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JPMorgan Initiates Coverage of Illumina with 'Overweight' Rating

NEW YORK (GenomeWeb News) – Investment bank JPMorgan has initiated coverage of Illumina with an “Overweight” rating on the firm’s stock.
JPMorgan analyst Tycho Peterson said in a lengthy research note published today that Illumina is “one of the best positioned [companies] to capitalize on a growing market for genetic analysis tools, including products for genotyping gene expression, next-generation DNA sequencing, molecular diagnostics, and for the applied and consumer markets.”
Specifically, Peterson said that while investors are currently focused on Illumina’s efforts in the genotyping, gene-expression, and next-gen sequencing fields, longer-term growth could come from opportunities in the molecular diagnostics, agricultural genetics, and consumer genotyping markets.
Illumina CEO Jay Flatley told investors earlier this month at the JPMorgan Healthcare Conference that the firm anticipates that its BeadXpress instruments and assays that are currently in development will provide the firm’s first proprietary molecular diagnostic revenues in 2009.
“While it is still early to tell how well the strategy to pursue molecular diagnostic content development will play out, we remain cautiously optimistic, given the solid demand for BeadXpress out of the gate … and partnerships with a number of biotech companies and academic centers … in diagnostic test development,” wrote Peterson.
In the near-term, he said that Illumina should benefit from its recent legal settlement with Affymetrix, under which Illumina is required to pay $90 million. However, it does not have to make any royalty payments to Affy going forward and also will not face further litigation in the future.
“We expect some modest SG&A leverage from the settlement as legal costs will come down, although this may be more than offset by higher sales expenses,” wrote Peterson.
In Tuesday afternoon trade on the Nasdaq, shares of Illumina were down .4 percent at $64.88.

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