NEW YORK (GenomeWeb News) – Investment bank Robert W. Baird has downgraded Illumina's stock to Neutral, citing "near-term obstacles."
In a note published today RW Baird analyst Jeffrey Elliott said that there are multiple risks with regard to Illumina's relationship with BGI. The Chinese firm is Illumina's largest customer for its HiSeq systems, and by his estimate has 137 HiSeqs compared to only one of Life Technologies' Ion Torrent systems. But BGI also is now Illumina's competitor in bidding to acquire Complete Genomics.
In addition, BGI's bid for Complete Genomics "demonstrates its desire to invest in other technology and [has] clouded the [Illumina] relationship," said Elliott. He added that Illumina's bid, whether it is successful or not, "could further complicate BGI matters … [and] raise integration risk and require sizeable investment, in our view."
In addition to the thorny issues surrounding its relationship with BGI, Elliott cited emerging competition in the DNA sequencing field. Life Technologies recently launched its Ion Proton platform, and Oxford Nanopore is expected to soon launch its highly anticipated sequencing system. In addition, Elliott noted that Complete Genomics is expected to launch in 2013 its long fragment read technology, which the firm has said will provide industry-leading accuracy and read lengths.
Elliott also noted that Illumina's shares have risen recently in response to rumors that Roche may make a fresh bid for the firm, after it abandoned a $51 per-share offer for Illumina in April.
Though he has downgraded Illumina's shares, Elliott noted that the firm's stock could be favorably impacted by a higher offer from Roche, a successful navigation of the current issues with BGI without disrupting that relationship or others, and a dramatic ramp in clinical demand for next-gen sequencing technologies in 2013.
Elliott has a $54 price target on Illumina's shares, which were down 3 percent at $51.27 in Monday afternoon trade on the Nasdaq.