Genome Sequencing Solutions Company Illumina (NASDAQ: ILMN) the stock has fallen below its pandemic lows. Missing a surprising profit, and reduced guidance led to a decline in share prices (-49%) for the year. The company is a market leader with its next-generation genome sequencing systems and analysis tools. It has a 90% market share of the global sequencing market with more than 17,000 active sequencing machines installed in 115 countries. The cost of DNA sequencing has fallen from $100 million per human genome in 2001 to less than $600 today. Illumina’s machines accelerate the advancement of precision medicine applications. While demand was still robust, macroeconomic uncertainty has led many of its customers to hold less stock and defer orders to conserve capital. Molecular diagnostics suppliers are a key growth engine for the company. Rising interest rates have a material impact on Illumina as its clients tend to be price sensitive, forcing them to cut back on purchases and expenses to conserve precious capital. Some of its clients include: Natera (NASDAQ: NTRA), Physical Sciences (NASDAQ: EXAS)Invitation, and Numerous Genetics (NASDAQ:MYGN) in addition to clinical laboratories, pharmaceutical companies, academic institutions, healthcare systemsand hospitals. FX Headwind and supply chain disturbances have had a direct impact on the top and bottom lines. The company expects the effects to reverberate in the near term.
The Grail Acquisition Dilemma
Illumina has been challenged by the Federal Trade Commission (FTC) and the European Commission (EC) over its completed $7.8 billion acquisition of GRAIL, a manufacturer of cancer tests over antitrust concerns. GRAIL developed Galleri, a blood test that can detect more than 50 types of cancer with a single blood draw. It is a powerful early detection tool with a low false positive and false negative rate. Most blood tests on the market only detect five types of cancer. Early detection is the first line of preventive care, as the risk of cancer increases with age. It partnered with Fountain Health Insurance to offer Galleri as part of its annual health benefits. GRAIL partners with Astra Zeneca (NASDAQ: AZN) to develop companion diagnostic tests to identify patients at high risk and early stage for new therapies. On September 1, 2022, Illumina won a lawsuit filed by the FTC to settle the merger. The FTC plans to appeal the decision. Pursuant to this court ruling, Illumina plans to appeal the EC’s decision to ban the merger. It is rumored that Illumina is in talks with EU antitrust officials about plans to divest GRAIL.
On August 11, 2021, Illumina released its second quarter 2021 results for the quarter ended June 2022. The company reported non-GAAP earnings per share (EPS) of $0.57 versus $0.64 consensus analyst estimates, a ) to miss. Diluted GAAP EPS was (-$3.40) including $609 million in legal contingencies. The company saw revenue grow 3.2% year-over-year (YoY) to $1.16 billion, missing analyst estimates at $1.22 billion. Francis deSouza, CEO of Illumina, commented, “Our second quarter results fell short of our expectations as challenges in a complex macroeconomic environment more than offset the growth we continue to see in sequencing runs on our platforms. While As we strategically navigate these dynamics, we continue to advance our innovation roadmap to support our long-term growth trajectory.At our upcoming Illumina Genomics Forum and Investor Day events, we look forward to demonstrating our breakthrough technologies that unleash the power and potential of demonstrate genomics.”
This is what the charts say
Using the gun cards on the weekly and daily timeframes provides an accurate picture of the landscape for ILMN stocks. The weekly gun chart peaked at $238.74 Fibonacci (fib) level. Shares collapsed on the second quarter 2022 earnings report and began the breakdown. The weekly 5-period moving average (MA) resistance is down at $196.14, followed by the weekly 15-period MA at $200.70. Weekly stochastics peaked and moved back down just below the 40 band as stocks slumped through the weekly market structure layer (MSL) buy trigger for $194.80. The daily gun chart attempts a reverse breakdown of the pups as stocks slip below the daily 5-period MA of $190.02, followed by the declining daily MA with 15 periods of $195.73. The daily lower Bollinger Bands (BBs) are at $177.76. The daily stochastic has stalled below the 30 band on the jump to set up a make or break with the daily MAs attempting a reverse pup versus a stochastic attempt at a mini pup. Attractive pullback levels are $181.17, $177.62, $170.75 fib, $162.51, $153.42 fib and the $143.74 fib.
Taking away expectations
Illumina cut earnings per fiscal year 2022 to come in between $2.75 and $2.90, from $4.00 to $4.20) versus $4.12 consensus analyst estimates. Full-year revenue is expected to be between $4.67 billion and $4.72 billion, compared to consensus analyst estimates of $5.21 billion.
At the Genomics Forum and Investor Day September 29, Illumina unveiled two NovaSeq X Series products that can process up to 20,000 human genomes per year, 2.5 times faster than current machines. This can bring the cost of sequencing down to $200 from just under $600. CEO deSouza noted, “This will be a tremendous force to greatly increase the accessibility of genomics in a number of ways. It will democratize access to genomics by allowing sequencing can be offered to hospitals and researchers at much lower prices.”