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Oligator Distribution Pact with Invitrogen Will Allow Illumina to Focus on Array Business

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Illumina will capitalize on Invitrogen’s sales and marketing muscle through a collaboration announced this week, under which Invitrogen will take over distribution of Illumina’s Oligator DNA synthesis technology worldwide.

The terms of the pact call for Invitrogen to invest $3.4 million in Illumina’s San Diego facility to extend its Oligator technology into tube-based oligonucleotide products and to transfer the technology to two Invitrogen facilities outside North America. The companies said that they expect to transition all responsibility for sales, marketing, and technical support for the Oligator products to Invitrogen over the “next several quarters.”

“We plan to leverage Illumina’s strength in DNA synthesis, specifically the Oligator technology, with Invitrogen’s global sales and marketing resources,” said Invitrogen Chairman and CEO Gregory Lucier in a conference call following the announcement. “We believe we can grow the market and generate more revenues and profit than either of us can do independently.”

Profits from the products will be split equally between the two companies.

“We believe that the market opportunity [for oligonucleotides] is somewhere north of $300 million,” Lucier said. “With this collaboration with Illumina, we now have the capability to provide full oligo sets to researchers worldwide.”

Meanwhile, Illumina President and CEO Jay Flatley called the collaboration “a very clear win for us. It will allow us to focus on building sales and marketing for the array part of our business, since we won’t be doing that any longer for the oligo portion.”

He added, “As we move forward into whole-genome chips and other market areas such as that, we think we’ll have the capacity to both serve the commercial oligo market and our internal capacity extremely well.”

Illumina’s Oligator technology is capable of producing tube-based oligos, but Flatley said selling to that market requires a much larger sales team than what Illumina currently has for its oligos — currently seven direct sales reps worldwide and a handful of distributors.

Illumina has “had great success in the plate-based oligo business, but this market is actually much smaller than the tube-based segment — approximately by a factor of four,” he noted. “Without a very significant investment in sales and marketing infrastructure, we never would have been able to successfully address the much larger tube business.”

Lucier noted that Invitrogen’s current oligo business is 80 percent tube-based and 20 percent plate-based, while most of Illumina’s business was plates, not tubes.

In effect, Illumina’s sales staff covering the plate-based oligos will become Invitrogen sales people, company officials noted during the conference call. But, Flatley noted that Illumina still expects to increase its sales force size by roughly 50 percent in 2005, following last year’s increase in sales staff of around 100 percent.

Invitrogen’s and Illumina’s main competitors in the oligo segment are IVT, Sigma-Aldrich, and Operon Biotechnologies, which Qiagen divested earlier this year.

— EW