Illumina, Inc. the US-based gene sequencing company yesterday rejected the $5.7-billion hostile takeover bid from Roche, saying that the Swiss drug maker's offer is ''inadequate and dramatically undervalues'' the company.

The San Diego, California-based company said that Roche's unsolicited hostile bid failed to properly value its existing and coming products, and recommended shareholders not to tender their shares to the offer.

"Your proposal fails to compensate our stockholders for the intrinsic and scarcity value associated with Illumina's unmatched leadership position," Illumina said in a statement.

''Illumina has established itself as the innovation and market leader in tools for genetic analysis, with a proven track record of profitability and outperformance, resulting in significant value creation,'' said Jay Flatley, president & CEO of Illumina.

''Our industry is nascent, with the promise and potential to experience extraordinary growth in the years ahead as genetic information becomes broadly applied beyond molecular biology research, and into medical diagnostics, reproductive health and cancer management. As the growth of this industry accelerates, Illumina is singularly positioned to expand its market leadership, and to deliver value to our stockholders that is far superior to Roche's offer,'' he added.

Last month, Basel, Switzerland-based Roche, the world's largest biotech company, launched a $5.7 billion, or $44.50 a share, hostile takeover bid for Illumina. Roche went directly to shareholders of Illumina after the company's board rebuffed its earlier informal approaches.

Illumina bolstered its takeover defences by adopting the so-called poison-pill, which gives investors the right to acquire shares and make the hostile takeover prohibitively expensive.

To make the takeover more unpalatable for Roche, Illumina also outlined a ''golden parachute'' compensation plan for its top executives in case they lost their jobs within two years of an acquisition. The plan includes paying double the annual salary, stock, bonus and other benefits.

Founded in 1998, Illumina began offering SNP genotyping services in 2001 and launched its first system, the Illumina BeadLab, in 2002, using GoldenGate Genotyping technology.

The company acquired Solexa in 2006 and soon after launched the Genome Analyzer, the first of many Illumina sequencing systems based on the sequencing by synthesis technology.

Illumina manufactures instruments and products that are used to study DNA, which allow researchers to study an individual's genetic makeup, sequence genomes, and determine the specific genetic causes of diseases.

Illumina's systems have three components, readers, reagents, and one-time-use arrays. The company generates revenue by selling the readers at low margins, while disposable arrays and reagents are replaced after each procedure.

Illumina holds a 60-per cent share in the next-generation sequencing market, a rapidly growing segment in the life science tools industry. The company believes that around 90 per cent of the world's sequencing output is produced on Illumina instruments.

Illumina has the widest commercial product portfolio in the life science tools industry, with over 2,300 peer-reviewed sequencing-related publications and more than 8,000 peer-reviewed publications using its technology.

Illumina has last month said that by the end of the year it would market a machine capable of scanning a person's complete DNA in a day.

The company, which generates about 65 per cent of its revenue from research institutes that are heavily dependent on government funding, expects 2012 revenues to be in around $1.175 billion by increasing its revenue from corporate customers.

Illumina also sells its products to pharmaceutical and biotechnology industries, a sector where consolidation is regular and the risk of losing large customers due to mergers and consolidation is also significant.

The potential acquisition would make Roche a market leader in gene sequencing, a procedure that helps identify which patients benefit from a given drug.

Roche, the world's biggest maker of cancer drugs, said it wants to shift Illumina's gene-sequencing technology from academic research labs into routine medical use. The acquisition would build its portfolio of health diagnostics products and most importantly, allow it to target its medicines toward individual patients.

Responding to the rejection, Roche said that it was disappointed that Illumina's board has recommended against our offer.

Severin Schwan, CEO of Roche said, ''We continue to believe that our offer is full and fair and provides a unique opportunity for Illumina's shareholders. As we have previously stated, it remains our preference to enter into a negotiated transaction with Illumina and we stand ready to commence discussions at any time.''