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Piper Jaffray Upbeat on MiSeq; Dismisses Rumors of Roche-Illumina Deal

NEW YORK (GenomeWeb News) – Illumina's MiSeq platform is best positioned to benefit from the growing interest in desktop sequencing, a Piper Jaffray analyst said today.

In a research note analyst William Quirk also called recent speculation that Roche could be again pursuing the San Diego-based company "ridiculous and unfounded."

Piper Jaffray conducted a survey recently which found "solid future interest" in desktop sequencing with 48 percent of respondents saying they will buy an instrument in the next year and 48 percent evaluating systems. Among those likely to buy a system, 59 percent said they would buy a MiSeq, the survey found, while 26 percent said they would buy the instrument of an unnamed private company. Another 22 percent said they would purchase Life Technologies' Personal Genome Machine, and 11 percent said they would buy Pacific Biosciences' RS platform.

"The bottom line is MiSeq continues to garner interest, and we believe it will remain Illumina's near-term growth vehicle," Quirk said.

Quirk also dismissed recent speculation that Roche is considering upping its bid to acquire Illumina. The Swiss drug, diagnostics, and research tools giant launched a hostile bid for Illumina earlier this year, but after repeated rejections by Illumina and the implementation of a poison pill strategy by the company, as well as a failed effort by Roche to get its candidates onto Illumina's board, Roche walked away from the table in April. Its final offer for Illumina was $51 per share.

An article in The Times of London last week reignited speculation that Roche could be relaunching another bid for Illumina, further fueled by recent comments by Illumina CEO Jay Flatley to Bloomberg that suggested his firm could be enticed to an M&A deal at the right price.

Quirk said, however, that he "had a good laugh" at The Times article. The report said that Roche could be preparing an offer of $60 per share for Illumina, but Quirk questioned Roche's willingness to pay an 18 percent increase from its last offer of $51.

"Roche and Illumina argued about different growth rates, and with a single quarter reported since the deal fell apart, it is far too early to resolve those differences," he wrote. "Roche was getting close to being stretched to justify $51, and thus an 18 percent move seems implausible."

Other factors working against another bid by Roche include the ongoing presidential election — which could affect the funding prospects to the National Institutes of Health, a direct impact to Illumina's business — as well as the uncertain sequestration issue in Congress, which could cut NIH funding by about 8 percent.

Quirk also noted that Roche Diagnostics has a new leader in Roland Diggelmann. His predecessor Daniel O'Day, now COO of Roche Pharma, wanted to get a Roche-Illumina completed, but Diggelmann may be more reluctant to proceed on such an aggressive acquisition at this point in his tenure, said Quirk.

He currently has a Neutral rating on Illumina.

In afternoon trading, shares of Illumina on the Nasdaq were down 2 percent at $51.02.

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