A technician handles an Illumina Advantage High Output Reagent Cartridge.
T. Narayan/Bloomberg
Illumina
got to a $34 billion market cap and 140-times earnings multiple by dominating the fast-growing market for reading genes.
The success of San Diego-based DNA sequencer’s Illumina (ticker: ILMN) and rich stock are naturally attracting competition.
Those competitors are out in force this week at the sequencing industry’s annual gathering known as Advances in Genome Biology and Technology, or AGBT. At this year’s AGBT meeting in Hollywood, Fla., Illumina is surrounded by a pack of small firms hawking systems they say can read genetic code faster, cheaper, or more accurately than Illumina.
Along with announcements at AGBT, investors will hear from Illumina after trading’s close on Tuesday, when the genomics leader announces results for the December quarter and 2022 year. At its recent level of $208, Illumina stock has recovered from the spill that followed the company’s announcement of reduced guidance for 2023 earnings.
Most analysts expect that in Tuesday’s communiqués, Illumina will reiterate the “guide-below” that it previewed on Jan. 9. In a Friday note, for instance,
Credit Suisse
analyst Dan Leonard predicts Illumina will report 2022 earnings of $300 million, or $1.90 a share, on sales of $4.57 billion. He’s forecasting sales growth of 6% in 2023, to $4.86 billion, with an earnings drop to $1.32 a share.
The Credit Suisse analyst rates Illumina stock at Neutral, saying that 2023 will be a “transition year” as the company scales up production of its newly announced NovaSeq X sequencer and waits for capital markets to allow its genomics customers to raise money again.
Leonard thinks Illumina’s sales could rebound to 13% growth in 2024, for earnings of $1.73 a share. A key variable in how those numbers come out, says the analyst, will be the success or failure of Illumina’s challengers. Even if they don’t gain much share, they may force Illumina to lower its pricing faster than planned.
Few of the rivals at this week’s AGBT meeting are publicly held. None are profitable. And to penetrate Illumina’s market, they’ll have to cross a wide moat, and climb steep barriers.
Largest among sequencing rivals are
Pacific Biosciences of California
(PACB) and
Oxford Nanopore Technologies
(ONTTF), with several billion dollars apiece in market value.
Singular Genomics
(OMIC) is currently valued at just $210 million. Privately held challengers showing their new systems at AGBT include Element Biosciences and Ultima Genomics.
A handful of companies are showcasing technologies that complement the products of Illumina and its rivals, by allowing the sequencing of a single cell’s DNA or the mapping of gene expression across a tumor biopsy. These systems come from the likes of
10x Genomics
(TXG),
NanoString Technologies
(NSTG),
Bionano Genomics
(BNGO), and
Akoya Biosciences
(AKYA).
Despite his reservations, Credit Suisse’s Leonard reminds his readers that skepticism about previous new systems from Illumina was followed by big growth spurts in the second years of those systems’ sales.
Write to Bill Alpert at william.alpert@barrons.com
Credit: marketwatch.com