Illumina plans cost cuts because it faces shrinking margins

Illumina on Tuesday unveiled plans to chop costs in a bid to enhance the DNA sequencing company’s shrinking margins.

The plans aim to cut back Illumina’s annualized run rate expenses by greater than $100 million starting later this yr, in accordance with the corporate’s first-quarter earnings release.

The corporate reported gross margins of 60.3% for the period, down from 66.6% in the course of the year-earlier period.

“These cost savings will speed up progress toward higher margins in addition to unencumber capital to extend investment in high-growth areas,” Illumina said in the discharge.

Amongst Illumina’s plans is to make use of its NovaSeq X sequencing system to speed up genomic discoveries. The system, which launched in September 2022, sequences DNA twice as fast and thrice as accurately as previous Illumina products.

The San Diego-based company said it also plans to save lots of by “enabling activities” in more cost effective areas world wide. Illumina didn’t reveal any specifics about those activities.

The corporate is battling criticism and a falling market cap within the wake of its controversial $7.1 billion acquisition of Grail, a cancer test developer.

Illumina’s market value has fallen to roughly $34.5 billion from around $75 billion in August 2021, the month it closed its acquisition of Grail. 

Antitrust regulators have repeatedly pushed back on that deal. 

The Federal Trade Commission earlier this month ordered Illumina to divest the acquisition, saying it will stifle competition and innovation. 

Last yr, the European Commission, the manager body of the European Union, blocked the deal over similar concerns.   

Illumina is appealing each orders and expects final decisions in late 2023 or early 2024. 

The Grail deal can be the main target of a proxy fight between activist investor Carl Icahn and Illumina. They’ve been trading jabs for greater than a month.

Icahn, who owns a 1.4% stake in the corporate, is searching for seats on Illumina’s board of directors and pushing it to unwind the Grail deal. He can be calling for Illumina to oust its CEO Francis deSouza “immediately.” 

The corporate is urging shareholders to reject Icahn’s three board nominees during its annual shareholder meeting on May 25. 

Illumina has repeatedly claimed that Grail has “tremendous long-term value creation potential.” 

Grail claims to supply the one commercially available early screening test that may detect greater than 50 forms of cancers through a single blood draw. 

The cancer test generated around $55 million in revenue in 2022 and is predicted to rake in as much as $110 million this yr, Illumina said.