Illumina, Inc.
Stock: ILMN
Rating: Good
Author: Waleed M. Tariq
Overview
- Researchers isolate and analyze genes using Illumina’s next-generation sequencing technology. Genomics enhances diagnosis, drugs, and treatment.
- Illumina serves U.S., European, Middle Eastern, and African pharma, biotech, research, and academic companies. Illumina shares are $363 in 2022, valued $57 billion.
Bullish
- Illumina regained pre-pandemic levels and expanded.
- Venture investments in initial biotech businesses have been rising for years. Established players buy biopharma startups to refill pipelines.
- $1.2 bn in revenue surpassed analyst projections by 5%, notably $50 million for Covid & $10 million from Grail. Sequencing instrument sales grew 29% year-over-year in Q4.
Bearish
- Competition and litigation will be major issues in 2022.
- Affordable genome sequencing is beneficial for consumers, but it isn’t Illumina’s goal.
- Illumina faces antitrust problems and increased competition in 2022, notably in oncology.
Life-Science Technology Industry
- Life-science appears good in 2022. After 2021’s business recovery, revenue growth should reach single digits. Customer demand is stable.
Biopharma and Diagnostics Customers lead the Recovery
- Covid-19 feels like yesterday as life-science recovers and end-markets near pre-pandemic levels. Lockdowns and isolation hampered lab research and equipment purchases. Peers predict demand recovery.
Venture-back Biotech is the New Investment
- Venture capital investments in early-stage biotech startups have been climbing for years and show no signs of slowing. Established players acquire small and medium biopharma startups to restock pipelines.
- Third-quarter 2021 funding exceeded 2020’s total. Current venture capitalists depart older biotech investments to boost early-stage funding in 2021.
Financial Performance
- $1.2 billion in revenue topped analyst estimates by 5%, including $50 million from Covid and $10 million from Grail. Q4 sequencer sales climbed 29% year-over-year. Non-GAAP EPS beat projections by 26 cents but decreased 59.09% from 2020.
- Illumina anticipates $5.16-$5.25 billion in sales and $4.00-$4.20 EPS in 2022. Illumina expects $70-$90 million from Grail, praising EU antitrust.
Particulars | Q4 2020 | Q4 2021 | % Change |
Revenue ($ million) | 953 | 1,190 | 26% |
Net Income Available to Common Stockholders ($ million) | 257 | 112 | -56.42% |
Basic Earnings per Share ($) | 1.76 | 0.72 | -59.09% |
Diluted Earnings per Share ($) | 1.75 | 0.71 | -40.57% |
Share Price ($) | 443.38 | 356.45 | -19.61% |
Financial Position
- Liquid illumination. Current ratio 2.48 and cash ratio 1.83 indicate it can handle current liabilities (2.45 billion in current assets, $0.914 billion in current liabilities). Illumina has above-average liquidity (2.48), ensuring financial stability. Grail reduces Illumina’s revenue.
Source: Bloomberg
- Illumina’s debt is 0.1% short-term and 3.8% long-term. Management should add debt to cut costs since it’s cheaper than equity. It reduces the tax rate. In a recession, the company’s low debt could benefit.
Conclusion
- Illumina, the leader in genomic studies, has shown the world new technology’s possibilities and risks. The $20 billion market is little touched. Illumina will encounter antitrust difficulties in 2022, especially in oncology. Grail and Helix require time.
- Strong finances allowed the company recover from the pandemic. Illumina’s research and projects are long-term investments. Volatile stock, so avoid it.