated and therefore involves significant interaction with public officials, including officials of non-U.S. governments. Additionally, in many other countries, the healthcare providers who administer diagnostic tests are employed by their government, and the purchasers of diagnostics tests are government entities; therefore, GRAIL’s dealings with these providers and purchasers are subject to regulation under the FCPA. The SEC and DOJ have increased their FCPA enforcement activities with respect to biotechnology and pharmaceutical companies. There is no certainty that all of GRAIL’s employees, agents, contractors, or collaborators, or those of its affiliates, will comply with all applicable laws and regulations, particularly given the high level of complexity of these laws. Violations of these laws and regulations could result in fines, criminal sanctions against GRAIL, its officers, or its employees, the closing down of GRAIL’s facility, requirements to obtain export licenses, cessation of business activities in sanctioned countries, implementation of compliance programs, and prohibitions on the conduct of its business. Any such violations could include prohibitions on GRAIL’s ability to offer its products in one or more countries and could materially damage GRAIL’s reputation, its brand, its international expansion efforts, its ability to attract and retain employees, and its business, prospects, operating results, and financial condition.

Risks Related to Intellectual Property

If GRAIL is unable to obtain and maintain intellectual property protection for its technology, or if the scope of the intellectual property protection GRAIL obtains is not sufficiently broad, its competitors could develop and commercialize technology and tests similar or identical to GRAIL’s, and GRAIL’s ability to successfully commercialize its products may be impaired.

GRAIL’s ability to compete successfully will depend in part on its ability to obtain and enforce patent protection for its products, preserve its trade secrets and operate without infringing the

proprietary rights of third parties. Filing, prosecuting, and defending patents on GRAIL’s products and other technologies in all countries throughout the world would be prohibitively expensive and time-consuming, and the laws of some foreign countries may not protect GRAIL’s rights to the same extent as the laws of the United States. GRAIL may not be able to file, prosecute, maintain, enforce, or license all necessary or desirable patents or patent applications at a reasonable cost or in a timely manner, or in all jurisdictions, or at all, or may choose not to do any of the foregoing. Furthermore, in some cases, GRAIL has only filed provisional patent applications on certain aspects of its products and technologies and each of these provisional patent applications, or any future provisional patent application on certain aspects of GRAIL’s products and technologies, is not eligible to become an issued patent until, among other things, GRAIL files a non-provisional patent application within 12 months of the filing date of the applicable provisional patent application. In cases where GRAIL has not obtained, or decided not to obtain, patent protection for certain of its inventions, GRAIL may not be able to prevent third parties from practicing its inventions or from selling or importing tests made using its inventions in and into the United States or other jurisdictions.

Moreover, while GRAIL has applied for patents that protect aspects of its technology in the United States and several other countries, GRAIL cannot assure you that its intellectual property position, including its owned and exclusively licensed pending and issued patents, will not be challenged or that all patents for which it has applied will be issued on a timely basis or at all, or that such patents will protect GRAIL’s technology, in whole or in part, or be issued in a form that will provide GRAIL with meaningful protection, prevent competitors from competing with GRAIL, or otherwise provide GRAIL with any competitive advantage. Although patents are presumed valid and enforceable upon issuance, a patent may be challenged as to its inventorship, scope, validity, or enforceability, and certain of GRAIL’s owned or exclusively in-licensed patents have been, and others in the future may be, challenged in the courts or patent offices in the United States and abroad. For example, three of GRAIL’s European patents were subject to oppositions in Europe, as described below. As a result of such challenges, GRAIL’s pending or future patent applications may not result in issued patents, or the scope of existing or future patents may not provide GRAIL with sufficient rights to exclude others from commercializing products similar or identical to GRAIL’s, or its issued patents may be held invalid or unenforceable. It is also possible that GRAIL may fail to identify patentable technologies in a timely fashion, which could impair GRAIL’s ability to obtain patent protection on such technology at all. GRAIL’s competitors may be able to circumvent GRAIL’s owned or exclusively in-licensed patents by developing similar or alternative technologies or tests in a non-infringing manner. Competitors could also set up laboratories outside the countries in which GRAIL has filed patent applications in order to compete without infringing upon GRAIL’s intellectual property, even if they process samples from countries in which GRAIL does have patent protection. In addition, to the extent GRAIL has granted, or may grant in the future, licenses or sublicenses of its intellectual property rights to third parties, GRAIL cannot provide any assurance that such intellectual property rights will not be used by those third parties in a manner that could compete with its business or otherwise negatively impact any competitive advantage provided by such intellectual property rights.

Publications of discoveries in scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, GRAIL cannot know with certainty whether it was the first to make the inventions claimed in its owned or licensed patents or pending patent applications, or that it was the first to file for patent protection of such inventions. As a result, the issuance, scope, validity, enforceability, and commercial value of GRAIL’s patent rights are uncertain. Given the amount of time required for the development, testing, and regulatory review of new tests, patents protecting such tests might expire before or shortly after such products are commercialized. As a result, GRAIL’s owned or exclusively in-licensed patent portfolio may not provide it with sufficient rights to exclude others from commercializing products similar or identical to GRAIL’s.

If a third party obtains an issued patent on inventions GRAIL uses in its products, that party could prevent GRAIL from using those inventions, and GRAIL may not be able to design around the third party’s patents or obtain a license on commercially reasonable terms, if at all. Third-party patents or other intellectual property may exist that GRAIL’s current technology, manufacturing methods, products, or future methods or tests infringe or will infringe, which could result in litigation, the imposition of injunctions preventing its use of the foregoing, or require GRAIL to obtain licenses or pay royalties and/or other forms of compensation to third parties, which could be significant and could harm its results of operations.

Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on patents and applications will be due to be paid to the U.S. Patent and Trademark Office (“USPTO”) and various government patent agencies outside of the United States over the lifetime of GRAIL’s owned or in-licensed patents and applications. In certain circumstances, GRAIL relies on GRAIL’s licensing partners to pay these fees due to U.S. and non-U.S. patent agencies and to take the necessary actions to comply with other requirements to maintain such in-licensed patents during their term. In some cases, non-compliance can result in abandonment or lapse of the patent or patent application, resulting in a partial or complete loss of patent rights in the relevant jurisdiction. In such an event, potential competitors might be able to enter the market with similar or identical tests or technology, which could have a material adverse effect on GRAIL’s competitive position.

If GRAIL fails to comply with its obligations in the agreements under which it licenses intellectual property rights from third parties or otherwise experience disruptions to its business relationships with its licensors, GRAIL could lose license rights that are important to its business.

GRAIL has agreements with Illumina and license agreements with The Chinese University of Hong Kong, among others, that provide rights to certain technologies related to assays used in GRAIL’s products. GRAIL may need to obtain additional licenses from others to advance its research or allow commercialization of GRAIL’s products or technology without infringing the intellectual property of third parties. It is possible that GRAIL may be unable to obtain such additional licenses at a reasonable cost or on reasonable terms, if at all. In that event, GRAIL may be required to expend significant time and resources to redesign its technology or to develop or license replacement technology, any of which may not be feasible on a technical or commercial basis. If GRAIL is unable to obtain or maintain applicable licenses, GRAIL may be unable to commercialize certain of its products or continue to utilize its technology, which could harm its business, financial condition, results of operations, and prospects.

In addition, GRAIL’s in-licenses impose various development, diligence, commercialization, and other obligations on GRAIL, and GRAIL expects that its future license or development agreements will contain similar types of obligations. Certain of GRAIL’s license agreements also require it to meet development timelines, or to exercise commercially reasonable efforts to develop and commercialize licensed products, including, for example, analyzing a minimum number of samples using the applicable product within a certain number of years, in order to maintain the licenses. Despite GRAIL’s efforts, its licensors might conclude that GRAIL has materially breached its obligations under such license agreements or its sublicensees may fail to fulfill their obligations to GRAIL or materially breach GRAIL’s related sublicense agreements, and GRAIL’s licensors might therefore terminate the license agreements or otherwise modify GRAIL’s rights under those agreements, thereby removing or limiting GRAIL’s ability to develop and commercialize products and technology covered by these license agreements or resulting in litigation. If these in-licenses are terminated, or if the underlying patents fail to provide the anticipated market exclusivity, competitors or other third parties may have the freedom to seek regulatory approval of, and to market, tests highly similar to GRAIL’s or GRAIL may be required to cease commercialization of its products or use of its technology. Any of the foregoing could have a material adverse effect on GRAIL’s competitive position, business, financial condition, results of operations, and prospects.

In addition, the agreements under which GRAIL currently licenses or otherwise obtains rights to intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations, which may lead to disputes between GRAIL and its licensor, including:

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the scope of rights granted under the license agreement;

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the extent to which GRAIL’s product and technology infringe on intellectual property of the licensor that is not subject to the license agreement;

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the right to sublicense patent and other rights under GRAIL’s collaborative development relationships;

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GRAIL’s diligence and other obligations under the license agreement; and

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the ownership of inventions and know-how resulting from the joint invention of intellectual property by GRAIL and is licensors and GRAIL’s partners.

The resolution of any contract disagreement that may arise could narrow what GRAIL believes to be the scope of its rights to the relevant intellectual property or technology, or increase what GRAIL believes to be its financial or other obligations under the relevant agreement, either of which could have a material adverse effect on its business, financial condition, results of operations, and prospects. If GRAIL is required to engage in litigation to enforce or defend its rights under its license or development agreements, even if it is successful, such litigation could require significant financial resources, divert the attention of management and harm GRAIL’s business. Moreover, if disputes over intellectual property that GRAIL has licensed or otherwise obtained rights to prevent or impair GRAIL’s ability to maintain its current arrangements on commercially acceptable terms, or at all, GRAIL may be unable to successfully commercialize the affected product or technology, which could have a material adverse effect on GRAIL’s business, financial condition, results of operations, and prospects.

GRAIL’s use of open-source software could subject GRAIL’s proprietary technology to unwanted open-source license conditions that could negatively impact its business.

A portion of GRAIL’s technology capabilities incorporates open-source software, and GRAIL may incorporate open-source software into other offerings or products in the future. If an author or other third party that distributed such open-source software to GRAIL were to allege that GRAIL had not complied with the conditions of one or more of these licenses, GRAIL could be required to incur significant legal expenses defending against such allegations. Further, the outcome of such litigation may be particularly uncertain in some cases, because there is little legal precedent governing the interpretation of certain terms of common open source licenses. In addition, if GRAIL combines its proprietary software with open-source software in a certain manner and makes it available to others, under some open-source licenses, it could be required to license or make available the source code of its proprietary software, which could substantially help its competitors develop products that are similar to or better than GRAIL’s and harm its business.

Developments in patent law could have a negative impact on GRAIL’s business.

From time to time, the U.S. Supreme Court, other federal courts, the U.S. Congress, the USPTO, or applicable authorities in other jurisdictions may change the standards of patentability and any such changes could have a negative impact on GRAIL’s business.

Several decisions from the U.S. Supreme Court regarding patentable subject matter are of particular relevance to patents in the medical diagnostics and computer-implemented applications space. The 2012 decision in Mayo Collaborative v. Prometheus Laboratories (Prometheus) concerns

patent claims directed to optimizing the amount of drug administered to a specific patient based on certain diagnostic measurements. The Supreme Court held that the applicable patent’s claims were directed to a law of nature (i.e., a natural correlation between drug levels and efficacy or toxicity) and failed to incorporate a sufficiently inventive concept above and beyond routine and conventional method steps to allow the claimed methods of treatment to qualify as patent eligible. The 2013 decision in Association for Molecular Pathology v. Myriad Genetics (Myriad) concerns the patentability of isolated DNA sequences that were related to methods of diagnosing genetic predisposition to cancer. The Supreme Court held that isolated fragments of naturally occurring genetic material are not patent eligible, but non-naturally occurring fragments can be patented. The 2014 decision in Alice Corporation Pty. Ltd. v. CLS Bank International (Alice) concerns a computer-implemented, electronic escrow service for facilitating financial transactions. The Supreme Court held that an abstract idea could not be patented just because it is implemented on a computer, thus providing guidance on the patentability of computer-implemented applications such as GRAIL’s products. GRAIL’s efforts to seek patent protection for its technologies and products may be negatively impacted by the Prometheus, Myriad, and Alice decisions, rulings in other cases, or guidance or procedures issued by the USPTO or authorities in other jurisdictions.

GRAIL cannot fully predict the impact of the Prometheus, Myriad, and Alice decisions or other decisions that have been made or in the future may be made by other authorities on its ability, or the ability generally of genomic testing, biopharmaceutical, or other companies, to obtain or enforce patents relating to DNA, genes, genomic-related discoveries, or computer-implemented tests, including such tests that use machine learning or rely on software pipelines, in the future, as the contours of whether claims are patent eligible, or recite laws of nature, natural phenomena, natural products, or abstract ideas are not clear and may take years to develop via interpretation at the USPTO and in the courts. There are many previously issued patents claiming nucleic acids and diagnostic methods based on natural correlations that issued before these recent Supreme Court decisions and, although many of these patents may be invalid under the standards set forth in these decisions, these patents are presumed valid and enforceable until they are successfully challenged. Thus, third parties holding these patents could allege that GRAIL infringes, or request that GRAIL obtain a license under, these patents, even if these patents are not likely enforceable under current U.S. laws. Whether based on patents issued prior to or after these Supreme Court decisions, GRAIL could be forced to defend against claims of patent infringement or obtain license rights, if available on commercially reasonable terms or at all, under these patents. In jurisdictions other than the United States, gene-related patent claims may remain valid and may be enforced against GRAIL.

Further, the U.S. Congress has periodically sought to pass bills concerning subject matter eligible for patent protection. GRAIL cannot fully predict the impact that such new laws may have on its ability to obtain patent protection on its products and technologies, and its ability to operate in view of the patents controlled by third parties.

These and other substantive changes to U.S. and foreign patent law could affect GRAIL’s susceptibility to patent infringement claims and its ability to obtain patents and, if obtained, to enforce or defend them, any of which could have a material adverse effect on its business.

Patent terms may be inadequate to protect GRAIL’s competitive position on GRAIL’s products for an adequate amount of time.

Patents have a limited lifespan in all jurisdictions around the world. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering GRAIL’s product are obtained, once the patent life has expired for a product, GRAIL may be open to competition. Given the amount of time

required for the development, testing and regulatory review of new products, patents protecting such products might expire before or shortly after such products are commercialized. As a result, GRAIL’s patent portfolio may not provide it with sufficient rights to exclude others from commercializing product candidates similar or identical to GRAIL’s for a meaningful amount of time, or at all. Such an inability to exclude competitors from commercializing similar or identical products could have a material adverse impact on GRAIL’s reputation, business, financial condition, results of operations and business prospects.

Issued patents covering GRAIL’s products and other technologies could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States and abroad.

Third parties may challenge the validity or enforceability of GRAIL’s owned or in-licensed patents in court or before administrative bodies in the United States or abroad. If GRAIL or one of its licensors initiated legal proceedings against a third party to enforce a patent, the defendant could counterclaim that GRAIL’s asserted patent is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, lack of subject matter eligibility, lack of written description, and non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a material misleading statement, during prosecution. Third parties have raised, and in the future may raise, claims challenging the validity or enforceability of GRAIL’s owned or in-licensed patents before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post-grant review, inter partes review, interference proceedings, derivation proceedings, and equivalent proceedings in foreign jurisdictions (such as opposition proceedings). Such proceedings could result in the revocation of, cancellation of, or amendment to GRAIL’s patents in such a way that they no longer cover Galleri, DAC or other technologies or products.

For example, GRAIL recently faced three patent oppositions in Europe with respect to European patent numbers EP 2 823 062 B1 and EP 2 898 100 B1, in-licensed from The Chinese University of Hong Kong, and European patent number EP 2 814 959 B1, in-licensed from the Fred Hutchinson Cancer Research Center. These opposition proceedings concluded with granted European patent numbers EP 2 823 062 B1 and EP 2 898 100 B1 being maintained based on claim amendments entered during the opposition proceedings and with EP 2 814 959 B1 being revoked. This revocation applies only in Europe, does not affect GRAIL’s patents outside of Europe and represents technology that is not currently being used in Galleri or DAC. GRAIL and the Fred Hutchinson Cancer Research Center have appealed the opposition division’s decision revoking EP 2 814 959 B1. In addition to these opposition proceedings, additional oppositions were recently filed against European patent numbers EP 3 354 748, EP 3 243 910 and EP 2 527 471, which are in-licensed from The Chinese University of Hong Kong. The outcomes of legal assertions of invalidity and unenforceability are unpredictable. For example, GRAIL cannot be certain that there is no invalidating prior publications or inventions, of which GRAIL or its licensing partners and the patent examiner were unaware during prosecution. If a third party were to prevail on a legal assertion of invalidity or unenforceability, GRAIL would lose at least part, and perhaps all, of the patent protection on its products or other technologies. Such a loss of patent protection could have a material adverse impact on GRAIL’s business, financial condition, results of operations, and prospects.

GRAIL may be subject to claims by third parties asserting that GRAIL’s employees or GRAIL have infringed or misappropriated intellectual property rights, or to assertions by third parties or employees claiming ownership of what GRAIL regards as its own intellectual property.

GRAIL’s former, current, and future employees may have been previously employed at universities or other biotechnology, diagnostic technology, or pharmaceutical companies, including GRAIL’s competitors or potential competitors and strategic partners. GRAIL trains its employees not to bring or use proprietary information or technology from former employers to GRAIL or use it in their work. Although GRAIL tries through such training and other measures to ensure that its employees do not use the proprietary information or know-how of others in their work for GRAIL, GRAIL has been in the past, and in the future may be, subject to claims that an employee or it has used or disclosed intellectual property, including trade secrets or other proprietary information, of such employee’s former employer. Litigation, which would be expensive, time-consuming, a distraction to management, and uncertain of outcome, may be necessary to defend against these claims.

In addition, while it is GRAIL’s policy to require its employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to GRAIL, GRAIL may be unsuccessful in executing or enforcing such an agreement with each party who in fact develops intellectual property that GRAIL regards as its own. GRAIL’s and their assignment agreements may be breached, and GRAIL may be forced to bring claims against third parties or current or former employees, or defend claims they may bring against GRAIL, to determine the ownership of what GRAIL regards as its intellectual property.

If GRAIL fails to prevail on any such claims, in addition to paying monetary damages, it may lose valuable intellectual property rights or personnel, or be required to obtain a license, which may not be available to GRAIL on commercially reasonable terms or at all. Even if GRAIL is successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management, which could harm its business.

If GRAIL is unable to protect the confidentiality of its trade secrets, GRAIL’s business and competitive position would be harmed.

In addition to seeking patents for GRAIL’s products and other technologies, GRAIL also relies on trade secrets and confidentiality agreements to protect its unpatented know-how, technology, data, and other proprietary information and to maintain its competitive position. Trade secrets and know-how can be difficult to protect. GRAIL expects its trade secrets and know-how to over time be disseminated within the industry through independent development, the publication of journal articles describing the methodology, and the movement of personnel from academic to industry scientific positions.

GRAIL seeks to protect these trade secrets and other proprietary technology, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as GRAIL’s employees, directors, corporate collaborators, outside scientific collaborators, CROs, contract manufacturers, suppliers, service providers, consultants, advisors, and other third parties. GRAIL also enters into confidentiality and invention or patent assignment agreements with its employees and consultants, and reminds departing employees when they leave their employment of their continuing confidentiality obligations. GRAIL cannot guarantee that it has entered into such agreements with each party that may have or have had access to GRAIL’s trade secrets or proprietary technology and processes. Despite GRAIL’s efforts, any of these parties may breach the agreements and disclose GRAIL’s proprietary information, including GRAIL’s trade secrets, and GRAIL may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive, and time-consuming, and the outcome is unpredictable. Some courts outside the United States are less willing or unwilling to protect trade

secrets. For example, in China, claims regarding infringement or misappropriation of trade secrets are difficult to prove, and consequently plaintiffs are rarely successful in bringing these claims. If any of GRAIL’s trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, GRAIL would have no right to prevent them from using that technology or information to compete with GRAIL. If any of GRAIL’s trade secrets were to be misappropriated by, disclosed to, or independently developed by a competitor or other third party, GRAIL’s competitive position could be materially and adversely harmed.

GRAIL has and may enter into collaboration, license, contract research and/or manufacturing relationships with contract organizations that operate in certain countries that are at heightened risk of theft of technology, data, and intellectual property through direct intrusion by private parties or foreign actors, including those affiliated with or controlled by state actors. Accordingly, GRAIL’s efforts to protect and enforce GRAIL’s intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that GRAIL develops or licenses, and GRAIL may be at heightened risk of losing its proprietary intellectual property rights around the world, including outside of such countries, to the extent such theft or intrusion destroys the proprietary nature of its intellectual property.

GRAIL’s success depends on its ability to develop and commercialize its technology without infringing, misappropriating, or otherwise violating the intellectual property of third parties. Third parties may initiate legal proceedings alleging that GRAIL is infringing their intellectual property rights, and if they prevail, could block sales of GRAIL’s products and force GRAIL to make large damages and/or royalty payments, which could have a material adverse effect on the success of its business.

GRAIL’s commercial success in part depends upon its ability, and the ability of its collaborators, to market, sell, and distribute GRAIL’s products and use GRAIL’s proprietary technologies without infringing, misappropriating, or otherwise violating the proprietary rights of third parties. There is considerable intellectual property litigation in the medical technology, biotechnology, diagnostic, and pharmaceutical industries. In addition, there is ongoing intellectual property litigation in the circulating nucleic acid analysis and cancer nucleic acid space, the outcome of which could also impact future litigation involving GRAIL’s intellectual property or its ability to commercialize its products. GRAIL may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to its products, including interference proceedings before the USPTO and similar bodies in other jurisdictions. Third parties may assert infringement claims against GRAIL based on existing patents or patents that may be issued in the future.

If GRAIL is found to infringe, misappropriate, or otherwise violate a third party’s intellectual property rights, it could be required to obtain a license from such third party to continue developing, marketing, selling, and distributing GRAIL’s products, or to cease using the infringing technology. However, GRAIL may not be able to obtain any required license on commercially reasonable terms or at all. Even if GRAIL were able to obtain a license, it could be non-exclusive, thereby giving GRAIL’s competitors access to the same technologies licensed to GRAIL. In addition, GRAIL could be found liable for monetary damages, including treble damages if it is found to have willfully infringed a patent and attorneys’ fees if the court finds the case to be exceptional. A finding of infringement, misappropriation, or other violation could prevent GRAIL from commercializing its products or force GRAIL to cease some of its operations, which could materially harm its business. Claims that GRAIL has misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on GRAIL’s business.

Even if resolved in GRAIL’s favor, litigation or other legal proceedings relating to intellectual property claims may cause GRAIL to incur significant expenses and could distract GRAIL’s personnel

from their normal responsibilities. Such litigation or proceedings could substantially increase GRAIL’s operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities. GRAIL may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of GRAIL’s competitors may be able to sustain the costs of such litigation or proceedings more effectively than GRAIL can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on GRAIL’s ability to compete in the market place.

Intellectual property litigation may lead to unfavorable publicity that harms GRAIL’s reputation and causes the market value of GRAIL Common Stock to decline.

During the course of any intellectual property litigation, there could be public announcements of the initiation of the litigation as well as results of hearings, rulings on motions, and other interim proceedings in the litigation. If securities analysts or investors regard these announcements as negative, the perceived value of GRAIL’s existing products, programs or intellectual property could be diminished. Accordingly, the market price of shares of GRAIL Common Stock may decline. Such announcements could also harm GRAIL’s reputation or the market for its future products, which could have a material adverse effect on its business.

GRAIL may become involved in lawsuits to protect or enforce or defend its patents, which could be expensive, time-consuming and unsuccessful.

GRAIL’s patents and any patents which it in-licenses may be challenged, narrowed, invalidated or circumvented. If GRAIL’s patents are invalidated or otherwise limited or will expire prior to the commercialization of its products, other companies may be better able to develop products that compete with GRAIL’s, which could adversely affect GRAIL’s competitive position, business prospects, results of operations, and financial condition.

The following are examples of litigation and other adversarial proceedings or disputes that GRAIL could become a party to involving its patents or patents licensed to it:

•

GRAIL or its collaborators may initiate litigation or other proceedings against third parties to enforce its patent rights;

•

third parties may initiate litigation or other proceedings seeking to invalidate patents owned by GRAIL or that are licensed to GRAIL or to obtain a declaratory judgment that their product or technology does not infringe GRAIL’s patents or patents licensed to it or that such patents are invalid or unenforceable;

•

third parties have initiated, and in the future may initiate, oppositions, inter partes review, post grant review, or reexamination proceedings challenging the validity or scope of GRAIL’s patent rights, requiring GRAIL or its collaborators and/or licensors to participate in such proceedings to defend the validity and scope of GRAIL’s patents;

•

there may be a challenge or dispute regarding inventorship or ownership of patents currently identified as being owned by or licensed to GRAIL;

•

at GRAIL’s initiation or at the initiation of a third party, the USPTO may initiate an interference between patents or patent applications owned by or licensed to GRAIL and those of its competitors, requiring GRAIL or its collaborators and/or licensors to participate in an interference proceeding to determine the priority of invention, which could jeopardize GRAIL’s patent rights; or

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•

third parties may seek approval to market products similar to GRAIL’s future approved products prior to expiration of relevant patents owned by or licensed to GRAIL, requiring GRAIL to defend its patents, including by filing lawsuits alleging patent infringement.

These lawsuits and proceedings would be costly and could affect GRAIL’s results of operations and divert the attention of GRAIL’s managerial, legal, and scientific personnel. There is a risk that a court or administrative body would decide that GRAIL’s owned or exclusively in-licensed patents are invalid or not infringed by a third party’s activities, or that the scope of certain issued claims must be limited. An adverse outcome in a litigation or proceeding involving GRAIL’s owned or exclusively in-licensed patents could limit GRAIL’s ability to assert its patents against competitors, affect its ability to receive royalties or other licensing consideration from its licensees or sublicensees, and may curtail or preclude its ability to exclude third parties from making, using and selling similar or competitive products. GRAIL may become more susceptible to these types of lawsuits and proceedings given the proliferation of organizations pursuing intellectual property protections in the cfNA space. Any of these occurrences could adversely affect GRAIL’s competitive business position, business prospects and financial condition.

If GRAIL’s trademarks and trade names are not adequately protected, then GRAIL may not be able to build name recognition in its markets of interest and its business may be adversely affected.

GRAIL’s application to register the “Galleri” mark and logo (for its multi-cancer test) and some of its applications to register the “GRAIL” mark and the logos associated with GRAIL in the United States are pending and GRAIL cannot assure you that its pending trademark applications will be approved. In addition, GRAIL’s registered or unregistered trademarks or trade names may be challenged, infringed or declared generic or determined to be infringing on other marks. GRAIL may not be able to protect its rights to these trademarks and trade names, which GRAIL views as valuable to building name recognition among potential partners and customers in its markets of interest. At times, competitors or other third parties have adopted or may adopt trade names or trademarks similar to GRAIL’s, thereby impeding its ability to build brand identity and possibly leading to market confusion and/or litigation. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of GRAIL’s registered or unregistered trademarks or trade names. Over the long term, if GRAIL is unable to establish name recognition based on its trademarks and trade names, then GRAIL may not be able to compete effectively and GRAIL’s business may be adversely affected. GRAIL’s efforts to enforce, protect, or defend its proprietary rights related to trademarks may be ineffective and could result in substantial costs and diversion of resources and could adversely affect GRAIL’s business, financial condition, results of operations and prospects.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This consent solicitation statement/prospectus and the documents incorporated by reference herein contain forward-looking statements within the meaning of applicable securities laws, including, in particular, statements about plans, objectives and strategies, growth opportunities in a company’s industries and businesses, its expectations regarding future results, financial condition, liquidity and capital requirements, estimates regarding the impact of regulatory developments and legal proceedings, and other trends and projections. These risks and uncertainties may be amplified by the COVID-19 pandemic, which has caused significant economic instability and uncertainty. The extent to which the COVID-19 pandemic impacts Illumina’s and GRAIL’s businesses, operations, and financial results, including the duration and magnitude of such effects, will depend on numerous evolving factors, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or mitigate its impact, and how quickly and to what extent normal economic and operating conditions can resume. Forward-looking statements are not historical facts and may be identified by words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “may,” “target,” similar expressions and variations or negatives of these words. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the consummation of the Transaction and the anticipated benefits thereof. These and other forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements, including the failure to consummate the Transaction or to make any filing or take other action required to consummate the Transaction in a timely matter or at all. Important risk factors that may cause such a difference include, but are not limited to:

•

the failure to complete the Transaction on the terms or timeline currently contemplated, or at all, including because Illumina and/or GRAIL may be unable to satisfy the conditions or obtain the approvals required to complete the Transaction, or such approvals may contain material restrictions or conditions;

•

the possibility that a condition to Closing may not be satisfied, including obtaining regulatory approvals, such as clearance under the HSR Act;

•

the potential impact of unforeseen liabilities, future capital expenditures, revenues, costs, expenses, earnings, synergies, economic performance, indebtedness, financial condition and losses on the future prospects, business and management strategies for the management, expansion and growth of the Illumina or the surviving company’s businesses after the consummation of the Transaction;

•

potential adverse reactions or changes to business relationships resulting from the announcement or completion of the Transaction;

•

negative effects of the announcement, pendency or consummation of the Transaction on the market price of the Illumina Common Stock or the value of shares of GRAIL Stock and on their respective operating results;

•

risks associated with third-party contracts containing consent and/or other provisions that may be triggered by the Transaction;

•

the risks and costs associated with the integration of, and the ability of Illumina to integrate, GRAIL’s business successfully and to achieve anticipated synergies;

•

the risks and costs associated with the development and commercialization of, and Illumina’s ability to develop and commercialize, GRAIL’s products;

•

the risk that disruptions from the Transaction will harm Illumina, GRAIL or the surviving company’s businesses, including their current or future plans and operations;

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•

the fact that certain GRAIL directors and executive officers have interests in the Transaction that may be different from, or in addition to, those of other GRAIL stockholders;

•

the fact that the value of the CVRs to be issued in the connection with the Transaction is speculative and the amount payable pursuant to the CVRs, if any, depends on the ability of Illumina to successfully bring to market certain drug products in development by GRAIL, which is subject to various operational and regulatory risks and uncertainties;

•

the potential impact of legislative, regulatory and economic developments; and

•

other business, financial, operational and legal risks and uncertainties detailed from time to time in Illumina’s SEC filings.

The foregoing list of factors is not exclusive. Additional information concerning these and other risk factors is contained in Illumina’s most recently filed Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other SEC filings. All cautionary statements made or referred to herein should be read as being applicable to all forward-looking statements wherever they appear. You should consider the risks and uncertainties described or referred to herein and should not place undue reliance on any forward-looking statements. The forward-looking statements speak only as of the date made, and Illumina and GRAIL undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this consent solicitation statement/prospectus or to reflect new information, actual results, revised expectations, or the occurrence of unanticipated events, except as required by law.

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INFORMATION ABOUT THE COMPANIES

Illumina, Inc.

Illumina’s principal executive office is located at 5200 Illumina Way, San Diego, CA 92122, and its telephone number is (858) 202-4500.

First Merger Sub

Second Merger Sub

SDG Ops, LLC, a direct, wholly owned subsidiary of Illumina, is a Delaware limited liability company that was formed on September 11, 2020 for the purpose of entering into the Merger Agreement and effecting the Second Merger. Following the First Merger and at the Second Effective Time, GRAIL, as the surviving corporation in the First Merger, will be merged with and into Second Merger Sub, with Second Merger Sub continuing as the surviving company and as a wholly owned subsidiary of Illumina. As a result of the Second Merger, Second Merger Sub, as the surviving company, will own the legacy business of GRAIL. The principal executive office and telephone number of Second Merger Sub is the same as Illumina’s.

GRAIL, Inc.

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cancer early detection blood test, that has demonstrated in clinical studies the ability to detect more than 50 types of cancer, over 45 of which lack recommended screening tests today—with a low false positive rate of less than 1%. When a cancer is detected, Galleri localizes the cancer signal with high accuracy, all from a single blood draw. Galleri is currently in late-stage development and GRAIL plans to commercially launch it in 2021 as a laboratory developed test.

GRAIL’s principal executive office is located at 1525 O’Brien Drive, Menlo Park, CA 94025, and its telephone number is (650) 542-0372.

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF ILLUMINA

The following table presents selected historical consolidated financial data of Illumina. The selected historical consolidated financial data as of December 29, 2019 and December 30, 2018, and for the years ended December 29, 2019, December 30, 2018, and December 31, 2017, has been derived from Illumina’s audited consolidated financial statements and accompanying notes contained in Illumina’s Annual Report on Form 10-K for the year ended December 29, 2019, which is incorporated by reference into this consent solicitation statement/prospectus. The selected historical consolidated financial data as of December 31, 2017, January 1, 2017 and January 3, 2016, and for the years ended January 1, 2017 and January 3, 2016, has been derived from Illumina’s audited consolidated financial statements for such years and accompanying notes, which are not incorporated by reference into this consent solicitation statement/prospectus. The selected historical consolidated financial data as of September 27, 2020 and for the nine months ended September 27, 2020 and September 29, 2019 has been derived from Illumina’s unaudited consolidated financial statements contained in Illumina’s Quarterly Report on Form 10-Q for the quarter ended September 27, 2020, which is incorporated by reference into this consent solicitation statement/prospectus, and has been prepared on the same basis as Illumina’s audited consolidated financial statements included in Illumina’s Annual Report on Form 10-K for the year ended December 29, 2019.

The information set forth below is only a summary. You should read the following information together with Illumina’s consolidated financial statements and accompanying notes and the “Management’s Discussion and Analysis” section contained in Illumina’s Annual Report on Form 10-K for the year ended December 31, 2019 and Illumina’s Quarterly Report on Form 10-Q for the three months ended September 27, 2020, which are incorporated by reference into this consent solicitation statement/prospectus. Illumina’s annual and interim period results are not necessarily indicative of Illumina’s results in any future period. In the opinion of Illumina’s management, the selected historical consolidated financial data as of and for the nine months ended September 27, 2020 and September 29, 2019 set forth in the tables below reflect all normal recurring adjustments necessary for the fair presentation of results of operations and financial position for these periods. For more information, see “Where You Can Find More Information.”


Consolidated Statement of Operations Data	Nine Months Ended
(in millions, except per share amounts)	September 27, 2020		September 29, 2019
Total revenue	$	2,286	$	2,591
Income from operations		447		717
Consolidated net income		399		751
Net income attributable to Illumina stockholders		399		763

Net income attributable to Illumina stockholders for earnings per share		399		763

Earnings per share attributable to Illumina stockholders
Basic		2.72		5.19

Diluted		2.70		5.13

Shares used in computing earnings per share
Basic		147		147
Diluted		148		149

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Consolidated Statement of Operations Data	Year Ended
(in millions, except per share amounts)	December 29, 2019		December 30, 2018		December 31, 2017		January 1, 2017		January 3, 2016
Total revenue	$	3,543	$	3,333	$	2,752	$	2,398	$	2,220
Income from operations		985		883		606		587		613
Consolidated net income		990		782		678		428		458
Net income attributable to Illumina stockholders		1,002		826		726		463		462

Net income attributable to Illumina stockholders for earnings per share		1,002		826		725		454		462

Earnings per share attributable to Illumina stockholders
Basic	$	6.81	$	5.63	$	4.96	$	3.09	$	3.19

Diluted		6.74		5.56		4.92		3.07		3.10

Shares used in computing earnings per share
Basic		147		147		146		147		145
Diluted		149		149		148		148		149


Consolidated Balance Sheet Data	As of
(in millions)	September 27, 2020		December 29, 2019		December 30, 2018		December 31, 2017		January 1, 2017		January 3, 2016
Cash, cash equivalents and short-term investments	$	3,324	$	3,414	$	3,512	$	2,145	$	1,559	$	1,386
Total assets		7,404		7,316		6,959		5,257		4,281		3,688
Short-term debt		507		—		1,107		10		2		75
Long-term debt		666		1,141		890		1,182		1,056		1,016
Redeemable noncontrolling interests		—		—		61		220		44		33
Total stockholders’ equity		4,700		4,613		3,845		2,749		2,270		1,849

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF GRAIL

The following table presents selected historical consolidated financial data of GRAIL. The selected historical consolidated financial data as of December 31, 2019 and 2018, and for the years ended December 31, 2019 and 2018, has been derived from GRAIL’s audited consolidated financial statements and accompanying notes which are included in this consent solicitation statement/prospectus in Annex H. The selected historical consolidated financial data as of September 30, 2020 and for the nine months ended September 30, 2020 and 2019 has been derived from GRAIL’s unaudited condensed consolidated financial statements which are included in this consent solicitation statement/prospectus in Annex I, and has been prepared on the same basis as GRAIL’s audited consolidated financial statements.

The information set forth below is only a summary. You should read the following information together with GRAIL’s consolidated financial statements and accompanying notes and “GRAIL’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this consent solicitation statement/prospectus. GRAIL’s annual and interim period results are not necessarily indicative of GRAIL’s results in any future period. In the opinion of GRAIL’s management, the selected historical consolidated financial data as of September 30, 2020 and for the nine months ended September 30, 2020 and 2019 set forth in the tables below reflect all normal recurring adjustments necessary for the fair statement of results of operations and financial position for these periods. For more information, see “Where You Can Find More Information.”


Consolidated Statement of Operations Data	Year Ended December 31,						Nine Months Ended September 30,
(in thousands, except share and per share data)	2019			2018			2020			2019
Operating expenses	$	255,663		$	287,496		$	220,446		$	187,995
Research and development⁽¹⁾		158,886			190,205			127,913			119,023
Research and development—related parties⁽¹⁾		8,202			32,955			7,323			7,704
Marketing⁽¹⁾		7,679			6,107			8,397			5,496
General and administrative⁽¹⁾		80,896			58,229			76,813			55,772
Loss from operations		255,663			287,496			220,446			187,995
Interest income, net		(12,430	)		(12,550	)		(5,078	)		(9,905	)
Other expense, net		1,817			287			1,404			(278	)
Loss before provision for (benefit from) income taxes		245,050			275,233			216,772			177,812
Provision for (benefit from) income taxes		(195	)		485			24			68
Net loss		244,855			275,718			216,796			177,880
Net loss attributable to Class A and Class B common stockholders, basic and diluted		244,855			275,718			216,796			177,880
Net loss per share attributable to Class A and Class B common stockholders, basic and diluted⁽²⁾	$	(1.99	)	$	(2.42	)	$	(1.61	)	$	(1.46	)
Weighted-average shares of Class A and Class B common stock used in computing net loss per share attributable to Class A and Class B common stockholders, basic and diluted⁽²⁾		123,188,351			114,138,912			134,477,041			122,100,069

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(1)	Includes stock-based compensation expense as follows:


	Year Ended December 31,				Nine Months Ended September 30,
	2019		2018		2020		2019
	(in thousands)
Research and development	$	3,913	$	937	$	4,921	$	2,460
Research and development-related parties		135		778		120		101
Marketing		202		123		1,898		88
General and administrative		24,141		9,203		27,354		15,134

Total stock-based compensation expense	$	28,391	$	11,041	$	34,293	$	17,783

(2)

See Note 13 to GRAIL’s audited consolidated financial statements and Note 12 to GRAIL’s unaudited condensed consolidated financial statements for further details on the calculation of net loss per share attributable to Class A and Class B common stockholders, basic and diluted, and the weighted-average shares used to compute net loss per share attributable to Class A and Class B common stockholders, basic and diluted.


Consolidated Balance Sheet Data	As of September 30,			As of December 31,
(in thousands)	2020			2019			2018
Cash, cash equivalents, and marketable securities	$	634,560		$	558,277		$	641,350
Working capital⁽¹⁾		578,371			512,583			575,074
Total assets		727,471			635,519			686,845
Total liabilities		117,536			84,992			86,473
Redeemable convertible preferred stock		1,994,921			1,763,060			1,603,224
Accumulated deficit		(1,522,427	)		(1,305,631	)		(1,060,776	)
Total stockholders’ deficit		(1,384,986	)		(1,212,533	)		(1,002,852	)

(1)	GRAIL defines working capital as current assets less current liabilities. See GRAIL’s audited consolidated financial statements and unaudited condensed consolidated financial statements for further details regarding GRAIL’s current assets and current liabilities.

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SELECTED UNAUDITED PRO FORMA FINANCIAL DATA

The following selected unaudited pro forma condensed combined financial information combines the historical financial statements of Illumina and GRAIL, after giving effect to the Transaction and related financing. The selected unaudited pro forma condensed combined balance sheet is presented as if the Transaction and related financing occurred as of September 27, 2020. The selected unaudited pro forma condensed combined statements of income (loss) for the nine months ended September 27, 2020 and the year ended December 29, 2019 give effect to the Transaction and related financing as if they had occurred on December 31, 2018, the beginning of the earliest period presented. The selected unaudited pro forma condensed combined financial information is provided for illustrative purposes only, does not necessarily reflect what the actual consolidated results of operations would have been had the Transaction and Permanent Financing occurred on the dates assumed and may not be useful in predicting Illumina’s future consolidated results of operations or financial position.

The selected unaudited pro forma condensed combined financial data has been prepared from, and should be read in conjunction with, (i) the more detailed unaudited pro forma condensed combined financial information and the related notes appearing in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” and (ii) the historical unaudited condensed consolidated financial statements and notes of each of Illumina and GRAIL included or incorporated by reference in this consent solicitation statement/prospectus. For additional information, see the sections entitled “GRAIL Audited Consolidated Financial Statements for the Years Ended December 31, 2019 and 2018” and “GRAIL Unaudited Condensed Consolidated Financial Statements as of September 30, 2020 and for the Three and Nine Months Ended September 30, 2020 and 2019,” included as Annexes H and I to this consent solicitation statement/prospectus and “Where You Can Find More Information.”

Selected Unaudited Pro Forma Condensed Combined Balance Sheet



(dollars in millions)	As of September 27, 2020
Current assets	$	2,905
Total assets		13,322
Current liabilities		1,307
Long-term debt, current portion		507
Long-term debt		1,659
Total stockholders’ equity		8,019

Selected Unaudited Pro Forma Condensed Combined Statement of Income (Loss)



(dollars in millions)	Nine Months Ended September 27, 2020		Year Ended December 29, 2019
Total revenue	$	2,280	$	3,536
Total cost of revenue		713		1,076
Gross profit		1,567		2,460
Total operating expense		1,415		2,729
Income (loss) from operations		152		(269	)
Consolidated net income		175		693
Net income (loss) attributable to Illumina stockholders		175		705

110

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

On September 20, 2020, Illumina entered into the Merger Agreement to acquire GRAIL. Under the terms of the Merger Agreement, and at the Effective Time, First Merger Sub will be merged with and into GRAIL, with GRAIL continuing as the surviving corporation and a wholly owned subsidiary of Illumina. As soon as practicable following the First Merger and at the Second Effective Time, GRAIL, as the surviving corporation in the First Merger, will be merged with and into Second Merger Sub, with Second Merger Sub continuing as the surviving company and a wholly owned subsidiary of Illumina.

The following unaudited pro forma condensed combined financial information combines the historical financial statements of Illumina and GRAIL, after giving effect to the Transaction and related financing. The unaudited pro forma condensed combined balance sheet is presented as if the Transaction and related financing occurred as of September 27, 2020. The unaudited pro forma condensed combined statements of income (loss) for the nine months ended September 27, 2020 and the year ended December 29, 2019 give effect to the acquisition as if the Transaction and related financing had occurred on December 31, 2018, the beginning of the earliest period presented. The unaudited pro forma condensed combined financial information is based on the historical consolidated financial statements of Illumina and GRAIL, and the assumptions and adjustments set forth in the accompanying explanatory notes. The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting for business combinations with Illumina considered the acquirer of GRAIL for accounting purposes. See “Note 2 – Basis of presentation” below.

Illumina’s fiscal year is the 52 or 53 weeks ending the Sunday closest to December 31, with quarters of 13 or 14 weeks ending closest to March 31, June 30, September 30 and December 31. GRAIL’s fiscal year is the calendar year. As Illumina and GRAIL have different fiscal year ends, the unaudited pro forma condensed combined financial information has been prepared utilizing period ends that differ by less than 93 days, as permitted by Regulation S-X. The unaudited pro forma condensed combined financial information was derived from and should be read in conjunction with the following historical financial statements and notes, which are included or incorporated by reference elsewhere in this consent solicitation statement/prospectus: (a) the audited consolidated financial statements of Illumina as of and for the year ended December 29, 2019; (b) the audited financial statements of GRAIL as of and for the year ended December 31, 2019; (c) the unaudited consolidated financial statements of Illumina as of and for the nine months ended September 27, 2020; and (d) the unaudited condensed consolidated financial statements of GRAIL as of and for the nine months ended September 30, 2020. For additional information, see the sections entitled “GRAIL Audited Consolidated Financial Statements for the Years Ended December 31, 2019 and 2018” and “GRAIL Unaudited Condensed Consolidated Financial Statements as of September 30, 2020 and for the Three and Nine Months Ended September 30, 2020 and 2019,” included as Annexes H and I to this consent solicitation statement/prospectus and “Where You Can Find More Information” elsewhere in this consent solicitation statement/prospectus.

The acquisition of GRAIL will be accounted for as a business combination and will reflect the application of acquisition accounting in accordance with Accounting Standards Codification (ASC) 805, Business Combinations (“ASC 805”). For purposes of developing the unaudited pro forma condensed combined balance sheet as of September 27, 2020, the acquired GRAIL assets, including identifiable intangible assets and liabilities assumed, have been recorded at their estimated fair values with the excess purchase price assigned to goodwill. The pro forma adjustments are based on preliminary estimates of the fair values of assets acquired and liabilities assumed and information available as of the date of this consent solicitation statement/prospectus. Detailed valuations and assessments, including valuations of intangible assets, the CVRs, Illumina’s previously held GRAIL investment, share-based compensation awards as well as the assessment of the tax positions and rates of the combined business, are in process and will not be completed until after the Closing. The estimated fair

111

values assigned in this unaudited pro forma condensed combined financial information are preliminary and represent Illumina’s current best estimate of fair value and are subject to revision. Accordingly, actual adjustments to the combined company’s financial statements following the acquisition could differ, perhaps materially, from those reflected in the unaudited pro forma condensed combined financial information because the purchase price, assets and liabilities acquired and share-based compensation awards will be recorded at their respective fair values on the date the acquisition is consummated.

GRAIL’s stockholders and holders of vested GRAIL Equity Awards will be provided with the option to elect the right to receive for each share of GRAIL Stock owned and each vested GRAIL Equity Award held by such individual: (i) the Cash Consideration, the Stock Consideration, plus one CVR issued by Illumina (collectively referred to as the “CVR Consideration”) or (ii) the Cash Consideration, the Stock Consideration, plus, and in lieu of a CVR, a number of shares of Illumina Common Stock and/or an amount in cash (which may be set by reference to the GRAIL Fully Diluted Share Count) (the “Alternative Consideration”), such number and/or amount of Alternative Consideration to be determined by Illumina in its sole discretion prior to the mailing of the Election Form (collectively, the “Cash & Stock Consideration”), in each case, for GRAIL Stock Options, less the value of the applicable exercise price. Illumina cannot predict the number of shares or vested GRAIL Equity Awards for which the Cash & Stock Consideration will be elected in lieu of the CVR Consideration. Further, as the number of shares of Illumina Common Stock and/or amount in cash to be offered as Alternative Consideration is not yet defined, Illumina cannot predict the estimated value of Alternative Consideration at this time. As described in the accompanying notes below, the number of shares or vested GRAIL Equity Awards for which the Alternative Consideration is elected as well as the value offered for the Alternative Consideration may impact the amount of cash available to pay the Cash Consideration and the other required uses of cash at Closing and may impact the mix of cash, equity and CVR consideration payable to the GRAIL stockholders. Accordingly, Illumina is providing the unaudited pro forma condensed combined financial information assuming that none of the GRAIL stockholders elect the right to receive the Alternative Consideration. In addition, the value of the stock component of the purchase price may fluctuate with the market price of Illumina Common Stock and with the number of Illumina shares issued, determined based on the weighted average trading price of Illumina Common Stock for the 20 consecutive trading days ending on (and including) the trading day that is 10 trading days prior to the Closing Date, subject to a collar of $295 to $399. As such, the actual purchase price may vary from the results shown.

GRAIL Equity Awards that are unvested, after taking into account the accelerated vesting described in the section entitled “The Transaction—Treatment of GRAIL Equity Awards” of this consent solicitation statement/prospectus, will, immediately prior to the Effective Time, be canceled in exchange for an equivalent equity award (i.e., stock options, restricted shares or restricted stock units, as applicable) with respect to shares of Illumina Common Stock. The number of shares of Illumina Common Stock subject to such converted award will be equal to the product (rounded down to the nearest whole share) of (i) the number of shares of GRAIL Stock subject to the unvested portion of the applicable GRAIL Equity Award and (ii) at the holder’s election, the CVR Consideration Award Ratio or the Alternative Consideration Award Ratio. If the CVR Consideration Award Ratio is elected with respect to an unvested GRAIL Equity Award, the holder will also receive a number of fully vested CVRs equal to the number of shares of GRAIL Stock subject to the unvested portion of such GRAIL Equity Award. Illumina cannot predict the number of unvested GRAIL Equity Awards for which the CVR Consideration Award Ratio or the Alternative Consideration Award Ratio will be elected. Further, as the Alternative Consideration Award Ratio is not yet defined, Illumina cannot predict the estimated value for the converted Illumina equity awards. As described in the accompanying notes below, the number of converted equity awards issued may impact the fair value of share-based compensation awards attributable to pre-combination service, the fair value of share-based compensation awards attributable to post-combination services or the CVR consideration payable to equity award holders. Accordingly,

112

Illumina is providing the unaudited pro forma condensed combined financial information assuming that none of the holders of unvested GRAIL Equity Awards elect the right to receive the Alternative Consideration Award Ratio.

The pro forma financial information has been prepared by Illumina in accordance with Regulation S-X Article 11, Pro Forma Financial Information, as amended by the final rule, Amendments to Financial Disclosures about Acquired and Disposed Businesses, as adopted by the SEC in May 2020 (“Article 11”). The amended Article 11 is effective on January 1, 2021, however voluntary early compliance is permitted. Illumina has elected to early comply with the amended Article 11. The unaudited pro forma condensed combined financial information is provided for illustrative purposes only, does not necessarily reflect what the actual consolidated results of operations would have been had the acquisition occurred on the dates assumed and may not be useful in predicting the future consolidated results of operations or financial position. Illumina’s results of operations and actual financial position may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

113

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF SEPTEMBER 27, 2020

(In millions)


	Historical						Pro Forma
	Illumina			GRAIL			Transaction accounting adjustments			Notes		Other transaction accounting adjustments			Notes		Pro forma combined
ASSETS
Current assets:
Cash, cash equivalents and short-term investments	$	3,324		$	632		$	(3,048	)		A	$	993			K	$	1,901
Accounts receivable, net		464			—			(1	)		B		—					463
Inventory		415			—			—					—					415
Prepaid expenses and other current assets		126			7			—					(7	)		L		126

Total current assets		4,329			639			(3,049	)				986					2,905
Property and equipment, net		910			25			—					—					935
Operating lease right-of-use assets		545			52			—					—					597
Goodwill		897			—			5,054			C		—					5,951
Intangible assets, net		149			—			2,450			C		—					2,599
Deferred tax assets, net		19			—			—					—					19
Other assets		555			11			(250	)		D		—					316

Total assets	$	7,404		$	727		$	4,205				$	986				$	13,322


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	156		$	8		$	(1	)		B	$	—				$	163
Accrued liabilities		452			52			130			E		3			L		637
Long-term debt, current portion		507			—			—					—					507

Total current liabilities		1,115			60			129					3					1,307
Operating lease liabilities		678			54			—					—					732
Long-term debt		666			—			—					993			K		1,659
Other long-term liabilities		245			3			50			F		—					1,605
								1,074			G
								233			G
Redeemable convertible preferred stock:
Series A		—			68			(68	)		H		—					—
Series B		—			1,235			(1,235	)		H		—					—
Series C		—			300			(300	)		H		—					—
Series D		—			392			(392	)		H		—					—

Total redeemable convertible preferred stock		—			1,995			(1,995	)				—					—
Stockholders’ equity (stockholders’ deficit):
Common stock		2			—			—					—					2
Additional paid-in capital		3,737			133			3,025			H		—					6,767
								(133	)		H
								5			I
Accumulated other comprehensive income		12			4			(4	)		H		—					12
Retained earnings (accumulated deficit)		4,466			(1,522	)		840			D		(10	)		L		4,475
								(130	)		E
								41			F
								(233	)		G
								1,522			H
								(499	)		J
Treasury stock, at cost		(3,517	)		—			280			H		—					(3,237	)

Total stockholders’ equity (stockholders’ deficit)		4,700			(1,385	)		4,714					(10	)				8,019

Total liabilities, redeemable convertible preferred stock and stockholders’ equity (stockholders’ deficit)	$	7,404		$	727		$	4,205				$	986				$	13,322

See accompanying notes to the unaudited pro forma condensed combined financial information.

114

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (LOSS)

FOR THE NINE MONTHS ENDED SEPTEMBER 27, 2020

(In millions, except per share amounts)


	Historical						Pro Forma
	Illumina			GRAIL			Transaction accounting adjustments			Notes		Other transaction accounting adjustments			Notes		Pro forma combined
Revenue:
Product revenue	$	1,904		$	—		$	(6	)		M	$	—				$	1,898
Service and other revenue		382			—			—					—					382

Total revenue		2,286			—			(6	)				—					2,280
Cost of revenue:
Cost of product revenue		535			—			—					—					535
Cost of service and other revenue		157			—			—					—					157
Amortization of acquired intangible assets		21			—			—					—					21

Total cost of revenue		713			—			—					—					713

Gross profit		1,573			—			(6	)				—					1,567

Operating expense:
Research and development		483			135			(6	)		M		—					685
								73			N
Selling, general and administrative		643			85			2			N		—					730

Total operating expense		1,126			220			69					—					1,415

Income (loss) from operations		447			(220	)		(75	)				—					152
Other income (expense):
Interest income		26			4			—					—					30
Interest expense		(33	)		—			—					(9	)		O		(42	)
Other income (expense), net		117			(1	)		—					—					116

Total other income, net		110			3			—					(9	)				104

Income (loss) before income taxes		557			(217	)		(75	)				(9	)				256
Provision for (benefit from) income taxes		158			—			(75	)		F		(2	)		O		81

Consolidated net income (loss)	$	399		$	(217	)	$	—				$	(7	)			$	175

Earnings per share:
Basic	$	2.72															$	1.11
Diluted	$	2.70															$	1.10
Shares used in computing earnings per share:
Basic		147						11			H		—					158
Diluted		148						11			H		—					159

See accompanying notes to the unaudited pro forma condensed combined financial information.

115

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (LOSS)

FOR THE YEAR ENDED DECEMBER 29, 2019

(In millions, except per share amounts)


	Historical						Pro Forma
	Illumina			GRAIL			Transaction accounting adjustments			Notes		Other transaction accounting adjustments			Notes		Pro forma combined
Revenue:
Product revenue	$	2,929		$	—		$	(7	)		M	$	—				$	2,922
Service and other revenue		614			—			—					—					614

Total revenue		3,543			—			(7	)				—					3,536
Cost of revenue:
Cost of product revenue		802			—			—					—					802
Cost of service and other revenue		240			—			—					—					240
Amortization of acquired intangible assets		34			—			—					—					34

Total cost of revenue		1,076			—			—					—					1,076

Gross profit		2,467			—			(7	)				—					2,460

Operating expense:
Research and development		647			167			39			G		—					1,034
								6			I
								85			J
								(7	)		M
								97			N
Selling, general and administrative		835			89			130			E		—					1,695
								194			G
								30			I
								414			J
								3			N

Total operating expense		1,482			256			991					—					2,729

Income (loss) from operations		985			(256	)		(998	)				—					(269	)
Other income (expense):
Interest income		75			13			—					—					88
Interest expense		(52	)		—			—					(10	)		L		(73	)
													(11	)		O
Other income (expense), net		110			(2	)		840			D		—					933
								(15	)		M

Total other income, net		133			11			825					(21	)				948

Income (loss) before income taxes		1,118			(245	)		(173	)				(21	)				679
Provision for (benefit from) income taxes		128			—			(139	)		F		(3	)		O		(14	)

Consolidated net income		990			(245	)		(34	)				(18	)				693
Add: net loss attributable to noncontrolling interests		12			—			—					—					12

Net income (loss) attributable to Illumina stockholders	$	1,002		$	(245	)	$	(34	)			$	(18	)			$	705

Earnings per share attributable to Illumina stockholders:
Basic	$	6.81															$	4.46
Diluted	$	6.74															$	4.40
Shares used in computing earnings per share:
Basic		147						11			H							158
Diluted		149						11			H							160

See accompanying notes to the unaudited pro forma condensed combined financial information.

116

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Description of the proposed GRAIL acquisition

On September 20, 2020, Illumina entered into the Merger Agreement to acquire GRAIL for $3.5 billion in cash, plus the Aggregate Option Exercise Price of all GRAIL Stock Options, and $4.5 billion in shares of Illumina Common Stock, subject to a collar, plus an option to receive CVRs or the Alternative Consideration set by Illumina in its sole discretion. The Transaction, which is expected to close in the second half of 2021, is subject to certain customary closing conditions, including the GRAIL Stockholder Approvals and the receipt of required regulatory approvals.

The Cash Consideration for the Transaction is expected to be funded using balance sheet cash, plus up to $1 billion in capital raised through a debt issuance. In advance of this anticipated issuance, Illumina has obtained a bridge facility commitment letter from Goldman Sachs Bank USA for a 364-day senior unsecured bridge loan facility, in an aggregate principal amount of $1 billion. The bridge facility commitment letter is subject to certain conditions, including consummation of the Mergers pursuant to the Merger Agreement. It is anticipated that some or all of the bridge facility will be replaced or repaid by Illumina through the issuance of debt securities. Illumina ultimately does not expect to utilize the bridge facility, and if necessary, expects to be able to obtain more cost-effective, permanent debt financing at a later date. The accompanying unaudited pro forma condensed combined financial information reflects the estimated cost of borrowing under an anticipated debt financing.

In connection with the Transaction, GRAIL stockholders and holders of GRAIL Equity Awards will have the option to elect to receive CVRs, which will entitle holders to receive future payments representing a pro rata portion of certain revenues (calculated in accordance with the CVR Agreement) each year for a 12-year period. Each holder of a CVR will be entitled to receive a pro rata portion of 2.5% of Covered Revenues, if any, up to and including $1 billion, plus 9.0% of Covered Revenues, if any, in excess of $1 billion, with such $1 billion threshold measured over an annual period to correspond with Illumina’s fiscal year. Illumina will offer GRAIL stockholders and holders of vested GRAIL Equity Awards the option to receive additional cash and/or stock cons