Slide 1: Schedule 14A Proxy Statement Cover
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 14A Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant x Filed by a Party other than the Registrant ¨ Check the appropriate box: ¨ Preliminary Proxy Statement ¨ Conf
Slide 2: Illumina, Inc. Investor Presentation Spring 2012
Illumina, Inc. Investor Presentation Spring 2012 © 2011 Illumina, Inc. All rights reserved. Illumina, illuminaDx, BaseSpace, BeadArray, BeadXpress, cBot, CSPro, DASL, DesignStudio, Eco, GAIIx, Genetic Energy, Genome Analyzer, GenomeStudio, GoldenGate, HiScan, HiSeq, Infinium, iSelect, MiSeq, Nextera
Slide 3: Safe Harbor Statement
Safe Harbor Statement This communication may contain statements that are forward-looking. Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected o
Slide 4: Executive Summary
Illumina Inc. Investor Presentation Executive Summary Roche is attempting a hostile take-over of Illumina: The offer price of $51.00 grossly undervalues the company and does not represent a reasonable basis from which to enter into a meaningful negotiation regarding a potential transaction The tende
Slide 5: Introduction to Illumina
1. Introduction to Illumina 2. Illumina’s Independent Board 3. Response to Roche’s Offer 4. Illumina’s Growth Opportunities 5. Financial Performance and Outlook 6. Summary and Conclusion 4
Slide 6: Illumina's Mission
Illumina’s Mission Innovating for the Future of Genetic Analysis From Genome Wide Discovery… To Targeted Validation and Beyond… To be the leading provider of integrated solutions that advance the understanding of genetics and health 5
Slide 7: Illumina's Matrixed Organization
Illumina’s Matrixed Organization Optimized to Tap Into New Markets Jay Flatley CEO & President Business Units PCR & Translational Functions Genomic Diagnostics Molecular & Consumer Solutions Biology Genomics Tristan Orpin Commercial SVP, Commercial Operations Operations Mostafa Ronaghi Research/Serv
Slide 8: Illumina is a Global Organization
Illumina is a Global Organization Multi-Site Manufacturing, R&D, Sales, Service & Support Illumina BV Illumina China (The Netherlands) (Beijing) Illumina Russia Epicentre Cambridge Illumina Hayward (Madison, WI) (Hayward, CA) Korea Greece Turkey Jinan, China Illumina KK (Tokyo) Israel Chengdu, China
Slide 9: Large and Growing Addressable Markets
Large and Growing Addressable Markets Next-Gen Sequencing Creates New Markets Molecular Dx ~$3B Applied Markets ~$1B Life Sciences ~$4B Consumer 8
Slide 10: Key Technologies Driving the Genomic Revolution
Key Technologies Driving the Genomic Revolution Sequencing vs. Genotyping Genotyping: DNA Sequencing: Reading known Reading the Letters “sign posts” 9
Slide 11: Who is Illumina?
Who is Illumina? Worldwide Leader in Genomic Analysis Recognized leader in next-generation sequencing with >90% of the world’s sequencing data generated using Illumina platforms Recognized leader in microarrays with ~80% market share in DNA genotyping Unmatched history of innovation and strong R&D p
Slide 12: Recognized leader in Genetic Analysis
Recognized leader in Genetic Analysis Illumina Has Earned and Maintained a Leadership Position Year-End Next Gen Sequencing Market 2011 DNA Genotyping Microarray Market Share by Revenue¹ Share by Revenue² 7% 1% 100% 3% 80% 11% Complete Genomics Illumina Pacific Biosciences 60% Affymetrix Roche Fluid
Slide 13: Illumina Portfolio Overview
Illumina Portfolio Overview Addressing the Breadth of Complexity Across Genetic Analysis From Genome-Wide Discovery to Targeted Validation and Screening Sequencing Arrays qPCR HiSeq MiSeq Genome HiScanSQ HiScan BeadXpress Eco Family High Analyzer IIx Unique Speed, quality Accuracy, Gold-standard Red
Slide 14: Innovation is in Our DNA
Innovation is in Our DNA Lower Array and Sequencing Costs Drive New, Large Market Opportunities Array Cost Per Data Point¹ Cost Per Whole Human Genome¹ $10,000,000 Cost per Whole $1.0000 Cost per Datapoint Human Genome Moore's Law (30x) Moore's Law $0.1000 $1,000,000 $0.0100 $100,000 $0.0010 $10,000
Slide 15: Illumina's Microarray Portfolio
Illumina’s Microarray Portfolio Broadest and Most Integrated Portfolio of Common, Rare & Custom Content AG Focused Whole-Genome BovineLD Human Exome Omni5 Developed with bovine Over 250k markers based The highest value thought leaders on exome sequencing content to power Screening for milk Over 1m s
Slide 16: An Example of Scale: the Human Genome Project
An Example of Scale: the Human Genome Project (HGP) 1990-2003 – 13 years – ~40 Institutions – 8-9X Coverage – $3.8 Billion 2012 – 1 instrument – ~1week – <1 FTE (Full-Time Equivalent) – 5 Genomes at 30X coverage – Or approximately the output of the entire, 13-year HGP in one 8 hour shift – >2,000,00
Slide 17: The Missing Heritability
The Missing Heritability “Genetics Loads the Gun, Environment Pulls the Trigger” Most diseases have familial risk, or heritability The sum of individual effects found so far is much less than the total measured heritability Rare Common Disease 100% 80% Explained Heritability 60% Missing Heritability
Slide 18: Genomics Technology Moves To the Clinic
Genomics Technology Moves To the Clinic Profound Impact of Whole Human Genome Sequencing Variants, disease mechanisms, diagnosis, treatment, prevention Illumina sequencing customers – Trisomy 21 – Down’s Syndrome (Potential for T18, T13) – Immune system – Targeted gene tests Research hospitals plann
Slide 19: Superior Revenue and EPS Growth
Superior Revenue and EPS Growth Continually Innovating and Redefining the Genetic Analysis Market 10 Year Revenue CAGR: 83% 5 Year EPS CAGR¹: 26% $1,200 $1.40 $1.20 $1,000 $1.00 $800 $0.80 $600 $0.60 $400 $0.40 $200 $0.20 $0 $0.00 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1 Revenue Non-
Slide 20: 10 Year Stock Performance
10 Year Stock Performance Execution Delivers Superior Shareholder Value Epicentre Acquisition HiSeq 2500 Announced ILMN: 1,129% MiSeq & BaseSpace Launched $1,800 S&P 500: 16% Eco Real-Time PCR $1,600 System Launched HiScanSQ Begins Shipping $1,400 HiSeq 2000 and Genome Analyzer IIe Launched $1,200 i
Slide 21: The Future of Genomic Analysis
The Future of Genomic Analysis Emerging and Very Large Markets Cancer Agrigenomics Cancer is a disease of the Helping to feed the world genome, resulting from a The world must increase food modified genome output by 70-100% by 2050 Saving lives, improving diagnosis, and tailoring personalized treatm
Slide 22: Illumina's Independent Board
1. Introduction to Illumina 2. Illumina’s Independent Board 3. Response to Roche’s Offer 4. Illumina’s Growth Opportunities 5. Financial Performance and Outlook 6. Summary and Conclusion 21
Slide 23: Independent Board of Directors
Independent Board of Directors Possesses Critical Industry and Business Experience William H. Rastetter, Ph.D. (Chairman): Director since 1998 – Partner of Venrock Associates (venture capital firm); Former Exec. Chairman of Biogen Idec Inc.; Former CEO, Chairman, President, and CFO of IDEC Pharmaceu
Slide 24: Strong Committee Structure
Strong Committee Structure Ensuring Effective Corporate Governance Below is a summary of our committee structure and membership information: 23
Slide 25: Directors Up For Re-election
Directors Up For Re-election Tremendous Experience and Leadership is at Stake William H. Rastetter, Ph.D. (Chairman since 2005; Director since 1998) – Bill has tremendous scientific and technical expertise combined with the highest level executive business experience leading rapidly growing companie
Slide 26: Active and Engaged Board of Directors
Active and Engaged Board of Directors Committed to Acting in the Best Interests of Our Stockholders Active and responsive Board – 40 Board and Board Committee meetings in the last 12 months All directors except CEO (Jay Flatley) are independent under NASDAQ rules and are committed to maximizing shar
Slide 27: Response to Roche's Offer
1. Introduction to Illumina 2. Illumina’s Independent Board 3. Response to Roche’s Offer 4. Illumina’s Growth Opportunities 5. Financial Performance and Outlook 6. Summary and Conclusion 26
Slide 28: Chronology of Roche's Unsolicited Offer
Chronology of Roche’s Unsolicited Offer Illumina’s Board Acted Proactively and Managed Review From the Start December 13, 2011 – Roche’s chairman made an unsolicited oral proposal to acquire Illumina (no price specified) December 14, 2011 – Illumina’s Board met to discuss and establish a process to
Slide 29: Chronology of Roche's Unsolicited Offer
Chronology of Roche’s Unsolicited Offer Illumina’s Board Acted Proactively and Managed Review From the Start January 24, 2012 – Roche’s chairman sent a letter, which Roche simultaneously publicly disclosed, making an unsolicited proposal to acquire Illumina for $44.50 per share in cash February 7, 2
Slide 30: Evaluating Roche's Unsolicited Offer
Evaluating Roche’s Unsolicited Offer The Board’s Process Was Thorough and Comprehensive The Board was fully engaged in managing this process Met thirteen times between December 14, 2011 and April 2, 2012 to review and consider matters relating to Roche’s unsolicited proposals and Illumina’s long-ter
Slide 31: Roche's Offer is Grossly Inadequate
Roche’s Offer is Grossly Inadequate Far From a Reasonable Starting Point For Negotiations The offer is grossly inadequate, does not reflect the intrinsic or scarcity value of Illumina, and is far from being a reasonable starting point for negotiations Dramatically undervalues Illumina’s unmatched le
Slide 32: Illumina's Growth Opportunities
1. Introduction to Illumina 2. Illumina’s Independent Board 3. Response to Roche’s Offer 4. Illumina’s Growth Opportunities 5. Financial Performance and Outlook 6. Summary and Conclusion 31
Slide 33: Next Gen Sequencing Will Become Ubiquitous
Next Gen Sequencing Will Become Ubiquitous Cost Reduction & Ease of Use Will Broaden Adoption >50,000 Molecular Biology Labs Globally Potential for Total Next-Gen Sequencing Installations 32
Slide 34: Segmenting the Sequencing Market
Segmenting the Sequencing Market Markets and Key Characteristics Low – Mid Throughput High Throughput Low capital cost, ease of use, rapid turnaround Low cost per base and high data quality time, sample prep, and high data quality Initial Markets Whole genome and exome – Existing HiSeq customers seq
Slide 35: Key Features of HiSeq 2500
Key Features of HiSeq 2500 Strong Customer Interest – Initial Orders Booked Special flow cell Quality equal to or better and reagents than standard 600 G/run On-board cluster Capable of 20 exomes a generation a la MiSeq day or up to 30 RNA-seq samples in 5 hours HiSeq 2500 – delivering “a genome in
Slide 36: Expanding the MiSeq Market
Expanding the MiSeq Market Near-Term Performance Improvements 4-7 Gb 4 Gb at 2 x 150 6 - 7 Gb at 2 x 250 Targeted cancer panels 1-1.5 Gb 100’s Mb Low run cost Amplicon & small microbial sequencing Targeted resequencing 35
Slide 37: BaseSpace Creates a Connected Ecosystem
BaseSpace Creates a Connected Ecosystem Accelerates Analysis and Sharing of Genomic Data App Space Public Databases 36
Slide 38: NIH Spending Levels
NIH Spending Levels $40 NIH Budget *ARRA Stimulus $2.1 Billion remains EB) tobe spent $30 $25 $15 $10 $5 $o 2005 2006 2007 2008 2009 2010 Stee | Budget ($ bn) a“ 8
Slide 39: NCI Spend on Sequencing
NCI Spend on Sequencing Spend in Sequencing Small Portion of Total Budget $120 NCI Sequencing Spend NCI Hypothetical Sequencing Spend at 2% of Budget $100 $80 $60 $40 $20 $0 2009 2010 2011 2012 2013 2014 2015 38
Slide 40: Trend of NIH Spend in Sequencing
Trend of NIH Spend in Sequencing Utility of Sequencing Drives Double Digit Growth $700 NIH Sequencing Spend NIH Hypothetical Sequencing Spend at 12% CAGR $600 $500 $400 $300 $200 $100 $0 2009 2010 2011 2012 2013 2014 2015 39
Slide 41: Large Sequencing Opportunities
Large Sequencing Opportunities Sequencing Core Technology for Modern Life Science Research 40
Slide 42: European Funding Environment Improving
European Funding Environment Improving Genomics Expected to Grow Significantly $350 FP7 Outlays Horizon 2020 Estimated Outlays $300 $250 $200 $150 $100 $50 $- 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E 2017E 41
Slide 43: Industrial Markets Present Significant Opportunities
Industrial Markets Present Significant Opportunities Illumina Technologies Ready to Address Key Drivers for Broad Adoption Industrial Market Opportunity ($millions) Key Drivers for Adoption: – Low cost / sample – Decreased capital costs 300 – Simplified sample prep 500 Forensics with high levels of
Slide 44: Diagnostic Market Opportunities
Diagnostic Market Opportunities Cancer & Reproductive Genetics driven by sequencing $25 $23.1 $20 $15 $13.0 $10 $5.7 $5 $0 2012 2015 2020 Infectious Disease Cancer Reproductive Genetics CDx & PGx Other 43
Slide 45: HiSeq Creates High-Throughput Clinical Market
HiSeq Creates High-Throughput Clinical Market Doubled Placements into Translational Sites (YoY) Sequenom MaterniT21 for Down syndrome Foundation Medicine Cancer treatment Partners Healthcare 46-gene cardiomyopathy panel Wash U Med School 28-gene cancer diagnostic panel Mayo Clinic 18-gene colorectal
Slide 46: Future Market Opportunities
Future Market Opportunities Very Large Sequencing Markets Emerging ~$626 Million Total US annual newborns 4.4M5 ~$348 Million Ex-US Industrial countries’ annual (Newborns) newborns 30.4M5,6 Assuming $1,000 genome and 1% US annual cancer diagnoses ex- penetration non melanoma skin cancer 1.6M2,3 ~$25
Slide 47: Summary
Summary Rapid innovation is driving new market opportunities – Integrated systems will create competitive advantage Global funding environment expected to improve – Allocation to next generation sequencing increasing Diverse array of applications is driving industrial markets – Enabled by lower cost
Slide 48: Financial Performance and Outlook
1. Introduction to Illumina 2. Illumina’s Independent Board 3. Response to Roche’s Offer 4. Illumina’s Growth Opportunities 5. Financial Performance and Outlook 6. Summary and Conclusion 47
Slide 49: Revenue Growth
Revenue Growth Illumina Has Delivered Consistent and Superior Revenue Growth… Illumina Historical Revenue 5 Year Revenue CAGR vs. Peers $1,200.0 $1,055.5 Illumina 41.7% $1,000.0 $902.7 $800.0 $666.3 $600.0 $573.2 Life Sciences Median 10.2% $400.0 $366.8 $184.6 $200.0 Molecular Diagnostics 23.1% Medi
Slide 50: Gross Profit
Gross Profit …Supported by Solid Gross Margins… Illumina Historical Adjusted Gross Profit¹ Key Drivers $800.0 100% $728.8 Constant technology & chemistry $700.0 innovation has enabled us to lead the enormous reduction in the cost of $615.2 90% sequencing $600.0 Our advances in production methods $50
Slide 51: Operating Profit
Operating Profit …Coupled with Robust and Improving Operating Margins… Illumina Historical Non-GAAP Operating Profit¹ 2011 Operating Profit Margin vs. Peers¹ $300.0 50% $266.8 45% Illumina 25.3% $250.0 $214.6 40% $200.0 35% $149.3 $150.0 30% Life Sciences Median 15.7% $121.2 25% $100.0 25% 24% 22% 2
Slide 52: Earnings Per Share
Earnings Per Share …And Industry Leading EPS Growth… Illumina Historical Non-GAAP EPS¹ 5 Year Non-GAAP EPS CAGR vs. Peers¹ $1.40 $1.30 Illumina 26.0% $1.20 $1.06 $1.00 $0.80 $0.80 $0.68 Life Sciences Median 12.8% $0.60 $0.41 $0.42 $0.40 $0.20 Molecular Diagnostics 13.2% Median $0.00 2006 2007 2008 2
Slide 53: Return on Invested Capital
Return on Invested Capital …In Addition to Strong and Improving Return on Invested Capital… Illumina Historical ROIC¹ 2011 ROIC vs. Peers¹ 25.0% Illumina 20.5% 20.1% 20.5% 20.0% 17.3% 15.0% 14.1% Life Sciences Median 11.2% 10.6% 10.0% 5.0% Molecular Diagnostics 15.8% Median 0.0% 2007 2008 2009 2010
Slide 54: Analyst Estimates
Analyst Estimates Illumina Has Outperformed Analyst EPS Estimates for 16 of the Last 20 Quarters Revenue % vs. IBES 8.6% 9.1% 4.0% 6.9% 5.6% 7.8% 2.9% 4.1% 1.2% (0.4)% (5.4)% 7.6% 8.0% 9.3% 8.7% 4.7% 8.1% 2.1% (15.7)% 1.0% $350 $283 $287 $235 $300 $261 $250 $237 $250 $212 $279 $192 $282 $200 $166 $1
Slide 55: Share Price and Total Shareholder Return
Share Price and Total Shareholder Return …Leading to Superior Share Price Performance and Shareholder Return… 5 Year Stock Price Performance¹ 297.3 % 84.1 % 82.6 % 78.6 % 56.5 % 50.6 % 50.3 % 30.6 % 30.6 % 24.3 % 22.1 % 21.4 % 17.0 % 8.4 % 5.2 % 0.2 % (2.3)% 5 Year Total Shareholder Return¹ 297.3 %
Slide 56: EV / Sales Trading Multiples
EV / Sales Trading Multiples …And Premium Trading Multiples LTM EV/Sales 14x 1 Year 3 Year 5 Year Illumina Average 5.8 x 6.5 x 7.6 x % of Days Illumina Multiple Greater than Roche Offer 51% 77% 82% Life Sciences Average 2.8 x 2.7 x 2.9 x 12x Implied Premium for Illumina 106% 139% 163% Molecular Diag
Slide 57: Premium P/E Multiple
Premium P/E Multiple Most Analysts Use P/E as Their Primary Valuation Metric for Illumina NTM P/E 70x 1 Year 3 Year 5 Year Illumina Average 31.9 x 35.3 x 40.5 x % of Days Illumina Multiple Greater than Roche Offer 45% 70% 76% Life Sciences Average 15.7 x 16.7 x 17.4 x 60x Implied Premium for Illumin
Slide 58: Recent Performance
Recent Performance Third Quarter 2011 Challenges Market Dynamics “Perfect Storm” Significant Continued Multi-Year NIH in Q3 Progress in Q4 Recovery in Q1 Funding Uncertainty Corrective Actions Key Quarter-to-Date Taken: Accomplishments: Trends: Suspended MiSeq instruments MiSeq continuing European D
Slide 59: Revenue Expectations and Share Price Performance
Revenue Expectations and Share Price Performance Industry Headwinds Impacted the NextGen Sequencing Sector Sum of 2012-2014 Revenue Estimates Stock Price Illumina ($bn) Life Technologies ($bn) Pacific Biosciences ($mm) Complete Genomics ($mm) Source: Bloomberg and IBES. 58
Slide 60: Sources of Revenue
Sources of Revenue The Company has Significantly Diversified its Revenue Base Over the Last 5 Years Revenue by Product Mix Revenue by End Market Revenue by Geography 2006 2011 Source: Company filings, company estimates and Wall Street research. 59
Slide 61: Financial Outlook
Financial Outlook Illumina Will Continue to Deliver Growth for the Foreseeable Future 2012 2013 and Beyond Key Target Markets: Revenue: $1,100 - $1,175mm – Life sciences: $4bn (4% – 11% Y-o-Y growth) – Molecular Dx: $3bn Gross Margin: ~ 70% – Applied markets: $1bn – Consumer Non-GAAP EPS¹: $1.40 - $
Slide 62: Summary and Conclusion
1. Introduction to Illumina 2. Illumina’s Independent Board 3. Response to Roche’s Offer 4. Illumina’s Growth Opportunities 5. Financial Performance and Outlook 6. Summary and Conclusion 61
Slide 63: Summary and Conclusions
Summary and Conclusions Recommend a Vote AGAINST Roche’s Proposals and FOR Illumina’s Proposals Illumina is the clear innovation and market leader in tools for genetic analysis at a time when our industry as a whole – and Illumina in particular – has the potential to experience extraordinary growth
Slide 64: Renato Dulbecco quotation
“…the sequence of the human DNA is the reality of the species, and everything that happens in the world depends upon those sequences.” Renato Dulbecco, Nobel Laureate 63
Slide 65: Additional Information and Where to Find It
ADDITIONAL INFORMATION AND WHERE TO FIND IT This communication does not constitute an offer to buy or a solicitation of an offer to sell any securities. In response to the tender offer commenced by CKH Acquisition Corporation, a wholly owned subsidiary of Roche Holding Ltd, Illumina has filed a soli
Slide 66: Certain Information Regarding Participants in the Solicitation
CERTAIN INFORMATION REGARDING PARTICIPANTS IN THE SOLICITATION Illumina and certain of its directors and executive officers may be deemed to be participants in the solicitation of proxies in connection with Illumina’s 2012 Annual Meeting of Stockholders under the rules of the SEC. Security holders m
Slide 67: Itemized Reconciliations of GAAP to Non-GAAP Results
Annex ILLUMINA, INC. ITEMIZED RECONCILIATIONS OF GAAP TO NON-GAAP RESULTS Below is a reconciliation of Illumina’s diluted net income per share, gross profit, and operating profit calculated in accordance with accounting principles generally accepted in the United States (“GAAP”), to non-GAAP diluted
Slide 68: Results of Operations as a Percentage of Revenue
Annex Results of Operations as a Percentage of Revenue (Dollars in thousands) ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP GROSS PROFIT AS A PERCENTAGE OF REVENUE: Fiscal Year 2011 2010 2009 2008 2007 2006 GAAP gross profit $709.1 67% 601.5 67% $453.9 68% $353.1 62% 231.9 63% $125.2 68% Stock-b
Slide 69: Results of Operations - Non-GAAP
Annex Results of Operations - Non-GAAP (In thousands, except per share amounts) ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME PER SHARE BY QUARTER: Fiscal Year 2011 (a) Fiscal Year 2010 (a) Fiscal Year 2009 (a) Fiscal Year 2008 (a) Fiscal Year 2007 (a) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2
Slide 70: Reconciliation of Non-GAAP Financial Guidance
Annex Illumina, Inc. Reconciliation of Non-GAAP Financial Guidance The company’s future performance and financial results are subject to risks and uncertainties, and actual results could differ materially from the guidance set forth below. Information on potential factors that could affect the compa