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Illumina Shareholders Vote out Board Chairman

NEW YORK – Illumina shareholders have voted to replace Board Chairman John Thompson with Andrew Teno, an investment manager employed by dissident investor Carl Icahn.

In a statement issued Thursday after the close of the vote, Illumina said the remaining eight board members, including CEO Francis deSouza and Robert Epstein — the other two individuals Icahn had sought to replace — had been reelected, according to preliminary results.

Shareholders also voted down Illumina's proposal to approve executive compensation. "Although not binding, the board of directors and the compensation committee will review and consider the voting results when making future decisions regarding executive compensation," Illumina said in its proxy statement filed March 30.

The results of the board election are in line with expectations heading into today's virtual annual shareholder meeting, given that two independent shareholder advisory firms had recommended replacing Thompson. Illumina will now have to elect a new board chairman, a process that will take place over the next few weeks.

Teno is a portfolio manager at Icahn Capital. He also serves on the boards of Southwest Gas and FirstEnergy. He was previously a director at Herc Holdings, Cheniere Energy, and Eco-Stim Solutions.

How much influence Teno will have on the board and his ability to effect Icahn's desired outcome of quickly spinning off Grail are also unclear.

Illumina declined to provide additional comment. Teno and Icahn's camp did not immediately respond to requests for comment.

The results suggest that Illumina's largest shareholders, represented primarily by investment funds, "did not want to shake things up and may be relatively comfortable with Francis deSouza and the progress of the company during his tenure," Canaccord Genuity Analyst Kyle Mikson said in an email.

In its statement, Illumina welcomed Teno to the board, saying the San Diego-based firm "[looks] forward to productive and collaborative engagement." It also thanked Thompson for his service.

In addition, Illumina thanked shareholders and said it was "committed to its mission of improving human health by unlocking the power of the genome. We appreciate the constructive shareholder feedback throughout this process and are committed to delivering on our plan to accelerate shareholder value creation. We will continue to provide transparent and effective communication as we move forward together."

In Thursday afternoon trading on the Nasdaq, shares of Illumina were down 10 percent at $191.14.

"The market is interpreting this outcome as a negative," Evercore ISI Analyst Vijay Kumar explained in a note to investors. Had shareholders supported Icahn's entire slate of three directors, the share price might have gone up. "At a high level, this initial stock reaction fits the historical pattern of reaction to headline news." However, both Kumar and TD Cowen Analyst Dan Brennan suggested the drop was an overreaction. "We don't see why the stock shouldn't settle back in the $200 to $210 range," Kumar wrote.