Despite experiencing "some weakness" in demand for its whole-genome genotyping chips in recent quarters, Illumina expects the genome-wide association studies market to revive by the middle of next year, and believes its array business will continue to grow, driven by the agricultural biotechnology market and custom projects.
Christian Henry, the San Diego firm's senior vice president of corporate development and chief financial officer, told investors at Morgan Stanley's Global Healthcare Conference in New York last week that there are "lots of opportunities" for Illumina's array business in GWAS, agbio, and other markets.
He also said that though second-generation sequencing is on the "tips of everyone's tongues all of the time," the company forecasts continued demand for its chips.
"One of the things that Illumina is really cognizant of is that we need to be agnostic in terms of technology," Henry said during his presentation, which was webcast. "In our own internal R&D we are beginning to push the boundaries of our [Genome Analyzer sequencer] in terms of density, in terms of cycle times, and in terms of accuracy," he said.
"At its core, we are thinking how to drive the cost of sequencing down so much that it supplants microarrays and it supplants other forms of biological analysis," Henry said. "The reality is that microarrays are still going to be much cheaper over any reasonable planning horizon."
Henry admitted that the firm saw "some weakness" last quarter due to a slowing in demand for chips for GWA studies (see BAN 7/28/2009). Illumina was forced to trim its Q2 revenue expectations for the quarter due to delays in array orders.
But he also echoed the company line that the market will return with the advent of chips containing new rare variation content drawn from sources like the 1000 Genomes Project.
The return of GWAS will "span several quarters" and "rare variant content will be a key driver," Henry said. "We are already looking at 22 million new SNPs put in the 1000 Genomes database," he said.
"We are continuing to push the technology as far as we can, and conferring with the best people we can to determine what the best products are," Henry said.
Still, that takes time, meaning that it may be a few quarters before GWA studies resume using the new arrays. "The content has to be generated, it has to be collated, [we have to determine] what are the right SNPs, what's the balance of SNPs and CNVs, what's the vision of the new product, and then it goes through product development program and then a launch," Henry said. "We think we will see the GWAS market return to normal state by the middle of next year."
In the meantime, Illumina's array business is being buoyed by demand from agbio researchers, Henry said, citing deals with bovine researchers and seed producers. "Sequencing is more exploratory, and arrays are a more affordable way to screen thousands and thousands of whatever samples you are looking at," he said.
During his presentation, Henry also discussed the impact of grants awarded under the American Recovery and Reinvestment Act of 2009. Henry noted that the stimulus funding gave researchers the capability to buy capital equipment, namely Genome Analyzers. "This accelerates the sequencing market, as we expect each instrument places to generate at least $200,000 worth of consumables revenue per year," he said.
Henry also said that Illumina expects to benefit from stimulus funding "through 2010 and possibly in 2011." He added that the array business will also likely benefit from the stimulus, but that it is difficult to predict by how much.
"There is going to be an impact in the array business but I don't know how pronounced it will be," Henry said.