Signposts at the door of Illumina Inc. offices in Hayward, California, USA, on Wednesday, March 5, 2025.
David Paul Morris | Bloomberg | Getty pictures
Company: Illumina, Inc. (Ilmn)
Business: Illumina Offers sequencing and array-based solutions for genetic and genomic analysis. It offers customers and services for customers in a number of markets and enables the introduction of genomic solutions in research and clinical environments. The DNA sequencing technology is based on its reversible terminator-based sequencing chemistry, which is called sequencing by synthesis biochemistry. The image array technology combines microscopic pearls and a substrate in a manufacturing process to create arrays with which many assays can be carried out at the same time.
Market value: $ 12.67 billion $ 80.00 per share)
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Illumina in the past 12 months
Activist: Corvex Management LP
Property: ~ 2.5%
Average costs: n/a
Activist comment: Corvex was founded in 2011 by Keith Meister, the former lieutenant of Carl Icahn, who acted as CEO and deputy chairman of Icahn Enterprises. Corvex is a highly concentrated, basic hedge fund that uses activism as a tool, but not as a primary strategy. The company's preference is not to be an activist, with a proxy fight being a last way out. It would rather be invited to boards.
What happens
On March 25th, Illumina announced that Keith Meister (founder, managing partner and chief investment officer of Corvex Management) will have joined the board on March 28. The company also said that Dr. Scott Gottlieb was elected as managing chairman of the board, and that Stephen Macmillan (chairman, president and CEO of Hologic), who joins the board of directors.
Behind the scenes
Illumina (Ilmn) is a technology company that sells sequencer machines and consumables that are required for genome tests. This business recorded a dramatic increase in demand during the Covid 19 pandemic. Between 2020 and 2021, sales rose by about 40% from USD $ 4.5 billion. During this period, profits before interest, taxes, depreciation and amortization from $ 800 million rose to USD 1.1 billion. The share was traded up to $ 511 per share in August 2021. Today sales are 4.3 billion US dollars, the EBITDA is $ 900 million and the share on Friday at $ 80.00.
Since Covid it has been nothing but bad news for Illumina. Initially slowed post-pandemic headwind the demand for sequencing machines, since the urgent need for tests decreased. However, the biggest cause of the underperformance of the company was the costly spin-out, the reconcentials and later the re-saving of his grade business. Illumina founded Grail in 2015 and replaced in 2016, which kept an ownership of 20%. In September 2020, Illumina agreed to use Grail for 8 billion US dollars. They closed the acquisition a year later, although they had not received the approval of the Federal Trade Commission or the European Union, which the European Commission annoyed. The European Commission ultimately blocked the deal and raised a significant fine. With the pressure from Icahn, who was an activist at Illumina at the time, the company finally turned Grail again in June 2024. However, this is not the end of Illumina's fighting because the new political environment has led to further challenges. The company has exposed to geopolitical setbacks for its companies in Russia and China. In addition, the Biotech financing, which causes the uncertain future of the National Institutes of Health. Once worth 70 billion US dollars, Illumina now has a value of less than 13 billion US dollars.
The good news is that all problems are in the rear view mirror. The effects of pandemic on the market have long been decreased, the companies Russia and China have been rated and the Gralaldbakel was solved. What is left is an optimized business with a new management team, including a new CEO, CFO and an updated board, which is managed by a new chairman under the direction of a new chairman. Illumina is now a company that is the market leader in selling gene sequencing technology. The company controls over 80% of the world market and maintains an installed basis of more than 20,000 machines. Illumina works under a shaving and sheet business model, whereby the machines themselves have an edge of approx. 30%, and the recurring sales turnover that increases the continued sales has a much higher margin with around 80%. The share price of Illumina has decreased since the grail spinoff has been announced. This is partly due to the only swallowing that the company has left: transition to a new generation of sequencing technology-das Novaseq X. This is a natural development for this type of business that should promote long-term growth, but can lead to short-term sales pressure.
Now Illumina has announced that Keith Meister (founder, managing partner and CIO of Corvex Management) adds to the board, which will be appointed on March 28. Master and Corvex are no strangers for the board of directors or the biotech. In fact, Master is currently a member of the Board of Directors of Gene, an important customer of Illumina who has integrated his organic IT platform of the targeted Bio-IT (Dynamic Read Analysis for Genomics). Corvex is a great investor, and master has created value as the director of many companies, including Biogen, Motorola, Yum Brands and MGM. In addition, a long -term investor Corvex probably sees the short -term challenge for sales during Illumina's technology transition as an opportunity. We assume that he will be a valuable director if the company goes through this transition.
Ken Squire is the founder and president of 13D monitor, an institutional research service for shareholder activism, and the founder and portfolio manager of the 13D activist fund, an investment fund that invests in a portfolio of activists 13D investments.
Disclosure: Scott Gottlieb is a CNBC actor and member of the board of directors of Pfizer, Gentest startup tempus, health company Aettion Inc. and Biotech Company Illumina. It also serves as co-chair of the Norwegian Cruise Line Holdings and the “Healthy Sail Panel” by Royal Caribbean.