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Illumina News Drags Down Stocks of Life Science Tools Vendors

NEW YORK (GenomeWeb News) – The stocks of genomic tools and molecular diagnostics vendors fell today in the wake of Illumina pre-announcing disappointing third-quarter revenues last night.

While Illumina traded down as much as 36 percent today, it dragged down the whole life science tools sector on concerns about end-market weakness, particularly in the academic/government customer segment. Most of the firms in the GenomeWeb Daily News Index saw their stocks hit by the news, even though a couple have reiterated their expectations to meet guidance and revenue shortfalls are not expected to be industry-wide when firms begin reporting third-quarter results later this month.

Quintin Lai, an analyst with R.W. Baird said in a note that he expects most life science tools firms to report results that are in line with or better than guidance for Q3. "Most have already cited academic softness, and we think Q3 numbers reflect this expectation," he wrote.

However, Amit Bhalla, an analyst with Citi Investment Research & Analysis who downgraded a number of life science tools firms yesterday before Illumina's announcement, cautioned about the current environment.

"Weakness in academic/government end markets is not simply 'marginal' as these customers are operating in an environment unlike any they have experienced in the past and are being forced to make tough purchasing/staffing decisions; as such we continue to remain cautious on the tools sector," Bhalla wrote today in a note.

Two firms in the GWDN Index, Bruker and Fluidigm, sought to quickly assure investors that despite Illumina's difficulties in the quarter, they expect to report results in-line with or better than guidance.

Fluidigm said that it still expects to report full-year 2011 revenue growth of between 27 percent and 30 percent, and Bruker said that it expects its third-quarter revenue to exceed its previous guidance of approximately $400 million.

Despite their statements, both firms were hit by investors' concern. In the final half-hour of trade Friday, Fluidigm was down around 6 percent at $13.83, while Bruker traded down nearly 3 percent at $13.34.

Among the other tool vendors that dropped today were Agilent, down 5 percent at $31.79; Affymetrix, down nearly 4 percent at $5.47; Life Technologies, down around 6 percent at $37.18; Luminex, down 7 percent at $20.94; PerkinElmer, down 7 percent at $18.15; and Waters, down 7 percent at $73.49.

Goldman Sachs analyst Isaac Ro suggested to investors that weakness in the tools sector could present a buying opportunity for Thermo Fisher Scientific, which has a more diverse revenue base than many of its competitors and offers "the best 2012 EPS visibility."

But, even Thermo Fisher couldn't escape the sell-off, falling 5 percent in afternoon trade to $50.97.

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