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Illumina Says Population Sequencing, DTC Will Continue to Grow in the Long Term

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NEW YORK – Despite a shortfall in second-quarter revenues due to delayed population genomics projects and weakness in the direct-to-consumer genetic testing market, Illumina believes that growth in these areas will eventually return, according to CEO and President Francis deSouza.

During a conference call to discuss Illumina's second quarter results this week, he provided additional details on why Q2 revenues stayed below expectations and highlighted other areas of potential growth, including oncology, clinical genetics, reproductive health, and clinical research.

Overall, the number of population genomics initiatives spearheaded by governments, health systems, and pharmaceutical companies continues to grow, and "we have seen no change to the level of commitment that governments and other stakeholders have shown towards these projects," deSouza said.

For example, South Korea recently unveiled plans to sequence 1 million genomes by 2029, India announced plans to launch a 'Genome India' project, and other nations, including France, Singapore, and Australia, are also planning large-scale genomics projects, he said. In addition, several pharmaceutical companies are getting involved in population genomics projects. As examples, he mentioned Decode Genetics' recent deal with Intermountain Healthcare to sequence 500,000 genomes, Regeneron Pharmaceuticals' recent partnership with the Mayo Clinic to sequence the exomes of 100,000 patients, as well as EMD Serono's collaboration with Nebula Genomics to sequence the genomes of lung cancer patients.

"But as expected, these are complex programs with many stakeholders, and therefore, it can take years to gain critical mass and ramp in volume," deSouza said.

One large, undisclosed deal was expected to close in the second quarter, he said, but because so many stakeholders are involved, this did not happen, though the project "continues to move forward."

In addition, the All of Us project in the US had initially said it would sequence 25,000 genomes as a pilot project during its first year of operation, he said, but this will now likely only start in 2020. While there is no shortage of samples or funding, deSouza said, the project is currently submitting an investigational device exemption to the US Food and Drug Administration and is working with an institutional review board on obtaining approval for consenting participants for the return of results. In addition, the project is currently selecting genetic counseling service providers. "While we have moved the projection of All of Us out of 2019, we certainly expect it to be a contributor in 2020," he said.

Finally, the UK's National Health Service is currently implementing clinical whole-genome sequencing as a routine service, which is taking longer than expected. "Incorporating routine genomic testing into a nationalized health service is not a small undertaking and the NHS is in the midst of making the necessary adjustments and building an information system to support the transition," he said.

Other, smaller population genomics programs have been similarly delayed, deSouza said, but Illumina expects they will get off the ground eventually.

Also, while consumer genomics has been in decline over the past few quarters, "we are optimistic about the long-term DTC opportunity," deSouza said.

Fewer than 10 percent of people in the US and even fewer elsewhere have ever purchased a DTC genetic test, he said, so the market is not saturated yet. "In the coming years, we expect to see the level of adoption significantly increase in the US and around the world for applications including genealogy, wellness, pharmacogenomics, health, and entertainment," he said.

Oncology testing was a strong driver of revenue growth in the second quarter, deSouza said, both for sequencing instruments and consumables, and the company expects this growth to continue. Only a low single-digit percentage of the 18 million US patients who were diagnosed with cancer in 2018 had their tumors sequenced, he said, "highlighting the substantial opportunity ahead of us."

More than 10 NovaSeq systems placed with US customers in the second quarter will be used for cancer genomic profiling or liquid biopsy assays, he said, including four systems that went to customers who did not previously own a NovaSeq, "highlighting that oncology testing is starting to move firmly into the realm of high throughput," he said.

There is a growing awareness of the need for more personalized cancer treatment, he said, and the number of targeted and immuno-oncology therapies continues to increase. Last year, 12 new drugs were launched with a predictive biomarker, he said, of which nine were approved for oncology indications and four with companion diagnostics. Also, over the past two years, the US Food and Drug Administration granted breakthrough device designation for eight genomic assays, he added, including Illumina's companion diagnostic assay, which is based on the content of its TruSight Oncology 500 (TSO 500) panel, which assesses 523 cancer-relevant genes from DNA and RNA for different types of mutations, including gene fusions, and covers both tumor mutational burden (TMB) and microsatellite instability (MSI).

"With the continued emergence of new genomic biomarkers, it is clear that comprehensive genomic profiling, or CGP, will offer the best insights to improve patient outcomes," deSouza said.

Since the launch of TSO 500 earlier this year, several customers have started validating and offering tests using that panel, including global clinical research organizations. Illumina also continues to partner with three pharmaceutical companies to develop companion diagnostics for different indications. "Over time, we believe more partners will leverage TSO 500 to identify actionable mutations for additional CDx indications," he added.

He also noted that recent prostate cancer guideline updates by the National Comprehensive Cancer Network (NCCN) named next-generation sequencing as the preferred method for determining MSI status for Lynch syndrome or eligibility for pembrolizumab (Merck's Keytruda) in castration-resistant prostate cancer, and including NGS as an option for germline testing. "This is a notable development and evidence that NGS-based testing is improving the standard of care," he said.

Clinical genetic testing also contributed to growth in the second quarter. DeSouza said that five US children's hospitals added NovaSeq instruments in order to perform pediatric genomic testing. He pointed out Nicklaus Children's Hospital in Miami, Florida, as an example of a hospital that is funding clinical whole-genome sequencing for critically ill children.

On the insurance side, Blue Shield of California recently updated its policy to cover rapid whole-genome sequencing for children with undiagnosed disease. "This is a huge milestone, making Blue Shield of California the first major Blue Cross Blue Shield plan to cover whole-genome sequencing, following the positive health technology assessment review from Evidence Street earlier this year," deSouza said.

In the area of noninvasive prenatal testing, Illumina continues to see growth for both high-risk and average-risk pregnancies, deSouza said, with the largest opportunities in the US and in China.

In China, an estimated 3 million to 4 million NIPT tests are performed each year, while the country has about 15 million births per year. "We're expecting to continue to see increased penetration into that NIPT market and we're doing a number of things to continue to drive that for the longer term," he said. For example, Illumina has signed a partnership with the Medical Information Institute of the China Academy of Medical Science for an NIPT health and economics study. "The idea there is to build evidence on the benefits of NIPT for first-line use, so that we can continue to expand the penetration of NIPT in China," he said.

In the EU, "NIPT had a record revenue quarter, with growing awareness and adoption," he said, despite the fact that the test is currently only covered for 15 percent of pregnancies, though Illumina is seeing improving coverage. Customers of Illumina's CE-IVD VeriSeq NIPT test in Europe processed almost twice as many samples in the second quarters as in the year-ago quarter, he said, "driven by the positive reimbursement environment and growing awareness of NIPT benefits," he said.

Last month, Illumina launched a new version of VeriSeq NIPT that covers additional chromosomal abnormalities, he added, for which it has seen strong interest. The company expects the majority of its partner labs to upgrade to VeriSeq 2 within a year.

Finally, deSouza pointed to clinical research as an area of growth for Illumina, and the use of next-gen sequencing, not only in cancer but also in other disease areas, such as Parkinson's, Alzheimer's, and autism. He specifically pointed out Fred Hutchinson Cancer Research Institute's spinout Adaptive Biotechnologies, which recently went public; Johns Hopkins University liquid biopsy spinout Thrive Earlier Detection, which recently raised $110 million in funding; and researchers at Harvard University who want to accelerate single-cell ATAC-seq. "We're excited to see sequencing play such a significant role in these monumental research efforts," he said.

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