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Illumina Q3 Chip Sales Fall 9 Percent, Though Exome Array Orders Spike


By Justin Petrone

Illumina's microarray sales fell 9 percent in the third quarter, due to uncertainty over the funding environment and a "tough" comparison to the same period in 2010, during which the vendor's sales rose on demand for its HumanOmni2.5-Quad DNA Analysis BeadChip, according to its CEO.

The decline in array consumable sales was "driven in large part by tough comparison with the very successful launch of the Omni2.5- Quad" last year, Jay Flatley told investors during the company's third-quarter earnings call this week.

During the call, Flatley also announced plans to restructure the company amid a 1 percent fall in total third-quarter revenues. The company's top line suffered not only from funding uncertainties but "excess capacity" in its next-generation sequencing business related to the launch of its V3 sequencing chemistry.

The company previewed the third quarter's "disappointing" earnings earlier this month and suspended making financial forecasts indefinitely (BAN 10/11/2011).

Flatley did not provide details of the restructuring, but said additional information would be available "soon."

On the array side, Illumina's best-selling array in Q3 was the 5-million-marker HumanOmni5-Quad DNA Analysis BeadChip, which debuted earlier this year. Flatley said that Illumina shipped a "record number of samples" during the third quarter, referring to the number of arrays shipped to customers on the company's multi-sample BeadChip formats, like the Omni5-Quad, which allows users to survey four arrays per chip, or the 12-sample HumanOmniExpress. He did not elaborate.

Officials said that array instrument sales rose during the quarter, though the firm's overall instrument sales fell 18 percent, largely due to delayed orders for next-gen sequencing instruments, which the firm blamed on the uncertain global funding environment. The company did not provide further details on the growth in its array instrument business.

During the conference call, Chief Financial Officer Christian Henry said that annualized consumable pull-through per array system declined by an undisclosed amount but remained within a targeted range of between $400,000 and $500,000 in chip sales per installed system.

However, he said the decrease "resulted primarily from a slowdown in demand for whole-genome genotyping arrays."

According to Flatley, there was strong demand for Illumina's new exome-array products during the quarter. The company announced earlier this month that it plans to make exome content available on several new arrays, including its 250,000-marker, 12-sample Infinium HumanExome BeadChip, scheduled to launch in November; its 950,000-marker, nine-sample OmniExpressExome BeadChip, also timed for a November release; and its 5-million-marker, four-sample HumanOmni5Exome BeadChip, expected to debut sometime next year (BAN 10/18/2011).

The Infinium HumanExome BeadChip has been available at an early-access price of $39 per sample, and one customer, Mark McCarthy of the University of Oxford, told BioArray News that customers had ordered about 400,000 chips so far.

This week, Flatley noted that Illumina's exome arrays were the "leading category" of array orders in Q3, though they are still not ready to be shipped. He also touted the product line as both a complement and an alternative to whole-exome sequencing.

"Researchers are now able to study very rare coding variants in dramatically larger numbers of samples in a more rapid fashion than would be possible by sequencing," Flatley said. "Exome arrays are very cost effective. Instead of doing 150 samples on exome sequencing, they can do 5,000 samples using exome arrays."

During the call, Flatley also said that demand was "strong" for the company's agricultural biotechnology-focused arrays in Q3. During the period, Illumina launched its Infinium BovineLD BeadChip for genomic selection, parentage, and traceability in dairy cows.

Flatley also provided an update on Illumina's ongoing dialogue with the US Food and Drug Administration regarding its arrays for its HumanCytoSNP-12 BeadChip. He said the firm now plans to submit a cytogenetics package to the agency in the first quarter of 2012. The firm first announced its plans to bring its offering through FDA review nearly two years ago (BAN 1/26/2010).

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'Confluence of Factors'

Illumina's total revenues for the three months ended Oct. 2 dipped less than 1 percent to $235.5 million from $237.3 million year over year. Product revenues fell nearly 1.8 percent to $220.3 million from $224.7 million, while service and other receipts increased 20 percent to $15.2 million from $12.6 million.

Meantime, instrument revenues declined 18 percent during the quarter to $72 million year over year. Henry said instrument revenues faced a tough year-over-year comparison due to an upgrade program last year for the firm's Genome Analyzer, which "drove significant instrument volume" in Q3 2010 and did not reappear in the most recent quarter.

Flatley said the firm "experienced a confluence of factors that led to very disappointing results." In the US, this included the "combination of the reduced 2011 NIH budget, the potential 1-percent reduction to [the National Cancer Institute and the National Human Genome Research Institute] for 2012, the recent 20-percent reduction to select genome centers for 2012, the roll-off of stimulus, the one-year no-penalty extension of ARRA grants, and uncertainty regarding future budgets," he said.

Despite the relatively weak quarter, Flatley said that Illumina's share "is stronger in our core markets than it's ever been," and stressed that the firm's losses were not due to rival offerings.

Illumina also said third-quarter profit plunged nearly 43 percent to $20.2 million from $35.4 million year over year. R&D spending increased roughly 13 percent to $50.4 million from $44.8 million, and SG&A expenses rose 20 percent to $66 million from $55 million.

Illumina finished the quarter with $229.8 million in cash and cash equivalents and $902.3 million in short-term investments.

Henry said that the firm expects fourth-quarter revenues to exceed the third quarter's, though Illumina declined to provide specific numbers given the uncertainty surrounding government funding of research.

In addition, due to that uncertainty, Illumina is undertaking a restructuring to "better align the company's organization and cost structure," said Henry. Illumina expects to take a restructuring charge of $15 million to $17 million, the majority of which will be recorded in the fourth quarter.

Have topics you'd like to see covered in BioArray News? Contact the editor at jpetrone [at] genomeweb [.] com

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