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Illumina Projects Q2 Revenue Miss, Lowers Full Year Guidance

NEW YORK – Illumina reported after the close of the market on Thursday preliminary second quarter revenues of $835 million, short of the consensus Wall Street estimate of $888 million. The firm also lowered its full year 2019 revenue guidance.

Revenues were up 1 percent year over year from $830 million in Q2 of 2018. However, they were lower than expected in a number of markets. The firm said it expects a revenue shortfall of $30 million from population genomics initiatives, including a "sizeable" purchase that did not close as expected and will likely close later in the year; $10 million from a weak direct-to-consumer (DTC) market; and $10 million from non-high-throughput sequencing systems and consumables, including NextSeq.

The firm added that it now expects 2019 revenue growth of approximately 6 percent, primarily associated with "lower near-term expectations in DTC, a more conservative assumption about the speed with which certain population genomics initiatives ramp, and lower non-high-throughput sequencing systems and consumables, including a delay in a partner program that is now expected to ramp in 2020." Earlier this year, Illumina had said it expected 2019 revenues to grow in the range of 13 percent to 14 percent.

Specifically, Illumina now anticipates sequencing revenue will grow approximately 10 percent in 2019, including 15 percent growth from sequencing consumables and a slight decline in sequencing services. The array business is expected to be down approximately 14 percent, primarily due to ongoing DTC weakness. NovaSeq system shipments are forecast to be flat or slightly up, as previously expected.

"We are obviously disappointed with our second quarter financial results. Our preliminary analysis suggests that these challenges are transitory and do not reflect a macro change to the fundamentals of our business," Illumina President and CEO Francis deSouza said in a statement. "Despite our shortfall this quarter, we remain as enthusiastic about the long-term growth prospects for our markets as we have ever been and are committed to setting the industry's bar for consistency and execution in the dynamic and rapidly growing world of genomics."

Illumina said it would share additional guidance, including full year EPS guidance, on a July 29 conference call to discuss its second quarter results.

The firm noted that NovaSeq consumable volume grew 40 percent sequentially and more than 100 percent year-over-year.

According to news reports, Bank of America Merrill Lynch analyst Derek de Bruin responded to the results by downgrading Illumina from "buy" to "underperform" and cut the bank’s price target from $355 to $290 per share. Other analysts kept their ratings but also lowered price targets. For example, SVBLeerink analyst Puneet Souda cut his price target from $380 to $360 per share and Cowen analyst Doug Schenkel from $380 to $320 per share.

In morning trading on the Nasdaq, shares of Illumina were down 15.7 percent at $306.49.

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