By David Wainer

Trade war with China? Check. Cuts to scientific research? Check.

President Trump's early policy decisions -- spanning trade, taxes and regulation -- have injected uncertainty into businesses across various sectors. But for biotech firm Illumina, a leading maker of gene-sequencing equipment, it has been a barrage of bad news. The company was already grappling with fierce competition and slowing growth, making these new challenges all the more disruptive.

Earlier this month, China placed Illumina on its list of "unreliable entities" in retaliation for Trump's new tariffs. Days later, the company faced fresh pressure at home when the National Institutes of Health announced caps on certain research expenses, a move that for now has been temporarily blocked by a judge.

Adding to the challenges, Roche on Thursday unveiled its highly anticipated new sequencing machine, fueling fears that competition is closing in on Illumina's sequencing machines. While competition from startups such as Element Biosciences as well as Chinese companies like MGI Tech have been eating away at Illumina's dominance and pricing power, Roche's entry represents a new level of threat given the pharma company's deep pockets and experience.

Alex Dickinson, a former Illumina executive who now advises companies in the space, says Roche's new technology could greatly reduce sequencing costs.

With each new development, Illumina's stock has continued to slide, bringing its total decline this year to more than 25%. The stock is down nearly 70% over the past five years.

Illumina is by far the dominant supplier of sequencing machines to research labs, hospitals and pharmaceutical companies, with a market share of over 75% in the U.S. But in recent years, as the company got entangled in a protracted and costly battle with government regulators and activist Carl Icahn over the acquisition of cancer blood test maker Grail, growth has suffered and competition has intensified.

Illumina's mounting challenges have sparked Wall Street concerns over its ability to meet its 2025 revenue forecast of $4.28 billion to $4.4 billion -- which already reflects little to no growth from the previous year. For Chief Executive Jacob Thaysen, who took over in late 2023, this marks his first major test as he navigates the company's post- Grail recovery. "Once you buy the house, you own it, this is your company," Doug Schenkel, an analyst at Wolfe Research, told management during the earnings call. "It seems like every quarter, there's something new."

Ankur Dhingra, the company's chief financial officer, said in an interview that the company's "customers can do more with their Illumina platforms than ever before" and that the company will continue to "navigate the changes to our marketplace as we always have" by focusing on innovation. "We have very large markets in front of us across several diagnostic and therapeutic areas, where use of genomics is just getting started and we have attractive new technologies that open those markets, " he added.

About 7% of Illumina's revenue comes from China, though that number has been coming down in recent years. For now, the company says it is still selling there and hoping to resolve the situation. One key reason to be cautious: China might be retaliating against Illumina specifically in light of the company's role in lobbying Congress to restrict its Chinese competitor in the U.S., Bank of America analyst Michael Ryskin wrote.

The NIH impact is easier to estimate for now. In keeping with a Trump administration directive to cut research costs, earlier this month the NIH said it would be limiting funding for indirect research expenses, a move that could translate to a 1% to 2% hit to revenue for Illumina, Ryskin estimates.

Over the long term, Illumina could very well get back to strong growth. The company is still highly profitable and benefits from the stickiness of its installed base in research and clinical settings. Unlike competitors that focus on specific segments, Illumina offers end-to-end solutions in gene sequencing and has the financial strength to drive innovation. More broadly, the rise of precision medicine and artificial intelligence should fuel long-term growth for the entire space, TD Cowen analyst Dan Brennan notes.

At this stage, though, Illumina is no longer seen as the high-growth company it once was, and continuing political uncertainty continues to weigh on its outlook. Trading at roughly 20 times forward earnings, the stock is now a far cry from the lofty multiples of around 50 that it commanded over the past decade.

Investment in continued innovation could reignite growth down the road. But for now, abrupt policy shifts in the U.S. and China have simply added too much uncertainty to what was already a complicated story for investors.

Write to David Wainer at david.wainer@wsj.com

(END) Dow Jones Newswires

February 24, 2025 07:00 ET (12:00 GMT)

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