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Illumina Asks US Patent Office to Investigate Affy IP, Posts 44-Percent Jump in Q3 Revenue

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Illumina this week asked the US Patent and Trademark Office to investigate the validity of a patent owned by Affymetrix's newly integrated ParAllele BioScience unit, claiming that its scientists had originally invented the technology.

The San Diego-based company announced that it had contacted the USPTO on Monday, the same day Affy said it had closed its acquisition of ParAllele for $121 million in stock and cash.

The move by Illumina is the latest in an ongoing patent clash between the West Coast array companies. Affymetrix sued Illumina in US District Court in July 2004, alleging that Illumina infringed six of its patents, and Illumina fired back in September of that year, requesting summary judgment from the court that Affy's patents are so broad as to be invalid.

The companies have been tentatively scheduled to meet in court in October 2006, and depositions in the case may begin later this month.

In the latest development involving ParAllele, which is unrelated to the July 2004 litigation, Illumina said it has asked the USPTO to declare "interference" with US Patent No. 6,858,412, which covers molecular inversion probe genotyping technology developed by ParAllele. Whomever the USPTO identifies as the "first to invent" is "ultimately awarded ownership and entitlement to the invention under US patent law," Illumina said.

Though the technology was invented by Illumina's scientists "during the course of early research and development at the company," it is "not currently in use" at Illumina, the company said in a statement. Therefore, the company's request for interference is based on a patent application describing the invention, which Illumina said it had filed ahead of the '412 patent.

"The earlier filing date is expected to establish Illumina as the 'senior party' in the interference proceeding, placing on the '412 patent inventors the burden of proof to establish an earlier date of invention," Illumina said in the statement.

Q3 Revenues Jump 44 Percent, Losses Narrow

The same day it announced its USPTO request, Illumina reported a 44-percent increase in third-quarter revenues accompanied by narrowed net losses.

The company posted total revenues of $19.5 million for the quarter ended Oct. 2, up from $13.5 million in the third quarter of 2004. Product-related revenues jumped to $16.3 million from $12.1 million in the prior-year period, while service revenues increased to $2.7 million from $1.1 million in the comparable period of 2004.

Illumina credited the increase in revenues to a "record" 19 BeadStations shipped during the quarter, bringing the company's installed base of BeadLabs and BeadStations to 102.

To handle increased demand, Illumina CEO Jay Flatley said in a conference call this week that the company has ramped up production in its manufacturing facility, and that its arrays have been manufactured "24-7" since September, yielding a "40-percent increase in capacity." Flatley also said that the company plans to invest $5 million more on manufacturing this year.

IIllumina narrowed its quarterly net loss to $1.4 million, or $.03 per share, from $2 million, or $.05 per share, in the third quarter of 2004.

The company increased its third-quarter R&D spending to $7.1 million from $5.4 million in the prior-year period.

Illumina held cash and investments totaling $50.2 million as of Oct. 2.

Looking forward, the company projected revenues of between $21 million and 23 million for the fourth quarter — up to 55 percent over fourth-quarter 2004 revenues of $14.8 million.

For the full year, Illumina said it expects total revenues of between $72 million and $74 million, which would represent an increase of up to 46 percent over $50.6 million in 2004 revenues.

— Justin Petrone ([email protected])

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