Strategic alliances, a strong R&D pipeline, and a vast array of new products are driving momentum in this company’s stock. UBS just initiated coverage with a “buy” rating.
Illumina, Inc. (ILMN)
from Dividend Lab
Illumina, Inc. (ILMN) is a global biotechnology and genomics company that produces sequencing and array solutions, and offers genome solutions, sequencings kits and library preparation solutions. Consumers, such as the Federal health department, research centers, public laboratories, hospitals, pharmaceutical companies and genomics companies, use the company’s products to research gene variations for healthcare and drug development.
The company is focused on $20 billion in total sales opportunities in the areas of oncology ($12 billion), life sciences ($5 billion), reproductive and genetic health ($2 billion) and new and emerging markets ($1billion).
Wall Street analysts have an average one-year price target of $230, which reflects 15% upside over current levels. Bullish analysts expect shares to rally to $270 over the next year, and 17 analysts have Strong Buy or Buy ratings on shares.
Illumina trades at a premium to peers but has the highest net profit margins (29.9% vs. peer average of 14.1%) and the highest long-term-growth forecast of 22.5% (vs. 12.4% for its peers).
In January 2015, Illumina introduced multiple new sequencing systems, adding to the company’s already impressive portfolio of the most comprehensive machines in the industry. The MiSeq FGx forensic genomics system is the first fully validated forensic system and offers a more robust analysis of genetic markers.
The company expects to launch the VeriSeq NIPT, a non-invasive prenatal test for an array of 48 samples, and research-only kits for the MiSeqDx for clinical and research opportunities in the second half of 2015.
The company offers the newly introduced NeoPrep, a library preparation system that allows reproducible sequencing libraries to easily be loaded onto any laboratory system. The innovative system is the first commercial product that uses microfluidic technology to reduce use time from hours to minutes. NeoPrep can create 16 libraries per run and 160 libraries per week.
Additionally, Illumina offers the HiScan and iScan, array scanners used in connection with the company’s systems for genetic analysis research. The scanners provide rapid, sensitive and accurate imaging by leveraging the company’s high-multiplex BeadArray and BeadChips technology.
In early 2015, Illumina signed a 15-year lease to develop a 360,000 square foot life sciences campus in Foster City, California, that will include two Class A laboratories.
Illumina recently entered various agreements and alliances with biopharmaceutical company Merck Serono and French biotechnology company bioMerieux. The US Agency for International Development, the Broad Institute and Illumina formed a public-private partnership to train and educate individuals in West Africa to use genome sequencing to help with diagnosis, vaccine development and therapies to combat the Ebola epidemic in the region.
In August 2014, the company entered into a strategic partnership with three top-tier pharmaceutical companies: Britain’s AstraZeneca (AZN), Janssen Biotech and France’s Sanofi (SNY). The mission of the consortium is to promote commercialization and new standards for easier regulatory agency approvals for clinical trials.
For the three months ended December 28, 2014, Illumina reported total revenue of $512.4 million (up 32%) and net income of $153.3 million (up 90%), or $1.03 per share.
For full-year 2015, management estimates non-GAAP earnings of $3.12-$3.18 per share on approximately 20% revenue growth, with 73% gross margin and a 28% pro forma tax rate.
Illumina is a leader in its niche sector and enjoys high barriers to entry with patent protections and hard to replicate technology, services and customer mind share. While shares have done very well over the years, the company’s strong leadership in a growing market, bold execution, rich margins and continued revenue growth, well ahead of peers, has analysts excited about future growth, with 38% share price upside in the bullish case and 15% on the average 12-month share price target.
Todd Johnson, Dividend Lab, www.dividendlab.com, 505-514-0036, March 23, 2015