Two supporting biotechnology companies will release earnings this coming week. Normally these two might not garner too much outside attention, but given the current climate of the pharmaceutical industry and the technology these players possess, interests have been piqued. Coming off the heels of GlaxoSmithKline's (GSK) $2.6 billion rejected bid for Human Genome Sciences, Inc. (HGSI), the pressure is on for smaller biotechs to perform or prepare to be taken over. Shares of HGSI flew up over 100% Thursday on record volume. This event hasn't been lost on investors keeping up with Illumina (ILMN) and its sector peer, Life Technologies, Inc. (LIFE).
Illumina will release earnings Monday after close with an expected EPS of $0.32, down from the same quarter a year ago. Earnings reports may be secondary to the real news surrounding the company however. ILMN will see Roche's (RHHBY.PK) $6.7 billion takeover bid expire Friday, but don't expect the spotlight to fade off this company anytime soon. Illumina CEO Jay Flatley, who has been extremely successful in raising revenues in his 12 year tenure, has a year to beat the Roche offer by introducing new technologies and strategies. The pressure is on for Illumina to perform or prepare to be taken over, as echoed by analysts who believe Roche's expiring bid isn't the end but a strategic move instead.
While direct takeover attention has not yet turned to Life Technologies, Inc., it is another to watch. The biotechnology tool company will release its earnings Tuesday. Estimates place EPS at $0.93, up over 9% from a year ago. The company has beaten estimates the past two quarters. Many analysts place life as a buy as much for its stable earnings as for its future potential.
LIFE will either make an attractive target or become an even more successful stand-alone player in the emerging genetic sequencing market. With chatter discussing Life's potential interests in acquiring Bio-Rad Laboratories (BIO), it seems for now that the company is not planning on being a takeover target any time soon, but time will tell.
With the sector leaning more and more toward individualized medicine, especially in the cancer arena, ILMN or its peer, LIFE make a potentially shrewd and lucrative takeover target for Roche, the world's leading cancer drug pharmaceutical. Though Roche may be taking the leap first, any other major pharmaceutical company looking to build an all-in-one personalized approach would see the benefit of picking up one of these two outfits. Tools like those provided by ILMN and LIFE may hold keys to open doors for greater pharmaceutical dominance. Estimates suggest the market for genetic sequencing in pharmaceuticals could border on $25 billion in just 10 years, dwarfing today's $5 billion revenues, making it obvious why Large Pharma wants in now.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.