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Illumina Plans New Expression Chips as Q3 Revenues Soar on Growing Genotyping Sales

One month after launching its first gene expression array for rat, Illumina is now planning to release new versions of its human and mouse expression BeadChips with updated content and higher quality data.
The chips will join a roster of other new products and applications Illumina is planning to roll out by the end of the year, including a new methylation assay and its BeadXpress platform. The launch also coincides with a new effort to attract users to Illumina’s gene expression products (see BAN 10/3/2006).
According to Illumina CEO Jay Flatley, while the company was developing its RatRef-12 Whole-Genome Expression BeadChip, it “made substantial improvements in [its] manufacturing processes resulting in a significant enhancement in data quality.”
“As a result, we’ll be shortly launching version 2 of our human and mouse arrays based on our enhanced performance,” he said during Illumina’s third-quarter earnings call last week.
In a follow-up e-mail to BioArray News, Flatley explained that these version 2 products have “a new gasketing system that is more user-friendly” and Illumina has “also made both manufacturing and assay process improvements that have taken the performance of the chips up substantially as measured by [a power prediction model].”
He added that the content on the human chip has been updated to the latest genome build.
Flatley declined to discuss Ilumina’s timeline for launching the new gene expression arrays. Illumina released its Sentrix Human WG-6 BeadChip and Sentrix Human RS-8 BeadChip in May 2004 (see BAN 5/19/2004), and its Sentrix Mouse-6 BeadChip and Sentrix MouseRef-8 BeadChip in September 2005 (see BAN 9/6/2005).
During the call, Flatley also discussed why the company has been talking up its gene expression business at a time when genotyping is clearly driving revenue growth.
He cited the publication of the Microarray Quality Control project results in September as driver for the gene expression platform, noting that the MAQC results ought to ease potential customers concerns over legacy data and concordance between platforms.
“We are starting to see some real momentum in our expression business,” Flatley said. “Our orders were up 20 percent over last quarter in the expression business.”
A $350 Million Genotyping Market
As Illumina continues to push into gene expression, its genotyping products are driving increased revenues. The company last week reported a 174-percent increase in total revenue for the third quarter of 2006, as compared with the same period last year.
Illumina reported total revenue of $53.5 million for the quarter ending Oct. 1, compared with $19.5 million in the third quarter of 2005, and revenues from product sales nearly tripled to $46.9 million from $16.3 million in the prior-year period.
Illumina reported net income of $16.2 million for the quarter, including total non-cash stock compensation expense of $3.8 million, compared to a net loss of $1.5 million in the third quarter of 2005.
R&D spending rose to $7.7 million from $7 million in the prior-year period.
Illumina ended the third quarter with cash and short-term investments worth $169.9 million, of which $44.2 million was in cash and cash equivalents.
During the earnings call, Flatley attributed the company’s revenue growth to a “strong interest in genotyping,” citing deals Illumina signed in the pharmaceutical, academic, and agricultural arenas — the latter including a recent deal with US Department of Agriculture’s Agricultural Research Service, the University of Missouri-Columbia, and the University of Alberta to develop a BovineChip for cattle research (see BAN 9/5/2006).
However, the major shift in Illumina’s genotyping clients continues to be among pharma. Two weeks ago the firm announced that an undisclosed “top five” pharmaceutical company has decided to bring a multi-component genetic analysis system in house and will use Illumina's Infinium assay and HumanHap650Y BeadChip to provide whole-genome genotyping in a project involving over 3,200 samples.

Illumina’s internal estimate is that the genotyping market is “in the range of $350 million or so with about $200 million array-based.”

During the call, Flatley said that the customer’s system is“capable of supporting both genotyping and expression applications.” While the name of the customer remains undisclosed, it is likely that it is either GlaxoSmithKline, which has a long history of partnering with Illumina, or Merck.
In June, Alan Sachs, vice president of molecular profiling at Merck, told BioArray News that Merck Research Laboratories, the R&D arm of the pharmaceutical giant, had made the decision to invest in its own genotyping capabilities.
Sachs mentioned both Affymetrix and Illumina as possible vendors. He also said Merck will continue to outsource some of its genotyping needs (see BAN 7/5/2006).
Flatley said that some pharmas are carrying out more large-scale genotyping projects in house, which is driving them to invest more in capital equipment.
“If you look back historically, one of the reasons that pharma tended to outsource genotyping was that the projects were aperiodic, so they didn’t have a regular process flow through the genotyping application,” he explained.
He added that just because companies like GSK and Merck might be taking the technology in house, “there are certainly some pharma companies who just don’t want to own the equipment and will for the long term adopt the service model.”
During the call, Flatley also offered an estimate of the genotyping market, which he pegged “in the range of $350 million or so with about $200 million array-based.” He said that the remainder is divided between RT-PCR and sequencing technologies. Flatley added that the genotyping market is currently growing at a rate of about 30 to 40 percent annually.

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