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Rising Demand for Illumina's Sequencing Reagents Causes Shipment Delays, Customer Frustration

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Illumina has enjoyed a steep increase in orders for its sequencing consumables in recent months, but customers have been frustrated by long shipment delays that have been affecting their projects.

Illumina officials acknowledged during an earnings call last week that a recent increase in orders has led to shipment delays for some of its customers. A company representative told In Sequence this week that resolving the issue is "a top priority" for Illumina, and that the company has already made some progress in doing so.

Illumina reported last week that sequencing consumables revenue for the first quarter grew by 20 percent over the same period last year, with revenue from TruSeq sample prep kits growing by 35 percent. Overall, consumables have now become "the largest source of sequencing revenue for the company," Illumina CEO Jay Flatley said during a conference call to discuss the firm's first-quarter earnings.

Orders for sequencing consumables also grew during the first quarter, by 33 percent over the fourth quarter of 2011. Part of this increase stems from standing orders that customers placed for the remainder of the year to avoid a price increase for TruSeq cluster and SBS reagents that went into effect in early April.

This spike in orders ultimately led to shipment delays for a number of customers.

The company saw "stronger demand than we were originally anticipating" for sequencing reagents during the quarter, so it shipped most of its "safety stock," said Christian Henry, Illumina's senior vice president and manager of genomic solutions, during the call. Rebuilding that safety stock "slowed some of the shipments in the first week or two" of April, he said, "but really doesn't have an impact on the overall second quarter."

Because the number and complexity of the sample prep kits has gone up, and orders for them have increased, some customers have also faced longer "lead times" for getting sample prep reagents, he added.

On the customer side, the shipment delays have caused serious dismay, however, as projects got stalled and service providers took the blame for a problem that did not originate with them.

Delays appear to be widespread: six out of eight customers who responded to a request about the problem by In Sequence, both from the US and from Europe, said they were recently affected by reagent shipment delays, including sequencing kits for HiSeq, MiSeq, and GAIIx and various types of sample prep kits.

Several customers said they usually receive reagent kits two to three weeks after placing their order, which they said they already find too long, but some shipments have now been delayed by more than six weeks. Other customers said that prior to the delays, they received reagents within one to two weeks.

One US-based sequencing service provider, who asked not to be named in order to maintain a good relationship with Illumina, said that standard delivery times for most consumables kits currently range from two to six weeks, causing "a lot of problems for our project turnaround times."

"Customers are not happy at all," according to the service provider, and some have wrongly concluded that it, rather than Illumina, is at fault.

Stephan Wolf, core facility director at the German Cancer Research Institute in Heidelberg, said he has been waiting on reagent kits, in particular ChIP-seq kits, for more than seven weeks now.

As a result, "it's hard for us to plan at least some of our sequencing projects and we've had to delay some of them," he said.

A US core facility director from a university on the East Coast said that shipment delays became successively longer over the last month or so. While the shipment date for an order placed in late March was a week, an order placed a week later received a three-week ship date, and an order placed the following week a five-week ship date.

The director, who asked not to be named in order to preserve his good relationship with Illumina, said he was able to borrow reagents from a nearby lab to bridge the gap until his own kits arrived, "but some labs were shut down for as long as a week or two while they waited for reagents to ship."

Illumina provided customers with various explanations for the delays.

An Illumina sales rep told the service provider, for example, that the company manufactures reagents "more or less" on demand, and that as a result, very few orders ship immediately, a problem Illumina is "working to improve" by keeping more inventory.

Anoja Perera, lab manager in the molecular biology facility at the Stowers Institute, who had to wait over a month for delivery, wrote directly to Flatley, who responded that the delays were due to a "backorder situation." She was told by an Illumina sales rep that the company received large numbers of orders as a result of the impending reagent price increase. In the meantime, her lab has received all but one of the kits it ordered.

The East Coast core facility director also believes the shipment problems stem from the recent price increase, which he said Illumina communicated poorly to its customers.

He said the 8 percent price increase, for TruSeq cluster and SBS kits, was first mentioned as a "small note" in an electronic newsletter, IllumniNotes, in mid-January, and then again in the February issue of the same publication. He missed both notes, however, because he was too busy to read the entire newsletters.

His Illumina account manager only sent him and other customers an e-mail about the price increase in late February, a week before the new prices were originally scheduled to go into effect, on March 1, a date that was later changed to April 2. Many customers likely placed large reagent orders ahead of the price change, he said.

"At the end of the day, Illumina's failure to give customers sufficient notice on a very significant price increase resulted in quite a mess," he said. "There is no reason that their sales force could not have directly contacted each customer three months in advance but apparently many members of the sales force were not informed of the price increase, and if they had not read the IllumiNotes publication, they were unaware of it."

While some customers might have placed last-minute orders, Henry said during last week's call that it is unlikely they ordered "a year's worth" of reagents because of their limited shelf life. A customer told In Sequence that most reagents affected by the price increase have a shelf life of six to 12 months.

In the meantime, Illumina is taking steps to clear the shipment delays and has made "significant progress" in supplying large volumes of reagents to customers over the last few weeks, according to Tristan Orpin, senior vice president and chief commercial officer.

Orpin told In Sequence that the primary cause for the delays was high demand that "outpaced available quality control capacity." He did not mention possible reasons for the high demand.

He said that in response, Illumina is "investing even more heavily in manufacturing and quality control capacity to meet the rapidly increasing demand for our products. We are very focused on implementing systems and processes that enable us to deliver the highest quality products while still achieving the short supply times required by our customers."

"We understand the impact these delays have had, we apologize to all of our customers for those delays, and we are working aggressively with affected customers to resolve this issue," Orpin said.

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