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Promising a Profitable 2006, Illumina to Invest in New Products, Manufacturing, Sales This Year

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Fresh from launching its Human Hap300 SNP chip and reporting a 55-percent gain in fourth-quarter 2005 revenues, Illumina officials last week predicted that the company will add to its product portfolio, strengthen its manufacturing capacity, build its international sales force, and ultimately achieve profitability by the end of this year.

Illumina chief financial officer Christian Henry told investors during a fourth-quarter conference call last week that Illumina expects to finish 2006 with a profit of $5 million to $13 million, based on total revenues of $115-$125 million, the first time the company will have crawled out of the red on an annual basis since it was founded eight years ago.

To help it get there, Illumina CEO and President Jay Flatley said, the company plans to release additional products for SNP genotyping, gene expression, and molecular diagnostics before the end of the year.

Flatley said that before the end of June, Illumina plans to launch a whole human genotyping BeadChip with 500,000 SNPs on one array. "Product development is underway, and we expect that this product will have similar performance characteristics to our [Human Hap300]," he said.

Illumina's chief competitor in the high-density genotyping arena is Affymetrix, which launched its two-chip 500K Mapping Array Set in October 2005 (see BAN 10/05/2005).


"The timing will vary on a product-by-product basis, but the [CyVera] factory and the [manufacturing] process will be approved by the end of 2006."

In the meantime, to provide customers with similar access to the genome, Flatley said that Illumina will launch a 230K BeadChip that will "allow users of the current 300K array to run a second array on their samples to obtain genomic coverage equivalent to what they would get on the Human Hap500."

Illumina spokesperson Bill Craumer told BioArray News this week that pricing for the 230K supplement and the 500K chip had not been decided yet. He also said that the price for the Human Hap300 chip plus the reagents kit with which it is sold ranges between $700 and $1,400 per chip, and is dependent on the order size. Price ranges for Affy's Mapping Array Set could not be immediately obtained.

Similarly, to fulfill its plans to update its offering for users running assays for gene expression, Illumina said it will launch a multi-sample rat genome chip later this year. "This product will be particularly valuable as a tool to penetrate toxicology markets," Flatley said.

Flatley said that, in particular, the company should benefit from whole-genome association studies in the future. "In each case researchers will demand the best performing chips to optimize their investments in these experiments," he said.

A recent example of this was a colorectal cancer genotyping project with British nonprofit Cancer Research UK disclosed in November 2005 (see BAN 11/16/2005). Illumina stands to gain $6 million as part of the deal.

CyVera

Adding a new dimension to Illumina's offering, however, will be the eventual launch of its CyVera platform, which uses the glass particle microbead technology it acquired of the company with the same name last year for multiplex assays aimed at the molecular diagnostics market.

Illumina Reports 55-Percent Gain in Q4 Revenue

Illumina last week reported that fourth-quarter revenue increased 55 percent amid an increase in R&D spending and a decline in net profits.

Total receipts for the three months ended Jan. 1 rose to $23 million from $14.8 million year over year, the company said. Product receipts increased 67 percent year over year to $16.7 million while service and "other" revenue increased 43 percent to $5.7 million. Research receipts grew to $609,000 from $321,000 year over year, Illumina said.

R&D spending in the fourth quarter increased 42 percent to $7.5 million from $5.3 million year over year.

Net profit in the current quarter declined to $326,000, or $.01 per basic share, from $3.2 million, or $.09 per basic share year over year. Illumina attributed the decrease to a one-time gain during the fourth quarter 2004 related to reduced damages awarded in a wrongful termination suit.

Illumina said it had around $50.8 million in cash and investments as of Jan. 1.

Looking ahead, the company said it expects 2006 revenue to increase between 55 percent and 70 percent to between $115 million and $125 million, driven primarily by organic growth in its genotyping products.

For the first quarter, Illumina said it expects total receipts to range between $22 million and $24 million, which would be a year-over-year increase of between 46 percent and 59 percent.

Illumina spent $7.5 million on R&D in Q4 '05, a 42 percent increase over the $5.3 million it spent during the same period in 2004, and Henry said that the increase was driven by CyVera's R&D expenses in 2005. Henry predicted that R&D spending would decline as a percentage of total revenue during 2006, and said he expects that R&D expenditures for this year could be between $30 million and $34 million.

According to Flatley, Illumina's goal is to have its CyVera manufacturing facility certified by the International Standards Organization by the end of this year. With that approval, Flatley said that the company will eventually be able to pair an assay with the system and submit it for US Food and Drug Administration clearance.

"The assay may come through us or it may come through our partners that we form in the diagnostic market," Flatley said last week. "The timing will vary on a product-by-product basis, but the [CyVera] factory and the [manufacturing] process will be approved by the end of 2006," he said.

According to Craumer, the CyVera platforms will be assembled at the company's Wallingford, Conn., location. Because the CyVera platform does not use microarray technology, future users will need to pay $75,000 for the CyVera instrument. However, the "system will be integrated into the Illumina system's architecture so that the assays, software, and LIMS will be the same," Craumer told BioArray News via e-mail this week.

Manufacturing & Sales

Illumina is also planning to invest approximately $5 million over the next three months to make good on a previously announced promise to bring to 33 the number of decoding imaging systems it uses to produce its chips. Illumina announced plans in April 2005 to triple its number of systems — then between 10 and 13 — in one year's time.

With a nod to the recent production woes felt by chief rival Affymetrix, Flatley also said that Illumina is prepared to double its manufacturing capacity by the end of 2006 if necessary (see BAN 1/31/2006).

Flatley added that in addition to investing in manufacturing, Illumina will add to its head count abroad. According to Henry, two-thirds of the company's business was in the US in 2005, 24 percent of revenues were earned in Europe and 9 percent in Asia, a ratio Craumer said has remained stable since the beginning of the Human HapMap Project in 2002.

In order to grow its business abroad, Illumina said it will open an office in The Netherlands this year, and add sales and support personnel to its foreign offices. In addition, Flatley said last week that Illumina recently set up a two-man sales and support team in China and that the company plans to expand that operation throughout the year.

Craumer said that the company's "current team outside the US is 25 to 30 [people] for sales and support and we will be expanding in all territories." He said that a 50 percent growth in headcount should be expected in 2006.

— Justin Petrone ([email protected])

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