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Illumina's Q3 Revenues Jump 50 Percent on Strength of HiSeq

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Illumina reported after the close of the market Tuesday that its third-quarter revenues jumped 50 percent, easily beating analysts' consensus estimate.

The San Diego-based sequencing and array technologies firm reported total revenues of $237.3 million for the three-month period ended Oct. 3, compared to $158.4 million for the third quarter of 2009. Analysts had expected the firm to post revenues of $218.2 million.

During a conference call following the release of the results, CFO Christian Henry said that the firm had product revenue of $225 million for the quarter, representing 49 percent growth year over year. He said the growth was due to both sequencing and microarray products.

The firm's consumables revenue was $133 million, up 53 percent from Q3 2009, and its service revenues for the quarter were up 63 percent to $13 million, which was the result of increased maintenance contracts for its sequencing machines.

Illumina's instrument revenues increased 45 percent to $88 million, due primarily to the HiSeq 2000, the sequencing platform launched by the firm early in 2010. "HiSeq continues to exceed our expectations," said Henry. "To meet demand we've significantly increased our production in the third quarter and expect to continue scaling our capacity into the fourth quarter, which will begin to decrease HiSeq lead times."

He added that he believes it will take several more quarters to reduce the HiSeq backlog to "ideal levels."

Illumina President and CEO Jay Flatley added during the call that the backlog for the HiSeq was due to the firm not ordering enough parts for the demand that exceeded expectations. "Now we're at the point where we're manufacturing enough units that we're going to begin to bring the backlog down," said Flatley. "It's going to take us a couple of quarters to do it."

Illumina posted net income of $35.4 million, or $.24 per share, compared to $17.1 million, or $.12 per share. The results include an $18M expense related to non-cash, stock-based compensation for Q3 2010. On a non-GAAP basis, its net income was $40.7 million, or $.30 per share, compared to analysts' expectations of $.24 per share.

The firm's R&D spending rose 30 percent to $44.8 million from $34.4 million, while its SG&A expenses were up 31 percent at $55 million, compared to $42.1 million for the third quarter of 2009.

Illumina also announced today the launch of its HiSeq 1000, a single flow cell version of the company's HiSeq 2000 sequencing system. Flatley said in a statement that the new system will "provide researchers who have lower throughput requirements an ideal platform to address their current research demands."

Illumina said that the HiSeq 1000 can "deliver greater than 750 million high-quality single reads per run in as few as two days, providing rapid and cost-effective transcriptional profiling, ChIP-SEQ, and methylation mapping."

The system also enables users to upgrade to the HiSeq 2000 as their research scales, the firm said.

Illumina finished the quarter with $210.8 million in cash and cash equivalents and $596 million in short-term investments.

The firm used around $31 million of its cash on hand during the quarter for "strategic investments," said Henry.

Company officials declined to provide details of any of those investments. However, Flatley said, "They're fundamentally technology pieces that could play broadly into our platforms," and could, like the firm's other existing technologies, eventually be applied to diagnostics.

Henry said that the firm believes it will exceed the annual revenue and earnings guidance it provided a few months ago — revenue growth of around 28 percent over its 2009 revenues of $666 million, and non-GAAP EPS of between $.93 and $1. However, he said that Illumina will not specifically update guidance right now.

In early Wednesday trade on the Nasdaq, shares of Illumina climbed 8 percent to $56.01.

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