Illumina unveils plans to cut costs as it faces shrinking margins

Illumina's world headquarters in San Diego is shown on September 1, 2021.

Reuters

Illumina announced plans on Tuesday to reduce costs to increase the company's margins, which are shrinking.

Illumina released its first-quarter earnings report, which stated that the company plans to reduce annualized expenses of Illumina by more than 100 million dollars starting in later this year.

The company reported gross margins for the period of 60.3%, down from 66.6% in the previous period.

Illumina stated in a press release that "these cost savings will accelerate the progress towards higher margins and free up capital for increased investment in high growth areas."

Illumina plans to use its NovaSeq X system to accelerate the discovery of genomic information. The system will launch in September 2022 and sequence DNA three times faster than previous Illumina products.

The San Diego-based firm said that it plans to also save by "enabling" activities in more cost-effective regions around the globe. Illumina didn't reveal specifics regarding these activities.

After its controversial $7.1 Billion acquisition of Grail (a cancer test developer), the company has been criticized and seen its market capitalization fall.

Illumina's value is down to $34.5 billion, from $75 billion when it acquired Grail in August 2021.

The antitrust regulators have resisted this deal repeatedly.

The Federal Trade Commission ordered Illumina earlier this month to divest its acquisition. They said it would stifle innovation and competition.

The European Commission, which is the executive arm of the European Union (EU), blocked the same deal last year due to similar concerns.

Illumina has appealed both orders, and is expecting a final decision in late 2023 or 2024.

The Grail deal has also been the subject of a proxy battle between activist investor Carl Icahn, and Illumina. The two have been exchanging jabs since more than a week.

Icahn owns 1,4% of Illumina and is pushing for seats on the board. He also wants the Grail deal to be rescinded. Illumina's CEO Francis deSouza should be fired "immediately" by Icahn, who owns a 1.4% stake in the company.

The company wants shareholders to reject Icahn’s three nominees for the board at its annual meeting of shareholders on May 25, 2008.

Illumina has claimed repeatedly that Grail offers "tremendous potential for long-term value creation."

Grail claims that it is the only early-screening test commercially available which can detect over 50 different types of cancers with a single blood sample.

Illumina reported that the cancer test will generate around $55 million revenue by 2022, and up to $110 millions this year.