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Illumina Launches Real-Time PCR Reagent Portfolio; Expects to Compete Primarily on Price

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Illumina this week announced the commercial launch outside the US of a portfolio of real-time PCR reagents, including probe-based chemistry and DNA binding dye assays for gene expression analysis, and high-resolution melting assays for genotyping studies.

The new assay products will complement Illumina's existing Eco real-time PCR system and are expected to help the company further tap into the real-time PCR market, which is currently dominated by rival Life Technologies, and which Illumina CEO Jay Flatley this week characterized as a "long-term investment" area for the company.

However, Flatley noted in a conference call to discuss the company's second-quarter 2012 financials that it would take some time for Illumina to ramp up distribution for its new reagents — a challenge the company will likely address in the second half of this year with a US distribution strategy. The new products will immediately be available through Illumina's international distributor network, the company said.

Separately this week, Illumina reported a 2 percent decrease in overall revenues for the second quarter, including a 32 percent decline in sales of instruments including sequencing and array platforms. The company did not provide details on sales of the Eco real-time PCR system.

The cornerstone of Illumina's real-time PCR product portfolio is a probe-based chemistry for gene expression analysis called NuPCR. Mark Lewis, senior vice president and general manager of Illumina's molecular biology and PCR business, told PCR Insider in an e-mail that the company did not invent the technology underlying NuPCR, but it improved upon existing technology "significantly," Lewis said, resulting in improvements in sensitivity, specificity, and ease of multiplexing. He added that the company has chosen to keep details of its external development partner confidential.

First and foremost, Illumina expects that NuPCR assays will compete on price, as it anticipates selling its assays at about half the price of competing probe-based assays. The company will also offer a "competitively priced" NuPCR master mix specifically formulated to support the NuPCR assay, Lewis said.

In addition, Lewis said that NuPCR can generate a higher signal-to-noise ratio than competing assays due to its use of nucleic acid-based enzyme called NuZyme for catalysis, which is not dependent on the 5' nuclease activity of the polymerase.

Finally, Illumina's customers will have access to a free web-based tool called DesignStudio, which will "significantly improve initial success rates and speed of overall assay development time for customers designing duplex assays" to detect target and reference genes in the same well, Lewis said.

Illumina has also used the DesignStudio tool to develop the two other offerings in its new portfolio: DNA binding dye assays and high-resolution melt assays. In fact, Lewis noted, the company put significant effort into the development of the proprietary algorithms used in DesignStudio, which Illumina also uses for other custom assays such as its TruSeq custom amplicon assays for the company's sequencing platforms.

The new products are optimized for use on Illumina's Eco real-time PCR system, an inexpensive benchtop platform that the company acquired along with Helixis in 2010 and subsequently rebranded and commercialized (PCR Insider, 7/29/2010). However, the reagents have also been validated for use on all major commercial real-time PCR systems.

Lewis said that Eco customers have thus far used a variety of commercially available reagents to run their real-time PCR experiments, and that Illumina expects that many of those customers "will be interested in moving to our NuPCR reagents." He also noted that the Eco system was "specifically designed with high-resolution melt assays in mind, incorporating a novel thermal module design that provides industry-leading thermal uniformity."

With the new products, Illumina is putting a "bullseye" on Life Tech's TaqMan-based real-time PCR offerings, Ross Muken, an analyst with ISI's Life Science Tools and Diagnostics group, wrote in a research note this week.

According to Muken, Life Tech currently controls more than 40 percent of the real-time PCR market, which is estimated to be worth more than $2.5 billion. Illumina will also compete with life science tool providers such as Bio-Rad and Roche in the real-time PCR space; to a lesser extent with Idaho Technology in the area of high-resolution melt assays; and in general with a handful of smaller real-time PCR reagent suppliers.

Muken noted that ISI believes that Illumina will use its competitive pricing and specificity differentiation "to gain a foothold in the [real-time] PCR market — particularly when competing against TaqMan — as well as keep key competitor Life Technologies rational in the sequencing market, where they have been a 'predatory pricer' in [next-generation sequencing]."

Muken also wrote that ISI believes Illumina can garner 5 percent of aftermarket sales over the next three to five years, implying a total real-time PCR revenue opportunity of "$50 million to $100 million over the medium term" for the company.

However, not all industry observers have painted a rosy picture for Illumina's real-time PCR play. In another research note published this week, Opco's David Ferreiro called Illumina's PCR reagents business "an uphill battle."

"While we view business diversification as positive, we see numerous challenges in displacing the industry leader," Ferreiro said. "We note a highly competitive marketplace with [more than] 10 players in which pricing has had little impact on market share."

In the near term, Illumina will begin its attempt to shoehorn its way into the real-time PCR reagents market overseas through its international distribution network. However, the company is currently considering the best way to break into the US market, a loose end that it hopes to tie up by the end of this year, Flatley said.

"I think we need to look at this as a long-term investment on our part," Flatley said in response to an analyst's question during a conference call this week recapping Illumina's Q2 earnings. "So we'll measure success over a period of a couple of years. It is going to take some changes in our distribution channel, which we've implemented internationally and have yet to do at the level we would like in the US but I think we're close to getting that done."

Flatley added that Illumina will "need to give that distribution channel some time to ramp up. It's not going to be as quick as our direct distribution channels typically would be for a new product. And so I think we'll measure success over probably the next two years.

"We need to have good reach to sell these products because they're sold in high volumes into lots of labs and not typically the places … where all direct sales people would've called otherwise," he added. "That's why the distribution model works well here."

In addition, Illumina may not be resting on its laurels in terms of PCR instrumentation offerings. In response to another analyst's question regarding the potential need to build out additional platforms to further support reagent sales, Flatley replied that the company is "continuing to focus on this as a business unit, and we certainly are looking at ways to continue to evolve the existing instrument, as we do with most of our platforms; and also clearly exploring what other instruments we might put into the PCR space."

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