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Illumina Reports Drop in Preliminary Q3 Revenues

NEW YORK (GenomeWeb News) – Illumina reported after the close of the market on Thursday a drop in preliminary revenues of almost 1 percent year over year for the third quarter.

The San Diego-based firm said that it estimates revenues for the third quarter to come in at around $235 million, compared to $237.3 million from a year ago. That figure also is well below the Wall Street consensus estimate of $277.7 million.

Illumina's shares tumbled 31 percent to $27.73 in early Friday trade on the Nasdaq.

The firm attributed the slowdown to uncertainty in funding in the US and Europe, which resulted in purchasing delays of both instruments and consumables, especially among large volume centers.

The launch of the V3 sequencing kits during the second quarter also resulted in a decrease in consumables revenues per instrument due to reduced runs, though Illumina said, "This impact will diminish as customers scale and gain access to greater numbers of samples."

Additionally, the firm noted that the number of upgrades to the HiSeq high-throughput sequencing platform from the Genome Analyzer systems was lower than expected, and among Genome Analyzer users reagent use experienced a "significant drop."

Jay Flatley, president and CEO of Illumina, said in a statement that the firm is "clearly disappointed" in the third-quarter revenues. "In the quarter, we saw what we believe to be an unprecedented slowdown in purchasing due to uncertainties in research funding and overall economic conditions, as well as temporary excess of sequencing capacity in the market."

He added that those factors are anticipated to continue through at least the fourth quarter of 2011, "while the 2012-2013 US budgets for [the National Institutes of Health] and other related agencies are determined."

Illumina's "execution, competitive position, and new product flow" remain "as strong as ever," however, despite the challenging environment, Flatley said, citing the launch of its MiSeq benchtop sequencing systems. More than 45 MiSeqs have been shipped after the firm started broader shipments of the system in mid-September, he added.

Illumina said that it believes fourth-quarter revenues will exceed third-quarter revenues, but it has decided to suspend financial guidance for full-year 2011 due to the "many market uncertainties."

During the second quarter, the company had given full-year 2011 guidance for revenue growth of between 24 percent and 26 percent over its 2010 revenues of $902.7 million. It also had said that non-GAAP EPS was expected to grow between 33 percent and 36 percent from $1.06 in 2010.

The company will release its third-quarter results on Oct. 25, after the close of the market.

Earlier on Thursday, Citi Investment Research & Analysis downgraded Illumina to a Hold rating from Buy and lowered 2011 EPS estimates to $1.50 from an earlier estimate of $1.55. Following Illumina's announcement he lowered the estimate even further to $1.30.

Several other banks also lowered their estimates and stock price target for the firm.

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