Illumina Stock Hit By Downbeat Guidance, Stiff Competition

On Jul 5, 2016, we issued an updated research report on San Diego, CA-based Illumina Inc. (NASDAQ:ILMN) , a company that provides tools and integrated systems for the analysis of genetic variation and function. The stock currently carries a Zacks Rank #4 (Sell).

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 significant market share, intellectual property portfolios and regulatory expertise. With substantially greater financial, technical, research and other resources, and larger, more established marketing, sales, distribution and service organization, these companies pose significant threat to the company.

Besides, Illumina faces high expenses related to the development of new products, their launch in various markets and investments in partnerships. Evidently, 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.

These escalating costs have compelled management to adopt a strategy to slow down investments in 2016. Moreover, Illumina’s recent dismal performance in Europe led to a below-par outlook for the company’s operations in the country and a slash in the overall guidance for the remainder of 2016.

On a brighter note, in line with its strategy of expansion through partnerships, Illumina recently inked a partnership with MolecularMD Corporation to co-develop and commercialize sequencing-based companion diagnostics to support biopharma drug development programs.

Illumina recently carved out GRAIL to focus on the cancer screening market. The move is expected to expand the company’s share in the multi-billion dollar oncology space. Besides, it has begun work on the detailed planning necessary to embark on a large-scale clinical trial in 2017 with the goal of demonstrating a stage shift in diagnosis.

Stocks to Consider

Some better-ranked medical stocks are GW Pharmaceuticals plc (NASDAQ:GWPH) , ICU Medical, Inc. (NASDAQ:ICUI) and Nxstage Medical, Inc. (NASDAQ:NXTM) . All these stocks sport a Zacks Rank #1 (Strong Buy).