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Illumina (ILMN) Strong on Product Launches, Competition Rife


On Oct 9, we issued an updated research report on Illumina, Inc. ILMN. The stock currently carries a Zacks Rank #3 (Hold).

Over the last three months, this San Diego, CA-based company providing tools and integrated systems for the analysis of genetic variation and function, has been trading above the broader industry. The stock has gained 17.4% in this period, higher than the broader industry’s 7.9% gain.

Over the past few quarters, the company has delivered promising top-line performances primarily banking on strong product launches. The latest in the list includes the launch of VeriSeq NIPT Solution in Europe. Also overall strong uptake in NovaSeq is encouraging. Moreover, the rate of NIPT adoption is rising outside the United States.

We are also upbeat about Illumina’s partnership with Telegraph Hill Partners to set up an independent company Verogen, Inc. The independent company is expected to boost Illumina’s next-generation sequencing (NGS) business in the forensic genomics market. Along with having global commercial rights to these products, Illumina will be the only provider of the MiSeq FGx Forensic Genomics System, including the MiSeq FGx sequencer, ForenSeq DNA Signature Prep Kit and the ForenSeq Universal Analysis Software.

We are encouraged by the developments within the clinical markets where demand from customers undergoing oncology tests remains robust. Moreover, investors are awaiting response to the Extended RAS Panel which is slated for launch in the third quarter. In June, the company announced the receipt of FDA approval for the Extended RAS companion diagnostic kit (as the Class III PMA).

We are also looking forward to GRAIL, Illumina’s own-developed company, focused on the cancer screening market.

On the flip side, weak margins due to the NovaSeq launch, higher array service revenues and product mix within sequencing consumables continue to raise concerns. Also, the National Institutes of Health (NIH) funding issue and a tough competitive landscape are a few challenges to deal with.

Key Picks

A few better-ranked stocks in the medical sector are Abbott ABT, IDEXX Laboratories, Inc. IDXX and Thermo Fisher Scientific Inc. TMO, with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Abbott has a long-term expected earnings growth rate of 10.7%. The stock has rallied roughly 25.4% over the last six months.

IDEXX Laboratories has a long-term expected earnings growth rate of 19.8%. The stock has gained 40.3% last year.

Thermo Fisher has a long-term expected earnings growth rate of 16.3%. The stock has gained 24.8% last year.

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