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Leerink Swann Raises Revenue, EPS Estimates for Illumina

By a GenomeWeb Staff Reporter

NEW YORK (GenomeWeb News) – Investment bank Leerink Swann raised its revenue estimates for Illumina today, saying it now expects sales to reach $288.8 million in the first quarter, while EPS is expected to be $.39.

The bank had earlier estimated $268.2 million in revenues and EPS of $.33 for the first quarter. Leerink Swann analyst Dan Leonard also revised estimates for full-year 2011, with expected revenue now at $1.14 billion, up from an earlier forecast of $1.10 billion. He expects full-year 2011 EPS of $1.51, compared to an earlier target of $1.39.

In a research note, Leonard said the new forecast reflects strong revenues from sales of Illumina's HiSeq next-generation sequencing platform, as well as an increased mix of consumables during the second half of 2011 and 2012, and accretion from recent refinancing and share repurchases.

Leonard said that following record sales for its sequencing instruments in the fourth quarter of 2010, the firm's sequencing-based revenues are expected to rise more than 10 percent in the first quarter of 2011, compared to the fourth quarter of 2010.

"Key to this thinking is an assumption that Illumina has capacity to manufacture nearly 200 HiSeq's per quarter, and that it will operate at full capacity while it works down its backlog," Leonard said. "Additionally, incremental instrument sales should come at much higher selling prices, since ILMN had largely worked through its backlog of deep discount HiSeq's" by the end of 2010, he said.

Sequencing revenues are expected to scale down in the second half of 2011, however, as early sales of MiSeq may not be enough to offset softer HiSeq sales. Illumina has said that it expects to ship the MiSeq — a lower cost platform to reach a broader audience — to early access customers in the third quarter of this year, with broad commercialization of the platform in the fourth quarter.

In total, Leonard expects Illumina's sequencing business to grow 45 percent year over year in 2011, with growth slowing to 17 percent in 2012.

He maintained an "Outperform" rating on Illumina and a $79 to $81 valuation range.