--Illumina stock down nearly 32% Friday
--Warns on third-quarter revenue and withdraws full-year
estimates
--Peers take tumble too but most aren't seen as tied to
government research funding
By Russ Britt
A dire revenue warning from biotech firm Illumina Inc. (ILMN)
swept away nearly a third of the company's market value Friday and
caused other players in the sector to tumble as investors feared
the worst.
Illumina plummeted nearly 32% to $27.22 in midday trading. The
company warned Thursday night that it expected third-quarter
revenue to be about $235 million, well off the $278 million
projected by Wall Street analysts. It also said it wouldn't provide
future forecasts and was withdrawing its full-year estimates.
Illumina cited uncertainty over research funding in the U.S. and
Europe as well as excess capacity and drops in purchased upgrades
of its Genome Analyzer equipment.
"In the quarter, we saw what we believe to be an unprecedented
slowdown in purchasing due to uncertainties in research funding and
overall economic conditions, as well as a temporary excess of
sequencing capacity in the market," Jay Flatley, Illumina's chief
executive, said in a written statement. "We expect these conditions
to continue through at least the fourth quarter, while the
2012-2013 U.S. budgets for [the National Institutes of Health] and
other related agencies are determined."
The news caused a panic among investors in other
medical-research-gear makers, including Agilent Technologies Inc.
(A), Waters Corp. (WAT), Thermo Fisher Scientific Inc. (TMO), Life
Technologies Corp. (LIFE), Human Genome Sciences Inc. (HGSI),
PerkinElmer Inc. (PKI) and Affymetrix Inc. (AFFX). All were down 6%
or more in recent action, with PerkinElmer and Affymetrix off
nearly 9%.
Illumina reportedly gets 80% of its funding through government
sources, but the average of the others is somewhat lower, said
Bryan Brokmeier, an analyst with Maxim Group. Concerns over the
drying up of government funding for research have sent Illumina
shares plunging from an intraday high of more than $78 reached in
July.
Illumina's warning, while not unexpected, was a surprise in its
severity, Brokmeier said. "This was worse than what people were
expecting," he said.
Although the company had been considered one of the premier
providers of research gear, a slew of analysts cut their rating on
the company's shares Friday, including Brokmeier, who downgraded
Illumina to hold from buy.
Deutsche Bank's Ross Muken did the same and lowered his price
target from $52.50 to $30.
"The magnitude of [Illumina's] miss will come as a surprise to
many and the implication that [the fourth quarter] and [first half
of 2012] revenue will be barely growing should serve to keep the
stock within a depressed range [for the medium term]," Muken said
in a note.
-Russ Britt; 415-439-6400; AskNewswires@dowjones.com