Vendors wanting to grow their genotyping business will need to target pharmaceutical companies as well as less-traditional sectors, such as agricultural biotechs, according to a senior Illumina official.
The official, Illumina Chief Financial Officer Christian Henry, also said that the gene-expression market will grow by $200 million to $900 million over the next three years, and declared that the $3 billion molecular diagnostics market is a significant future opportunity for growth.
Henry told investors at Deutsche Bank’s Small and Mid-Cap Growth Conference in Naples, Fla., last week that the key to dominating the genotyping market is reducing cost and increasing throughput. “These are highly elastic markets,” he said. “The lower you can drive costs, the more samples that you can run, then the bigger these markets become.”
Henry, who reckoned the genotyping market was worth around $600 million last year and expects to reach “north of a billion dollars” in coming years, said that a new technology platform Illumina debuted last month will enable the company to grow in the broader genotyping space. The technology, called HD, currently enables Illumina to produce genotyping chips containing 2.1 million features.
The first two chips to be launched using the new format will be the Human 610-Quad BeadChip, a four-sample array containing the content from the firm’s HumanHap550 chip plus 60,000 copy number-variation; and the HD Human1M-Duo BeadChip, a two-sample chip containing 2.4 million variations (see BAN 1/8/2008
Henry said that “HD has allowed Illumina to reinvent the entire technology behind its array business to keep it moving ahead of the competition,” and said the technology gives it an advantage over rival Affymetrix, which does not manufacture its genotyping chips in multisample formats.
According to Henry, multisample chips “decrease the handling costs of the product.” He said that typical genome-association studies look at thousands of samples and that “the more chips you need to move around the lab, the more costs you have.”
Gene Expression and Molecular Dx
During his presentation, Henry also made projections for the gene-expression market and the molecular diagnostics market.
Henry said that the gene-expression market is currently worth around $700 million and that the company expects it to grow to $900 million over the next three years. At the moment, Illumina serves the expression markets through both its BeadArray platform and its next-generation sequencing platform, the Genome Analyzer.
“The lower you can drive costs, the more samples that you can run, then the bigger these markets become.”
Henry admitted that Illumina’s older array-based gene-expression products for human, rat, and mouse studies have not enabled the company to gain a large part of the market, but the firm has been touting digital gene-expression applications run on the Genome Analyzer as a possible future mechanism for displacing products sold by rivals like Affymetrix and Agilent.
In particular, the company is betting a new application, called whole-transcriptome digital gene expression, will foment such a displacement over the next 18 months. Illumina has not disclosed when that application will become commercially available (see BAN 2/12/2008
A market with even more potential, though, is molecular diagnostics, which Illumina expects to eventually be worth $3 billion. However, the company does not plan to use its array technology as a platform for that market, saying it instead prefers its midplex BeadXpress system, which uses digital microbead technology.
In January, Illumina announced an internal restructuring that created a diagnostics business unit within the company. Since then the company has hired a senior vice president and general manager to oversee the development of the unit. Their names have not been disclosed.
Henry said that Illumina is mulling a hybrid approach where it will partner on some diagnostics that run on the BeadXpress, while offering internally developed tests on its own. He also didn’t rule out that the company could make future acquisitions to gain access to useful diagnostic content or, especially, infrastructure that would allow it to better compete in the molecular-diagnostics market.
“At this point we don’t have diagnostics infrastructure, so when you think about M&A, what comes to mind is building infrastructure, as well as possibly making acquisitions that play into the content side of the world,” Henry said. “You will start to see that strategy play itself out more aggressively over the next year to eighteen months.”
Henry projected that annual revenues, which were $366.8 million in 2007, will grow by 20 percent to 40 percent annually over the next three years. He said that the company will spend roughly $40 million this year to add manufacturing capacity and invest in global sales and support to keep up with the structural challenges of meeting high demand for the firm’s products.
“We have aggressively been growing our infrastructure over the last year and we will in 2008 as well to really have the support infrastructure necessary to keep all the systems up all the time, to help scientists with their experiments, so that you maximize the throughput per system, which translates into consumable revenue,” said Henry.
In particular, the firm is looking to add sales and support personnel in Asia and Europe. Illumina, which employs slightly more than 1,000 people, currently has 70 sales people worldwide and 100 technology-support personnel, Henry said.