Illumina has disclosed it has begun eliminating an unspecified number of jobs and reducing its office and research space this year as part of a cost-cutting plan designed to reduce its annual expenses by $100 million—a plan launched by former CEO Francis deSouza, who resigned earlier this month after shareholders ousted his ally as board chairman.
The sequencing giant projected it will take charges against earnings of between $25 million and $35 million reflecting the job cuts, which it said began on June 21 and will continue into the third quarter. Most of the charges will be incurred during the second quarter.
“The company estimates that substantially all of these charges will result in cash expenditures relating to severance payments, employee benefits, and associated costs,” Illumina stated Monday in a regulatory filing, through which it made public its reduction in force.
Some of that job cutting included eliminating 10% of its internal R&D staff, STAT News reported, citing internal emails. The R&D staff operates from San Diego, where Illumina is headquartered, as well as Madison, WI, Singapore, the U.K., and the San Francisco suburb of Foster City, CA.
Investors reacted coolly to Illumina’s layoff news, sending the company’s shares down 4% as of 3:20 p.m., to $183.50 from Monday’s close of $191.88.
Real estate savings
In its regulatory filing, Illumina said it will also cut real estate costs by vacating its i3 campus in San Diego, which opened in 2017 at a time when the company anticipated it was a year away from outgrowing its headquarters within that city. Illumina also said it was “evaluating its options” about whether to stay in Foster City, a site the company opened in 2018 as its beachhead site for the Bay Area and northern California.
Illumina said it could not furnish a timeframe for exiting i3 or deciding on Foster City, and could not estimate how much in charges it would incur related to any changes in operations at those sites. Illumina’s balance sheet includes $60 million in assets related to i3, and $186 million related to Foster City.
Illumina employed approximately 10,200 full-time employees, 60 part-time employees, and 1,400 contingent workers as of January 1, according to its Form 10-K annual report for 2022, filed on February 17. That does not include the approximately 1,300 full-time employees and 400 contingent workers that work for cancer blood test developer Grail.
Grail’s $7.1 billion acquisition by Illumina and the resulting resistance from U.S. and European regulators sparked the stock decline that compelled activist investor Carl Icahn to demand that Illumina fire deSouza and sell off Grail. Icahn also nominated to Illumina’s board three allies—one of whom, Andrew J. Teno, was elected last month after Icahn stated his case for change in letters to shareholders and an exclusive GEN interview.
The election of Teno, a portfolio manager at Icahn’s investment management firm Icahn Capital since 2020, led to the ouster from the board of John W. Thompson, a deSouza ally who had served on Illumina’s board since 2017, the last two years as chairman. deSouza resigned some two weeks later.