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Illumina Revenues Increase 20 Percent in Q3

This article has been updated with information from Illumina's earnings call.

NEW YORK (GenomeWeb) – Illumina reported after the close of the market on Tuesday that its revenues for the third quarter grew 20 percent year over year, driven by growth across its sequencing and microarray products.

For the three months ended Sept. 30, the San Diego-based company reported $853.0 million in total revenues, up from $714.0 million in Q3 2017 and beating the average analysts' estimate of $828.6 million. The revenue increase resulted from 21 percent growth in the sequencing business and 11 percent growth in the microarray business.

Product revenues for the quarter rose 19 percent to $710.0 million from $596.0 million in Q3 2017, and included $550.0 million in consumables revenues, which grew 22 percent year over year, and $154.0 million in instrument revenues, which grew 10 percent year over year.

Service and other revenues rose 21 percent to $143.0 million from $118.0 million in last year's third quarter.

During a conference call to discuss the firm's earnings, Illumina President and CEO Francis deSouza said that sequencing consumables revenues grew 23 percent to $467.0 million in the quarter and represented 55 percent of total Q3 revenues. This included about $14.0 million from Chinese customers who stocked up on sequencing consumables because of fear of future tariffs. DeSouza said that so far, only instruments have been affected by tariffs that were imposed in the third quarter. Those tariffs amount to about 5 percent, which deSouza called "modest".

He also noted that while HiSeq consumables continued to represent most of the revenues from high-throughput sequencing instruments, NovaSeq consumables sales are growing quickly as customers transition to this platform from the HiSeq. Consumables sales for the NextSeq also did well, he said, and the annual consumables pull-through per system is currently at the high end of the projected $100,000 to $150,000 range. Likewise, he added, consumables sales for the MiSeq and MiniSeq were "within their expected ranges" and the new iSeq sequencer made a "modest contribution" to consumables revenues.

Sequencing systems revenues were $138.0 million during the quarter, representing the strongest quarter of the year so far and the highest revenues for sequencing systems since 2015. NovaSeq sales went well, deSouza said, and the company continues to target shipments of 330 to 350 NovaSeq systems for 2018. Shipments of NextSeq instruments also grew, both sequentially and year over year, "with a good mix of existing and new-to-sequencing customers," he said. Sales of MiSeq and MiniSeq systems were up sequentially, with good adoption by customers who are new to sequencing. Finally, the iSeq system "got off to a great start," he said, with demand from both new and existing Illumina customers and shipments ahead of forecast.

Sequencing services and other revenue amounted to $109.0 million in Q3, up 36 percent from the year-ago quarter.

Microarray revenue totaled $134.0 million in Q3, up 11 percent from the same quarter in 2017. It included $16.0 million in microarray instrument revenues, which deSouza said was higher than expected and driven by a large direct-to-consumer testing customer who scaled capacity ahead of the upcoming holiday season. However, this growth was "more than offset" by lower microarray service and other revenue on a sequential basis, he added.

The company's Q3 net income rose to $199.0 million, or $1.33 per share, from $163.0 million, or $1.11 per share, a year ago. The firm's adjusted net income for the quarter was $1.52 per share, beating the average analyst estimate of $1.26 per share.

Illumina's R&D expenses for the quarter climbed 19 percent to $159.0 million from $134.0 million in the prior-year quarter. Its Q3 SG&A costs rose 18 percent to $197.0 million over $167.0 million in Q3 2017.

As of Sept. 30, Illumina had $1.35 billion in cash and cash equivalents, and $2.04 billion in short-term investments.

Illumina continues to expect 20 percent revenue growth for fiscal year 2018. It increased its earnings prediction for 2018 to a range of $5.32 to $5.37 per share, from a previous projection of $5.10 to $5.20 per share. The firm expects adjusted earnings per share of $5.70 to $5.75 for the year. Analysts are expecting earnings of $5.45 per share for the year.

The company's shares were up more than 1 percent to $317.99 in morning trading on the Nasdaq.