Illumina(ILMN)

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.

Biotech stocks market cap and liquidity ratios

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.