Illumina Rises 20% on Settlement: Time to Cut Back

| About: Illumina, Inc. (ILMN)

I just noticed Illumnia (NASDAQ:ILMN) is up 20%.... not too shabby. It was up on Wednesday in a bad tape, so I guess yesterday's news about settling its patent dispute leaked out... shocker that the stock was up the day ahead of public release, eh?

I wrote a few weeks ago [Nice Write up on Illumina]

Illumina has some of the very high growth component to it, that I really like. The main risk here is patent based risk...

Well that is taken care of now! Even better no future royalty payments to Affymetrix, just a one time pay off of $90M. Fantastic.

I am going to cut back my position quite a bit here, to raise some cash and take advantage of this big spike. This was a top 10 position going into the day at 3% of the portfolio (up to 3.5% after the spike), and I am cutting 375 of the 575 shares I own to move Illumina down to a 1.25% position. These sales are in the $72s (I was not around when it spiked to $75s this morning) I'll look to add in the future on any pullback. The stock closed at $60.50 yesterday so we have a huge "gap" in the chart. Hopefully it gets "filled" and I can buy this stock back in the low $60s. Or maybe it just continues straight up for all I know, but in this market I will take gains when I can get them.
  • Shares of gene-testing system maker Illumina Inc. jumped Thursday, while shares of rival Affymetrix Inc. fell, after Illumina agreed to pay Affymetrix $90 million, ending a series of patent lawsuits between the two companies.
  • Affymetrix was suing Illumina in the U.S., U.K. and Germany, alleging that Illumina's scanners, software and others products violated its patents. A Delaware jury ruled in Affymetrix's favor in October, awarding the company $16.7 million for five counts of patent infringement.
  • Affymetrix filed several new patent claims in October. All the suits have been dismissed with prejudice in return for the one-time payment, in which Illumina acknowledges no liability.
  • Un Kwon-Casado of Pacific Growth Equities said in a note that she expected Affymetrix investors to be disappointed with the settlement, as the company will not receive royalties on sales of any Illumina products. She estimated the suit would be worth more than $400 million for Affymetrix, including royalties.
  • Kwon-Casado decreased her price target on Affymetrix to $20 from $26, and raised her target on Illumina stock to $76 per share from $69.

Disclosure: Long Illumina in fund; no longer long in personal account!