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Illumina Says New Products Will Revive Array Business in H2 '10

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By Justin Petrone

Though a slowdown in the genome-wide association studies market has led to diminishing sales of its arrays, Illumina is confident that new genotyping chips scheduled to launch next year will restore array revenues, according to a company official.

Chief Financial Officer Christian Henry last week told an investor conference that Illumina expects array sales to rise again in the second half of next year as the San Diego firm makes higher-density chips available with rare variation content culled from efforts like the 1000 Genomes Project.

"Everything is indicating that, as we launch this next generation of chips with rare variant content, there is a lot of interest for these products," Henry said during a webcast presentation at Piper Jaffray's Healthcare Conference in New York.

Illumina in October announced a roadmap for its Infinium whole-genome genotyping platform in which it said it plans to debut chips next year that enable researchers to look at up to 5 million variants per sample. The company said at the time that it intends to release an intermediate 2.5-million variant product that adds rare variants to the backbone of content on the HumanOmni1-Quad BeadChip, which launched in May.

Researchers who begin studies using Illumina’s whole-genome genotyping products will also have access to supplemental arrays that build from the Omni content to the full 5-million-variant chip, Illumina said (see BAN 11/3/2009).

"We are actually creating an upgrade path where you can run our OmniQuad … and a supplemental chip, the 2.5 million, then a supplemental chip again to get you to the 5 million," Henry said last week of the anticipated products. "So if you want to make yourself forward compatible, we have that capability."

Henry said that Illumina believes these products can "restore the growth prospects of the array business," but that the restoration of growth is "probably not going to happen in the first part of the year. It's more of a back half [of 2010] activity than a front half."

The company is convinced that growth will return partially because it is collaborating with customers to design the new products. Illumina is "taking the detailed content from the 1000 Genomes Project, and analyzing that content to determine which are the most important SNPs to put on the product, and then we'll develop that family of products and get it into the market," Henry said.

"We think the gating factors are: a) collaborating and getting the right content, and b) turning the crank to get those products developed, validated, and into the hands of our customers," he added.

Illumina's business continues to suffer due to lower-than-expected sales of arrays for GWA studies. For the third quarter, for instance, Illumina posted consumables revenue of $87 million, down 4 percent from $90 million in Q3 '08. Illumina said at the time it reported its Q3 earnings in October that GWAS revenue was $7 million below the firm's internal forecast for the quarter. The company attributed the decline in sales to delayed orders as customers waited to receive funding or new products, and a shrinking of funding opportunities for European researchers (see BAN 11/3/2009).

"We have seen some impact from endowment funding and in Europe we have had some weakness due to some endowment-related issues," Henry said last week of the market environment. "Academic budgets continue to be under pressure, but the good news is that these genomic technologies tend to be in the front of the line of budget allocations," he said. "I would argue that the endowment spending has had the major impact over the past few quarters."

During his presentation, Henry also commented on the status of Illumina's R&D resources and sales and marketing efforts. Henry said that Illumina will have spent over $100 million on R&D by the end of this year and that the company has a "critical mass of R&D resources to execute in projects and continue to innovate."

On the sales and marketing side, he said Illumina will continue to scale. "We continue to become more and more global all the time," Henry said. "There are significant opportunities for us in Asia and in Europe, and we will continue building infrastructure there over the next few years."

Henry noted that Illumina's Singapore manufacturing plant, opened last year, has been "successful" and has served as a logistics center for the company in the region as well (see BAN 2/8/2009).

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