Activist investor Carl Icahn has published a deck explaining why he believes U.S. biotech Illumina needs a refreshed board to turn around its fortunes after the current team oversaw a $50-billion market value plunge in less than two years.
In a 37-slide presentation published on Tuesday, Icahn blamed Illumina CEO Francis deSouza and the board for closing the $7.1-billion acquisition of cancer detection test maker Grail in 2021 despite opposition from regulators. Grail, initially a part of Illumina, was spun-out in 2016 and raised capital from outside investors including billionaires Bill Gates and Jeff Bezos at a valuation of $1-2 billion.
Legal problems with Grail’s integration have led to hefty fines and impairment charges for Illumina, Icahn noted in his presentation. He added that under CEO deSouza’s leadership, Illumina’s core business has also deteriorated due to ‘‘a talent exodus, decrease in new product cycles, slowing revenue growth, and declining margins.’’
Despite these issues, which Icahn believes are at the root of a 62% share price plunge for Illumina since August 2021, the company’s board gave deSouza an 87% pay increase to $27 million in 2022, Icahn lamented.
Earlier in April, the U.S. Federal Trade Commission (FTC) ordered Illumina to unwind its purchase of Grail, in a new blow for the biotech after a similar decision by EU regulators in late 2022.
The activist said his three director nominees – Jesse Lynn, Andrew Teno, and Vincent Intrieri – ‘‘will bring financial and legal acumen, common sense, and a history of fixing companies in crisis.’’
The three would push Illumina’s board to drop the appeal process concerning Grail and focus on divesting the business, possibly via a spin-off and rights offering to shareholders, according to the presentation.
Icahn’s nominees would also ask Illumina former boss Jay Flatley to return either as CEO or chairman, work to refocus the company on the core business, repair relationships with customers and regulators, and improve investor disclosure, the deck reads.
However, Illumina says that Icahn’s candidates have no “relevant healthcare or genomics expertise on paper” and adding them to the board ‘‘risks jeopardizing the long-term success’’ of the company’s core franchise. About Grail, Illumina said last month that while it believes the company has ‘‘tremendous long-term value creation potential’’ and would like to be able to integrate it, it stands ready to sell the business if needed.