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At Goldman Sachs Confab, Illumina Predicts Future Growth in AgBio, Diagnostic Sectors

Illumina CEO Jay Flatley last week said that sales to commercial customers, which currently make up around 30 percent of the company's revenues, could comprise up to 40 percent of its revenues within five years, due in part to growth in the agricultural biotechnology and molecular diagnostics segments of the commercial market.
Sales to industrial and agriculture customers today contribute 30 percent of Illumina’s business, but “in five years it could be 40 percent of our business,” Flatley told investors at Goldman Sachs’ Annual Healthcare Conference, held in Dana Point, Calif., last week.
Molecular diagnostics could comprise up to half of that revenue, he said. “Five years from now I think you could see us having 20 percent of our revenue from diagnostics, or maybe 10 to 20 percent.”
During the presentation, Flatley shed additional light on Illumina’s growing interest in the agbio arena and provided a sketch of where the firm’s nascent diagnostics business is at the moment.
According to Flatley, roughly 70 percent of Illumina’s revenues come from sales to academic or government researchers, including university, genome center, core laboratory, and National Institutes of Health accounts. By comparison, sales to “commercial” customers, including large pharmaceutical companies, biotechs, reference and service labs, and commercial agriculture, account for the remaining 30 percent.
One area that Illumina specifically sees as a growth driver is the agbio sector, an area in which the company has been active in recent years through a partnership with research consortia developing SNP-genotyping arrays for the bovine, canine, and equine research communities.
“We think there is a potential emerging crisis in the food supply,” Flatley explained. “If you look at what is happening or is forecast to happen in terms of the population growth, the production problems that are happening within food, the increasing prices connected with food supply, there is a very clear need to improve [the] food supply and to work with the market in improving crops and breeding animals.”
He showed figures that predicted that global food prices are likely to grow by 40 percent over the rest of the year, and that 40 percent of the world’s harvest is lost to pests, weeds, and disease.
Flatley added that there is “also a push for increasing safety in food and we think genetics can play a key role in this, and we are starting to see increasing demand from the customer base to use genetics to help improve the food supply.”
According to Illumina, the agbio market is currently valued at about $300 million, and 5 percent of the company’s 2008 revenues so far have come from this market. Illumina said that demand exists for all of its three platforms: the Genome Analyzer second-generation sequencer, the array-based iScan system, and the digital microbead-based BeadXpress system.

“We are starting to see increasing demand from the customer base to use genetics to help improve the food supply.”

Customers can hypothetically use the Analyzer to discover SNPs; the iScan to interrogate them; and the BeadXpress to validate and screen the SNPs. The firm’s iSelect custom genotyping offering is of special interest to agbio researchers because of its flexible format and price, Flatley claimed.
He said that the demand has picked up in recent quarters in particular. “About 5 percent of our business in 2007 came from this agricultural market using our iSelect technology as well as our BeadXpress technology,” said Flatley.
“We have also done close to 50 [sequencing] projects already in the agricultural market; we have dealt with about 70,000 plant and animal samples; and we have discovered using sequencing roughly 200,000 plant and animal SNPs; and this is really only in the last couple quarters,” said Flatley. “We have worked on quite a number species. This list is actually quite long and includes some species that I have never even heard of.”
Illumina’s interest in the agbio market is part of a broader market phenomenon. Last month, Agilent Technologies said that it plans to release up to 30 new organism-specific gene-expression arrays by the end of the year in order to tap growing demand from the agbio sector (see BAN 5/6/2008).
Irina Sini, Agilent’s genomics model organism product manager, told BioArray News at the time that demand for the chips is likely being driven by an increase in available sequence information for a variety of organisms, such as rabbit and cotton.
Sini said this new ability has, in turn, caused a jump in interest for microarray organism products, leading customers to use its gene-expression array products and to some extent its comparative genomic hybridization chips for these applications.
Mark McCormick, senior manager of global e-marketing at Roche NimbleGen, also told BioArray News at the time that the firm has experienced increasing demand from the agbio sector across all application areas. For example, he said, the firm’s 2.1-million feature high-density arrays are attractive to customers studying large plant genomes.
“The increase in agbio research activity is evidenced by the growing number of scientific publications as well as rising attendance at key conferences,” McCormick said. “We are also receiving increasing requests for microarray analysis of undisclosed newly and partially sequenced plant and animal genomes” (see BAN 5/6/2008).
During his Goldman Sachs presentation, Flatley also addressed the firm’s ongoing plan for the molecular diagnostics market. He said that Illumina already has several diagnostic partnerships underway to develop content for potential tests. Such collaborations include work with Iceland’s DeCode Genetics, India’s ReaMetrix, and others. 
“We are already working to some extent in the diagnostic business through partnerships that we have and our existing customer base,” Flatley said. “We have four or five partnerships where we get back various IP, but that is more of an opportunistic strategy, [to] sell more BeadXpress platforms.”
Flatley said that Illumina is currently engaged in a “significant internal effort to define what we think is a larger, more scalable, winning diagnostics strategy for Illumina.” He noted that the company has made several key hires, including Greg Health, formerly of Roche Molecular Systems, who has become general manager of Illumina’s Diagnostics Business Unit.
“We are working very hard to try and understand what part of the diagnostics market Illumina can go into to become a significant player and contribute in a significant way to our revenue,” Flatley said. “There’s an array of about 15 different descriptions of diagnostic strategies that we are evaluating and that covers quite a range.”
Last month, Flatley said that acquisitions of molecular diagnostics firms or content are also on the table as the company fleshes out its diagnostics strategy. He added that Illumina could begin commercializing its first tests by 2010, and that by 2013 revenues from molecular diagnostics could account for up to a quarter of Illumina’s sales (see BAN 5/20/2008).

In the past, Illumina has largely positioned its lower-throughput BeadXpress reader as the ideal platform for molecular diagnostics. However, last month, Flatley told BioArray News that its second-gen sequencer could hypothetically also be used as a platform for tests.

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