Illumina 3Q13 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“This quarter, we processed approximately 90,000 consumer, agriculture and research genotyping samples, a new record and a trend we expect to continue. As we’ve previously shared, the array market trend is toward large sample numbers at lower complexity and thus lower ASP per sample.”

“Sequencing revenue grew 37% year-over-year in the third quarter, driven by impressive demand for consumables in HiSeq instruments.”

“more than 50% of MiSeqs were ordered by nonacademic customers due to enthusiasm from pharmaceutical, translational and clinical segments. Many of these customers are interested in our TruSight content sets. To date, close to 200 customers have used our panels, primarily the tumor-inherited cancer and exome sets, and are validating the assays in their laboratory setting, a process which typically takes 9 months.”

“This quarter, we shipped more than 3,000 whole human genomes, close to a 90% increase from the 1,600 genomes in the prior year period. This quarter saw orders for more than 10,000 genomes, a new record.”

“today, we announced the start of a 3-year project in collaboration with the University of Cambridge and Genomics England to sequence 10,000 whole genomes of children and young adults with rare genetic diseases. This project is the beginning of the U.K.’s effort to sequence 100,000 genomes and our participation validates our scale in high-throughput sequencing. These programs, alongside many other population projects being discussed, are going to be critical to accelerating the discovery of new associations between the human genome and disease.”

“So the strategy in oncology is to focus on continuous improvement of the tool set that we provide to that market. We don’t believe, as we’ve stated previously, that Illumina is going to take a proprietary position in particular tests in the oncology market that we would provide through our own lab operations, but rather, we’re going to continue to improve the sequencer, obviously, as well as the automation of the Sample Prep, focus on specific aspects of Sample Prep that need to be optimized for the oncology market and really fine tune the software to make the ability to decipher cancer genomes ever more powerful. ”

“We certainly have seen increased demand for instrument purchases for the routine research going on in the biopharmaceutical industry and we get orders for the labs around the world on a routine basis.”

“we’re very optimistic about the potential for companion diagnostics to move towards sequencing. I think, in terms of partnerships, they are always challenging because the need of the pharmaceutical industry is to have a product ready the day a drug gets released into the market, be globally available. And as we all know, the fraction of those drugs that actually get approved by the FDA is pretty small. So making a very large investment years before a drug decision date is a challenging business model. So we’re working through that, but I think there is going to be a big opportunity for us there.”

“Well, we’ve continued to be surprised a bit on the upside, frankly, by the HiSeq performance. So we didn’t model HiSeqs to be quite as good as they have been over the past year. But I think it’s reflective of the fact that the world just needs to do more and more sequencing as we model out our existing markets and the new emerging market opportunities. The demand for sequencing over the next 5 years is going to be absolutely enormous. And we said this for years and years, we do believe that we’re still very early in the cycle of how sequencing will be applied. There is no other displacing technology that’s likely to come online in the next 5 years. And so we continue to believe that this is going to be an absolutely enormous market and there will be demand for very high throughput instrumentation at ever decreasing prices per genome. And I think that all fuels the strategy around the high-end part of our product line.”

“a large fraction of our R&D is always focused on new platform technologies. So you can imagine about half of the overall R&D spend, if you take research out of it, I’m talking about product development here, is focused on what’s happening in our platforms. And so that would be sort of the core sequencing reagents and instrumentation and evolutions of those platforms. Probably of their other half, probably half of that is focused on various assay methods and automation of those assay methods, including our spending money on our investments in ALL and bringing that technology into the product portfolio. And so hopefully, we’ll see some very nice developments there over the next couple of years. And then the remainder is in software and we continue to put a lot of emphasis on the back end part of the software as we’ve gotten better and better at sort of processing the raw data off the machine, we need to now move downstream and figure out how do we help our customers interpret genomes much more quickly and efficiently.”

” I think there is going to be, in the long run, a market for very rapid turnaround, which might be 15 minutes to half an hour. But I don’t think there’s any technology yet that’s really addressing that market segment. And I don’t think that will be enormous. But there will be, if you fast forward a couple of years, an opportunity to develop technologies for doing screening of patients entering hospitals, as an example, triage. But no one can quite do that yet.”

“[university labs] really is the focal point of the clinical market now as opposed to, say, community hospitals, where we’re still probably a ways away from putting sequencers in community hospitals.”