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Illumina Keen on Genome Network Growth & Global Expansion

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On Aug 25, 2016, we issued an updated research report on San Diego, CA-based Illumina Inc. (ILMN - Free Report) , a company that provides tools and integrated systems for the analysis of genetic variation and function. The stock currently carries a Zacks Rank #2 (Buy).

After a promising second quarter performance, Illumina is currently keeping in-line with its earlier stated goals to strengthen its foothold in the multi-billion gene sequencing market with some highly competitive products in its existing portfolio and pipeline.

For its market expansion, the company’s primary focus is on reproductive and genetic health space, for which Illumina seeks to increase its portfolio by providing the verified laboratory-developed non-invasive prenatal test (NIPT). In the U.S., currently 26% of covered lives can undergo NIPT, indicating further potential for this market space’s expansion. Additionally the Dutch Health Council has recently approved NIPT for all pregnancies, which in turn is expected to boost the demand for NIPT, particularly in the international market.

We are also looking forward to GRAIL, Illumina’s recently developed company focused on the cancer screening market. Currently, Illumina is working on transferring its ctDNA programs, MSK partnership to GRAIL. Besides, it has begun work on the detailed planning necessary to embark on a large-scale clinical trial in 2017 with the goal of exhibiting a stage shift in diagnosis. We believe, GRAIL is anticipated to significantly expand Illumina’s share in the multi-billion dollar oncology market.

In terms of geographic expansion, in the second quarter, Illumina observed better-than-expected double-digit growth in the Americas, while its business in Asia-Pacific also witnessed a double-digit growth contrary to the poor performance that was delivered in the prior quarter in the region.

Nevertheless, the company’s prediction of a slow paced recovery in its EMEA business, in 2016, indicates its sluggish performance in Europe to prevail at least for some time. Besides, intense competition continues to be a major challenge for Illumina in the sequencing, SNP genotyping, gene expression and molecular diagnostics markets with several large players already enjoying considerable market share, intellectual property portfolios and regulatory expertise.

Moreover, Illumina faces high expenses related to the development of new products, their launch in various markets and investments in partnerships. Consequently, in recent times, Illumina has been witnessing a substantial rise in operating expenses on account of a higher head count, investments in GRAIL and Helix, as well as development projects like Project Firefly.

Stocks to Consider

Some better-ranked medical stocks are Anika Therapeutics Inc. (ANIK - Free Report) , Actelion Ltd. and Heska Corp. . All these stocks sport a Zacks Rank #1 (Strong Buy).

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