Illumina Still 'Top Growth' Play In Tools, DX Space

• Illumina, Inc. ILMN shares have plunged 21 percent in the last three months, down significantly from the $240 mark reached on July 20.
• Stifel’s Miroslava Minkova maintained a Buy rating on the company, with a price target of $235.
• Minkova said that the fundamental picture for the company is still very positive.

Analyst Miroslava Minkova mentioned that the takeaways from the Genomics & Healthcare conference were:

1. HiSeq X utilization at the NY Genome Center has ramped rapidly in the past year, from low utilization to now running at close to full capacity
2. The need for more DNA sequencing in oncology, neuropsychiatric and neurodegenerative disorders was evident from the sequencing data presented throughout the day.

Illumina has launched its initial, "research use only" TruSight Tumor 15 oncology test panel, which is designed to identify sequence variants in 15 cancer genes. The genes have been carefully selected to match currently marketed cancer drug therapies.

“We view the launch as an important first step in a potentially very significant ($10B+ TAM) oncology market opportunity for ILMN,” Minkova said.

While mentioning that there still were reimbursement concerns in oncology markets, Minkova noted that a simplified work flow, carefully selected “actionable” gene content and optimized performance with oncology samples “could help facilitate adoption at a broader array of hospitals around the country, above and beyond leading cancer centers, in our opinion.”

The company’s shares have been under pressure in recent weeks, in-line with the biotech and S&P 500 indices. The shares could remain volatile “on sentiment changes” in the near-term, Minkova said.

Illumina is expected to generate 15-20 percent revenue growth over the foreseeable future, the Stifel report stated, while adding, “We view the shares as a top growth opportunity in Tools & Dx.”