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Illumina Records Strong 2021 Sequencing Instrument Sales, Touts New Chemistry X


NEW YORK – In the face of looming competition from firms like Pacific Biosciences, Oxford Nanopore Technologies, and several startups, Illumina saw renewed strength in sequencing instrument sales in 2021, while developing a new chemistry to keep the competition at bay.

In a conference call following the release of the firm's fourth quarter and full-year 2021 financial results on Thursday, company officials touted returns from sequencing instrument sales and talked up the new chemistry without providing any details.

"In 2021, we shipped more than 3,200 sequencing instruments and added more than 930 new instrument customers, over 50 percent more than in 2020 or 2019," said Illumina CEO Francis deSouza. As a result, Illumina's installed base grew to more than 20,000 instruments at the end of 2021. He also broke down placements and consumables pull-through figures for each of the instrument throughput levels.

In response to heavy questioning from analysts, deSouza also spoke more about Chemistry X, Illumina's chemistry for all future platform releases, teased at last month's JP Morgan Healthcare Conference.

Illumina reported $191 million in sequencing instrument revenues for Q4 and 76 percent year-over-year revenue growth in 2021. In a supplement to its earnings release, the firm reported $736 million in sequencing instrument revenues for the year.

"[T]he company continues to benefit from recent expansions in clinical NGS testing, especially liquid biopsy, and upcoming new product cycles should support continued strength in instrument placements in the near term," JP Morgan analyst Tycho Peterson wrote in a note to investors.

Sequencing instruments in all throughput ranges sold well in 2021.

Specifically, Illumina shipped 384 NovaSeq units in 2021, with more than one third going to oncology testing customers. "Approximately 50 percent of NovaSeq orders in 2021 were to new-to-high-throughput or new-to-Illumina customers," deSouza said. NovaSeq consumables pull-through across 2021 was more than $1.3 million per instrument, "the highest ever average even with over double the placement compared to last year," he added. However, Illumina CFO Sam Samad noted that the forthcoming NovaSeq Dx "does not represent material impact in terms of growth for instruments in 2022."

In its NextSeq mid-throughput tier, Illumina shipped more than 1,100 instruments last year, nearly doubling 2020 shipments. "This volume was driven by growing NextSeq 550 demand in clinical applications like oncology testing and reproductive health, as well as NextSeq 1000 and 2000 demand as customers expand into multiomic applications," deSouza said. More than 20 percent of NextSeq 1000 and 2000 units went to new customers using higher-throughput applications, he added.

Illumina also shipped more than 1,600 low-throughput units, partially driven by more than 700 new customers.

Illumina also raised its guidance on per-instrument annual consumables pull-through for 2022: For NovaSeq, it predicts usage in the range of $1.2 million to $1.3 million; for NextSeq 1000 and 2000, $130,000 to $180,000; for NextSeq 550, $100,000 to $150,000; for MiSeq, $35,000 to $45,000; and for MiniSeq, $20,000 to $25,000.

"Record annual NovaSeq pull-through … was notable given record placements," Canaccord Genuity analyst Kyle Mikson wrote in a note to investors. "The company also placed a record number of NextSeq instruments and increased market share in the low- to mid-throughput market."

DeSouza also noted that earlier this month, Illumina partnered with McGill University's Montreal Neurological Institute-Hospital, Takeda, and Roche to sequence a total of approximately 16,000 patients with Parkinson's disease and REM sleep behavior disorder to identify drug targets for neurological diseases.

Illumina is donating materials and data management and analysis tools to the project to support whole-genome sequencing of approximately 1,000 patients. Takeda and Roche are providing $7 million in funding over three years.

"Working with Amazon Web Services, we will use the breadth and depth of AWS' Cloud to support the project's data analysis and storage needs while keeping all of the information in Canada," Nicki Berry, Illumina VP and general manager for the Americas, said in a statement last week announcing the project.

While Illumina put the focus on its sequencing instruments during the earnings call, its new sequencing-by-synthesis Chemistry X drew much of the attention during the Q&A session.

Last month, deSouza said Chemistry X was an overhaul of Illumina's chemistry from the ground up, halving cycle times and increasing both read lengths and accuracy. On this week's call, he referred to it as "probably the single biggest advance in our chemistry since Solexa was created all those years ago."

"We can expect a step change in terms of the speed of the chemistry, and that will translate into much faster turnaround times for the tests that our customers are running," he said, adding that it represents a "big step forward in terms of price reduction. And so, depending on the form factor, depending on the instrument we put out, it will be able to deliver a lower cost in that part of the market."

Illumina has not yet announced any new line of sequencing instruments, though. "This approach of limited disclosure while promising a revolutionary product is not in line historically with Illumina's prior launches," SVB Leerink analyst Puneet Souda wrote in a note to investors. "Though we expect some investors to view the potentially faster and cheaper Chemistry X to drive increasing elasticity of demand for ILMN, we remain on the sidelines and await detailed specs that should outline if there is meaningful reduction in instrument run time (thus sample turnaround time) and/or lower price per Gb."

Faster turnaround time is especially important for clinical sequencing, deSouza said, suggesting that some NGS-based tests could be completed in about eight hours. "That would be fundamentally enabling to some clinical applications," he said, though he did not provide any specific examples. Chemistry X could also enable customers to run "much larger experiments" in single-cell and neurological research, he added.

Chemistry X may also be important to help Illumina stay ahead of the curve as new customers enter the market looking to use sequencing for high-intensity applications. "New customers are coming in at higher ends of the portfolio than we've seen historically," deSouza said. "We saw this play out in the computer with the PC market; we saw this play out with iPhones, that the devices just need to be more and more powerful."

"'NovaSeq is the new MiSeq,'" deSouza said. "That's sort of the ethos we're seeing in the market, that there is this insatiable demand for more power … if you’re targeting what's the low- and mid-throughput today, you better show up with a lot of power. Because the future low- and mid-[throughput] will look a lot more like today's high-throughput market."

Illumina expects to see sequencing instrument sales continue to grow this year, guiding for 10 percent revenue growth in the segment in 2022, driven by NovaSeq and NextSeq placements. The order backlog is nearly double what it was a year ago, and existing customers are growing their fleets, deSouza said.

Samad noted that instrument sales for COVID-19 surveillance were likely to fall off a cliff. "We don't expect, frankly, to place instruments for COVID surveillance in 2022," he said. Still, the company expects COVID-19 surveillance revenues for 2022 in the range of $130 million to $150 million.