ILMN :Signs $25 millon Deal With Children's Hospital of Philade
2006-06-07 12:16 (New York)
Piper Jaffray & Co.
Company Note
(ILMN - $26.62)
Outperform Volatility: Medium
Signs $25 millon Deal With Children's Hospital of Philadelphia
Edward A. Tenthoff, Sr Research Reason for Report:
Analyst Company Update
212 284-9403,
edward.a.tenthoff@pjc.com
William T. Ho, Research Analyst
212 284-9308, william.t.ho@pjc.com
KEY POINTS:
* This morning, Illumina announced a big deal with the Children's Hospital of
Philadelphia (CHOP) for a large-scale genotyping facility. This is the
largest single contract Illumina has ever signed with an initial value in
excess of $25 million for the first 30,000 samples.
* The goal of the new Center for Applied Genomics at CHOP is to genotype over
100,000 children in order to understand the genetic basis of the most
common diseases. This contract could ultimate exceed $75 million.
* The CHOP deal increases our confidence in our product sales forecast for
Illumina of $27 million in 2Q:06 and $111.5 million for all of 2006.
* Further, this deal reinforces our thesis that Illumina is gaining share
from Affymetrix with the recent launch of the HumanHap550 Genotyping
BeadChip. Affymetrix has struggled with the launch of its own 500K
genotyping array.
* Last month, Illumina completed a successful equity offering of 4.025
million shares, raising gross proceeds of $96.2 million. This deal
significantly strengthened Illumina's balance sheet with pro forma cash of
$145 million.
* With the increased share count offset by increased interest income, we
continue to estimate Illumina will achieve pro forma EPS of $0.08 in 2Q:06,
$0.33 in 2006 and $0.69 in 2007.
From To Price: $26.62
Changes (Previous) (Current) 52 Week High: $32.00
Rating -- Outperform 52 Week Low: $10.30
Price Tgt -- $34.50 Price Target: $34.50
FY06E Rev (mil) -- $135.2 (50x 2007E Pro Forma EPS of
FY07E Rev (mil) -- $195.7 $0.69)
FY06E EPS $0.32 $0.33 Shares Out (mil): 50.1
FY07E EPS -- $0.69 Market Cap. (mil): $1,333.7
Avg Daily Vol (000): 676
Book Value/Share: $1.70
Cash Per Share: $2.90
Debt to Total Capital: 0%
Est LT EPS Growth: NM
P/E to LT EPS Growth (FY06): NA
Est Next Rep Date: 07/18/2006
Fiscal Year End: Dec
Incl impact of equity offering
Rev (mil) 2005A 2006E 2007E EPS 2005A 2006E 2007E
Mar $15.2A $29.1A $41.3E Mar ($0.03)A $0.07A $0.12E
Jun $15.8A $33.0E $48.4E Jun ($0.07)A $0.08E $0.16E
Sep $19.5A $33.2E $45.9E Sep ($0.03)A $0.07E $0.17E
Dec $23.0A $39.9E $60.0E Dec $0.01A $0.12E $0.24E
FY $73.5A $135.2E $195.7E FY ($0.12)A $0.33E $0.69E
CY $73.5A $135.2E $195.7E CY ($0.12)A $0.33E $0.69E
FY RM 18.1x 9.9x 6.8x FY P/E NM 80.7x 38.6x
CY RM 18.1x 9.9x 6.8x CY P/E NM 80.7x 38.6x
INVESTMENT RECOMMENDATION:
We reiterate our Outperform rating and are maintaining our $34.50 price
target based on a 50x multiple to our 2007 pro forma EPS estimate of $0.69.
We continue to view this multiple as warranted due to the rapid top-line and
earnings growth at Illumina. We look for Illumina to remain a leader in the
fast-growth genotyping market and grow new products in gene expression and
MoDx.
RISKS TO ACHIEVEMENT OF TARGET PRICE:
Risks include the development of new technologies that could obsolete
Illumina's products, increased competition, new product adoption and
litigation. Also, Illumina may not integrate CyVera and may fail to achieve
our sales or earnings forecasts.
COMPANY DESCRIPTION:
Illumina is a leading provider of genotyping technology to the life science
research market. Now, Illumina is expanding into gene expression research and
molecular diagnostics, dramatically expanding the company's market
opportunity. |
