The Motley Fool: Can Anything Stop Illumina?

There aren't many companies that have done what Illumina, (NASDAQ: ILMN  ) has done. Illumina does not have monopoly share, but it also doesn't have much to worry about today in terms of competition. I have my doubts as to whether Thermo Fisher Scientific (NYSE: TMO  ) is truly prepared to invest the sort of sums into R&D that it will take to make Life Technologies Corp.  (NASDAQ: LIFE  ) a true neck-and-neck long-term rival, and Oxford Nanopore has struggled to deliver its systems to market on time.

The biggest problem with Illumina is the price. I realize growth investors are famously ambivalent about valuation, but it looks to me as though the market is pricing in over 20% long-term free cash flow growth for Illumina. At that pace, the company would have well over $5 billion in revenue in 2022 and the sort of free cash flow margins that even the best med-tech, pharmaceutical, diagnostics, and life sciences companies struggle to match.

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Can Anything Stop Illumina?

The Motley Fool: Thermo Fisher Scientific May Be Hard Pressed To Outperform

To be clear from the outset, I'm a fan of Thermo Fisher Scientific Inc. (NYSE: TMO  ) , and I believe the company's impending acquisition of Life Technologies Corp. (NASDAQ: LIFE  ) will be a transformative deal for a company with a long history of strong M&A moves. With this deal, Thermo Fisher will operate on a scale that the likes of VWR, Merck KGaA, Agilent, and Waters cannot match, and the company will have the resources to challenge companies like Illumina (NASDAQ: ILMN  ) , Becton Dickinson, and Danaher in their growth markets to the extent management wishes to invest.

The question is price. This has been a good year for anything "bio", but Themo Fisher has outperformed almost everybody else in the sector with a 70% jump in the last twelve months. Even with a double-digit multiple to EBITDA and/or strong long-term mid-single digit free cash flow growth, it is hard to call these shares a bargain. Thermo Fisher has a good history of drawing more value than expected from its M&A transactions, but that seems to be the base case assumption here rather than the upside.

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http://www.fool.com/investing/general/2013/12/26/thermo-fisher-scientific-may-be-hard-pressed-to-ou.aspx

Seeking Alpha: Did PacBio Just Sorta Sell Itself To Roche?

As a Roche (RHHBY.OB) shareholder, I've been waiting for a while for the company to do something with its life sciences research business, and its sequencing business in particular. The company took a well-known run at Illumina (ILMN) and made a lesser-publicized joint bid for Life Technologies (LIFE). With the options getting narrower, particularly with respect to systems that could be commercialized on a near-term basis, Roche made its move - signing a development and marketing agreement with Pacific Biosciences (PACB) covering sequencing, consumables, and related diagnostics products for the in vitro market.

I'd be curious to know if Roche has made any overtures toward Oxford Nanopore, but that's neither here nor there at this point. For Pacific Biosciences, this is a major public affirmation of the progress the company has made to recover from system performance and reliability problems that took a once-ballyhooed story to almost flirting with bankruptcy. PacBio has already been a great pick for me (having recommended the stock in an Alpha-Rich piece here), but I wouldn't assume that there is all there is left in the story.

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Did PacBio Just Sorta Sell Itself To Roche?

Seeking Alpha: Pacific Biosciences Will Go Checkers Or Wreckers

I live in NASCAR country and it's not that rare to hear the expression "going checkers or wreckers" - meaning throwing caution to the wind and going all-out, with the idea that you either win or end up in a smoking heap.

That notion would seem to apply to Pacific Biosciences (PACB) today, as this once-promising innovator in single-molecule sequencing has been battered by concerns about the accuracy and value of its systems. With intriguing accuracy-improvement technology and techniques now available, though, PacBio may have its last best chance to achieve the success that many once thought was near-certain. If PacBio can recover its reputation and drive system and consumables sales, this stock could be undervalued by 50% or more. On the other hand, failure to markedly accelerate customer adoption over the next three years could have this company in bankruptcy and the share price in tatters.

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Pacific Biosciences Will Go Checkers Or Wreckers

Seeking Alpha: Can New Management Drive New Growth At Techne?

Techne (TECH) has always been a little different in the realm of publicly-traded life science companies. While the company's headquarters are pretty pleasant once you're inside, the surroundings are a pretty nondescript commercial/light industrial zone. Likewise, it's a little strange to sit down as an analyst with a management team that tells you they will not do road shows or conference calls, and doesn't much care whether they get any attention from Wall Street at all.

None of this is meant as a criticism against the company - management was always unfailingly polite and helpful to me in my analyst days, and the company's stock has generated excellent returns over the past 20 and 10 years. Where there is an issue, though, is in the more recent performance, where Techne has notably lagged other life sciences companies like Thermo Fisher (TMO), Sigma-Aldrich (SIAL) and more specialized/focused companies like Illumina (ILMN).

I'm optimistic about the potential for new management to put Techne on a more growth-oriented footing, not only with an expanded international focus but also perhaps a wider view of the company's addressable market opportunities. While I could see bull-case upside into the low $80s for Techne, that requires a level of transformation that is pretty aggressive. A more probable trajectory suggests Techne is close to fair value today, but still offers good near-real time exposure to life sciences spending.

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Can New Management Drive New Growth At Techne?

Seeking Alpha: Illumina Flexes Its Muscles A Bit

The strong revenue growth and lucrative margins of Illumina's (ILMN) core sequencing business has attracted ample competition over the years. It's testament to the quality of Illumina's technology (both acquired and internally-developed), though that a lot of these competitive attempts have only served to highlight the attributes and advantages of the company's approach.

I certainly have my questions and doubts about Illumina. I do think the company was caught a little flat-footed by the success of Life Technologies' (LIFE) Ion Torrent products, and my talks with several people in academic/research labs do lead me to believe they rushed their high-throughput products to market (leading to some unhappy customers). Last and not least, I think that Street expectations for sequencing-driven clinical diagnostics could be ambitious. All of that said, though, it's hard not to acknowledge and appreciate the business that Illumina is building here.

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Illumina Flexes Its Muscles A Bit

Investopedia: Thermo Steps Up And Seals A Deal For Life Technologies

After months of speculation, Thermo Fisher (NYSE:TMO) has brought its rumored pursuit of diversified lab equipment and supply manufacturer Life Technologies (Nasdaq:LIFE) to a successful close. The two companies announced on Monday that they had reached an agreement whereby Thermo would acquire the company in an all-cash deal. While Life Tech's share price after the deal seems to show a little larger-than-normal discount, the bigger question may be whether Thermo anticipates another deal down the line.

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http://www.investopedia.com/stock-analysis/041913/thermo-steps-and-seals-deal-life-technologies-tmo-life-ilmn-rhhby-sial-dhr-ge.aspx

Seeking Alpha: Luminex Has Both Many Opportunities And Many Questions To Answer

While I'm not opposed to paying up for a strong growth story, particularly in an area like molecular diagnostics (MDx), I think there are too many questions about the basic business model at Luminex (LMNX) to pay up for this stock today. The company does indeed have significant potential and large addressable markets, but the combination of inherent business model volatility, less than full control on product development, and rampant technological and commercial competition are all significant factors as well.

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Luminex Has Both Many Opportunities And Many Questions To Answer

Seeking Alpha: If Agilent Weakens Further, Take Advantage Of It

As a high-quality company with strong share in most of its addressed markets, Agilent (A) doesn't frequently get all that cheap. The initial reaction to a weaker-than-expected fiscal first quarter has been pretty restrained as of this writing, but investors may want to sharpen their pencils and get ready to move on this name. Agilent has cyclical volatility and exposure to weaker government spending, but represents a good quality growth name at the right price.

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If Agilent Weakens Further, Take Advantage Of It

Seeking Alpha: M&A Chatter Shouldn't Obscure Better Results At Life Tech

Life Technologies (LIFE) may or may not find a deal to its liking and shuffle off the coil of publicly -traded companies. Consequently, investors shouldn't completely lose sight of the underlying fundamentals at this lead life sciences company. Those fundamentals are actually looking pretty good right now, though the chatter around a possible transaction has pushed the shares to a point where there's not much fundamental value left.

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M&A Chatter Shouldn't Obscure Better Results At Life Tech

Investopedia: Has Roche Said "Nein" To Illumina's Asking Price Once More?

The "will they or won't they" between Roche (OTC:RHHBY) and Illumina (Nasdaq:ILMN) has continued to spur rumors and debate ever since Roche walked away from its bid for the leading gene sequencing company earlier this year. Rumors in the fall said that Roche was working on yet another bid, while subsequent rumors claimed that agreements had been reached at $60 per share or even $66 per share. Given reports of Roche chairman Franz Humer's statement to a Swiss newspaper on Sunday, however, it looks like this deal is off once again.

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http://www.investopedia.com/stock-analysis/2013/Has-Roche-Said-Nein-To-Illuminas-Asking-Price-Once-More-RHHBY-ILMN-PACB-LIFE0107.aspx

Investopedia: Agilent's Grim Guidance Obscures Long-Term Value

About the best thing I can say about my bullish call(s) on Agilent (NYSE:A) is that owning its shares hasn't hurt you too badly in 2012, as the stock has lagged the S&P 500 by about 7% for the year so far and actually outperformed (slightly) over the past quarter. While the company's guidance for 2013 was not very compelling, I continue to believe that Agilent offers a good collection of businesses with ongoing growth potential, as well as longer-term margin and free cash flow (FCF) leverage. The question is whether or not investors can afford to be patient while that long-term thesis works itself out.

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http://www.investopedia.com/stock-analysis/2012/Agilents-Grim-Guidance-Obscures-Long-Term-Value-A-DHR-LIFE-DOV1120.aspx

Investopedia: Will It Be Even Harder For Life Tech To Muddle Through In 2013?

Outside of some notable struggles among small and unproven companies, this has been a surprisingly strong year for life sciences companies. This strength, and relatively health multiples, is coming despite relatively unimpressive revenue growth and signs that 2013 could be a very tough year for the academic and government lab sectors. Consequently, while Life Technologies (Nasdaq:LIFE) is certainly worth a spot on a watch list, it's hard to muster a lot of enthusiasm for the stock right now.

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http://www.investopedia.com/stock-analysis/2012/Will-It-Be-Even-Harder-For-Life-Tech-To-Muddle-Through-In-2013-LIFE-ILMN-QGEN-DHR1105.aspx

Investopedia: Is There Enough Growth To Really Push Life Technologies?

Investors are often surprised at the relatively low growth rates that are available in the life sciences industry. While there are indeed segments that offer exceptional top-line growth prospects (like genetic sequencing), the sheer size of the sector and the fact that many new offerings simply supplant older technologies and products means that the overall growth rates are more moderate.

It's important to understand that backdrop when looking at Life Technologies (Nasdaq:LIFE). Life Tech is indeed a very good life sciences company, but serious competition in sequencing from Illumina (Nasdaq:ILMN) and Oxford Nanopore does challenge the company's ability to outgrow the broader market, as does the less-desirable state of government-sponsored research funding in the U.S.

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http://stocks.investopedia.com/stock-analysis/2012/Is-There-Enough-Growth-To-Really-Push-Life-Technologies-LIFE-ILMN-A-TMO0629.aspx

Seeking Alpha: Illumina Tries To Get The Kool-Aid Flowing Again

I'll give Illumina (ILMN) management credit for at least one thing - in the wake of turning down Roche's (RHHBY.PK) buyout bid, they know they have to keep analysts and investors excited about the company's prospects, or the stock will suffer. Unfortunately, while Illumina's technology is largely first-rate, the expectations for this business still seem pretty aggressive.

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Illumina Tries To Get The Kool-Aid Flowing Again

Seeking Alpha: Roche's Earnings Show Real Progress

For much of 2011, Roche (RHHBY.PK) was the red-headed stepchild of the Big Pharma world. Recently that started to change as Wall Street believed that the company had put most of its bad news behind it and was in position to once again deliver lucrative (if not especially torrid) growth. With the recent hostile bid for Illumina (ILMN) distracting investors though, some of that progress is overshadowed by the risk that Roche will overpay and redeploy too much cash away from shareholders.

A Surprising Surprise To Close The Year
Although the fact that Roche produced fourth quarter revenue about 2% ahead of expectations may not qualify as much of a surprise, the fact that it surprised at all is the surprise - a top-line revenue beat has been more than a year in coming. The Pharma business grew about 3% this quarter in constant currency, while the diagnostics business delivered a surprisingly strong 7% sales increase.


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Roche's Earnings Show Real Progress

Seeking Alpha: Roche Looks To Regain Life Sciences Legitimacy With A Bold Bid For Illumina

It wasn't that long ago that I mused about Roche (RHHBY.PK) having lost its way and much of its relevance in the life sciences space. With a bold announcement Tuesday night, it looks like this Swiss medical giant is looking to fix this problem in a big way. Roche is proposing to acquire sequencing giant Illumina (ILMN) for $44.50 in cash.

The Proposed Deal
At the proposed price, Roche is offering to pay Illumina investors an 18% premium over Tuesday's close, but a 60% premium to Illumina's price when rumors of a possible deal started lifting these shares up off the mat. If the deal goes through, Roche will be paying a lofty 18 times trailing EBTIDA and more than five times trailing revenue.

That may be a reasonably large "if", though. Like most companies in the med-tech space, Roche prefers to keep things quiet and relatively friendly. The fact that Roche is taking this approach suggests that Illumina either turned them down flat or held out for a sweeter price. Now Roche is looking for shareholders to apply pressure on the Illumina board to sit down at the bargaining table.

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Roche Looks To Regain Life Science Legitimacy With A Bold Bid For Illumina

Seeking Alpha: Roche Goes From Also-Ran To Darling

I didn't exactly win a lot of fans for myself last year when I decided it was time to jettison Johnson & Johnson (NYSE: JNJ) and turn my affections to other med-tech names – most notably Swiss giant Roche (Nasdaq: RHHBY.PK). At the time, few people seemed to like Roche. The company was under (theoretical) assault from biosimilar competition, the efficacy of major drug Avastin was in question, and the company didn't have much to offer in areas like vaccines, generics, and consumer health while investors started to drool over the supposed synergies of one-stop shops like Novartis (NYSE: NVS).

What a difference a year makes. Although J&J has done a little better than I thought it might, Roche has done about as well as I thought it would and last year's 20% gain was welcome indeed. More importantly, the situation around Roche today is one that warms the heart of many value investors – analyst sentiment has shifted and Roche has moved from a least-favored name to one of the more popular picks for 2012.

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Roche Goes From Also-Ran To Darling

Investopedia: Neogen Is Almost Cheap

Investors who want to play the really interesting stories in med-tech have to be ready to act fast or step up when times look uncommonly tough. That's about the only way to get a decent valuation on stocks like Intuitive Surgical (Nasdaq:ISRG), Cepheid (Nasdaq:CPHD) or Illumina (Nasdaq:ILMN), and that seems largely true for animal and food safety specialist Neogen (Nasdaq:NEOG). Although valuation and earnings quality are still problematic here, these shares also highlight the importance of being up-to-date on research and able to pull the trigger quickly.

A Disappointing Second Quarter  
Although Neogen doesn't generally step far out of line, this quarter was a notable exception. Revenue rose just 2% this quarter, not only missing the averaged estimate but missing the low-end estimate as well. Animal safety revenue was up just 1%, due at least in part to lower activity in the GeneSeek agricultural genomics business. Food safety was hardly stellar, though, as revenue was up just over 3% this quarter.

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http://stocks.investopedia.com/stock-analysis/2011/Neogen-Is-Almost-Cheap-NEOG-ILMN-BIO-LIFE-IDXX-WAT-SNY1229.aspx

Investopedia: Renewed Realism May Make Life Tech A Buy

It's easy to get sucked into the "gee-whiz" aspect of a lot of new technology, and that probably explains why bubbles are much more common in tech and health care than in industrials or transports. It's easy to dream of how gene sequencing might change the world; quite a bit harder to imagine the same from a new hydraulic component. Unfortunately, the reality is that life sciences is not the eternal growth engine that investors have long hoped.

Although investors in life sciences stocks like Life Technologies (Nasdaq:LIFE) have seen a lot of pain as Wall Street reorients its expectations, the worst may be over. With more realistic expectations in place, it may be time to consider Life Tech as a good blue-chip play on a sector that may not be the stuff of dreams, but is hardly a nightmare. (For related reading, see A Primer On The Biotech Sector.)

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http://stocks.investopedia.com/stock-analysis/2011/Renewed-Realism-May-Make-Life-Tech-A-Buy-LIFE-PACB-ILMN-DHR-A-MTD-WAT-AFFX-BRKR-PKI1130.aspx