Illumina 5% High Pre-Market on Deal News

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Illumina To Buyout Other Shareholders

Shares in US biotech firm Illumina are trading almost 5% higher pre-market on Friday. Over recent days, Illumina shares have been well bid. This is in response to news that the company agreed to a $7.1 billion deal to buy cancer screening firm Grail Inc.

Grail is currently working on developing a liquid biopsy blood test which could diagnose cancers much earlier than current standards, improving the chances of treating the disease. The group currently projects that it will launch a trial of the test in 2021.

In 2016, Illumina founded Grail and ran it as a separate company. They attracted investments from big names including Amazon and Microsoft. However, Illumina remained the largest stakeholder with 14.5% holding in the company.

Big Growth Market

The market that Grail is involved in has been flagged as a major growth market over the coming years. Wall Street projects a $130 billion market cap in the near future. However, as yet, the technology remains experimental and still needs to gain FDA approval.

Commenting on the deal, illumine CEO Francis DeSouza said:

“From our perspective, early detection of cancer is the largest application of genomics for the next decade, decade and a half.”

DeSouza said that his board began discussing the deal earlier this year in response to positive data gathered on its experimental diagnostic tests.

Illumina shares have fallen around 35% from the highs posted in July. This was following a weaker than expected Q2 earnings report. Illumina posted Q2 earnings per share of $0.32. This is less than half the expected $0.67 reading forecast.

Speaking on the earnings call, DeSouza explained that all of the business’s regions were negatively impacted. America saw the largest sequential dollar impact with revenues falling by $142 million from the prior quarter to $335 million.

25% Drop in Revenues

In all, the company reported Q2 revenues of $633 million, marking a 25% decrease on the same period a year earlier. Gross margin in the second quarter fell to 67.7% from 68.4% a year prior. Free cash flow operations rose to $202 million from $96 million in the same period last year.

Illumina Shares Rebounding Following Earlier Loss

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Shares in illumina have seen heavy selling over recent months with several downside gaps on the decline from highs around the 400 mark.

Price has recently found support at the 263.52 level and is now retesting the 289.04 level. If price can break back above here, the next level to watch will be the 302.96 level.

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