Illumina CEO Jay Flatley said the company last month dropped the list prices and reduced the discounts for its Infinium whole-genome genotyping kits a few weeks after rival Affymetrix cut the price of its 500K array kit.
Flatley’s remarks, made during a break-out session at the UBS Life Sciences Conference in New York last week, also come a little more than two months after he had said the company “feel[s] very comfortable with the position of our products in the market and the pricing of those products.”
Flatley said Illumina created its original pricing schedule 18 months ago when the company was planning to launch its first Human-1 BeadChip. At that time Illumina set up the schedule “for where we thought the list prices were going to be for the family of products and what the volume discounts were going to look like off of that schedule.”
Flatley said that when the volumes of the kinds of deals Illumina began signing turned out to be “much bigger than we ever thought, the discounts got big as a result of that.
“The actual discounts we were giving wound up to be absurdly large,” he said, adding that they made the lists prices “not very meaningful.” This, in turn, emboldened the company to “drop the list prices and shrink the discount percentages.”
He said the result was that some customers got “somewhat better pricing” while “some stayed the same.”
As Pharmacogenomics Reporter reported in July, around 30 minutes after Illumina released its second-quarter earnings report Affymetrix announced it would immediately cut the price of its Mapping Array 500K set to $250, or by roughly half [See 7/19/2006 PGx Reporter].
In an interview at that time with Pharmacogenomics Reporter sister publication BioInform, Gregory Marcus, senior product manager of DNA analysis at Affymetrix, said that a new algorithm enabled the price cut by freeing up half the space on the two 250K chips that comprise the 500K set. [See 7/21/2006 BioInform].
Flatley, during a conference call with investors following his company’s second-quarter conference call that day, said in response to an analyst’s question that Affy’s announcement would have no effect on his company’s strategy going forward.
“We feel very comfortable with the position of our products in the market and the pricing of those products,” Flatley had said.
This week, in an interview with Pharmacogenomics Reporter, Flatley said Illumina “had been thinking about” restructuring the pricing and said the company “had a plan in place well in advance to do that.” He said Illumina ended up taking the step “probably a little sooner than we might have otherwise.”
He said the timing of Illumina’s price restructuring “was probably precipitated by Affy’s change, but it didn’t cause it.”