Illumina said Thursday it has retained advisers to prepare for a sale or capital markets transaction of its Grail cancer test unit.
The genomics company, under pressure from regulators to divest the business it acquired two years ago without their permission, also said it formed a special committee to expedite decisions on the future of Grail.
Illumina will be in contact with investment capital sources or potential purchasers even as it continues to appeal orders from regulators in the U.S. and Europe to divest Grail, CEO Jacob Thaysen said in his first earnings call as head of the company. Thaysen established the special committee on Grail, along with three board members.
“The appeals will not impact our ability to move swiftly,” said Thaysen, who joined Illumina in September from Agilent Technologies. “Make no mistake, I’m here to focus on the core business.”
Thaysen stepped into the CEO role nearly three months after Francis deSouza resigned in the wake of a proxy battle led by activist investor Carl Icahn, who has pushed for the gene sequencing market leader to quickly unwind the acquisition of Grail, maker of a multi-cancer early detection test.
Illumina said it expects decisions on its appeals from the U.S. Court of Appeals for the Fifth Circuit by the end of 2023 and from the European Court of Justice in mid-2024.
The appeals are important not only for Grail, Thaysen said, but because they will affect the company’s flexibility for future transactions.
Illumina is appealing a record fine imposed by the European Commission for closing the Grail transaction prematurely.
The Federal Trade Commission has also ordered Illumina to divest Grail, after determining that its ownership would stifle competition and innovation in the U.S. market for life-saving cancer tests. Grail’s liquid biopsy tests screen for multiple types of cancer at early stages using DNA sequencing.
Illumina posted third-quarter revenue of $1.12 billion, flat with the year-ago period and down 5% from the second quarter, citing customer capital budget constraints and reduced demand from Russia and China.
The company shipped 97 NovaSeq X instruments in the quarter, fewer than originally anticipated, and now expects to ship 330 to 340 instruments for the full year.
Illumina reported a third-quarter net loss of $4.77 per share, which included goodwill and intangible impairments of $821 million related to Grail. In the year-ago period, Illumina lost $24.26 per share, including goodwill impairment of $3.91 billion for Grail.
Thaysen, on the call, said Illumina expects “2024 results will look very similar to 2023.” The company anticipates fewer shipments of its NovaSeq X platform and lower revenue from sequencing consumables used with the machines as customers transition to the new system.
Illumina forecasts that 2023 consolidated revenue will decline by 2% to 3% from the prior year, with core Illumina revenue falling by 3% to 4%. The company previously forecast consolidated revenue growth of about 1%, including flat core revenue.
Grail revenue is now projected at the low end of the previous range of $90 million to $110 million.
J.P. Morgan analyst Rachel Vatnsdal said Illumina’s third-quarter results were modestly below Wall Street expectations, but the outlook for 2024 is uncertain.
Vatnsdal wrote that “while the 3Q print was fine (albeit missing placement expectations), the 2023 guidance cut and significantly lower NovaSeq X placement expectations, paired with weak 2024 outlook and Grail divestiture uncertainty, all contribute to very limited [near-term] visibility.”