USA — in a dynamic quarter marked by regulatory pressures and leadership changes, Illumina has disclosed that its third-quarter revenues remained steady at US$1.1 billion compared to the previous year.

However, the company reported a significant reduction in net loss, shrinking to US$754 million from US$3.8 billion a year ago.

This financial landscape unfolds amidst the aftermath of the European Commission’s directive for Illumina to reverse its US$7.1-billion acquisition of cancer diagnostic maker Grail.

Illumina’s CEO, Jacob Thaysen, who assumed the role in September following Francis deSouza’s resignation, expressed confidence in the company’s ability to navigate the challenging environment.

Thaysen outlined the strategic approach, emphasizing a focus on driving placements of the NovaSeq X to boost consumables demand while optimizing operations and ensuring stronger execution.

In the third quarter, Illumina’s core business contributed the bulk of sales, with Grail adding US$21 million, up from US$10 million the previous year.

However, the quarter saw the recognition of US$712 million in goodwill and US$109 million in intangible asset impairment charges related to the Grail segment.

The company had previously flagged weakened demand for genetic testing tools and diagnostics products, citing factors such as a protracted recovery in China, cautious consumer spending, and prolonged sales cycles.

Grail’s regulatory challenges and the path forward

The European Commission’s order to dissolve the Grail acquisition has prompted Illumina to divest Grail within the next 12 months unless the company successfully challenges the directive in court.

Illumina is diligently working through legal and regulatory processes while concurrently preparing sale and capital markets transaction options for Grail.

The U.S. Federal Trade Commission is also enforcing the divestment, with an expedited review scheduled for April.

The company’s consolidated revenue outlook for the year has been revised, expecting a decrease of 2% to 3% compared to fiscal year 2022, a shift from the previous anticipation of approximately 1% growth.

Core revenues are projected to decline by 3% to 4%, contrary to the earlier forecast of “approximately flat” growth. Grail revenue is expected to fall at the lower end of the initial forecast of between US$90 million and US$110 million.

Activist investor Carl Icahn’s legal action and Illumina’s response

In a new development, activist investor Carl Icahn has sued Illumina’s board of directors, accusing them of breaching their fiduciary duties related to the completion of the Grail acquisition.

The lawsuit, sealed for now, reflects Icahn’s dissatisfaction with the acquisition, which had been a focal point of his proxy fight earlier this year. Illumina is reviewing the complaint but has not yet provided additional comments.

Illumina’s stock price has experienced a 36% decline since January, prompting changes in leadership, with the board replacing the CEO soon after Icahn secured a board seat.

The gene-sequencing company had repurchased Grail in 2021, despite opposition from U.S. and European antitrust regulators.

Amidst these challenges, Illumina is expanding its global footprint with the opening of the Illumina Solutions Center in Bengaluru, India.

This state-of-the-art facility aims to grow the genomics market in South Asia, unlocking opportunities for advancing healthcare and combating the effects of climate change.

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