Illumina Writes to Stockholders with Plea to Reject Roche

It was revealed on Monday that Illumina

, which develops, manufactures and markets life science tools and integrated systems for the analysis of genetic variation ad function, has sent a second letter to stockholders clearly stating ILMN's impressive track record of superior operational performance and financial success. According to

, the letter is a clear attempt to urge stockholders to reject Roche's efforts to acquire ILMN at a seriously reduced rate. The letter also reiterates the recommendation from ILMN's board that the company's stockholders vote for the election of Illumina's highly qualified director of nominees at the 2012 stockholders meeting. “Your vote at Illumina's Annual Meeting on April 18th is critical to protecting the value of your investment from Roche's hostile bid to buy Illumina at a low-ball price,” the letter said. “To further its own agenda, Roche is trying to have director nominees who are loyal to Roche elected to Illumina's Board. However, it is your Board's unanimous view that Roche's hostile offer is grossly inadequate and that Roche's efforts are self-serving and not in your best interests.” Roche CEO Daniel O'Day said during that company's investor presentation that, “[Illumina has] had a track record of continuously evolving their technologies to stay in the leadership position. So I'm a big believer that past behavior also predicts future behavior … Illumina is clearly the leading technology in sequencing today, has been for many years, and we are confident with that type of track record that it will continue to do well vis-à-vis the competition.” On March 19, Morgan Stanley published a research report stating that an earlier than expected shareholder meeting and record date reduces remaining hope that Roche could gain control of the BoD this year and close the deal early. “Illumina set this year's annual shareholder meeting for 4/18/12, which is earlier than expected (rules dictate the annual meeting can be held as late as 13 months from the 5/10/11 prior year's meeting).” On Friday, Wedbush said that ILMN trades at a premium to the life science tool peer group on a 2012E PE multiple basis (32x vs 17x) and EV/Sales basis (5.6x vs 3.1x) and FCF yield basis (5.1% vs 5.6%). “Our $65 price target assumes a 2012E EV/Sales multiple of 7.5x (inline with the price Roche paid for Ventana in 2008) and 2012E FCF yield of 4%, in-line with the current diagnostics peer group.” In further news,

is reporting that Illumina is being sued by Columbia University for alleged infringement of five patents related to DNA sequencing. The university, seeking royalties, triple damages and other remedies, said that it's patents cover NGS technologies, allowing rapid and precise DNA sequencing. Columbia said that the technologies are particularly important in personalized medicine, in which individuals' genomic DNA sequence information is used as a basis to provide health care.