Carl Icahn, the activist investor who is seeking a management shakeup of Illumina, on Thursday provided more insight into how his three nominees to the company’s board would approach the role if elected, including “asking the tough and sometimes uncomfortable questions.”
Icahn has been publicly sparring with the board of the maker of DNA sequencers. In mid-March, he launched a proxy fight where he accused management and the board of wiping out $50 billion in market value by defying antitrust regulators when it completed the $7.1 billion acquisition of cancer test developer Grail in 2021.
With Illumina’s virtual annual meeting approaching on May 25, Icahn repeated his call for the ouster of Illumina CEO Francis deSouza in a new letter to fellow shareholders. He reiterated his view that Illumina should work with regulators to divest Grail as quickly as possible through a spinoff.
The third step to improving Illumina’s margins and restoring its financial profile of double-digit revenue growth would be to return the company’s focus to its core gene sequencing business, Icahn argued.
“When we show up in a boardroom we never know exactly what we will find and how we will be greeted by the other board members,” Icahn wrote, noting any actions his nominees propose as directors would need to garner majority support.
“There might be board members that are sympathetic to our beliefs but are intimidated to speak up (as it is a hard thing to do). We are prepared to be those voices in the room,” the billionaire added.
Illumina’s nine-member board of directors, up for re-election to one-year terms, includes former Food and Drug Administration Commissioner Scott Gottlieb, Intuitive Surgical CEO Gary Guthart, Nobel Prize winner Frances Arnold and other prominent names in business and healthcare.
Icahn has proposed three associates to the board: former Icahn Group employee Vincent Intrieri and current employees Jesse Lynn and Andrew Teno. He is pushing to replace deSouza, board chair John Thompson and physician Robert Epstein.
In the letter, Icahn said his team doesn’t believe that board members should micromanage CEOs or be intimately involved in executing company strategy.
“We believe that the primary jobs of board members are to hire/fire the CEO, hold the CEO and team accountable to a plan, help guide strategy, and prevent companies from avoidable calamity,” he said.
“After the proxy contest is over, we pride ourselves on working with boards in a collegial and constructive manner,” Icahn added.
Illumina has repeatedly urged shareholders to re-elect all of its director nominees. The company, in a press release on Monday, said Icahn’s board candidates are unqualified and could harm its core business if elected. It also accused Icahn’s campaign of spreading false information.
Both the U.S. Federal Trade Commission and European Commission have ordered Illumina to divest Grail, which the company is appealing. The FTC has said the deal is likely to substantially reduce competition in the U.S. market for research, development and commercialization of liquid biopsy tests. Illumina is the dominant producer of next-generation sequencing platforms used to analyze genetic material from the blood samples drawn for the multi-cancer early detection tests.
The company late last month reported an 11% decline in first-quarter revenue and announced plans to cut costs by $100 million. Its shares have fallen 14% since the earnings announcement on April 24.
Illumina said this week it has empowered genomic breakthroughs and dramatically increased the affordability and accuracy of genomic sequencing. The cost of sequencing a human genome has plunged from $150,000 in 2007 to $200 this year with the launch of its NovaSeq X, which is seeing strong demand, the San Diego-based company said.
Illumina expects the addressable genomics market to grow from $5 billion to $120 billion by 2027.