Illumina Shares Take Hit on Weakness in Europ

Illumina Inc.'s shares plunged Tuesday, scraping near 52-week lows after the company pared its revenue-growth target amid weaker-than-expected sales in Europe.

Shares plunged 24% to $135.46 in midday trading in New York, a decline that would erase roughly $6 billion of the company's market value in one day if the stock closes at that level. Analysts said the company's revenue forecast could reflect a misread of the market environment in Europe and that Illumina is likely to be alone among its peers in posting underwhelming results on the region.

Illumina, the maker of gene-sequencing machines, said Monday that sales of its HiSeq 2500, 3000 and 4000 instruments were lower than anticipated in Europe, resulting in management changes in the region. The company blamed greater-than-expected outsourcing, which analysts said could reflect more lab and equipment sharing. The company also pointed to fewer upgrades of older instruments.

A representative for Illumina said the company wouldn't comment further until it reports results on May 3.

Paul Knight, an analyst with Janney Montgomery Scott LLC, said that a greater amount of equipment and lab sharing in Europe compared with other regions such as the U.S. likely weighed on the results. But he said that lab sharing in Europe is "nothing new," and that "it was clearly a management misread" to overestimate sales in the region.

Leerink analysts said in a note that the guidance prompted "an emerging debate over ILMN's ability to forestall centralization." The analysts said it was the first time they had seen this shift affect a company's quarterly results, and that any correlation to other firms would be "modest at best." Kevin Chen, an analyst with Leerink, said in an interview that "there is a trend in Europe where there is more sharing of these major instruments."

Leerink also said the lower-than-expected revenue was likely an Illumina-specific issue, as other tools vendors such as Thermo Fisher Scientific and PerkinElmer Inc. have recently reported revenue that beat consensus estimates. Mr. Knight of Janney noted that U.K.-based Oxford Instruments said last week it saw "a strong performance" in its March quarter, and expected results in line with expectations.

Illumina said it now expects 12% revenue growth for the year, compared with prior guidance of 16% growth. The firm said first-quarter revenue was about $572 million, below the average estimate of $596 million that analysts had forecast in a Thomson Reuters poll.

Write to Joshua Jamerson at [e-mail]

(END) Dow Jones Newswires

April 19, 2016 14:55 ET (18:55 GMT)

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