(Bloomberg) -- Illumina Inc.’s shares fell the most in 10 months after its plan to increase sales through easier DNA sequencing and improved data analysis failed to excite investors, with targets short of earlier growth rates.
The strategy will lead to sales growth of as much as 8% to 9% by 2027, the San Diego-based company said Tuesday, and earnings per share growth of at least 10% over the next three years, in part by finding $200 million in cost savings. Illumina also announced a new partnership with the Broad Institute of MIT and Harvard, a research center focused on genomic medicine.
The projections “seem a bit underwhelming,” Bloomberg Intelligence analyst Jonathan Palmer said in an email. The target for high-single digit revenue growth “is a step down from what Illumina used to grow at pre-pandemic.”
Illumina shares fell as much as 9.1% as of 11:53 a.m. in New York, the most intraday since November. They had lost 8% this year through Monday’s close.
Core Business
Illumina Chief Executive Officer Jacob Thaysen wants to revive the core business after a long, contentious battle with regulators spurred the company to abandon a $7 billion takeover of Grail Inc., a cancer detection startup. After two years of flat revenue and a proxy fight with investor Carl Icahn that led to the resignation of former CEO Francis deSouza, Thaysen is ready to turn the page.
Illumina dominates the market for machines that decode DNA, and has long focused on slashing the price of spelling out individual human genomes. Now it needs to find more ways for customers to use its machines to offset the resulting sales decline, said Conor McNamara, an analyst at RBC Capital Markets.
Sequencing has become so cheap that “it’s not only the cost of sequencing that matters,” Thaysen said in an interview. “It’s everything else that also matters.”
By acquiring Grail, Illumina was hoping to tap into a market for using blood tests to screen for a wide variety of cancers, sometimes called liquid biopsies. Regulators saw the deal as anti-competitive, and Illumina divested the unit, retaining a 14.5% stake.
On top of that, Illumina has seen a slowdown in its China business, while the biotech firms that buy $1.25 million sequencers are conserving cash. Last week, the company said it expects revenue to decline as much as 3% this year. It announced the effort to find opportunities to cut costs on its earnings call last week.
In place since September, the CEO is envisaging new products that simplify preparation of samples for sequencing, a process that can take up to 12 hours. Illumina will also market new ways of analyzing cells and tissues simultaneously through their DNA, RNA and protein profiles.
Real Diagnosis
The approach, called multiomics, is helping cancer researchers develop new drug targets and can provide a deeper analysis of individual cells that can lead to better understanding of complex organs like the brain. The new partnership with the Broad Institute will aim to advance single-cell DNA sequencing, Illumina said.
Over the next decade, Thaysen envisions Illumina customers will use AI to make more sense of the test results and countries will sequence their citizens’ DNA to develop preventative medicines. He believes Illumina’s machines will eventually become routine parts of medical care.
“Every time a patient is told they have a disease, the real diagnosis will happen through genomic sequencing,” he said.
(Updates with shares, analyst comment from third paragraph.)
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