QUOTE AND NEWS
GenEng News  Nov 19  Comment 
Officials at the U.S. Agency for International Development (USAID), the Broad Institute of MIT and Harvard, and Illumina say they have entered into a public-private partnership to aid those on the ground who are fighting the spread of Ebola. The...
Forbes  Nov 18  Comment 
In early trading on Tuesday, shares of Illumina (ILMN) topped the list of the day's best performing components of the Nasdaq 100 index, trading up 3.1%.  Year to date, Illumina registers a 70.4% gain.
newratings.com  Nov 18  Comment 
SAN DIEGO (dpa-AFX) - Genomics company Illumina Inc. (ILMN) and bioMérieux, an in vitro diagnostics firm, said they have signed an exclusive agreement to launch a next-generation sequencing or NGS epidemiology solution for service labs. The two...
Benzinga  Oct 29  Comment 
Two weeks ago, the stock market put in an important low that has led to a near 10 percent rally. If investors had purchased virtually any stock near that time, they probably saw significant gains. However, one of the industries that continue...
SeekingAlpha  Oct 22  Comment 
By William Meyers: Illumina (NASDAQ:ILMN), the leading maker of DNA sequencing equipment, reported spectacular third quarter results on Monday, October 20th. Prior guidance had been that full year 2014 revenue would grow between 25% and 26% over...
Forbes  Oct 21  Comment 
In early trading on Tuesday, shares of Illumina (ILMN) topped the list of the day's best performing components of the Nasdaq 100 index, trading up 7.2%.  Year to date, Illumina registers a 59.5% gain.
Benzinga  Oct 21  Comment 
Analysts at Janney Capital upgraded Illumina (NASDAQ: ILMN) from Neutral to Buy. The price target for Illumina has been raised from $165.00 to $192.00. Illumina shares have gained 101.16% over the past 52 weeks, while the S&P 500 index has...
TheStreet.com  Oct 21  Comment 
NEW YORK (TheStreet) -- Shares of Illumina Inc are soaring, up 8.83% to $179 in early market trading Tuesday, after the company was upgraded to "buy" from "neutral" with a higher price target of $192 from $165 at Janney Capital. Anlaysts at the...
Benzinga  Oct 20  Comment 
Illumina, Inc. (NASDAQ: ILMN) announced its financial results for Q3 2014 on Monday and beat analyst expectations. The company reported revenue of $481 million, above the average estimates of $451.2 million and a 35 percent increase compared...




 


Illumina Inc. (Nasdaq: ILMN) manufactures instruments that are used to study DNA. The company's products allow researchers to study an individual's genetic makeup, sequence genomes, and determine the specific genetic causes of diseases. Illumina's systems have three components: readers, reagents, and one-time-use arrays. Much like its competitors Affymetrix and Applera, Illumina sells the readers at low margins and generates its revenue and income from the sale of disposable arrays and reagents, which are replaced after each procedure. Each reader generates approximately $600,000 in disposables revenue per year.[1]

Illumina's customers include genomic research centers, pharmaceutical companies, academic institutions, clinical research organizations, and biotechnology companies. Illumina develops and commercializes sequencing technologies used to perform a range of analyses, including de novo sequencing, whole genome re-sequencing, gene expression analysis, and small RNA analysis. Its product and service offerings also include solutions for single-nucleotide polymorphism (SNP) genotyping, copy number variation (CNV), deoxyribonucleic acid (DNA) methylation studies, gene expression profiling, and low-multiplex analysis of DNA, small ribonucleic acid (RNA), and protein.

Illumina has expanded its product portfolio in the last few years, with the acquisitions of CyVera in 2005 and Solexa in 2007. The fastest DNA sequencer of the last generation was the 3730xl from Applera, capable of sequencing one million bases of DNA per day. In contrast, Illumina's Genome Analyzer can sequence over 600 million bases per day.[2] Next-generation products greatly decrease the cost of sequencing DNA. The falling costs of sequencing have opened up new markets for companies like ILMN. The company has partnered with 23andMe, a Google financed startup that analyzes individual customers' genotypes for various diseases.

Company Overview

Business and Financial Metrics

Second Quarter 2010 Results[3]

Illumina reported revenue for the second quarter of 2010 of $212.0 million, a 31% increase over the $161.6 million reported in the second quarter of 2009. GAAP net income for the quarter was $29.8 million, or $0.21 per diluted share, compared to net income of $24.7 million, or $0.18 per diluted share, for the second quarter of 2009. Net income for the second quarter of 2010 included $5.2 million in non-cash interest expense. Non-GAAP net income for the quarter was $34.0 million, or $0.26 per diluted share, compared to $29.2 million, or $0.22 per diluted share, for the second quarter of 2009.

Business Segments

Sequencing Technology[4]

In its DNA sequencing systems, the Company applies the SBS biochemistry on microscopic islands of DNA, referred to as DNA clusters. Each cluster starts as a single DNA molecule fragment, typically a few hundred bases long, attached to the inside surface of a flow cell. It then uses an amplification biochemistry to create copies of each starting molecule. As the copies are made, they are covalently linked to the surface, so they cannot diffuse away. After a number of cycles of amplification, each cluster might have approximately 1,000 copies of the original starting molecule, but still be only about a micron (one-millionth of a meter) in diameter. By making so many copies, the fluorescent signal from each cluster is significantly increased. As the clusters are so small, hundreds of millions of clusters can be independently formed inside a single flow cell. This large number of clusters can then be sequenced simultaneously by alternate cycles of SBS biochemistry and fluorescent imaging. Sequence reads are aligned against a reference genome and genetic differences are called using specially developed data analysis software.

BeadArray Technology[4]

Illumina’s BeadArray technology combines microscopic beads and a substrate in a simple manufacturing process to produce arrays that can perform many assays simultaneously, enabling large-scale analysis of genetic variation and biological function. Its BeadArray technology consists of two-micron silica beads that self-assemble into microwells etched into an array substrate. It has deployed its BeadArray technology in two different array formats, the Array Matrix and the BeadChip.

VeraCode Technology[4]

Illumina’s VeraCode technology platform leverages the power of digital holographic codes to provide a robust detection method for multiplex assays requiring high precision, accuracy, and speed. Each VeraCode bead type is inscribed with a digital holographic code to designate and track the specific analyte or genotype of interest throughout the multiplex reaction. When excited by a laser, each VeraCode bead emits a code image, allowing for quick and specific detection by Illumina’s BeadXpress Reader System.

Acquisitions[4]

In July 2010, Illumina acquired Helixis Inc.

Trends and Forces

A highly concentrated market poses significant growth and revenue risks

Many of the customers in these markets are government organizations, such as the National Institute of Health, or research institutions that rely heavily on government-funded research grants.[5] Any decrease in government funding would severely impact Illumina and other companies in this R&D-intensive industry. About 65% of Illumina’s revenues come from government and academic customers, who are heavily dependent on grant funding, while 35% come from corporate customers. Moreover, Illumina also sells its products to pharmaceutical and biotechnology industries, a field where consolidation is frequent. The risk of losing large customers due to mergers and consolidation is also significant.

Growing international and alternative markets open to next-generation gene sequencing technology

Customers for gene sequencing technology increasingly come from outside the 10 major genome research centers such as the J. Craig Venter Institute and the Broad Institute. Illumina is at the forefront of this trend, with 90% of its customers for its Genome Analyzer coming from outside the genome centers.[6] International opportunities are also increasing, not just in Europe, but also in China and India. Illumina earns 43% of its revenues from abroad, and with emerging economies booming, many governments are expanding funding for life sciences research. However, their sales abroad are generally denominated in dollars, so they do not benefit from the weak dollar.[7] Europe is home to many of the world’s largest research centers, but they are also heavily dependent on grants. China and India present growth opportunities for genomics research, thanks to more affordable and accessible research techniques. For example, Illumina installed 11 Genome Analyzers last quarter at the Beijing Genomics Institute, bringing its total to 17.[8] It should be noted, however, that Illumina competitor Applera has over 100 installed last-generation sequencers at the Beijing Genomics Institute.[9]

The sharply decreasing cost of sequencing is leading to the rise of consumer genomics companies

The cost of sequencing an entire genome has fallen (and continues to fall) rapidly toward the long-expected $1000 genome, leading to the rise of companies that offer sequencing of individuals’ genomes and tests for various genetic disorders. Given the size of the consumer market, it would not require massive use of these services to make them successful. If 1% of the populations of New York, San Francisco, and Los Angeles were to use one of these services, those 300,000 tests would translate to $150 million in revenue for the company (Illumina or its competitors) providing the sequencing technology. Even though these companies are still startups, the size of the potential market makes them quite important. Illumina provides the instruments to two of the companies, 23andMe, which charges $999 per individual, and deCODE Genetics, which charges $985. Illumina has actually entered into a joint development agreement with deCODE Genetics to develop tests for genes linked to heart attacks, type 2 diabetes, and breast cancer.[10]

Competition

Illumina faces significant competition in most of its product categories, notably from Affymetrix, Agilent, Applera, Sequenom, and Roche through its acquisition of NimbleGen.

Genotyping and Gene Expression

The commercial microarray market today is dominated by four companies: Affymetrix, Agilent, Illumina, and Roche/NimbleGen. Most other competitors, such as GE Healthcare and Applera, have exited the market. Affymetrix leads this market, with over 50% market share, although that dominant position is under attack from competitors. Agilent, a Hewlett-Packard spinoff, focuses on lower-cost products and has approximately 12-13% market share. Roche/Nimblegen is by far the smallest company in the pack, and focuses largely on newer applications of products for genotyping.[11] Illumina produces high-end products for genotyping, and charges a substantial premium for its products, in contrast to Affymetrix, which competes on price. While Illumina has substantial market share in genotyping and makes 80% of its revenues in this market, it has a much smaller share in gene expression, where it has been unable to steal customers from Affymetrix. Genotyping is an approximately $600 million market, growing at approximately 20% per year[12], and gene expression is a $700-750 million market, growing much more slowly at 3-5% per year.[13] As a result of Illumina's strong position in the faster-growing market, analysts expect it to overtake Affymetrix in sales of consumables in the next 12-18 months.[14]

DNA Sequencing

The DNA sequencing market is about a $900 million market, but market analysts expect it to expand significantly with the entry of the next generation of sequencing technologies, such as Illumina’s Genome Analyzer, as the cost of sequencing decreases, making it more accessible. According to analysts at market research firm Frost and Sullivan, this market will grow at 10.4% for the next few years, becoming a $1.5 billion market by 2012.[15] Illumina’s competition in this market consists largely of Applera. Roche is present through acquisition here as well, through its purchase of 454 Biosciences. Helicos BioSciences has a high-potential technology in its HeliScope system, but it only shipped its first reader in March 2008 and is not as well-known as its competitors. Despite Illumina's early launch and initial orders, Applera's SOLiD system has significant advantages despite its late launch, such as the presence of its last-generation predecessor in many laboratories and a long history of DNA sequencing expertise. Applera's last-generation machines, the 3730xl sequencers, have over 70% of the market, with over 10,000 installed.[16]

(all figures in millions) Illumina Affymetrix Applera Agilent Roche
Total Revenue366.8371.322,132.495,420.0046,133
Gross Profit231.93232.61,181.022,969.0032,390
Net Income(278.40)12.59 159.30638.0011,437
Net Profit Margin-75.89%13.65%14.63%10.99%24.79%
Return on Assets-45.69%6.87%11.25%5.33%14.63%
Return on Equity-84.48%10.18%21.13%17.80%21.45%

Molecular Diagnostics

Molecular diagnostics, at $2 billion, is the largest and most competitive market in which Illumina operates. Established competitors in this market include Abbott, Applera, Cepheid, Gen-Probe, Luminex, and Roche.[17] Illumina only entered the market in March 2007, but it has entered into partnerships to develop tests for various diseases, not just with deCODE, but also with the Mayo Clinic for several complex diseases[18], and with the Children’s Hospital of Eastern Ontario for screening children for various genetic disorders.[19]



References

  1. Illumina Inc. Q1 2008 Earnings Call Transcript--Seeking Alpha 4/22/08
  2. Illumina Products and Services: Systems & Software: Genome Analyzer system - Overview
  3. Illumina Investor Relations: "Illumina Reports Financial Results for Second Quarter 2010" July 27, 2010
  4. 4.0 4.1 4.2 4.3 Reuters: ILMN Company Profile
  5. Business Wire: Illumina Reports Financial Results for First Quarter 2004; Revenue Increases 153% Over First Quarter 2003 04/20/04.
  6. Illumina Inc. Q1 2008 Earnings Call Transcript--Seeking Alpha 4/22/08
  7. Illumina 10-K FY 2007 pg. 13
  8. Seeking Alpha: Illumina Sells 11 More Genome Analyzers to the Beijing Genomics Institute 04/28/08
  9. Genome Technology Magazine: Next-Gen Sequencers Improve, Promise More 02/2008
  10. Illumina 10-K FY 2007 pg. 11
  11. Roche Nimblegen Products and Services
  12. Micronews: Biochips and Microfluidics Chips: A Market Overview pg. 4 04/2002
  13. UBS Investment Research Illumina Inc.: Growth Opportunities Abound, but Legal Uncertainties Confound: Initiate at Neutral pg. 14
  14. JP Morgan Illumina Inc.: Taking Genetic Analysis to the Next Level; Initiating with an OW pg. 40
  15. Genetic Engineering and Biotechnology News BioMarket Trends: Genomics & Impending Market Revolutions 06/15/07
  16. The Scientist: DNA Sequencing Industry Sets its Sights on the Future pg. 44
  17. List of Molecular Diagnostics Companies
  18. Business Wire: Illumina Announces Collaboration with Established Clinical Research Institute to Develop Molecular Diagnostics for Complex Diseases 01/09/07
  19. Business Wire: Illumina and the Children's Hospital of Eastern Ontario Embark on a Research Collaboration for the Development of Molecular Diagnostics for Newborn Screening 01/08/07
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