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Illumina Seeing Strong NovaSeq X Demand, Reports Preliminary Q4 Revenues Down 10 Percent

This article has been updated to correct that Illumina's Q4 2022 revenues are predicted to be down 10 percent, not 1 percent.

SAN FRANCISCO ­– Illumina's new NovaSeq X instrument is on track to be even more popular than the NovaSeq 6000, according to launch metrics shared Monday by CEO Francis deSouza at the 2023 JP Morgan Healthcare Conference. He also disclosed preliminary fourth quarter and full-year 2022 financial results as well as 2023 revenue and EPS guidance.

Announced in late September and shipping this quarter, the sequencer has already seen more than 140 orders. Moreover, there are at least 200 orders in Illumina's pipeline. Orders are coming from 25 countries, four times as many as seen with the NovaSeq 6000 launch, he said. Approximately 15 percent of orders are coming from customers new to high-throughput sequencing and more than 35 percent are from clinical customers — a surprise for Illumina.

"This represents the strongest pre-order book we have seen with any Illumina instrument launch," deSouza said in the firm's presentation. During the Q&A portion of the talk, he said Illumina is "sold out not just for Q1, but most of Q2, as well."

Illumina expects to ship between 40 and 50 instruments in Q1 and more than 300 in 2023.

The NovaSeq X upgrade cycle will drive revenue growth in 2023 in the range of 7 percent to 10 percent, or total revenues in the range of $4.90 billion to $5.03 billion, with core Illumina revenues growing 6 percent to 9 percent and Grail revenues growing approximately 80 percent to between $90 million and $100 million. The firm expects adjusted EPS between $1.25 and $1.50.

That should build on a year that saw Q4 drop 10 percent and full-year revenues stay mostly flat year over year. The firm expects to record fourth quarter revenues of approximately $1.08 billion, according to preliminary numbers presented at the conference, down from $1.20 billion a year ago, with core Illumina revenues of $1.06 billion, driven by record NextSeq shipments, and Grail revenue of approximately $23 million. Wall Street analysts had, on average, estimated revenues of $1.06 billion.

The firm expects to report full-year 2022 revenues of $4.58 billion compared to $4.53 billion a year ago, beating the consensus Wall Street estimate of $4.56 billion. Core Illumina revenues were $4.55 billion while Grail revenues were approximately $55 million. The firm's R&D spending in 2022 was approximately $1 billion, deSouza said, compared to $1.19 billion a year ago.

During his presentation, deSouza also highlighted the day's earlier announcement that the firm would partner with Amgen and its subsidiary DeCode Genomics to sequence 35,000 samples from the Nashville Biosciences biobank. The deal could lead to the largest genomic dataset of African Americans, who have been underrepresented in genomic research. At last year's virtual conference, Illumina announced a partnership with Nashville Biosciences to sequence 250,000 patients who have been consented for whole-genome testing.

DeSouza also shared data on more than 3,200 placements in 2022 across Illumina's entire line of sequencers. The firm shipped about 340 NovaSeq 6000 instruments, bringing the installed base to about 1,820. In mid-throughput, it shipped approximately 700 NextSeq 1000 and 2000 machines and 510 NextSeq 500 and 550 machines, bringing the installed bases to 1,570 and 5,180, respectively. The firm also shipped about 1,670 low-throughput sequencers — the MiSeq, MiniSeq and iSeq platforms — bringing the installed base to about 14,280.

Illumina will bring its new XLeap-SBS chemistry to existing NextSeq 1000 and 2000 instruments in the first half of 2024, deSouza also noted.

Illumina Complete Long-Read, announced a year ago, is on track to launch with a human whole-genome kit in Q1, and an enrichment panel is now slated for the second half of the year.

For Grail, deSouza touted Galleri's 60,000 orders. "This is the fastest first-year revenue ramp in cancer screening test history," he said. But Illumina is expecting the European Commission to issue a divestment order as part of its investigation into the acquisition. Any divestment will have to be done both "swiftly" but also protect Grail's ability to operate in the future, deSouza noted. "We want to move quickly but also make sure we're doing the right thing for Illumina shareholders," he said.

Illumina provided 2023 revenue guidance of 7 to 10 percent growth, which is below the initial 10 percent outlook provided at the time its third quarter results were released. Its EPS guidance for 2023 of $1.25 to $1.50 also is well below Wall Street's estimates.

In Tuesday morning trading on the Nasdaq, shares of Illumina were down around 6 percent at $193.90.