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Illumina Upgraded to Overweight by Piper Sandler

NEW YORK – Piper Sandler on Tuesday upgraded its rating for Illumina to Overweight with a new price target of $415, following conversations with the management teams of Illumina and cancer diagnostics firm Grail, which Illumina is in the process of acquiring.

In a note to investors, Piper Sandler analysts Steven Mah and Rachel Vatnsdal wrote that the upgrade reflects "increased confidence in Grail and [Illumina's] core NGS business."

Specifically, they were encouraged by clinical trial data for Grail's early-detection Galleri test for various cancer types. The test, they wrote, "could result in many more cancer patients being identified" and could help identify a cancer's tissue or origin. Grail is expected to launch Galleri as a lab-developed test in 2021 at a price between $600 and $900. In addition, they pointed to Grail's other two tests in development, the DAC (Diagnostic Aid for Cancer) for patients with cancer-like symptoms, to be launched in the second half of 2021, and the MRD (Minimal Residual Disease) test.

Illumina, meanwhile, is poised to grow its leadership in the sequencing market. "We believe concerns that Illumina will compete with its customers in the oncology space are overblown," they wrote, and that the firm "can maintain and grow its position by continuing to lower sequencing costs and taking advantage of data science advances (AI/ML) to improve short-read performance."

Illumina said in September that it would acquire Grail for $8 billion in cash and stock, a deal expected to close in late 2021. Following that announcement, JP Morgan and UBS each downgraded Illumina to a Neutral rating.