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Illumina CEO Jay Flatley Speaks on Staying on Top in HTP Genotyping

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At A Glance

Name: Jay Flatley

Title: President, CEO, and member of the board of Illumina

Background: BA in Economics from Claremont McKenna College; BS in Industrial Engineering from Stanford University; MS in Industrial Engineering from Stanford University

While at Molecular Dynamics, Jay Flatley, president and CEO of Illumina, led its initial public offering in 1993 and the company’s sale to Amersham Pharmacia Biotech in 1998. Under his direction, the company developed and launched more than 15 instrumentation systems, including the world’s first capillary-based DNA sequencer. Flatley currently serves on the board of directors of Bruker AXS, an X-ray instrumentation company. Before he joined Molecular Dynamics, Flatley was vice president of engineering and of strategic planning for Plexus Computers, a manufacturer of Unix supermicrocomputers.

Illumina seems to be doing well — what are your plans for staying on that track?

We have been very successful, particularly recently, we’ve had 12 sequential quarters of revenue growth that has been driven in large measure by the high-end genotyping systems that we’ve placed into the marketplace and the consumables associated with those.

Going forward, we’re pushing very aggressively into the midmarket for genotyping, which we think in the long run is going to be a much larger opportunity, and have customer potential of more than 1000 sites. We’re working hard with our technology to enable large disease association studies through price reductions overall and by the advent of fixed-content chips, which we will have in the market next year. And we’re pushing into the expression marketplace, in addition to our genotyping technology, and that’s a very large existing market that is $500 million and growing quickly.

Can you tell me more about your plans for the expression market?

We announced that we have been successful in putting six whole human genomes on a Bead Chip — that is what we call our MEMs-based implementation of our bead-and-wells technology.

Because we’ve been able to do that, we’ve been able to drive the price points down per sample to about $160 per sample, and we’re very close to beginning shipment of those chips, which will happen over the next month or two. They run on the installed base of BeadArray readers that we have out on the marketplace. So we have our BeadStation product line that can read these chips, and the next version of that product line contains software that enables expression analysis.

Last November you attended the DIA conference. What is your take on the FDA pharmacogenomics draft guidance? What do you think the agency should work toward?

We think it is great conceptually. I think they need to do a fair amount of additional work to deal with some of the practical questions and issues that came up both during that meeting last November, and as a result of the direct comments on the draft. Our understanding is that the draft has been delayed until late this year.

Our hope is that in the revision of the draft and the final guidance that they continue to work to build confidence for big pharma that there is going to be independence in review of this pharmacogenomic data, so that they will feel that they can submit the data without risk of it being used in the approval or disapproval of a drug.

I certainly hope they resolve some of the uncertainties regarding the definitions — things like the question of what a biomarker really is. And also dealing with questions about how data that is submitted from multiple companies — if you viewed it from each company’s perspective, it may not have any validation of a particular biomarker. If that information came from multiple companies, would the FDA then declare it a valid biomarker because it came from multiple sources, and has sufficient validation between companies to call it validated?

Does Illumina have different plans depending on the outcome of the final guidelines?

I don’t think it will change our plans. In any case, we think that this guidance is going to be favorable for companies like ours that are supplying systems for doing expression and genotyping in the clinical setting. In virtually any case, it will help grow that market opportunity; it’s just a question of degree.

A little more about Illumina’s future — can you tell me if there are any partnerships on the horizon?

We’re certainly looking for potential technology partnerships. We had a product-and-distribution partnership in the past [with ABI] that was not successful, so we’re very cautious about moving forward on that front. But we’re certainly looking to get access to technologies that may complement our product line, and we may do that through partnerships.

As we build additional diagnostic content that can run on our arrays, we will very likely be looking for a diagnostic partner to help us bring that technology into the diagnostic space, since we’re not fundamentally addressing that market today — even though our technology will address that market.

About the BeadArray, will it be moving into the molecular diagnostic space?

Absolutely. The technology is very applicable, particularly as diagnostic content becomes enriched and we have a much larger number of markers related to sub-classing diseases or measuring metabolic uptake. The overall sets of markers will become more complex and therefore very amenable for use on a large array platform like ours.

Research and development spending has been fairly flat for at least 18 months. Do you have any plans to change that?

I suspect over the next year, at least, R&D spending will be relatively flat. We’re investing a fair amount in R & D and we’re having the ability, because of that investment, to pump out a large number of products.

We think we’ll be able to continue to do that with the level of spending we have now, and over time bring that into a rational range — in terms of a percentage of revenue. At that point we begin adding additional R & D spending to keep up with that percentage, and we think that’s somewhere in the range of 15 to 20 percent of revenue, on an ongoing basis.

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