Carl Icahn speaks at Delivering Alpha in New York on September 13, 2016.
David A. Grogan | CNBC
Carl Icahn on Friday called by Illumina first quarter result “very disappointing” and criticized the DNA sequencing company new plan to cut costs.
Active investor, who owns 1.4% shares of Illumina, is in a hot proxy war with the company on the acquisition of cancer test developer Grail in 2021.
Icahn and Illumina have been stab transaction for more than a month.
Icahn is seeking a seat on Illumina’s board of directors and is pushing the company to cancel its acquisition of the Holy Grail. He is also calling on the San Diego-based company to fire Chief Executive Francis deSouza “immediately”.
Illumina on Tuesday report quarterly revenue and earnings beat Wall Street expectations.
But the company also posted net income of $3 million for the quarter, down more than 96 percent from the $86 million it earned in the same period a year earlier.
In an open letter Friday to Illumina shareholders, Icahn accused deSouza on being “desperate, hilarious, and most of all unsuccessful” in trying to turn around “supposedly mediocre” quarterly results during this week’s press tour.
Icahn pointed to deSouza’s interview above “ink pot” on Wednesday, as the CEO touted strong demand for Illumina’s diagnostic testing services.
Icahn wrote: “The CEO of Illumina, Francis deSouza, seems to believe he can fool everyone all the time.
“Those who don’t have dual speech decoding skills may really get the impression that Illumina is doing well!” he added.
Icahn also said that Illumina’s stock price fell further as the company’s CEO this week, “clearly signals dissatisfaction with the earnings report and displeasure with Mr. deSouza’s transparent efforts to put lipstick on. pig.”
Shares of Illumina have fallen more than 10% since the company reported earnings. Shares closed largely flat on Friday after Icahn published his letter.
In that letter, Icahn also looked at the cost-cutting plans Illumina revealed to improve its shrinking profit margins. He called those measures “vague” and “extremely obvious”.
The company on Tuesday said it would enable unnamed “operations” in more cost-effective parts of the world and would use its new tool. NovaSeq X . Sequencing System to accelerate genome discovery, among other efforts.
Those plans will help Illumina meet its adjusted operating profit margin goals of 24% in 2024 and 27% in 2025, the company said in the earnings release.
Icahn calls those margin targets “less modest”. And he argues they will “take years to realize, if they get it all.”
The company had projected an estimated operating margin of 22% for 2023, down from the 23.8% reported in 2022.
Illumina reported a negative operating margin of 5.7% for the quarter, down from 15% in the same period a year ago. The company’s gross margin for the period fell to 60.3%, down from 66.6% in the first quarter of 2022.
Illumina did not immediately respond to a request for comment on Icahn’s letter.
Criticize the Holy Grail Agreement
Elsewhere in his letter, Icahn criticized deSouza’s positive comments this week about Illumina’s $7.1 billion acquisition of Grail.
DeSouza told CNBC the deal “makes sense” because Illumina can significantly expand the market for Grail’s early screening test for different types of cancer.
The CEO also touted Grail’s 100% revenue growth in the quarter year-over-year.
But Icahn said deSouza had not spoken to the public about comments made earlier this month by the Federal Trade Commission, which suggested the deal would stifle competition and innovation.
FTC also command Illumina divested from the acquisition because of those concerns.
The European Commission, the European Union’s executive body, also blocked the deal last year over similar concerns.
Illumina is appealing both orders and expects final decisions in late 2023 or early 2024.
Last week, a US federal appeals court say it will quickly follow the review of Illumina’s challenge to the FTC order.
Icahn’s objection to the acquisition stems from Illumina’s decision to close the deal without obtaining approval from those antitrust regulators.
At the beginning of this month I was strong criticize Illumina and its management have finalized a “reckless deal,” calling it “a new low in corporate governance.”
Illumina has urged shareholders to reject three Icahn board candidates in the process Annual shareholders meeting scheduled for May 25.
