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Illumina (ILMN) Rides on NGS Portfolio Expansion Amid Macro Woe

Illumina ILMN possesses promising opportunities to advance the next-generation sequencing ecosystem. Adverse macroeconomic challenges remain a major downside. The stock carries a Zacks Rank #3 (Hold) currently.

Illumina is currently keeping up well with the goals to strengthen its foothold in the multi-billion gene sequencing worldwide market with some highly competitive products in its existing portfolio and pipeline. Further, the company is developing sample-to-answer solutions to catalyze adoption in the clinical setting, including in reproductive and genetic health and oncology.

In reproductive health, the company primarily focuses on driving noninvasive prenatal testing (NIPT) adoption globally through technology, which identifies fetal chromosomal abnormalities by analyzing cell-free DNA in maternal blood. In 2023, in the United States, Louisiana, Michigan, North Carolina, Rhode Island and Tennessee updated their state Medicaid coverage for NIPT in all pregnancies. Across Europe, NIPT is currently available for all pregnancies in the Netherlands and has been approved for broader coverage in Italy.

Illumina, Inc. Price

Illumina, Inc. Price
Illumina, Inc. Price

Illumina, Inc. price | Illumina, Inc. Quote

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The market adoption of the Next-Generation Sequencing (NGS) technology is also accelerating the research for rare and undiagnosed diseases to discover the genetic causes of inherited disorders by assessing many genes simultaneously. Throughout 2023, growth in clinical sequencing consumables was led by the strong momentum in oncology and genetic disease testing.

An expanding NGS oncology portfolio is helping Illumina drive the revolution in cancer genomics. Over the years, the company has developed multiple pharma partnerships to bring custom panel tests to market. Even as others enter the market, Illumina remains the key player, taking strength from the two-and-a-half-decade-long built infrastructure, compelling offerings that set the global standard and a deep commitment to innovation.

The company has been making significant progress in NGS-based oncology testing reimbursement. Illumina’s market-leading TruSight Oncology assay, TSO 500, recorded increased utilization and broader adoption throughout 2023. In the fourth quarter, the company introduced TruSight Oncology 500 ctDNA version 2, with key improvements like faster turnaround time, greater analytical sensitivity and a more streamlined workflow, which will be further enabled with automation in the first half of 2024.

On the flip side, on Dec 17, 2023, Illumina formally announced that it would divest GRAIL after the U.S. Court of Appeals for the Fifth Circuit issued its decision that the acquisition would indeed threaten competition in the cancer detection test market. Throughout the course of the two-year-long battle, Illumina incurred significant financial penalties, operational restrictions and increased costs as a result of the adverse decisions from governmental or regulatory authorities. We worry that the potential imposition of conditions could also lead to more loss of revenues for the company, including unfavorable outcomes for its business, financial condition and results of operations.

Further, the current macroeconomic scenario, including the conflict between Russia and Ukraine, which began in 2022, and the sanctions imposed by the United States and other countries, has impacted the company’s ability to ship products to affected regions and customers. Furthermore, the slowdown of COVID-19 surveillance and macroeconomic factors, such as inflation, exchange rates and competitive challenges in China region, have impacted both Illumina’s business performance and customers’ behavior. In the near term, management does not expect these headwinds to lessen.

In the fourth quarter, total sequencing consumable revenues were also impacted by the end of COVID-19, Russia and China factors as well as the effect of macroeconomic conditions on customers' purchasing power. Revenues from COVID-19 surveillance totaled nearly $4 million in the fourth quarter compared with $20 million in the year-ago period.

Key Picks

Some better-ranked stocks in the broader medical space are DaVita DVA, Cardinal Health CAH and Stryker SYK. While DaVita presently sports a Zacks Rank #1 (Strong Buy), Cardinal Health and Stryker carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Estimates for DaVita’s 2024 earnings per share have moved up from $8.46 to $8.86 in the past 30 days. Shares of the company have increased 45.6% in the past year compared with the industry’s 7.9% rise.

DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 35.6%. In the last reported quarter, it delivered an earnings surprise of 22.2%.

Cardinal Health’s stock has increased 32.6% in the past year. Earnings estimates for Cardinal Health have risen from $6.90 to $7.17 for fiscal 2024 and from $7.73 to $7.94 for fiscal 2025 in the past 30 days.

CAH’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 15.6%. In the last reported quarter, it posted an earnings surprise of 16.7%.

Estimates for Stryker’s 2024 earnings per share have increased from $11.54 to $11.84 in the past 30 days. Shares of the company have moved 32.8% upward in the past year compared with the industry’s rise of 4.9%.

SYK’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.1%. In the last reported quarter, it delivered an earnings surprise of 5.8%.

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Stryker Corporation (SYK) : Free Stock Analysis Report

DaVita Inc. (DVA) : Free Stock Analysis Report

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Illumina, Inc. (ILMN) : Free Stock Analysis Report

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