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Supply and Compete

Industry players and observers are still intrigued by Illumina's recent decision to acquire Verinata Health, among them Christophe Lambert, CEO of bioinformatics firm Golden Helix. Noting that Verinata's sequencing-based non-invasive prenatal testing service competes against offerings from other NIPT players such as Sequenom, Natera, LifeCodexx, and Ariosa — all of which are run on Illumina's instruments — Lambert ponders on the firm's blog about what moved Illumina to "compete with its own customers."

He provides two possible explanation's for Illumina's "puzzling" strategy. The first is that, given research funding constraints and other issues, the San Diego firm's existing products and markets will not enable it to sustain the 83 percent compound annual growth rate it has enjoyed during the past decade,and that has prompted Illumina to enter new markets, "including selling to the customers of their customers." The other explanation is that Illumina is "deliberately shaking up a conservative diagnostics market" to drive adoption of high-throughput sequencing for clinical applications.

"Absent some consumer genetics play, for Illumina to do well by its shareholders and grow from a $1B company to a $10B company in the years to come, it almost seems forced to enter the diagnostic testing market as a laboratory service, instead of just providing the equipment and consumables," writes Lambert, adding that such a strategy could lead to a "future collision" with some of its own customers as they fight for market share.