Illumina: Spinning Off Grail to Shareholders

Illumina announced that it plans to spin off shares directly to shareholders, with trading expected to begin on the Nasdaq as of June 25. When that spinoff is completed, we expect to reduce our fair value on Illumina to about $188 per share, which includes $180 of value on the firm's core sequencing business plus about $8 of value on Illumina’s remaining 14.5% stake in Grail, down from $228 currently. We also expect to maintain our narrow moat rating on Illumina, which relates primarily to the intangible assets and switching costs in sequencing.