Carl Icahn speaks at Delivering Alpha in Recent York City, September 13, 2016.
David A. Grogan | CNBC
Carl Icahn called on Friday Illumina’s first-quarter results were “very disappointing” and condemned the DNA sequencing company’s latest cost-cutting plans.
The activist investor, who owns a 1.4% stake in Illumina, is in a fierce proxy battle with the corporate for the 2021 acquisition of Grail, a maker of cancer tests.
Icahn and Illumina have been trading blows for over a month.
Icahn bids for a seat on Illumina’s board of directors and pressures the corporate to back out of the Grail takeover. It also calls on the San Diego-based company to “immediately” remove CEO Francis deSouza.
Illumina on Tuesday reported quarterly revenues and profits that exceeded Wall Street expectations.
But the corporate also reported a net profit of $3 million for the quarter, down greater than 96% from the $86 million it earned in the identical period a 12 months ago.
In an open letter Friday to Illumina shareholders, Icahn accused deSouza “desperately, hilariously, and above all, unsuccessfully” attempting to crank out “definitely mediocre” quarterly results during this week’s press tour.
Icashn pointed to deSouza’s interview on CNBC’s “Squawk Box” on Wednesday, through which the CEO touted the high demand for Illumina’s diagnostic testing services.
“Illumina CEO Francis deSouza seems to imagine he can cheat all of the people on a regular basis,” Icahn wrote.
He added that “those that are usually not adept at deciphering double speech may get the impression that Illumina is doing well!”
Icahn also said Illumina’s share price fell the more its CEO this week, “clearly signaling dissatisfaction with the earnings report and dissatisfaction with Mr. deSouza’s transparent try to put lipstick on a pig.”
Illumina shares have fallen greater than 9% for the reason that company reported profits. Stocks were mostly flat on Friday after Icahn posted his letter.
In that letter, Icahn also photographed the cost-cutting plans Illumina revealed to enhance its shrinking margins. He called the measures “vague” and “extremely unambitious”.
On Tuesday, the corporate said it will enable unnamed “operations” in additional profitable areas of the world and use its latest NovaSeq X sequencing system speed up genomic discoveries, amongst other things.
These plans will help Illumina meet its adjusted operating margin targets of 24% in 2024 and 27% in 2025, the corporate said in an earnings announcement.
Icahn called these fringe goals “lower than modest.” And he argued that “these will take years to materialize, if achieved in any respect.”
The corporate forecasts an operating margin of twenty-two% in 2023, down from 23.8% in 2022.
Illumina reported a negative operating margin of 5.7% within the quarter, down from 15% in the identical period a 12 months ago. The corporate’s gross margins for the period fell to 60.3%, down from 66.6% in the primary quarter of 2022.
Illumina didn’t immediately reply to a request for comment on Icahn’s letter.
Criticism of Grail transactions
Elsewhere in his letter, Icahn criticized deSouza’s positive remarks this week about Illumina’s $7.1 billion acquisition of Grail.
DeSouza told CNBC that the deal “is sensible” because Illumina could significantly expand the marketplace for Grail’s early screening tests for various sorts of cancer.
The CEO also touted a 100% increase in Grail’s revenue through the quarter in comparison with the identical period a 12 months ago.
But Icahn said deSouza had not informed the general public of an opinion issued earlier this month by the Federal Trade Commission that said the deal would stifle competition and innovation.
The FTC also ordered Illumina to withdraw from the acquisition over these concerns.
The European Commission, the European Union’s executive arm, also blocked the deal last 12 months over similar concerns.
Illumina is appealing each orders and expects final decisions in late 2023 or early 2024.
Last week, the U.S. Federal Court of Appeals he said it will quickly follow an outline of Illumina’s FTC order challenge.
Icahn’s resistance to the acquisition stems from Illumina’s decision to shut the deal without obtaining approval from these antitrust authorities.
Earlier this month, he heavily criticized Illumina and its management for finalizing a “reckless deal”, calling it “a latest bottom of corporate governance.”
Illumina urged shareholders to reject Icahn’s three board appointments through the term annual shareholders’ meeting scheduled for May 25.