This story has been updated to include comments from analysts at Barclays Capital and TD Cowen.
NEW YORK – Illumina on Tuesday spelled out its ambition and strategy for tackling the multiomics market, offering a glimpse at its product roadmap that promises to improve both the content and workflow of next-generation sequencing.
The firm also pledged to grow revenues in the "high single digits" by 2027 while achieving "double-digit to teens" growth for earnings per share. In the meantime, it plans to cut costs by at least $200 million over the next three and a half years.
"Illumina has made organic and inorganic investments to expand our reach into proteomics, single cell, and software that supports enhanced visualization," Illumina CEO Jacob Thaysen told investors in a conference call Tuesday outlining the firm’s business strategy for the next three years. "The bottom line is, Illumina will provide solutions for analyzing each omics layer — the genome, epigenome, transcriptome, and proteome — while making interpretation straightforward."
Among the products in its R&D pipeline, Illumina highlighted two, the so-called "5-base genome" and "comprehensive WGS."
According to Steve Barnard, the firm's chief technology officer, the 5-base genome is a technology that will enable both genetic variant and methylation detection in a single assay. "It's essentially a whole genome [sequencing] workflow with one added step," he said. The product "interrogates the methylation directly and then has the data interpretation at the end."
Barnard said the technology's accuracy for methylation "matches the current industry leading standards" while its variant accuracy "surpasses existing solutions." However, he did not show any preliminary data to substantiate those claims.
Once commercialized, Illumina’s 5-base genome assay will likely compete with UK company Biomodal’s epigenetic analysis products, which are based on the so-called "five-letter seq" method invented by Shankar Balasubramanian, who also developed the sequencing-by-synthesis technology used by Illumina.
Compared with existing products in the market, a major advantage of Illumina’s 5-base genome assay will be "very little hands-on time," Barnard claimed, adding that the low sample input requirement and ability to scale are other benefits of the product.
Still, it remains to be seen how the 5-base genome will compare with Biomodal’s products, which are also optimized for Illumina sequencing and enable 6-letter sequencing to detect A, C, G, T, 5mC, and 5hmC.
As for comprehensive WGS, Barnard said the product is designed to get rid of library preparation steps ahead of the sequencer. "Eliminating these steps cuts down on customer labor and reduces turnaround time while minimizing failure points in variability," he noted.
With less than 10 minutes of hands-on time, Barnard said, the assay will enable library preparation on the flow cell while generating comprehensive insights including single nucleotide variants, structural variants, phasing, and repeat expansions.
Barnard said both products will be launched within the next 12 to 18 months. In response to questions from investors, company management declined to disclose a more specific timeline at this point.
In addition to the planned products, Barnard also briefly highlighted some of the existing offerings that are part of Illumina's multiomics strategy. These include the PIPseq single-cell assay, which the company obtained through its Fluent BioSciences acquisition last month; the proteomics assay it is developing in partnership with Standard BioTools, which is currently in early access and slated to be fully launched early next year; and the Partek Flow visualization and analysis software for multiomics data, which is already on the market.
While Illumina did not comment in great detail on its plans to further develop and market PIPseq, Barnard said the company has partnered with the Broad Institute to leverage the Fluent technology for large-scale PerturbSeq single-cell studies.
Besides providing R&D updates, Illumina also outlined its business strategies over the next three years.
CFO Ankur Dhingra underscored three key drivers for the firm moving forward. For one, he said it plans to boost its core sequencing business by continuing to drive customers to transition to the NovaSeq X. Additionally, he noted that Illumina’s "scalable entry" into the rapidly expanding multiomics market will further fuel growth. Lastly, he said the company aims to expand its growing services, data, and software offerings, which he considered to be "scalable high-margin businesses with recurring revenue potential."
Meanwhile, Dhingra said the company has also taken several steps to reduce its operational costs, including making the "tough choice" of cutting its global workforce by approximately 10 percent and reducing its real estate footprint in California. Overall, the firm plans to save at least $200 million in expenses over the next three and a half years through various measures.
"We remain focused on margin improvement that is multifaceted, with a no-stone-unturned approach that looks across all functions and all geographies for optimization opportunities," Dhingra noted.
With the new business strategy, Illumina, which just reported a 6 percent year-over-year decline in Q2 revenues due to falling sequencing instrument sales, hopes to achieve revenue growth in the high single digits by 2027.
Reaching into the multiomics market, the NGS platform maker will likely directly compete with the assay developers it strives to support, leading to new market dynamics.
"Illumina remains committed to an open ecosystem and will continue to work with all our partners, including single-cell companies, to provide our customers with the flexibility to leverage the solutions they want," Thaysen assured investors.
Still, Illumina’s appetite for a bigger slice of the multiomics market is clearly apparent. "You only saw the tip of the iceberg," Thaysen said. "We are only showing you some tidbits into our R&D roadmap."
Some investors reacted favorably to Illumina's game plan. On Wednesday, investment bank Barclays Capital upgraded Illumina's shares to an Equal Weight rating while TD Cowen upgraded the firm's shares to a Buy rating.
"Overall, the [Illumina strategy update] was not as exciting as some had expected and hoped, but we think that it lays a solid framework on how we can think about the business going forward," Barclays analyst Luke Sergott wrote in a note to investors.
At market close on Tuesday on the Nasdaq, Illumina's shares were down almost 4 percent to $119.72.