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Illumina Says Analyzer Saw ‘Broad Adoption’ In Q4, Vows to Improve Tool to Face Rivals

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Illumina this week reported a “broad adoption” of its Genome Analyzer during the fourth quarter of 2007, while a senior company official said that demand for next-gen sequencing tools in general will be “literally insatiable for at least the next 10 years.”
 
Company officials also said they are well aware of the mounting competition for its next-generation sequencing platform, and the company is working on improving the system’s performance and facilitating data analysis. Eventually, the firm plans to use the platform in sequencing diagnostics.
 
Illumina officials made their remarks during the company’s fourth-quarter conference call, during which they reported that total revenue during the period rose 86 percent to $112.6 million over the year-ago quarter.
 
Of that total, $41.8 million came from instrument sales, up 216 percent from the year-ago quarter. Instrument revenues were “driven by the rapid uptake of the Genome Analyzer,” Illumina Chief Financial Officer Christian Henry said during the company’s earnings call this week.
 
Illumina does not break out sequencer sales, but said that about two-thirds of the analyzers sold during the quarter went to customers outside of genome centers.
 
“We are seeing a broad uptake in all of the geographical territories, with the small or mid-sized customers as well as the genome centers,” Henry said. “This broad … adoption probably surprised us a little bit,” he added, attributing it to “the breadth of applications” the instrument can support, such as ChIP sequencing, digital gene expression, and small RNA analysis.
 
The company reiterated that as of the end of 2007 it had shipped more than 200 Genome Analyzers, including 14 instruments Solexa had shipped before being acquired by Illumina last year.
 
What has changed over the last year, according to Illumina CEO Jay Flatley, is that genome centers that have had a Genome Analyzer for more than three months are beginning to put it into production mode.
 
“Some of the genome center customers take these [instruments] from the situation where they are exploring applications and … different parameters with the system, and pushing them into true production environments,” he said during the call.
 
This trend has resulted in greater consumables sales, and Flatley said the company has “begun to see very strong repeat orders from these customers on the consumables side.”
 
Although it is too early to tell how much consumables revenue each system will eventually generate, “we continue to feel pretty good about our estimates, that are in the $150,000 to $200,000 range,” he said.
 
Total consumables revenues during the quarter increased 76 percent to $56.2 million, “driven by strong demand across the family of Infinium arrays as well as the pull-through of sequencing consumables from the Genome Analyzer,” Henry said during the call.
 
Flatley also alluded to the rising competition in next-generation sequencing, referring to Applied Biosystems, which launched its SOLiD sequencer last fall, as “a very big competitor.”  
 
Illumina said that with more than 200 units placed in labs since the platform was launched, the company has the largest installed base of next-generation sequencers to date — neither Roche/454 nor Applied Biosystems report numbers of installed instruments — but “what we need to do as an organization is make sure that we continue to innovate very rapidly so that we can still be the company that’s ahead two or three years from now,” Flatley said.
 

“The sequencing demand in the marketplace, we characterize it as literally insatiable for at least the next 10 years.”

Besides increasing the overall performance of the instrument, he said Illumina is working on improving how the tool manages and analyzes data. “I think the biggest challenges in the small labs are on the informatics side, having both the compute infrastructure … and also the ability to run the software and do the data analysis,” he said.
 
In an attempt to confront that challenge, the company is developing a program that will “dramatically reduce the amount of data that actually comes off the system,” he said. “That new capability will come to the market fairly quickly and provide great relief, not only to the single-user customers but also for the genome centers.”
 
The company is also defining computer configurations for customers and is “working very hard” on “making the analysis software package more and more shrink-wrapped” he said, adding that “it’s not fully available yet, but it will be.” He reiterated that the company is “consistently generating internal sequencing runs of over 3 [gigabases] of high-quality data” using paired-end sequencing.
 
In addition, Illumina beta-site customers are expected to present data from paired-end runs at the Advances in Genome Biology and Technology meeting on Marco Island this week.
 
In terms of applications for the system, Flatley said that the company sees “market excitement around migrating specific applications to sequencing that have traditionally been run on microarrays,” such as mRNA tag profiling or small RNA discovery.
 
The sequencer is also being used in large-scale sequencing projects such as the 1,000 Genomes Project (see In Sequence 1/22/2008), he pointed out.
 
Mid-term, demand for next-generation sequencing in general will grow more, Flatley predicted. “The sequencing demand in the marketplace, we characterize it as literally insatiable for at least the next 10 years,” Flatley said, and it will only be limited by the amount of funding available, which he believes “is going to be very robust over the next few years.”
 
Illumina’s capacity for manufacturing Genome Analyzers is currently sufficient, Flatley mentioned. “The product is at a point where it’s beginning to become very stable in terms of the design changes. I think we are going to get more efficient as we go forward, which will allow us to produce more instruments per unit of labor that we put in.”
 
Eventually, he said, the sequencing platform will also find a place in diagnostics. “Clearly, there is going to be a large and emerging market for sequencing diagnostics as well, and we clearly have a platform technology to do that,” he said, adding that “it may not be the existing version of the instrument that would do diagnostic sequencing.”

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