Illumina's Prelim Results Shine - Analyst Blog

By Zacks Equity Research,

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Illumina Inc. ( ILMN ) recently came out with its preliminary results for the first quarter of fiscal 2012. The company expects to report revenues of $270 million during the quarter, surpassing the Zacks Consensus Estimate of $263 million. However, on a year-over-year basis, projected revenues are down 4.4%.

The company also assumes the adjusted earnings per share for the quarter to be in line or above the street consensus estimate. The Zacks Consensus Estimate for the first quarter of 2012 is 31 cents. Illumina is slated to release its first quarter result by the end of April 2012.

With the growing demand for the Next Generation Sequencing ( NGS ) products in research and clinical development, Illumina is able to continue with its growth momentum in the life science tools industry. We are also pleased with the company's impressive book-to-bill ratio of 1.1 (the third consecutive quarter with over 1) reflecting significant demand in the market particularly on the heels of new projects. Also, for the quarter, the company's annualized HiSeq consumable pull-through is up at an encouraging level of around $300,000 per instrument.

Last quarter update

In the last quarter, Illumina derived 92.1% of its total revenue from products while the remaining comes from services. During the quarter, Illumina also declared significant development of its MiSeq platform. Additionally, the company also introduced HiSeq 2500, a new multi-mode next-generation sequencer with the option for the upgradation of its existing HiSeq 2000 instruments. The company expects the new system and upgrades to be available in the second half of 2012.

Further, The company entered into a partnership with Siemens Healthcare Diagnostics to use the MiSeq platform for Siemens' molecular HIV tests. In addition, the company expanded its Genome Network with the inclusion of British Columbia Cancer Agency to its existing list.

Illimina also emphasised on strengthening its management by appointing Pfizer 's ( PFE ) Senior Vice President of Finance, Marc Stapley, as Chief Financial Officer and created the position of a Senior Vice President and General Manager of Translational and Consumer Genomics Business Unit.

Update on Roche bid

The burning issue for Illumina these days is whether the company will yield to Roche Holdings ' ( RHHBY ) hostile takeover bid. Now the talking point in the industry is whether the rejection of Roche bid will be beneficial for Illumina and its shareholders in the long run? The tussle between Roche and Illumina dates back to January 25, 2012 when Roche offered $44.50 per share (aggregate value $5.7 billion) in cash to acquire Illumina. This offer was at a premium to the then prevailing share price ($37.69) of Illumina.

However, last week, subsequent to Illumina's second request letter to its shareholders justifying the earlier Roche bid as undervalued, Roche increased its offer price to $51.00 from the previously declared $44.50 a share. Apart from rejecting the revised Roche bid this week, Illumina also released a third request letter to its shareholders discussing the huge growth prospect of the next-generation sequencing market. The company also restated the board's recommendation to vote against the Roche proposal and in favor of Illumina's director nominees at its 2012 annual investors meeting.

Based in California, Illumina develops, manufactures, and markets life science tools and integrated systems for the analysis of genetic variation and function at a broader scale. The company derives product revenues from the sale of microarrays and DNA sequencing products. As a life sciences tools company, Illumina has a track record of innovation and operational excellence.

Currently, Illumina's shares are trading at $52.00, which is higher than the revised bid price, reflecting the investors' high aspiration about the company's future prospects. Despite the back drop of a hostile takeover bid from Roche, we are also encouraged with the impressive and consistent growth performance of Illumina and expectthe company to expand in fiscal 2012 and beyond. Presently, Illumina retains a short-term Zacks #2 Rank (Buy). Over the longer term, we have a 'Neutral' recommendation on the stock.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: ILMN , NGS , PFE

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