Markets

Illumina Downgraded by Leerink, Shares Plummet Over 10%

Shares of Illumina Inc.ILMN plunged more than 10% to reach $157.21 yesterday, after an analyst at investment bank Leerink Partners downgraded the company from Outperform to Market Perform. Consequently, the target price for the company also suffered a major fall from $225 to $185.

Notably, the analyst particularly expressed his concern over Illumina's ability to successfully penetrate various diagnostics and consumer applications, citing uncertainty regarding the growth potential of the company's next-generation sequencing (NGS) products in the research market. the target price for the company also suffered a major fall from $225 to $185.

Although the analyst retained his confidence in Illumina's long-standing competitive advantage and long-term trends in NGS, he estimated the company's risk-reward profile to be less compelling over the next 12 months.

Further, the analyst was doubtful as to whether Illumina's HiSeq 3000/4000 system, which has been its primary growth driver so far, will be sufficient to drive upgrades and replacements going forward, at the same rate as in the previous product cycles (according to GenomeWeb).

According to Investor's Business Daily, this downgrade was partly induced by the earlier-than-expected launch of the new Sequel high-throughput gene-sequencing system of genomic services provider - Pacific Biosciences of California, Inc. PACB . The Sequel system is a direct competitor of Illumina's NextSeq system.

Nevertheless, it is worth mentioning that this same Leerink Partners analyst referred the long-term trend for NGS in biomedical research as a robust one (as per Benzinga). This indicates that road ahead for a pioneer in next-generation sequencing (NGS) like Ilumina is not all dark.

Moreover, we note that only one analyst has downgraded Illumina, while other credit rating firms are maintaining their ratings for the company, indicating no sign of uncertainty on their part as yet.

Evidently, looking at the Zacks Consensus Estimate we can see that, over the past 7 days, none of the 15 analysts covering Illumina's stock have lowered their estimates for the company, for both the current quarter and full year 2015.

In fact, despite the negative wave currently hovering around Illumina, the company has been in the limelight in the last couple of days, first for collaborating with biotech company Amoy Diagnostics, which will market oncology tests based on Illumina's NGS platforms in China and secondly, the company's announcement of the addition of advanced features to its BaseSpace Genomics Analysis platform to ease the use of its NGS systems by customers via cloud computing.

These positives hint at the fact that Illumina remains committed to its strategy of delivering the best-in-class NGS services to its customers and hence, the Leerink downgrade should not act as a major deterrent.

Currently, Illumina retains a Zacks Rank #3 (Hold). Some better-ranked biomedical stocks are Anika Therapeutics Inc. ANIK and Regeneron Pharmaceuticals, Inc. REGN . Both the stocks sport a Zacks Rank #1 (Strong Buy).

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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.


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

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