Slide 1: Roche's Offer to Acquire Illumina
[logo] Roche's Offer to Acquire Illumina February 2012
Slide 2: Forward-looking statements
This presentation contains certain forward-looking statements. These forward-looking statements may be identified by words such as 'believes', 'expects', 'anticipates', 'projects', 'intends', 'should', 'seeks', 'estimates', 'future' or similar expressions or by discussion of, among other things, str
Slide 3: Offer Summary
[logo] ----------------------------------------------------------- Offer Summary ----------------------------------------------------------- Illumina Growth Perspectives Illumina Share Price Perspectives Offer Price Rationale Conclusion 3
Slide 4: Acquisition Rationale
Acquisition Rationale [o] Strengthen Roche's participation in increasingly important sequencing market [o] Complementary technologies in Genetics/Genomics research and routine diagnostics [o] Leverage Roche's diagnostics expertise to drive biomarker discovery [o] Combined capabilities and global rea
Slide 5: Offer Summary
Offer Summary Roche's all-cash offer of $44.50 per share is highly attractive, providing full and certain value to Illumina's shareholders. Consideration [o] $44.50 per share, all-cash Unaffected Price [o] $27.17 on 12/21/2011 Premium [o] 64% to unaffected 1-day (1) [o] 61% to unaffected 1-month ave
Slide 6: Situation Overview
Situation Overview After multiple attempts to engage with Illumina were rebuffed, Roche has taken its offer directly to Illumina's shareholders. [o] On November 1, 2011, a member of Roche's Board spoke with Illumina's Chairman and expressed Roche's interest in Illumina and requested a meeting. Illum
Slide 7: Key Claims
Key Claims Key Claims Made by Illumina to its Shareholders Roche's Rationale for Illumina Shareholders [o] Roche's offer conditions create uncertainty [o] Illumina management has a proven track record [o] Roche is attempting to take advantage of depressed stock levels [o] Illumina and its industry a
Slide 8: Illumina Growth Perspectives
[logo] Offer Summary ------------------------------------------------------------- Illumina Growth Perspectives ------------------------------------------------------------- Illumina Share Price Perspectives Offer Price Rationale Conclusion 8
Slide 9: Heightened Competition Increases Uncertainty of Illumina's Growth Prospects
Heightened Competition Increases Uncertainty of Illumina's Growth Prospects Oxford Nanopore Life Technologies [o] On February 17, 2012, Oxford Nanopore unveiled high performance electronic sequencing devices GridION and MinION [o] MinION System, a disposable DNA sequencing device the size of a USB m
Slide 10: Gene Sequencing Market Continues to Mature
Gene Sequencing Market Continues to Mature Illumina's statements around its substantial near term growth opportunities are not consistent with the views of the broader equity research community. [o] Technological innovation continues to put pressure on pricing [o] Growth prospects have weakened, as
Slide 11: Diminishing Illumina Growth Prospects
Diminishing Illumina Growth Prospects Lowest growth guidance ever provided by Illumina management despite the disappointing 2011 results, which provided a lower base for year-over-year comparison in 2012. Illumina Management Guidance Revenue [graphic omitted] Adjusted EPS (2) [graphic omitted] Sourc
Slide 12: Illumina Share Price Perspectives
Offer Summary Illumina Growth Perspectives ------------------------------------------------------ Illumina Share Price Perspectives ------------------------------------------------------ Offer Price Rationale Conclusion 12
Slide 13: Illumina's Share Price Has Underperformed Peers
Illumina's Share Price Has Underperformed Peers Over the past year, Illumina has underperformed its peers and the broader market. [graphic omitted] Recent Management Performance [o] Missed quarterly earnings twice in 2011 [o] Suspended forward guidance in October 2011 [o] Refused to engage in dialog
Slide 14: Illumina Share Price Decline Driven by Diminishing Growth Prospects
Illumina Share Price Decline Driven by Diminishing Growth Prospects Illumina Share Price Post Earnings Illumina 2-Year Forward Growth Estimates Release(1) (Adjusted EPS) [graphic omitted] [graphic omitted] Source: FactSet, Capital IQ, I/B/E/S consensus. Note: 2-Year forward growth estimates based on
Slide 15: Illumina Valuation Over Time
Illumina Valuation Over Time Until recently, Illumina's projected revenue and net income growth were well above its peer average. As this gap in growth between Illumina and its peers has closed, the gap in valuation between them has narrowed. Share Price Performance Since January 2009 [o] Prior to t
Slide 16: Illumina Rolling NTM P/E/G Analysis
Illumina Rolling NTM P/E/G Analysis Roche's offer implies a price-to-earnings-growth ratio that is approximately equal to Illumina's three-year high and above its three-year average. [o] Based on Illumina's current price, management's 2012 EPS guidance of $1.45 and its long-term EPS growth of 16.6%,
Slide 17: Absent Roche's Offer, Illumina Would Likely be Trading at Much Lower Levels
Absent Roche's Offer, Illumina Would Likely be Trading at Much Lower Levels P/E/G Adj. Price [graphic omitted] Source: Company filings, Bloomberg, Capital IQ, I/B/E/S consensus, and FactSet. (1) Reflects midpoint of Illumina 2012E EPS management guidance of $1.40 - $1.50. 17
Slide 18: Absent Roche's Offer, Illumina Would Likely be Trading at Much Lower Levels (Cont'd)
Absent Roche's Offer, Illumina Would Likely be Trading at Much Lower Levels (Cont'd) Estimated Unaffected Price [graphic omitted] Source: FactSet as of 2/24/2012. Notes: Peer Index includes Thermo Fisher, Becton, Dickinson, Agilent, Life Technologies, Sigma-Aldrich, Waters, Mettler-Toledo, Qiagen, P
Slide 19: Absent Roche's Offer, Illumina Would Likely be Trading at Much Lower Levels (Cont'd)
Absent Roche's Offer, Illumina Would Likely be Trading at Much Lower Levels (Cont'd) P/E Adj. Price [o] Starting point is Illumina's P/E multiple as of 12/21 (17.8x), which represents a premium of 4.8x compared to the peer median of 13.0x (1) [o] From 12/22 to 1/9, Illumina's multiple is assumed to
Slide 20: Illumina's Business Faces Significant Challenges
Illumina's Business Faces Significant Challenges [o] All-cash offer transfers 100% of risk from Illumina's shareholders to Roche [o] Maturing market and unsettled global economic conditions imply reduced growth prospects [o] Uncertainty around longer-term outlook for genetic funding by NIH and other
Slide 21: Roche Has the Ability to Grow Illumina's Business Over Long Term
Roche Has the Ability to Grow Illumina's Business Over Long Term [o] Roche is better positioned to make the type of investments that are required for long term success - Roche is uniquely positioned to expand Illumina's end markets from both a geographic and customer mix perspective - Rapidly evolvi
Slide 22: Illumina 2012 Guidance in Line with Pre-JPM Consensus Estimates
Illumina 2012 Guidance in Line with Pre-JPM Healthcare Conference Consensus Estimates [o] Illumina's pre-announcement of earnings and signal on 2012 guidance had minimal impact on analysts' price targets [o] Pre-JPM Healthcare Conference, the median Illumina price target was $32 Pre-JPM Conference M
Slide 23: Illumina's Actions Suggest Bearish View of Stock Price
Illumina's Actions Suggest Bearish View of Stock Price [o] Throughout the first half of 2011, Illumina repurchased stock in the $60's and $70's [o] However, after suspending forward guidance and highlighting a pull-back in academic research spending, Illumina ceased its share repurchases [o] Most re
Slide 24: Illumina's Actions Suggest Bearish View of Stock Price (Cont'd)
Illumina's Actions Suggest Bearish View of Stock Price (Cont'd) [o] When Illumina repurchased its 2014 convertible debt and unwound the corresponding bond hedge (Illumina's right to purchase 18.3mm Illumina shares at $21.83), Illumina did not retire warrants related to the convertible bond call spre
Slide 25: Offer Price Rationale
[logo] Offer Summary Illumina Growth Perspectives Illumina Share Price Perspectives ------------------------------------------------------ Offer Price Rationale ------------------------------------------------------ Conclusion 25
Slide 26: Offer Multiples Above All Peers
Offer Multiples Above All Peers Roche's offer values Illumina well above any of its peers based upon a P/E multiple. Even after adjusting for growth, the P/E/G multiple is well above the peer median P/E/G. 2012E P/E [graphic omitted] 2012E P/E/G [graphic omitted] Source: Company filings, Bloomberg,
Slide 27: Offer Multiples Above Precedents
Offer Multiples Above Precedents Roche's offer is at the high end of valuation multiples paid in recent precedent life science tools transactions. Enterprise Value / LTM Revenue [graphic omitted] Enterprise Value / LTM EBITDA [graphic omitted] Source: Company filings, Bloomberg, Capital IQ, I/B/E/S
Slide 28: Offer Premiums Above Precedent Transactions
Offer Premiums Above Precedent Transactions Unaffected Premiums 1 Day Premiums 1 Month Average Premiums [graphic omitted] Source: Company filings, Bloomberg, FactSet. Note: Includes announced, closed and effective transactions since 2006 in the biotechnology research equipment manufacturing and biol
Slide 29: Conclusion
Offer Summary Illumina Growth Perspectives Illumina Share Price Perspectives Offer Price Rationale ------------------------------------------------------ Conclusion ------------------------------------------------------ 29
Slide 30: Roche's Offer Represents Value Certainty Amidst Significant Headwinds
Roche's Offer Represents Value Certainty Amidst Significant Headwinds [o] $44.50 all-cash offer provides attractive value today for Illumina shareholders - Roche to hold all risk related to increasing competitive pressures and tightening fiscal policy related to government funding - Removes executio
Slide 31: Appendix
Appendix 31
Slide 32: Illumina Stock Performance
Illumina Stock Performance Over the past year, Illumina has underperformed its peers and the broader market. [o] Illumina's stock dropped as much as 60% from its 52-week high because of several factors, including: - Twice-lowered revenue guidance after a drop in orders due to the constrained governm
Slide 33: Summary Evaluation of Offer Price
Summary Evaluation of Offer Price [o] Higher cash value relative to Illumina's unaffected share price, particularly in a period of market uncertainty - Implies 1-day, 1-week and 1-month average premiums of 64%, 66% and 61%, respectively (1) - Since 2006, similar life sciences tools industry transact
Slide 34: Analyst Observations
Analyst Observations "What is debatable is Illumina's growth potential over the next 2-3 years (investment time horizon for the majority of the shareholders, in our view), which we estimate is significantly below market projections when shares were trading at >$70/share, as well as Illumina's potent
Slide 35: We Innovate Healthcare
[Roche logo] We Innovate Healthcare 35 ADDITIONAL INFORMATION AND WHERE TO FIND IT THESE MATERIALS ARE FOR INFORMATIONAL PURPOSES ONLY AND DO NOT CONSTITUTE AN OFFER TO PURCHASE OR A SOLICITATION OF AN OFFER TO SELL ILLUMINA COMMON STOCK. THE TENDER OFFER IS BEING MADE PURSUANT TO A TENDER OFFER STA