People can argue all day about whether Illumina has, at last, given us the $1,000 genome. The answer does matter, because the cheaper it gets to sequence a whole human genome, the easier it will be to gather lots of them. That will help us understand what makes people different, and shed light on what causes disease. Or so scientists hope.
It’s heady stuff. But that’s not the biggest story at Illumina right now.
The big story is that San Diego-based Illumina (NASDAQ: ILMN) has cemented its position as the dominant player in genomics, at what you could call the beginning of the age of genomic medicine. Through a series of in-house technology advances and savvy business strategy, the company has put itself in an enviable spot. It has a broad and loyal customer base, faces marginal competitive threats, and its market is growing beyond research into the broader world of medical diagnostics.
Illumina is still not that huge, with $1.42 billion in revenue a year ago, but it recently told investors it sees a total addressable market ahead of $20 billion. Illumina should capture 75 percent of the market through 2020, Goldman Sachs analyst Isaac Ro recently said in a note to clients.
“There is, as far out as we can see, an insatiable demand for whole genome sequencing,” CEO Jay Flatley told investors last week on a conference call.
The stock climbed 37 percent in January alone, to close at $152. Not bad for a company that was the subject of a hostile takeover bid, at $44.50 a share, less than two years ago.
“It’s a terrific company, and they are in a very dominant position,” says Jay Shendure, an associate professor of genome sciences at the University of Washington. “It’s hard to see that changing in the near future.”
For those who missed the news a few weeks ago, scientists were buzzing over two announcements Illumina made at the JP Morgan Healthcare Conference in San Francisco. One was that it had developed a new top-of-the-line sequencing system, called HiSeq X 10. It’s supposed provide whole genome sequencing at full-factory scale, with 10 sequencers (total price: $10 million) running together. At that scale, those machines can crank out 18,000 genomes per year, bringing the price down to an estimated $1,000 apiece. It’s a big deal, not only because scientists have been anticipating the $1k genome for a decade, but because it will enable scientists to run all kinds of ambitious new experiments, involving tens of thousands of patients, that weren’t possible before. Early orders have come in from Macrogen, a genetic sequencing service based in Seoul, South Korea; the Broad Institute in Cambridge, MA; the Garvan Institute of Medical Research in Sydney, Australia; the New York Genome Center; and Amgen’s (NASDAQ: AMGN) deCode Genetics unit.
The other Illumina story got less attention, but is probably even more important for the company. The NextSeq 500 was unveiled as the company’s new middle-of-the-lineup offering. It’s priced at $250,000 per instrument (about one-third the list price of its current workhorse HiSeq 2500). Unlike the large HiSeq, it’s small enough to sit on a desktop, and easy enough to use that anybody in the lab can run one, not just a specialized technician. That little desktop machine can deliver almost 10 times the output of Illumina’s current desktop sequencer, the MiSeq.
Through a series of technical advances in automated sample prep, advanced optics, and surface chemistries, Illumina’s new NextSeq can do an entire human genome sequencing run in about 30 hours, says Christian Henry, the company’s chief commercial officer.
That whole package, with the combination of lower price, high performance, and the ease of use, is exactly what someone needed to do to come up with a product that could be sold to hospital pathology labs, says Todd Smith, a Seattle-based bioinformatics entrepreneur. Hospitals don’t like sending DNA samples away to some distant lab—many prefer to sequence patients on site, get an answer fast about what’s wrong with a patient, and use the info to help guide doctors. A fast, powerful desktop machine also appeals to scientists, who want their data tomorrow, not next week, especially when they are competing to get their next big paper in Nature.
Ro, the Goldman Sachs analyst, predicts the NextSeq will almost immediately be the company’s second-best selling sequencing instrument, and will rival sales of the cheap and versatile MiSeq desktop sequencer by 2016.
People in genomics tend to be a skeptical bunch, as some commercial players tend to make grand claims that they can’t back up over time. After allowing some of the news to sink in, and reviewing notes from a recent in-depth conversation I had with Henry, I’ve been trying to put my finger on what has enabled Illumina to be so successful where others have failed. Here are some thoughts:
—It has a highly productive internal R&D team. A common view in the industry is that Illumina is a savvy acquirer of innovation, and good at integrating things, but not really a fountain of innovation itself. Many point to the company’s 2007 acquisition of Hayward, CA-based Solexa is a key piece of supportive evidence. But these latest announcements … Next Page »