Sales of Illumina's HiSeq instrument and consumables are continuing to drive the firm's revenue gains, leading to a 25 percent increase in third quarter revenues over the previous year, the firm said this week.
Illumina reported revenues of $357 million for the three-month period ended Sept. 29, up from $285.9 million for Q3 2012. Its sequencing business grew 37 percent, "driven by impressive demand for consumables and the HiSeq," CEO and President Jay Flatley said during a conference call to discuss the company's third quarter results.
Flatley also disclosed on the call that Illumina will exit the qPCR market. "Given the tremendous opportunities for our sequencing and array technologies, we need to continue to focus our R&D and commercialization priorities," he said.
By the end of the year, Illumina will cease selling its Eco real-time PCR instrument and PCR assays, but will "continue to provide service and support for the installed base for a customary period," Flatley said.
Sequencing consumable revenue grew 38 percent, year over year, due to higher system utilization and the company's growing sample prep business. In the third quarter, sample prep shipments grew more than 25 percent, driven by its Nextera product line, Flatley said.
During the third quarter, Illumina shipped over 100 HiSeq instruments, a feat it has accomplished only four times since the launch of the system four years ago. Of the new HiSeq orders, more than half were from existing customers looking to add capacity. New customers made up 40 percent of HiSeq orders.
The 2500 version has proven to be particularly successful, said Flatley, and 80 percent of new HiSeq orders were for the 2500, with commercial, translational, and hospital customers accounting for half of those orders.
MiSeq orders, while down slightly sequentially, were still up year-over-year, said CFO Marc Stapley. Additionally, the firm has lowered its consumable pull-through estimate for the MiSeq from around $50,000 per year to between $40,000 and $45,000.
Stapley said that in the third quarter 70 percent of MiSeqs were placed with new customers looking to validate targeted panels on the system. Because validation can take some time, utilization of the instrument is lower, he explained.
Annual pull-through for the HiSeq was within the firm's anticipated range of $300,000 to $350,000.
Illumina has completed upgrade orders for the 2500, which brought in around $3 million in revenue, Stapley said. The 2500 was "one of our most successful product roll outs to date," he added.
Moving forward, Flatley said he expects to see continued demand for HiSeq instruments. "As we model out our existing markets and the new emerging market opportunities, the demand for sequencing over the next five years is going to be absolutely enormous," he said. "There will be demand for very high-throughput instrumentation at ever decreasing prices per genome, and I think that all fuels the strategy around the high-end part of our product line."
The 2500 product in particular, has given the company access to accounts that wanted to get into sequencing, but for whom the turnaround time was too long, added Christian Henry, senior vice president and general manager of genomic solutions. "The 2500 has given us that boost in terms of market penetration that I think will continue to extend into the future," he said.
Strong Q3 for services
Illumina took orders for more than 10,000 genomes in the third quarter. It shipped around 3,000 whole genomes, a 90 percent increase from the prior-year period, Flatley said.
This increase was driven primarily by the firm's partnership with the Global Genomics Group to provide whole-genome sequencing for the Genetic Loci and the Burden of Atherosclerotic Lesions, or GLOBAL, clinical trial.
Overall, the services business, which includes sequencing services, genotyping, the BlueGnome and Verinata Health businesses, grew 64 percent to $38.2 million, up from $23.5 million.
In July, Illumina began offering synthetic long reads using the Moleculo technology as a service, and Flatley reiterated the company's intent to launch a kit version by early next year.
"We continue to be very excited about the enabling capability that those synthetic long reads will bring to the market," he said, but did not elaborate on how many customers were using the technology.
Flatley also did not comment on the company's recent licensing deal with the University of Alabama, Birmingham and the University of Washington for nanopore technology.
Researchers from those institutions have been developing a nanopore sequencing system that couples the Mycobacterium smegmatis porin A, or MspA, pore with a system for ratcheting DNA through a nanopore. The team published their most recent study in Nature Biotechnology last year.
Due to Illumina's strong quarter, which beat Wall Street consensus estimates, the company raised its 2013 guidance and said it is now anticipating 22 percent revenue growth.
The firm's quarterly revenues of $357 million surpassed the consensus estimate for revenues of $343.6 million.
Its product revenues rose to $318.6 million from $262.4 million. Instrument revenue was $100 million, up from $82 million in the year-ago quarter, while consumable revenue increased 22 percent to $216 million from $177 million.
Illumina's sequencing business grew 37 percent, while its microarray business decreased 3 percent.
Illumina posted net income of $31.4 million, or $.22 per share, compared to $29.7 million, or $.22 per share, for Q3 2012.
The firm's R&D spending jumped around 31 percent to $71 million from $54.1 million, and its SG&A expenses increased around 37 percent to $95.6 million from $69.8 million.
Illumina finished the quarter with $1.03 billion in cash, cash equivalents, and short-term investments.