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Illumina's Q1 Array Revenues Rise 4 Percent on Sales to Ag Research, Reproductive Health Customers

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NEW YORK (GenomeWeb) — Microarray sales to agricultural and cancer researchers as well as reproductive health and consumer clients drove Illumina's chip revenues up 4 percent in the first quarter, the company said last week.

However, weaker sales of array instruments as well as genotyping chips for genome-wide association studies partially offset this momentum, and next-generation sequencing sales led to a 27 percent jump in Q1 revenues, overshadowing Illumina's array growth.

CEO Jay Flatley said during an earnings call that Illumina has benefited since it introduced new prices for its chips at the end of last year, and that customers ordered arrays to process "close to record levels" of samples in Q1, "demonstrating the elasticity of the market."

Illumina discussed the price changes during a workshop at the American Society of Human Genetics meeting in October. At the time, company representatives reported that the price of Illumina's HumanOmni2.5 BeadChip had been halved to $172 from $349, while the firm reduced the price of its HumanOmni5 BeadChip by roughly a third to $273 from $399.

According to Flatley, similar price reductions "fueled increased demand" for the firm's 12-sample OncoArray-530K BeadChip and whole-genome arrays in Q1, specifically its eight-sample Infinium HumanOmniExpressExome and 12-sample Infinium HumanCoreExome BeadChips.

Illumina launched its Infinium OncoArray-500K BeadChip in October. The array, designed in collaboration with the OncoArray consortium, enables researchers to study variants associated with five common cancers – breast, ovarian, colon, lung, and prostate. Sales of the OncoArray also contributed to a spike in array revenues in the fourth quarter of 2013.

While Illumina has not publicly discussed the prices of these three products, the University of Utah's HSC Cores Research Facility, for example, charges $66 per sample run on the OncoArray-500K, $109 per sample run on the HumanOmniExpressExome, and $54 per sample run on the HumanCoreExome BeadChips.

Another array that contributed to Illumina's Q1 growth is the firm's BovineLD+, a 24-sample, 7,000-SNP array for genotyping cattle. Demand for the BovineLD+ as well as the firm's custom iSelect BeadChips led to a 20 percent jump in agriculture-associated array revenues.

"We continue to see expanded use of selective breeding based on genotype in crop and livestock with a significant number of customers standardizing on Illumina’s products," said Flatley.

Reproductive health

Illumina has built a reproductive and genetic health business over the past few years by acquiring Cambridge, UK-based BlueGnome, which offers arrays for constitutional and cancer cytogenetics as well as pre-implantation genetic screening (PGS) and pre-implantation diagnosis (PGD), as well as Verinata Health, which has developed and launched a noninvasive prenatal test on Illumina's next-generation sequencing platform.

Earlier this year, Illumina announced plans to launch a 12-sample array for PGD called CytoSNP Karyomapping, and during last week's call Flatley noted that the firm successfully launched the product during the quarter.

Flatley also said that the company is on track to launch a sequencing-based PGS product called VeriSeq PGS for use on its MiSeq platform, with the intention to make it available on its NextSeq platform later this year.

Last month, researchers from Genoma Molecular Genetics Laboratory in Rome published a paper in the Journal of Fertility and Sterility that compared the new, sequencing-based PGS method for aneuploidy screening on single cells with existing comparative genomic hybridization-based approaches and found a high level of concordance between the two technologies.

"The study concluded VeriSeq PGS is a robust high-throughput method ready for clinical application and reproductive medicine, citing potential advantages of reduced cost and enhanced position," Flatley noted on the call.

'Offsetting factors'

Looking ahead, Flatley said that there are "some offsetting factors at work" in the array market.

On the upside, the company believes future growth will be driven by reproductive health and agricultural research markets, as well as sales to direct-to-consumer companies. Illumina continues to supply chips for the majority of consumer genomics offerings, and its arrays are used by Ancestry.com, Family Tree DNA, National Geographic's Genographic Project, ScotlandsDNA, and 23andMe in their ancestry testing and genetic genealogy services.

"We remain bullish about what’s going to happen in the consumer markets using arrays here over the next couple of years," said Flatley, "and we’re continuing to see remaining elasticity there as the prices come down."

However, the company said that these gains could be offset by "downward forces on the overall array business," such as decline in interest in array-based GWAS, a market that is "moving much more toward sequencing, [just as] the expression market is moving toward RNAseq."

Because of these opposing trends, Illumina's internal forecast for the array market is static. The firm predicts that array revenues may be down or up by single digits in coming quarters.

Another array-related factor affecting the company's performance is its payments to Syntrix Biosystems. A US District Court last year ruled that Illumina by selling its BeadChip products had infringed on IP held by Auburn, Wash.-based Syntrix Biosystems, with which it held business discussions nearly 15 years ago. The court ordered Illumina to pay $115 million in damages and established a 6 percent royalty rate.

CFO Marc Stapley said on the call that Illumina recorded a $6 million charge plus interest in Q1 related to the ongoing royalty payments to Syntrix. Illumina has since appealed last year's ruling to the US Court of Appeals for the Federal Circuit, claiming a flawed interpretation of the IP central to the case and contesting the calculated royalty rate.

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