San Diego's Illumina gets split decision in proxy fight with activist investor Carl Icahn [The San Diego Union-Tribune]

San Diego's illumina dodged the worst in its proxy fight with activist investor Carl Icahn — though shareholders nonetheless expressed frustration over the ongoing regulatory turmoil surrounding the company's $7.1 billion acquisition of early cancer detection startup Grail.

At Illumina's annual meeting on Thursday, shareholders elected one of the three alternative board candidates nominated by Icahn.

Andrew Teno, a 38-year-old portfolio manager for Icahn Capital, will join Illumina's board. He has served on public company boards before, mostly in the energy sector.

Illumina Chairman John Thompson, 73, was voted off the board. The former CEO of computer security software firm Symantec and ex-chairman of Microsoft, Thompson joined illumina as a director in 2017 and rose to chairman in 2021.

Eight other directors nominated by Illumina retained their seats, including Chief Executive Francis deSouza. He became a lightning rod for criticism during the proxy war over the company's strategy and performance, with Icahn pushing for his ouster.

Illumina's shares ended trading Thursday down 9 percent at $193.53 on the Nasdaq exchange.

Meanwhile, shareholders rejected the company's advisory vote on executive compensation — known as say-on-pay. It is unusual for say-on-pay proposals to fail, though it's not unheard of.

Illumina declined to release exact percentages of the shareholder support for board candidates and say-on-pay, calling the results preliminary. They are expected to be available next week.

In a statement, Illumina thanked shareholders and acknowledged the concerns raised during the proxy battle.

"We appreciate the constructive shareholder feedback throughout this process and are committed to delivering on our plan to accelerate shareholder value creation," the company said in a statement.

Icahn entities, which own 1.4 percent of Illumina's shares, didn't immediately return a phone call and email seeking comment. In the proxy battle, Icahn sought to remove Thompson, deSouza and Robert Epstein — Illumina's longest-tenured director — from the board.

Icahn's fight with Illumina centers on the company's decision in August 2021 to close the acquisition of Grail — even though the transaction remained under review from anti-monopoly regulators in the U.S. and Europe.

Grail makes a diagnostic test that screens for 50 different types of cancer via a single blood test. To date, some 85,000 Grail tests have been done, and a 140,000-patient clinical trial is expected to begin soon in the United Kingdom.

Illumina announced plans to acquire Grail back under its umbrella in September 2020. An administrative law Judge for the U.S. Federal Trade Commission found the transaction was legal.

But the politically appointed commission overruled the judge and ordered Illumina to divest Grail. European regulators also rejected the acquisitions as anti-competitive.

Illumina is appealing in court. It expects decisions later this year or early next. Anti-monopoly regulators say the acquisition would hurt competition because Grail's putative rivals also rely on Illumina's gene sequencing equipment.

While Illumina offered contractual guarantees to Grail's rivals to ensure similar pricing and supply for up to 12 years, regulators dismissed the measures as inadequate.

During the proxy battle, Icahn argued that the unprecedented move to close the deal ahead of regulatory approval was reckless and cost the company billions in value — highlighting the board's failure to hold executives accountable. Illumina also faced criticism for deSouza's compensation. His performance targets for stock awards are tied only to the company's core gene sequencing business – thus excluding the potentially large operating losses from Grail that shareholders will shoulder.

In addition, critics zeroed in on deSouza's relationship with Thompson. He was CEO of Symantec when it acquired IMLogic in 2006, a company that deSouza founded. Thompson joined Illumina's board the year after deSouza became chief executive in 2016.

Along with Teno, deSouza and Epstein, other members elected to Illumina's board are Frances Arnold, Caroline Dorsa, Scott Gottlieb, Gary Guthart, Philip Schiller, and Sue Siegel.

This story originally appeared in San Diego Union-Tribune.

©2023 The San Diego Union-Tribune. Visit sandiegouniontribune.com. Distributed by Tribune Content Agency, LLC.