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Illumina's New CEO to Focus on Software as Flatley Takes on Reimbursement

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NEW YORK (GenomeWeb) – Software is becoming an increasingly important part of Illumina's business, and will be a key focus of current President Francis deSouza when he takes the helm as CEO in July, current CEO Jay Flatley said in a Q&A at Goldman Sachs' Global Healthcare Conference last week, which was webcast.

Flatley, meantime, will stay on as executive chairman of Illumina and said that part of his role would involve tackling the reimbursement challenges for clinical next-generation sequencing products.

Flatley said that although software has always "been a necessary component of what we do," it hasn't been a revenue generator. But, as it becomes increasingly important for the company's clinical products and its HiSeq X Ten platform, the firm will focus more on that portion of the company. Illumina employees who worked on software aspects and were previously spread throughout the various units of the company now all operate under the enterprise informatics business unit, Flatley said.

The unit has enabled deals like the one announced in February with Genomics England to develop interpretation tools for its 100,000 Genomes Project. Those types of projects will become more important for enabling population sequencing. "We need a full-scale solution where we can do it and install it on a turnkey basis," he said.

Illumina is also "taking steps to monetize investments in software," Flatley said, initially through its BaseSpace platform. Last year, it launched version two of BaseSpace Onsite, a locally installable version of BaseSpace cloud. BaseSpace Onsite sells for $60,000 for the first year and an addition $15,000 per year afterwards. The company continues to enable additional sequencing instruments to stream data on both the cloud version and the onsite version, and Flatley said that customers are now beginning to "take subscriptions to use BaseSpace at very significant storage and compute levels."

Flatley noted that building out the software infrastructure will be "an important area of focus" for deSouza, who was previously president of products and services at cyber security firm Symantec.

Software will also be increasingly important for clinical systems, Flatley said. This includes both the software that runs inside the sequencing instruments, enabling a more hands-off approach from the customer, as well as the software that goes with the instrument, such as variant calling, clinical interpretation, and the LIMs infrastructure. "The intricacies of how you re-QC samples when you have sample failure is an area of increasing importance," Flatley said.

As part of his efforts to focus on the reimbursement challenges for clinical NGS tests, Flatley said he would be working with both the payor community as well as the US Food and Drug Administration.

Some of the main challenges right now include getting clarity on how the FDA will regulate laboratory-developed and in vitro diagnostic tests, and what will be required to bring NGS tests through IVD clearance. He said that Illumina will especially focus on oncology, including through its work with the Actionable Genome Consortium to develop standards, as well as with its TST15 product — a targeted NGS test that analyzes the 15 cancer genes for which there are associated approved drugs.

Part of Illumina's role, Flatley said, would be to "reconsolidate the market around a set of standards." One current challenge for payors right now, he said, is that there are so many different cancer panels. These panels look at different genes — in some cases, different portions of the same gene — use different methods for target capture, and have different coverage metrics. The launch of TST15, in particular, he said, was an "attempt to create a standard in the market."

Aside from standards, Flatley said the company would be working with payors on specific projects to demonstrate the health economic benefits of using NGS in specific applications.

Finally, he said, he would be discussing with the FDA how to bring NGS panels through regulatory clearance with the flexibility to add new content. For instance, the current TST15 panel will in a few years need to have more genes added to it as pharmaceutical companies bring new drugs through FDA approval that target different genes. There needs to be a rapid way in which to add those genes, he said. "If you have to redo all the clinical trials, it doesn't work."

Besides his focus on software, deSouza will continue Illumina's clinical push and will also focus on making the company more global, which could involve tailoring products to suit the specific geographical location in which it's being sold.

In a separate presentation at a William Blair conference this week, which was also webcast, deSouza said that Illumina's spinout company Grail is on track to launch a clinical trial next year for its non-invasive early-stage cancer test. An eventual product would cost less than $1,000, he said, and would likely be self-paid initially, but eventually reimbursed.

He added that reproductive health and population sequencing are two other key markets for Illumina. Interest in population sequencing has piqued recently, he said, with the announcement of the US Precision Medicine Initiative, the Cancer Moonshot initiative, and Genomics England's 100,000 Genomes project. In addition, he said, while the specifics of the Chinese Precision Medicine Initiative are still being worked out, there is the potential that China could spend $10 billion over the next 15 years on that project. As a result, he said, there has already been significant demand from "companies ordering our high-end instruments in anticipation of the sequencing that will be associated with it."

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