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At Investor Confab, Illumina Details 'Enormous' DTC Demand as Market Shifts to Less Complex Chips

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The market for microarrays continues to grow, thanks to demand from direct-to-consumer genetics companies, as well as researchers who now favor using lower-complexity arrays in larger studies, according to Illumina CEO Jay Flatley.

Because of this demand for lower-complexity chips, Illumina has set aside earlier plans to debut higher-density whole-genome genotyping arrays containing up to 20 million variants, Flatley said during a presentation at Bank of America Merrill Lynch's Global Healthcare Conference, held last week in Las Vegas.

In addition, Flatley this week provided BioArray News with an update on BlueGnome, the cytogenetics and preimplantation genetic diagnosis-focused company that Illumina acquired last year.

'Enormous Elasticity'

According to Flatley, whose remarks were webcast, Illumina recently received "large orders" from consumer genetics firms including 23andMe and Ancestry.com.

Illumina's iSelect BeadChips are used in 23andMe's DTC services, as well as Ancestry.com, National Geographic, and Family Tree DNA's genetic genealogy services (BAN 7/31/2012).

Flatley said that the consumer market now generates about $50 million for the company in annual revenues. "This is a very significant and growing business for us," he said, one that the firm believes will "continue to grow very fast" and will "at least double" in the next few years.

During Illumina's first-quarter earnings call last month, Flatley described a "pricing sweet spot" for the arrays it sells to consumer genetics firms (BAN 4/23/2013). Such companies offer their array-based services for between $100 and $200, an amount that it seems many customers find acceptable.

Flatley said last week that customers such as 23andMe and Ancestry.com have "hit a goldmine price point" in the marketplace, and that the market is "showing enormous elasticity." Focusing on Mountain View, Calif.-based 23andMe, which prices its services at $99, Flatley described "enormous uptake of their array at that price point" and said the firm now has genotyped 200,000 customers to date and "they are going to get to a million as fast as they can."

23andMe has also coupled that genotypic data with a "rich collection" of phenotypic data it has collected from clients via online surveys, he added.

Market Pivot

The array market has "changed a lot in the last few years," Flatley said. In the past, the firm believed that customers "would continue to demand arrays of increasing complexity."

Illumina rolled out its first whole-genome genotyping array based on the Infinium assay, the 100,000-marker Human-1 Genotyping BeadChip, in 2005. Over the past eight years, the company has introduced incrementally higher-density chips. In 2012, it launched its Omni5 BeadChip, a 5-million-marker array intended for use association studies.

However, rather than experiencing demand for an even higher-density array to top the content of the Omni5, Illumina has seen its customers move to next-generation sequencing to obtain a high-resolution look at the genome.

"We got up to [a] 5-million-[marker] array, and we had plans and technology to get up to a 20-million-marker array, if that were required, but it turned out that the market sort of pivoted, and now they are using sequencing for those complexity experiments for very logical and biological reasons," said Flatley.

The array market, meantime, has shifted to using "low-complexity arrays at very high sample numbers," he said. While that has led to a reduction in demand for higher-density chips, demand for Illumina's exome chips has "dramatically increased." The firm said last year, for instance, that its exome arrays have been among its best performing microarray products in its 15-year history, in part because they cost less than higher-density chips like the Omni5 (BAN 5/15/2012).

"We are seeing very large sample numbers in these experiments," Flatley said. "That coupled with the significant demand we are seeing from the consumer business around arrays I think is the reason for the strength we saw [in array sales] in Q1."

BlueGnome Update

Flatley last week also discussed BlueGnome, the Cambridge, UK-based company Illumina paid $88 million to acquire in September 2012.

BlueGnome offers a menu of CytoChips for both constitutional and cancer cytogenetic research as well as its internally produced 24sure bacterial artificial chromosome arrays used in preimplantation genetic diagnostics. Agilent Technologies has manufactured BlueGnome's CytoChips for years. But, according to Flatley, BlueGnome's new products will be offered on Illumina's BeadChip platform in the future.

"We need to move them over to our arrays," Flatley said. "They have classically used Agilent arrays and have been buying those at Agilent prices," he said. "Once they start using our arrays in their work, they purchase those at cost, rather than the price we would pay to Agilent," Flatley added.

In an email to BioArray News this week, Flatley elaborated on the firm's position.

"It is clearly to our advantage to have BlueGnome use Illumina arrays where possible," Flatley said. "Having said that, we have an ongoing relationship with Agilent to supply arrays because many customers are used to them, have existing databases and systems for Agilent arrays," he said.

"We started by making the BlueGnome software work with Illumina arrays, and new products will of course be developed on the Illumina platform," Flatley added.

At the time the acquisition was announced, Greg Heath, manager of the firm's diagnostics business, told BioArray News that BlueGnome would "remain in operation as a wholly owned subsidiary of Illumina" and would "continue to honor all business agreements," including those with Agilent (BAN 9/25/2012).

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