(Reuters) -Illumina said on Friday it would divest cancer test maker Grail in 12 months, according to the terms of the European Commission's order, if the life sciences company does not win its challenge in court.

Under the terms of the order, Illumina might extend the timeframe by three months and would be permitted to explore options which include, but are not limited to, a third-party sale or a capital markets transaction.

If Illumina opts for a capital markets transaction, it would have to capitalize Grail at the time of the transaction with two-and-a-half years of funding based on the cancer test maker's long-range plan.

The order also provides for Illumina to retain up to a 14.5% stake in Grail and reestablish the royalty arrangement it previously had in place.

Illumina had spun off Grail in 2016, and retained a 12% stake.

EU antitrust regulators on Thursday ordered Illumina to divest Grail, after it completed the deal before securing their approval.

The $7.1 billion deal was opposed on concerns that Illumina would have an incentive to stop Grail's rivals from accessing its technology to develop competing blood-based early cancer detection tests.

The San Diego-based genetic testing company last year challenged the EU watchdog saying it does not have jurisdiction over the acquisition of Grail. Its challenge remains pending at the European Court of Justice (ECJ).

If Illumina wins, the divestiture order would be eliminated, it said.

But if it is not successful with either its ECJ jurisdictional appeal or in a final decision of the U.S. Fifth Circuit Court of Appeals, Illumina will divest Grail.

Illumina had in June appealed against the order by the Federal Trade Commission, which enforces antitrust law in the U.S., to divest Grail.

The company is required to continue to fund Grail until it's divested.

(Reporting by Sriparna Roy in Bengaluru; Editing by Shilpi Majumdar)