You may have noticed the Illumina share price drop below $300 a share on your weekly mini statement. The share price first hit $300 in July 2018 and peaked at $380 a share in July of this year. Why the recent fall?
The company has a sizeable deal on the cards. Last week reports came out that Illumina wants to buy Cancer Testing company Grail. Grail was actually spun out of Illumina in 2016 and Illumina still owns 15% of the company.
There are some other big name investors in Grail such as Bill Gates, Jeff Bezos, Johnson & Johnson, Tencent and Merck. The reason for all the interest is because Grail's blood tests can potentially detect over 50 types of cancers. The commercial launch of the test is only tipped for next year.
But this all sounds like good news? You can still overpay for an amazing company and maybe that is what the market is worried about here. Reports suggest that Illumina could pay up to $8bn for Grail, a lot more than its latest valuation of $6bn.
Illumina has a market cap of $40bn, an $8bn deal can really move the needle. Buying Grail could have a short tern drag on financials because it does not have a marketable product yet.
Luckily we are long term investors. Disease diagnostics is a huge theme with massive potential. We have seen that first hand during a global pandemic. We see this share price weakness as a buying opportunity.