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Illumina Acquires Moleculo, Plans to Increase MiSeq Reads to 400 Bases, Opens New Sequencing Facility

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SAN FRANCISCO — Illumina said today at the JP Morgan Healthcare conference here that it has acquired Moleculo, a Stanford University spinout that has been developing long-read sequencing technology.

CEO Jay Flatley in his presentation also discussed improvements to the MiSeq system being planned for the year, as well as new sample-prep products such as a rapid capture exome kit and a targeted RNA sequencing kit. He also provided preliminary results from the company's fourth quarter and noted that Illumina has opened another sequencing facility in Hayward, Calif., to expand its sequencing services capacity.

Flatley also said that the company has submitted its MiSeqDx system to the US Food and Drug Administration for 510(k) approval, as well as an assay for cystic fibrosis testing, as previously planned (CSN 11/1/2012).

Moleculo is a spinout from Stephen Quake's group at Stanford University that has been developing a long-read sequencing technology. The company has six full-time equivalent employees who will remain on at Illumina's new Hayward facility, Flatley said. The acquisition is the second that Illumina disclosed this week, following its announcement yesterday that it plans to buy another firm affiliated with Stephen Quake, noninvasive prenatal testing firm Verinata Health (CSN 1/7/2012).

Moleculo's technology has the "capability to take short reads and combine them into synthetic long reads that exceed 10,000 bases," which enables whole-genome phasing, Flatley said. Internally, Illumina has been able to generate synthetic reads of 100,000 bases.

The technology has "exquisite accuracy" and requires 30 gigabases of incremental sequencing, or the equivalent of one additional HiSeq lane.

Flatley said that Illumina plans to introduce the technology to phase whole genomes in its services business in the second quarter of 2013 and as a kit in the fourth quarter.

Turnaround time, including sample prep through whole-genome sequencing and phasing, is four days. Over the next couple of years, Flatley said, turnaround time could likely be reduced further, to two to three days, by reducing sample prep from two days to one.

The technology will open up other applications for sequencing, including scaffolding of genomes, which will be particularly important in agriculture studies; metagenomics; resolving structural variations in cancer genomes; and to eliminate the need for Sanger validation in clinical applications, Flatley said.

Overall, he estimated that the market for long reads comprises 10 percent of the entire next-gen sequencing market.

Illumina also has several programs internally to extend the reads of its sequencing systems, and is working on alternative chemistries for long reads. Flatley said that the Moleculo technology is "complementary to internal programs," and that the company continues to work on its own chemistries, but that they are not yet ready for market.

In the company's own research and development, it has already obtained reads of 800 bases with sequencing-by-synthesis technology, and "we're confident we can get to 1,000" bases, he said.

As part of its internal development program, it is working on new flow cell technology. Currently, clusters on the flow cells grow at different rates, which results in less than optimal utilization, said Flatley. Currently, at most only 36 percent of clusters are usable, which is "not very efficient," he said. With the new technology, the company has "achieved 75 percent clonality and we think we can push this up to 80 percent," Flatley said.

The first kits using this technology will be available in the third quarter of this year and will increase throughput and lower the cost per data point as well as turnaround time, he said.

MiSeq Improvements, New Sample-Prep Products, New Sequencing Facility

Flatley said that Illumina this year plans to increase read lengths on the MiSeq to 2x400 bases and will eventually reach 700 to 800 bases. Along with the read length increase to 400 bases, throughput of the MiSeq will double to 15 gigabases in the second half of the year. These improvements will be reagent and software upgrades, and not any changes to the hardware, Flatley said.

Also this quarter, the company plans to launch a targeted RNA-seq kit for the MiSeq using the TruSeq chemistry. The kits will enable users to design panels that include up to 1,000 targets in a single run. Additionally, Illumina will release fixed RNA panels to address "interesting pathways" such as immune response and cancer, he said, citing the p53 pathway as an example. Flatley said these kits would target the "mid-range market for expression." With the current version of the MiSeq, one run of the targeted RNA-seq kit is the equivalent of running 15,000 real-time PCR reactions, and as output increases, one run will be the equivalent of 25,000 RT-PCR reactions.

"MiSeq hasn't been, until now, very well suited for doing human RNA work, and that's because of the size of the genome and the ability to target," Flatley said.

Also within the TruSeq product line, the company is planning DNA PCR-free kits, which will be available for order by the end of the month.

To further enhance Illumina's sample-prep capabilities, the company also plans to release a rapid exome capture kit by the end of the quarter. The kit, based on Nextera's tagmentation technology, will reduce exome capture from 2.5 days to 1.5 days and will be able to prepare 96 exomes at once. The kit was developed in conjunction with the Broad Institute. Custom kits using the technology will be available in the second quarter.

Within its Nextera product line, mate-pair sample-prep kits are available now that can prepare 15-kilobase libraries in less than two days.

Finally, the firm has increased its sequencing services capacity by opening up a new facility in Hayward, Calif. In the first quarter of 2013, it will have the ability to sequence 4,000 genomes. It plans to have the capacity to sequence 30,000 genomes for the entire year.

Flatley said that while the expansion had been planned, the company opened the new facility sooner than expected due to an uptick in services.

In the fourth quarter of 2012, the company shipped 2,550 genomes and took an order for 1,500 genomes from a "major hospital system" doing an Alzheimer's study.

Preliminary Q4 Results

During his presentation, Flatley provided some preliminary results for the company's 2012 fourth quarter. MiSeq was a "star performer," he said, with more than 300 units shipped in the quarter, bringing the installed base to more than 1,000 units. Half of all orders were from non-academic customers and the company has completed the field upgrades that increase output to 8 gigabases in 75 percent of customers. Average reagent pull-through for the MiSeq is around $50,000.

Additionally, the company has begun shipping the nano and micro versions of the MiSeq flow cell kits that enable lower throughput, down to around 0.5 gigabases, for customers that want to do targeted sequencing on fewer genes or to sequence smaller genomes.

Already, 80 percent of MiSeq customers are connected to the company's BaseSpace cloud-based data storage platform, with more than half of them uploading customer data to the cloud. Flatley said this enables the company to track customer reagent use.

Flatley said that there has been stronger than expected uptake of the HiSeq 2500. In the fourth quarter, the company shipped 42 HiSeq 2500 units, or 10 per week. Additionally, the company expects more than 35 percent of its installed base to upgrade from the HiSeq 2000 to the 2500.

Going forward, Flatley said that the company plans to release 2x250 base kits for sequencing on the 2000/2500, which will enable 300 gigabases of sequence data in 60 hours, enabling three 30x genomes to be sequenced in 2.5 days, which could be especially useful in sequencing tumor/normal genomes, he said. These improvements will be reagent and software upgrades and will be available in the second half of the year.

Average reagent pull-through in the fourth quarter of 2012 for the HiSeq is expected to be around $300,000 to $350,000, similar to the second quarter of 2012.

Total revenues for the quarter are projected to be $309 million, a 24 percent increase over 2011 fourth-quarter revenues of $250 million and an 8 percent sequential increase from $285.9 million. Revenues for the entire year are projected to be $1.15 billion, a 9 percent increase from 2011 revenues of $1.06 billion.

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