Activist investor Carl C. Icahn stating his case for change at Illumina on GEN’s “Close to the Edge” video series in April. [GEN]

Illumina CEO Francis deSouza has resigned from both his position and his seat on the board, the company said today—just over two weeks after he survived a proxy campaign to oust him that was led by activist investor Carl C. Icahn.

deSouza’s resignation, which took effect immediately, marks the second victory for Icahn in his effort to change the direction of Illumina’s management by reshaping its board. Late last month, Illumina shareholders ousted chairman John W. Thompson, who has ties to deSouza, and instead elected to Illumina’s board Andrew J. Teno, a portfolio manager at Icahn’s investment management firm Icahn Capital since October 2020.

In a statement unusual for its release Sunday morning after the news was first reported by Endpoints, Illumina named Charles Dadswell, senior vice president and general counsel, as its interim CEO pending a search for a new CEO to be conducted by the board.

Illumina said it will consider internal and external candidates: “The Board is focused on finding a world-class business leader who can drive advancements in healthcare, growth, and shareholder value.”

In the statement, neither deSouza nor Illumina offered any reason for his resignation.

“It has been the privilege of a lifetime to serve Illumina,” deSouza stated. “We have made great progress together, but I believe we are still at the very beginning of the impact Illumina will have on human health by unlocking the power of the genome,” deSouza added.

deSouza later posted a letter to employees on LinkedIn saying his decision to exit Illumina “was an extremely difficult one since the people and mission at Illumina inspire me every day and my friendships here are dear to me.”

“Leaving you will be a loss, deeply felt. That said, I leave with a sense of fulfillment and pride at where, together, we have taken the company over that ten-year course,” deSouza added.

deSouza will remain with Illumina in an advisory capacity until July 31.

“We thank Francis for his contributions and leadership, and are very excited about embarking on the next chapter of Illumina’s great journey,” said Illumina’s board chair Stephen P. MacMillan, who is also the CEO of Hologic. “Illumina’s technology remains at the forefront of DNA sequencing and has continued to set the pace for the industry. We are confident Illumina can continue to execute on its goals while we conduct and complete a CEO search process.”

Icahn sees “significant positives”

Icahn responded to deSouza’s resignation Sunday on Twitter with a tweet stating that he was “happy to see all of the recent events occurring at Illumina.”

“While obviously I believe the change of CEO should have come meaningfully sooner, it is still a very positive occurrence. The new additions to the board, the CEO transition, as well as the change of the chairman, are significant positives that should drive value for all stakeholders and human health,” Icahn predicted.

Icahn added that he was “instrumental as an activist in bringing Steve MacMillan to Hologic, where, as history shows, he greatly enhanced value for all stakeholders.”

“I am happy to see him as chairman at Illumina and am also quite pleased with the addition of Scott Ullem to the board,” Icahn continued. “To sum up, all these changes are important steps for Illumina in particular and activism in general.”

Andrew J. Teno, a portfolio manager at activist investor Carl C. Icahn’s investment management firm Icahn Capital since October 2020, was elected last month to Illumina’s board. Teno joined Icahn on GEN’s “Close to the Edge.”[GEN]

Illumina’s progress—and its disappointing results of recent years—were among key issues raised by Icahn, Teno, and two other Icahn allies nominated by Icahn. Those other two allies were Vincent J. Intrieri, founder and CEO of VDA Capital Management, a private investment firm, and a former Icahn employee from 1998–2016; and Jesse A. Lynn, general counsel of Icahn Enterprises (IEP).

Icahn Enterprises is Icahn’s publicly-traded diversified holding company based in Sunny Isles Beach, FL, 20 miles northeast of Miami. Pharma is one of the seven primary business segments of Icahn Enterprises; the other six are investment, energy, automotive, food packaging, real estate, and home fashion.

During more than two months of open letters to Illumina shareholders—and in an exclusive interview on GEN’s “Close to the Edge” video series, Icahn and Teno stated their case for change at Illumina. That case has rested on three key arguments:

  • Illumina has drained itself of resources through its nearly three-year effort to acquire cancer blood test developer Grail in the face of opposition from U.S. and European regulators.
  • Illumina’s stock price has shrunk to the point where the company has lost some $50 billion in market capitalization—the share price times the number of outstanding shares of a public company.
  • Illumina’s board nearly doubled CEO Francis deSouza’s total compensation last year, to almost $27 million, with much of that increase based on stock options.

Yo-yo share prices

The price of Illumina shares has yo-yoed since Teno’s election to the board. Shares had risen 9% from $193.53 on May 25—the day his election was announced—to $210.56 on June 5, the day Illumina filed an appeal of the FTC’s order that it divest itself of Grail.

Illumina argued in a filing to the U.S. Fifth Circuit Court of Appeals that the FTC “violated due process by depriving Illumina and Grail of a fair proceeding before an impartial tribunal.”

Since June 5, however, Illumina shares have declined nearly 5%, closing Friday at $200.53.

Shares of Icahn Enterprises have somewhat rebounded since May 25, from $20.63 to $27.99. But the stock is still trading at about half of its price of $50.42 on May 1, the day before short-seller Hindenburg Research took a short position in Icahn’s investment firm—and issued a scathing report taking issue with many of its practices.

Icahn attacked what he called Hindenburg’s “self-serving” report, saying it was “intended solely to generate profits on Hindenburg’s short position at the expense of IEP’s [Icahn Enterprises’] long-term unitholders. We stand by our public disclosures and we believe that IEP’s performance will speak for itself over the long term as it always has.”

Illumina has declined comment on the Hindenburg report—but a week later pointedly publicized Icahn Enterprises’ disclosure that the U.S. Attorney’s office for the Southern District of New York had launched a federal investigation into the company’s practices.

Expanding the board

MacMillan was one of two independent board members whose election was announced on June 2, after the board decided to expand from nine to 11 members—an apparent effort to thwart future proxy campaigns by Icahn, who has said he will seek to nominate additional allies to Illumina board.

MacMillan succeeded Thompson, who had served on Illumina’s board since 2017, the last two years as chairman. The other independent board member elected was Scott B. Ullem, CFO of Edwards Lifesciences.

Despite ousting Thompson, shareholders largely upheld the status quo by voting to reelect eight directors endorsed by Illumina, including Frances Arnold, PhD; Caroline Dorsa; Robert Epstein, MD; Scott Gottlieb, MD; Gary Guthart, PhD; Philip Schiller; Sue Siegel—and deSouza.

deSouza, 52, joined Illumina in 2013 as president under CEO Jay Flatley—whom Icahn has sought to persuade to return to the company’s helm. Three years later, deSouza succeeded Flatley as CEO.

Before joining Illumina, deSouza served as president, products and services, of Symantec from 2011 to 2013, and was Symantec’s senior vice president, Enterprise Security Group, from 2009 to 2011. Earlier, he founded or worked in several other technology businesses.

He graduated Tau Beta Pi, Eta Kappa Nu, and Sigma Xi from MIT in 1992 with master of science and bachelor of science degrees in electrical engineering and computer science and a minor in economics.

“When I joined this company in 2013, we talked about making the company more clinical, more digital, and more global,” deSouza recalled. “On behalf of patients, clinicians, and physicians everywhere, I’d like to thank the thousands of Illumina employees who made it happen.”

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