Driven by strong MiSeq and sequencing consumables sales as well as its services business, Illumina saw a 24 percent increase in revenues in the fourth quarter of 2012 to $309 million, compared to $250 million in the fourth quarter of 2011, officials said yesterday during a conference call discussing the company's fourth-quarter and full-year earnings.
The company also provided an update on its R&D pipeline for sequencing technology, including a ramped up effort in nanopore sequencing.
Illumina's Q4 revenue growth was driven particularly by its sequencing business, which saw revenues spike 35 percent. Instrument revenue was up 6 percent, driven by MiSeq demand. The company took orders for 300 MiSeq instruments in the fourth quarter, exceeding its shipment capacity.
Additionally, consumables revenues grew 56 percent year over year. Sample-prep products, particularly from its Nextera line, "continued to gain share and contribute significant sequencing-related growth," CEO Jay Flatley said during the call.
Sequencing services and other revenues grew 50 percent in the quarter to $30.3 million from $19.7 million in the year-ago quarter. The company shipped 2,500 genomes in the quarter and through its Illumina Genome Network took orders for over 13,000 genomes for the entire year.
Flatley said that Illumina will make investments in three key areas in 2013. First, it plans to hire 50 sales representatives to increase the geographical reach of its sequencing business. Secondly, it will invest incrementally more in research and development, including in new chemistries, nanopore sequencing technology, and bioinformatics solutions. Finally, it is planning to invest around $10 million in infrastructure projects in 2013, including one project to improve its global business processes and a second project to improve order fulfillment and manage inventory. The infrastructure build-out will be partly focused on the company's growing clinical and diagnostic customers, Flatley said.
"The strategic investments will accelerate the adoption of sequencing technology in all of our end markets," he said.
The impact of the planned acquisition of Complete Genomics by BGI, Illumina's largest customer, remains unknown. Flatley said that Illumina would continue discussions with BGI, adding that its current supply agreement runs through April 2013.
As the company said at the JP Morgan Healthcare conference in San Francisco last month, it is planning to launch a series of new products this year (IS 1/8/2013).
In the first quarter of 2013, it plans to launch a Nextera rapid exome capture kit for its HiSeq and MiSeq instruments as well as a targeted RNA-seq kit for its TruSeq product line. Additionally, it has already begun shipping its TruSeq DNA PCR-free kit.
Illumina is also making enhancements to its sequencing-by-synthesis chemistry to increase cluster density on its flow cells and the number of reads produced, which it will begin testing at field sites in the third quarter with kits available by the end of the year.
Also as previously stated, Illumina will launch Moleculo's long-read technology in the second quarter of this year through its services business, with kits available by the end of the year. The technology will enable 10-kilobase haplotyped reads, with the ability to sequence a phased genome in four days. The company disclosed its acquisition of the privately held Moleculo earlier this month (IS 1/15/2013).
Due to the Moleculo acquisition, as well as increased attention to making enhancements to its SBS chemistry and internal nanopore projects, Flatley said the company has decreased its focus on the so-called chemistry A and chemistry B technologies it was developing last year.
Flatley said last spring that chemistry A was already running in-house, with cycle times of less than 10 seconds, and could be compatible with both light and lightless detection instruments. Chemistry B, meantime, is single molecule with long reads and fast runs (IS 4/24/2012).
During this week's call, Flatley said that the company has "diverted some investment over to nanopore sequencing. And we've continued to make unbelievable progress on SBS. So if you look at the ratio of dollars being spent on alternative chemistries, it's probably shifted a little bit away from A and B because we've made such good progress on SBS and nanopores."
Illumina owns a 15 percent stake in Oxford Nanopore Technologies and has exclusive distribution rights to ONT's exonuclease sequencing technology. However, Flatley said the company's current work on nanopore sequencing is unrelated to ONT.
Additionally, due to enhancements to reagents and software for its HiSeq instrument, by the second half of the year Illumina plans to launch sequencing kits that will enable up to 300 gigabases in 60 hours.
As Illumina previously said, it has placed over 1,000 MiSeq instruments since the system's launch in late 2011. In the fourth quarter of 2012, it took orders for 300 instruments — more than it was able to ship. Christian Henry, the company's vice president and general manager of genomic solutions, said that the backlog was due primarily to the rate at which the company was able to receive raw materials, not its production capacity, and that it will work through its backlog quickly.
Flatley added that in terms of competition, he thinks MiSeq has more than 50 percent of the market share for desktop sequencers and that in head-to-head competitions, Illumina wins 80 percent to 90 percent of the time. While the company does not currently have the global geographical reach of competitors such as Life Technologies, Flatley said that hiring 50 additional sales people this year should help tap those markets.
Illumina reported fourth-quarter 2012 revenue of $309 million, a 24 percent increase over year-ago revenues of $250 million. Product revenue was $278.9 million, up from $230.4 million year over year, while service and other revenue was $30.3 million, up from $19.7 million year over year.
Research and development expenses for the fourth quarter of 2012 increased to $56.9 million from $45.5 million in the fourth quarter of 2011, while selling, general and administrative expenses rose to $79.7 million from $60.9 million in the comparable period of 2011.
The company also incurred $4.4 million in expenses related to Roche's unsolicited offer to acquire the company earlier in the year, $2.2 million in headquarter relocation expenses, and $88,000 in restructuring charges.
Its acquisition of BlueGnome contributed $7 million in revenue for the quarter.
For the entire year, Illumina's revenues increased 9 percent to $1.15 billion from $1.06 billion in 2011.
R&D expenses for fiscal 2012 were $231 million compared to $196.9 million in fiscal 2011. Full-year SG&A expenses rose to $286 million from $261.8 million in fiscal 2011.
Illumina finished the year with $434 million in cash and cash equivalents and $916.2 million in short-term investments.