NEW YORK (GenomeWeb News) – Illumina's second-quarter revenues retreated 2 percent year over year, but beat the consensus Wall Street estimate, the company reported after the close of the market on Tuesday.
For the three months ended July 1, the San Diego firm had revenues of $280.6 million, compared to $287.5 million a year ago, and above analyst estimates of $278.7 million. Product revenues slid to $258.8 million from $269.9 million a year ago, while service and other revenues rose to $21.8 million from $17.6 million.
On a conference call following the release of Illumina's earnings, Marc Stapley, senior vice president and CFO, said that instrument sales of $72 million were down 32 percent year over year with decreases in both sequencing and array instrument sales.
He added that consumables now are 65 percent of total revenues and that the company is very pleased with the trend.
Illumina President and CEO Jay Flatley added on the call that core sequencing consumable revenues for the first time surpassed instrument revenues, but said that he was pleased with the impact of the HiSeq 2500 platform and that 75 percent of orders include the upgrade. He said that the 2500 has helped the outlook on the overall trendline for the HiSeq line of sequencers and noted a surprising sales performance from the HiSeq 1500 during the quarter.
On the MiSeq, the company remains on track to submit the instrument to the US Food and Drug Administration for 510(k) clearance before the end of 2012, he said. Upgraded versions of the instrument will begin shipping from Illumina's factories within the next two weeks and the field upgrade program is about to start.
Initial test upgrades, Flatley said, have gone "extremely well."
On Monday, Illumina announced the launch of its real-time PCR reagents portfolio and said that the availability of its NuPCR technology in the US would be announced in the near-future. It is available in other markets through the company's international distributor network
Flatley said on the conference call that the portfolio would be priced very aggressively and that Illumina was working on its distribution strategy. The company continues to focus on this as a business unit and is exploring new instruments.
On its array business, Flatley said overall, it was flat. The instrument business was positive, while whole-genome association type chips were trending down. Exome chips were positive during the quarter, however, and ag-bio chips also is on a positive trend.
R&D expenses during the quarter increased 40 percent to $71.2 million from $50.8 million during the second quarter of 2011. Included the recently completed period was a one-time charge of $21.4 million related to in-process research and development associated with the impairment of an early stage technology that was purchased in 2010, the company said. It also included $7.7 million and $8.5 million of non-cash stock compensation expense in the second quarters of 2012 and 2011, respectively.
SG&A expenses were down 1 percent to $68.5 million from $69.2 million in the year-ago period.
Illumina profits for the quarter were down to $23.4 million, or $.18 per share, from $30.6 million, or $.22 per share a year ago. On a non-GAAP basis, EPS was $.40, surpassing analyst estimates of $.36.
The company said that it has purchased $32 million of its stock under a previously announced share buyback program. Illumina exited the quarter with $316.4 million in cash and cash equivalents.
In a statement, Flatley said Illumina is reaffirming 2012 revenue guidance of between $1.1 billion and $1.18 billion and raising its non-GAAP EPS to a range of $1.50 to $1.60, from a previous range of $1.40 to $1.50.
"We are very pleased with our operational execution for the first half of 2012 and the resulting financial performance," Flatley said in the company's statement. "While some uncertainty exists with respect to academic and research funding in the second half of the year, our outlook is generally as we anticipated."
Illumina shares inched up 1 percent to $42.06 in late-morning trading on Wednesday on the Nasdaq.
In a research note today, Amanda Murphy, an analyst at William Blair, said that while government and academic funding remains a real risk to Illumina through 2012 and into 2013, "we believe that fundamentals of the base business have begun to stabilize (and are even improving) and that the company now has better visibility into its reagent revenue stream."
She added that in the longer term, "Illumina should maintain its dominant market share in a space that is garnering more attention and utilization (sequencing)."