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Illumina's Q4 Revenues Rise 86 Percent; Legal Expenses Hit Bottom Line

This article has been updated to include comments from a conference call, financial guidance, and a stock update.
 
NEW YORK (GenomeWeb News) – Illumina yesterday reported an 86 percent increase in revenues for the fourth quarter ended Dec. 31, 2007, while its profit swung to a loss due to legal expenses associated with a recent settlement with Affymetrix.
 
The San Diego-based firm had fourth-quarter revenues of $112.6 million compared with revenues of $60.4 million in the fourth quarter of 2006. The fourth-quarter results include the operations of Solexa, which Illumina acquired in January 2007 for $600 million.
 
During a conference call last night, Illumina CEO Jay Flatley attributed the revenue growth to the firm’s genotyping and next-generation sequencing platforms. The firm recently said that it has already shipped 200 of the Genome Analyzers. Flatley also noted that Illumina launched 14 new array products during 2007.

He said that the “rapid adoption of the Genome Analyzer represents what we believe to be a significant change in the dynamics of the sequencing market.”

 
Consumables revenues for the quarter were $56.1 million compared to $32.5 million in the fourth quarter of 2006. Instrument revenues were $41.8 million, up from $13.2 million in the comparable quarter of 2006. CFO Christian Henry said during the conference call that the firm’s Genome Analyzer, which it gained through the acquisition of Solexa, helped drive the significant gain in revenues for both instruments and consumables.

Services revenues, which includes both contract services and maintenance, were $11.5 million compared to $11.2 million in Q4 2006.

Illumina posted a net loss of $4.1 million, or $.07 per share, for the quarter compared to a profit of $17.1 million, or $.34 per share, in the comparable period a year ago. The loss was primarily due to litigation settlement expenses of $54.5 million related to the settlement of the intellectual property dispute with Affymetrix, under which Illumina agreed to pay Affy a settlement fee of $90 million.
 
The litigation expenses were partially offset by a tax benefit of $25.3 million attributable to a reversal of the firm’s valuation allowance. Excluding these and other items, Illumina’s profit for the quarter would have been $22.5 million, or $.38 per share.
 
Illumina’s R&D expenses more than doubled year over year to $20.1 million from $8.8 million. Its SG&A costs also more than doubled to $30 million from $14.9 million.
 
For full-year 2007, the company generated revenues of $366.8 million, a 99 percent increase from revenues of $184.6 million in 2006. Its net loss for the year was $278.4 million, or $5.14 per share, compared to net earnings of $40 million, or $.82 per share, for 2006. Fiscal 2007 results include the settlement charges plus non-cash charges of $306.8 million associated with the acquisition of Solexa.
 
Illumina’s R&D costs grew to $73.9 million from $33.4 million year over year, while its SG&A expenses jumped to $101.3 million from $54.1 million.
 
Illumina finished 2007 with $174.9 million in cash and cash equivalents.
 
The firm expects to report first-quarter 2008 revenues of $110 million to $115 million and earnings per share of $.21 to $.24. Excluding non-cash compensation expense, amortization of acquired intangible assets, and other items, Illumina projected adjusted earnings per share of $.33 to $.36.

Analysts polled by Thomson Financial had forecast Q1 revenues of $111.2 million and a profit of $.26 per share, excluding items.

For full-year 2008, the firm forecast revenues of $500 million to $525 million. It expects a profit of $.97 per share to $1.12 per share and adjusted earnings per share of $1.45 to $1.60. Analysts expected revenue of $493.8 million and earnings of $1.23 per share.

 
In early Tuesday trade on the Nasdaq, Illumina's shares were up 7 percent at $69.42.

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