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In Second Letter, Roche Urges Illumina Shareholders to Accept 'Highly Attractive' Offer

NEW YORK (GenomeWeb News) — In its pursuit to acquire Illumina in a hostile takeover, Roche has again turned directly to the company's shareholders, aiming to convince them of the attractiveness of its offer.

In a letter addressed to Illumina stockholders today — Roche's second such letter since it made its initial bid for the company in January — CEO Severin Schwan said that the stockholders' decision on the offer "will ultimately determine your ability to obtain certain value for your investment amid increasing headwinds for Illumina and the broader sequencing sector."

Roche noted that Illumina's board has been unwilling so far to negotiate directly, leaving it with "no choice but to bring our offer directly to you, Illumina's shareholders, and provide you with the opportunity to act in your own financial interests."
In bold type, Roche urged shareholders to tender their shares and vote for Roche's candidates for Illumina's board of directors and an increase in the number of board members at Illumina's annual meeting on April 18.

Given its $51 offer, "the fiduciary responsibilities of the board and management of Illumina require engagement," the letter said. The current offer is "full and fair and attractive by every conceivable financial metric based on publicly available information," it added.

While Illumina has made "a number of qualitative statements" regarding future markets for its products, the company "has yet to produce any quantifiable evidence or projections to reassure shareholders when or how this growth will be realized," according to Roche's letter.

Since its offer, Roche said, the "only relevant industry news" has been product announcements from Oxford Nanopore Technologies and Life Technologies that highlighted "the increasing competitive landscape."

Wall Street research analysts, Roche claimed, had also already factored in Illumina's future growth potential into their price targets prior to Roche's offer, which it said had a median value of $34 per share.

Roche's address to shareholders follows a letter Illumina sent to its stockholders yesterday, its third such letter, in which it urged them to reject the offer and to vote against Roche's board nominees and board expansion proposal.

In that letter, signed by CEO Jay Flatley and Chairman William Rastetter, Illumina said that the use of sequencing outside of research has the potential to double its addressable market from $4 billion to over $8 billion, with the molecular diagnostics market alone providing a $3 billion long-term growth opportunity.

Illumina also hinted that "in the coming months and years" it will "lead major technological advances" that will enable economical sequencing with "very rapid" turnaround times.

Its current product portfolio "does not even begin to reflect the value-creation potential" of its "rich R&D pipeline," Illumina said. By reducing the cost per genome below $1,000 and decreasing turnaround time, "an entirely new world of sequencing applications will become possible," it said.

Based on its estimated future market size, a cost of $1,000 per genome, and a 1 percent market penetration, Illumina said it "could easily" gain $600 million in new revenue.

Roche's revised offer is "nothing more than the next step in its aggressive campaign to opportunistically acquire Illumina at the lowest possible price," Illumina concluded. "Execution of our strategic plan will create considerably more value than Roche is offering."