NEW YORK – In line with preliminary results released last month, Illumina on Tuesday reported that its fourth quarter revenues were down 10 percent year over year, while full-year 2022 results inched up 1 percent.
For the three months ended Dec. 31, Illumina posted $1.08 billion in revenues, down from $1.20 billion in the year-ago quarter. On a constant currency basis, revenues were down 7 percent. Analysts, on average, had expected revenues of $1.07 billion.
In a statement, Illumina CEO Francis deSouza said the results were "in line with our expectations, with ongoing traction across our product portfolio amid a challenging macroeconomic environment."
Most revenues continued to come from Illumina's core business. Core revenues in Q4 came in at $1.07 billion compared to $1.19 billion in Q4 2021, while Grail contributed $23 million to Q4 revenues compared to $10 million the year before. COVID-19 surveillance contributed approximately $20 million in Q4, including $19 million in sequencing consumables. Core Illumina sequencing service and other revenue was $131 million, up 24 percent year over year, driven by higher instrument service contract revenues and an increase in oncology and inflammatory bowel disease partnership revenues.
Grail revenue for Q4 was $23 million, up 130 percent year over year, driven by accelerating adoption of Galleri and higher contributions from minimal residual disease pharma partnerships.
Illumina's net loss for the quarter totaled $140 million, or $.89 per share, compared to net income of $112 million, or $.71 per share, in Q4 of 2021. Non-GAAP EPS came in at $.14, above the average Wall Street estimate of $.10 per share. Illumina CFO Joydeep Goswami said adjusted EPS was "lower than expected due to approximately $87 million in incremental tax expense from the R&D capitalization requirements that were not repealed in Q4 2022."
The firm's R&D expenses dipped slightly in the quarter to $346 million from $350 million in the previous year's Q4, while SG&A expense increased to $432 million from $426 million.
According to deSouza, Illumina's NovaSeq X, the high-throughput sequencer the company launched with great fanfare last fall, has met with "strong customer interest," and the company has begun shipping instruments.
For full-year 2022, Illumina reported $4.58 billion in revenues, essentially flat compared to 2021, when it booked $4.53 billion in revenues, and in line with the average Wall Street estimate of $4.57 billion. Revenues were up 3 percent on a constant currency basis. Core revenues for the year were $4.55 billion, up from $4.52 billion the year before, while Grail revenues were $55 million, up from $12 million in 2021.
Sequencing instrument revenues declined 24 percent year over year to $146 million, driven by lower NovaSeq 600 shipments ahead of NovaSeq X availability, partially offset by record NextSeq 1000 and 2000 shipments.
On a conference call with investors following the release of results, deSouza noted that the firm placed more than 3,200 instruments in 2022, increasing its installed base to approximately 23,000 instruments worldwide.
Illumina's new NovaSeq X had a strong launch, deSouza reiterated, but led many customers to hold off on instrument purchases. Still, the NovaSeq 6000 saw 340 placements over the year, "with more than one-third of those instruments for oncology testing and nearly half to new-to-high-throughput or new-to-Illumina customers," he said.
For mid-throughput instruments, Illumina shipped a record 1,215 instruments, with Q4 the highest quarter on record for the NextSeq 1000 and 2000 instruments.
Illumina shipped about 1,670 low-throughput instruments with nearly 700 going to new customers, deSouza said.
Clinical markets accounted for 45 percent of core Illumina consumables shipments in 2022, and oncology testing grew 7 percent year over year. Sample volume for the TruSight Oncology (TSO) 500 comprehensive genomic profiling assay grew approximately 60 percent year over year. Genetic disease testing consumables grew 11 percent year over year, driven by "broader adoption of whole-genome sequencing globally and increased demand for rare disease treatment," deSouza said.
Research and applied markets accounted for the other 55 percent of core Illumina consumables shipments.
Americas revenues were $577 million, down 7 percent year over year. Europe, the Middle East, and Africa revenues were $301 million, down 14 percent year over year and down 10 percent on a constant currency basis. China revenues of $94 million were down 22 percent year over year and 14 percent on a constant currency basis as the region was impacted by COVID lockdowns. Asia-Pacific and Japan revenues were $93 million, down 10 percent year over year and down 4 percent on a constant currency basis. "Strong growth across clinical markets was more than offset by the conclusion of a large research project in Japan and delayed high-throughput instrument purchases due to the introduction of NovaSeq X," Goswami said.
Illumina's net loss for the year was $4.40 billion, or $28 per share, compared to net income of $762 million, or $5.04 per share, in 2021. Non-GAAP EPS was $2.12, below analysts' average estimate of $2.16 EPS.
Illumina took a goodwill impairment charge of $3.91 billion during the year related to Grail, which it said was primarily due to capital market conditions and higher discount premiums, including a standalone risk premium, on the fair value calculation of that business. Illumina had announced that it would take the charge during its third-quarter results call in November. "The reassessment of Grail's book value was really more of an accounting requirement triggered by some of the regulatory decisions coming out of Europe," Goswami said during that call.
Though Illumina completed its acquisition of Grail in August 2021, the deal was done under objections from the European Commission, which is expected to soon issue a divestment order that would unwind the transaction.
As of Jan. 1, Illumina held $2.01 billion in cash and cash equivalents and $26 million in short-term investments. This includes $991 million in net proceeds from term notes the company issued in December 2022.
In 2023, Illumina continues to expect revenues to grow 7 percent to 10 percent. This includes 6 percent to 9 percent growth of core revenues and Grail revenues ranging from $90 million to $110 million. Illumina expects more than $100 million from TSO 500 revenues in 2023, deSouza said, and COVID surveillance revenues of approximately $30 million. The company predicts EPS of $.03 to $.28 and non-GAAP EPS of $1.25 to $1.50 for the year, in line with earlier estimates.
For Q1, Illumina expects consolidated revenues in the range of $1.05 billion to $1.07 billion with quarterly revenues growing throughout 2023, driven by a ramp up in NovaSeq X shipments and utilization, recovery from COVID disruptions in China, and accelerating adoption of Galleri, and an "expected mitigation of macroeconomic headwinds in the second half," Goswami said.
In Wednesday morning trading on the Nasdaq, Illumina's shares were down 4 percent at $206.91.