Illumina Q3 - Growth in Sequencing Consumables

I was supposed to write about Illumina's third quarter results a few weeks ago, and I am only getting around to it now. This company makes machines and consumables to analyse genetic material. Their clients are mostly research facilities, pathologists and hospitals, and services that offer DNA analysis to retail customers who want to know their heritage and propensity to contract certain illnesses.

Illumina has annual revenues of about $3.2 billion and a market capitalisation of $44 billion, so it's a big company, but to judge from the share price, it has been battling. It's been drifting around in a band at $300 a share for the last two-and-a-half years.

Illumina CEO Francis deSouza's comments on the earnings call were as follows: "Our business accelerated in the third quarter with sequencing consumable revenue growing 29% from the second quarter." He went on to say that "Illumina is making progress incorporating genomics into the standard of care in non-invasive pre-natal testing, oncology therapy selection, and genetic disease diagnosis."

Illumina is in the middle of an acquisition of its former spin-off, a company called Grail. That company does blood tests to pick up early signs of cancer. The market is concerned that Illumina might over pay for a relatively new operation. The stock price fell on the initial announcement.

However, deSouza said, "Looking forward, we believe our planned acquisition of Grail will catalyse a new era of early cancer detection, transforming cancer survivability and opening up the largest clinical application of genomics we've seen."

It feels like we were a bit early in recommending this company to Vestact clients. However, I'm confident that genetic medicine is going to be a very big industry and Illumina is the pre-eminent company in this sector. We should hold this one, and accumulate more where possible.