This article was originally published Oct. 26.
Due to continued growth in MiSeq sales, more customers than expected ordering upgrades to the HiSeq 2500, and a 54 percent uptick in its services business, Illumina's revenues rose 21 percent in the third quarter of 2012, to $285.9 million from $235.5 million in the third quarter of 2011.
In general, the 21 percent revenue increase was "due to the strength of our sequencing business," said chief financial officer Marc Stapley during a conference call discussing the company's quarterly financial results.
Another bright spot has been the company's TruSeq and Nextera sample prep product lines, where "revenue year to date has more than doubled as compared to the same period last year," CEO Jay Flatley said.
Additionally, the company is seeing "diversification" in its customer base, said Flatley, with growth coming from the clinical, translational, and applied markets.
Moving forward, Flatley said that the HiSeq 2500 instrument and upgrades to the MiSeq put it in a good position to compete in the sequencing market, despite the recent launch of Life Technologies' Ion Proton machine.
Nonetheless, the company is maintaining conservative estimates for future revenues due to uncertainty surrounding federal research funding. Therefore, it is projecting full-year revenues between $1.134 billion and $1.144 billion, equating to fourth-quarter revenues of $295 million to $305 million — an 18 percent to 22 percent increase over its 2011 fourth-quarter revenues of $250 million.
Another unknown is the impact of a potential purchase of Complete Genomics by BGI. The Chinese research institute is Illumina's largest customer, operating more than 100 HiSeq 2000 machines out of its Shenzhen and Hong Kong laboratories.
In September, BGI proposed to take over Complete Genomics for $117.6 million (IS 9/18/2012). The deal has not yet been finalized. Flatley said that it is still too early to say how the possible takeover would affect Illumina, but estimated that around 10 percent to 20 percent of BGI's work is whole human genome sequencing — the focus of Complete's sequencing technology.
"We're in discussions with BGI to get a sense of where the relationship may go," he said.
Flatley said orders for the MiSeq instrument have grown for the fourth consecutive quarter and that the company believes it has "50 percent share of installed units and a significantly higher share of the market revenue" within the benchtop segment of the market.
Additionally, he said that a rollout of MiSeq upgrades — which increases read lengths to 2x250 base pairs and output to 7 gigabases — is around 40 percent complete, and many customers are seeing greater throughput than promised, up to around 10 gigabases per run.
Each MiSeq instrument generates around $45,000 in pull-through revenue for the company per year.
Flatley added that the MiSeq trade-in program continues to be successful, although he did not provide specifics. The company offers discounts on the MiSeq for customers who trade in an Illumina GA machine or a competitor's system (IS 7/31/2012).
Another trend in MiSeq sales has been orders for multiple systems, with around 20 percent of customers ordering multiple units in the third quarter, Flatley said, which is "a change over where we've been."
The MiSeq system has also opened up new markets for the company beyond its core base of academic researchers, said Flatley. While Illumina has focused heavily on penetrating the clinical market, Flatley said that there are also opportunities in applied markets, such as food-borne pathogen testing and forensics.
As an example of the opportunity for sequencing in applied markets, he cited the recent Food and Drug Administration contract to use the MiSeq in federal and regional labs for pathogen sequencing. The contract could be worth up to $17 million over the next five years (IS 10/9/2012).
Additionally, he said, there "huge untapped opportunities for us" in forensics.
Illumina will begin the full shipment of its HiSeq 2500 instruments sometime in the next few weeks, following early-access shipments in the third quarter. Flatley said he's been pleased with interest in the machine from new customers, as well as core labs and research centers that are adding capacity.
Additionally, based on orders booked to date, "at least 30 percent of the installed base of HiSeq 2000 and 1000 instruments will be upgraded, exceeding our expectations," he said.
Flatley predicted that the HiSeq 2500 instrument, because of its faster run times, would also help increase consumable revenue, since the system yields greater revenue per genome. The company has said previously that it expects annual consumables revenue of between $300,000 and $400,000 for the HiSeq 2500.
Third-quarter revenue increased 21 percent year-over-year to $285.9 million from $235.5 million. Instrument revenue represented $82 million, up 15 percent from the year-ago quarter; and consumable revenue was $177 million, down 4 percent sequentially, but up 22 percent compared to the third quarter of 2011. Total product revenue was $262 million, compared to $220 million in the third quarter of 2011.
Services and other revenue, which includes genotyping and sequencing services as well as instrument maintenance contracts, was $23 million, a 54 percent increase over year ago quarter revenues of $15 million.
Research and development expenses totaled $54.1 million this quarter, compared to $50.4 million in the year-ago quarter, while selling, general, and administrative expenses rose to $69.8 million from $66 million. Illumina also had around $4 million in expenses related to Roche's failed attempt to acquire the company earlier this year and it spent $88 million in cash acquiring BlueGnome.
The company ended the quarter with $343.1 million in cash and cash equivalents.