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Investment Bank William Blair Lowers Estimates for Illumina, PacBio

NEW YORK (GenomeWeb News) – Investment bank William Blair today lowered top-line and bottom-line estimates for Illumina and Pacific Biosciences, citing government funding worries that could impact sales of both firms' instruments.

In a research note analyst Amanda Murphy lowered 2012 revenue estimates for Illumina to $1.33 billion from an earlier estimate of $1.39 billion, and EPS estimates to $1.85 in 2012 from $1.91. She forecast revenues of $1.57 billion for 2013, down from $1.68 billion, and EPS of $2.31, down from $2.37.

Murphy noted potential cuts in National Institutes of Health funding, saying that in a worst-case scenario, funding could be down 2 percent in 2012 from 2011 levels, while 2013 funding could drop 10 percent, compared to 2011.

Because sequencing projects remain a priority with NIH, the impact of any cuts "should be somewhat mitigated for companies with exposure to these types of technologies or highly diverse revenue bases," she said.

Illumina's management remains cautious about potential NIH cuts, and though its sequencing business should ease the effects of any reductions in the NIH budget, "in a down 10% scenario the company would likely feel some impact to the top line and is looking for ways to rationalize its cost structure in that type of environment," Murphy added.

She also revised estimates on HiSeq shipments, lowering it to 260 in 2012 from an earlier forecast of 288, and to 248 in 2013, down from 280. Due to a recent decrease in HiSeq consumable revenues, Murphy lowered annualized consumable revenue estimates to $350,000 for 2012 from an earlier target of $361,000. 2013 consumable estimates were lowered to $368,000 from $390,000.

Murphy lowered estimates for Illumina's microarray business by $9 million for 2012 and by $17 million in 2013, which would represent about 4 percent each year for the segment.

William Blair has an Outperform rating on Illumina.

Murphy also lowered revenue estimates for PacBio to $75 million in 2012 from an earlier target of $108 million, and to $132 million in 2013 from $181 million. The revision comes as a result of lower than anticipated backlog additions during the second quarter as well as funding concerns, she said.

Loss-per-share estimates were raised to $2.20 in 2012 from an earlier estimate of $2.13. For 2013, loss-per-share estimates were increased to $1.51 from $1.11.

Murphy added that she now expects PacBio to ship 86 instruments in 2012 and 133 instruments in 2013. Murphy had previously forecast 174 shipments in 2012 and 170 units in 2013. PacBio is expected to reach break-even in 2015 rather than 2014 as previously anticipated, she added.

Murphy has a Market Perform rating on PacBio.

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