March 29, 2023

Investor Carl Icahn is pushing to replace Francis deSouza as Chief Executive of Illumina, a bio-technology company based in San Diego, California.

Since August 2021, “$50 billion of value has been wiped from” Illumina’s market value, Icahn stated in an open letter to Illumina’s shareholders earlier this month. “This value destruction is a direct result of a series of ill-advised (and frankly inexplicable) actions taken by the board of directors” in connection with the acquisition of GRAIL.

Illumina sells machines and chemicals for DNA sequencing and array-based solutions used in the research and analysis of samples and data to identify human genetic variations. They are used in oncology, life sciences, reproductive health, genetic disease, agriculture, microbiology, and other areas by pharmaceutical, biotechnology, academic, government, and other institutions around the globe. They are also used in experiments and analysis for disease research and the development of drugs and molecular tests to detect diseases.

In fiscal year 2022, Illumina earned $338 million in net profits, before one-time legal and goodwill charges, on $4.7 billion in revenues.

In 2021, Illumina bought Grail for $8 billion in cash and stock. Grail, which is based in Menlo Park, California, was founded by Illumina in 2016. It was spun out as an independent company. Grail is using Illumina’s technology to develop a blood-based DNA genome test for detecting up to 50 types of cancer - 45 of which have no screening in the U.S. - at very early stages.

Grail’s test “is among the most promising new tools in the fight against cancer,” said Illumina’s deSouza in a statement announcing the purchase of Grail. The purchase will expand Illumina’s business to include proprietary cancer screening, diagnosis and cancer monitoring. The market for such cancer tests, Illumina estimates, will compound 27% annually, reaching $75 billion by 2035.

Cancer kills around 600,000 people annually in the U.S. and 10 million worldwide. Seventy-one percent of all deadly cancers do not currently have a screening test. Grail’s test correctly identified the tissue of a cancer’s origin in 93 % of the positive results, according to Illumina.

Icahn's letter does not recognize “the real value that GRAIL can provide to Illumina's shareholders,” the company’s board said in a statement.

Regulators in the European Union have opposed Illumina’s purchase of GRAIL. “Illumina is now forced to pay $800 million in (GRAIL’s) annual operating costs but has no control of GRAIL and can’t realize any synergies from the acquisition,” says Icahn’s letter.

He adds that Illumina may have to pay a $458 million potential fine; may have to pay up to $1.75 billion in taxes if the company is forced to sell GRAIL at the same price for which it was purchased; and that “Illumina would be a forced seller (of GRAIL) in a deteriorating market of an asset the company acquired at an exorbitant price.” He adds that if Illumina continues on its current path, “the cost of fighting powerful (EU) regulators, especially when they obviously believe strongly in their position, will become extremely expensive no matter what happens.” 

https://www.globalindiantimes.com/globalindiantimes/2021/4/6/illumina-cancer-detection-tests

Icahn, 87-years-old, owns stock worth around $500 million in Illumina, which has a market value of $37 billion. He and his affiliated companies own a range of businesses, including in real estate, telecommunications, transportation, industrial services, oil refining and manufacturing. 

Since 1978, he has taken substantial and sometimes controlling positions in companies including Texaco, Western Union, Samsonite, Yahoo!, Motorola, Apple, and eBay. At many companies, as with Illumina, he seeks changes in senior management and the board of directors, often through shareholder votes.  

Icahn, who grew up in Queens, New York, earned a degree in philosophy from Princeton University in 1957 and a medical degree from New York University. After serving in the Army, in 1961 he began his career on Wall Street. He has a net worth of $18 billion, according to Forbes.

In 2013, deSouza joined Illumina as President to lead its business units. Three years later he was appointed chief executive. He owns around $25 million of Illumina stock and reportedly sold $26 million of stock.

Earlier deSouza, 52-years-old, co-founded IMlogic and Flash Communications. He was CEO of IMlogic, a vendor of protection software. In 2006, it was bought by Symantec for a reported $91 million, with deSouza earning $10 million. He then served as President of Products and in other executive roles at Symantec, a provider of IT security software.

Prior to founding IMlogic, deSouza was a co-founder and CEO of Flash Communications, a provider of corporate instant messaging. It was acquired by Microsoft in 1998 for an undisclosed price. He stayed on at Microsoft, leading a team developing the company’s enterprise real-time collaboration offerings. He serves on the board of The Walt Disney Company.

In 1992, deSouza received a BS and MS in Electrical Engineering and Computer Science from the Massachusetts Institute of Technology. In 1987, at age 16, he graduated from St. Mary's Catholic High School in Dubai, United Arab Emirates.  

He was born in Addis Ababa, Ethiopia. His mother, a home maker, was Ethiopian Greek and his father was from India. His paternal grandparents were from Parra and Anjuna in Goa, according to the Goan Voice. His father was a commercial representative for a Japanese trading company. Before he was 5, deSouza’s family moved to Dubai.

Icahn has nominated three people for the elections to Illumina’s board of directors at the annual shareholders meeting. Illumina has yet to announce the date of the 2023 meeting. Last year, the meeting was held on May 26.  

Illumina should bring back its former CEO Jay Flatley, Icahn told The Wall Street Journal today. Flatley “obviously knows the company and did a good job with it,” said Icahn. In 1999, Jay Flatley joined Illumina as CEO. He grew the company from $500,000 in annual revenue to over $2.2 billion in 2015, both organically and through acquisitions.

In 2016, Illumina’s president Francis deSouza took over as the CEO. At that time Flatley said in a statement that “Francis is an exceptional leader, with a demonstrated track record of leading large organizations and implementing complex growth strategies. I look forward to partnering with him in his new role to continue the company’s strong legacy of innovation and execution.”  

In January this year, Flatley told the Financial Times that Illumina had overpaid for Grail, and that, “if nothing happens on this in the next year, I think the grumbling will probably get louder…Francis (deSouza CEO) is at the point of that spear.”

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