Illumina Outlines New Corporate Strategy

SAN DIEGO – Illumina, Inc. (Nasdaq: ILMN) is rolling out a revamp of its corporate strategy and is looking to lead in a new direction for the genetic sequencing is priced.
The global leader in genomics announced Aug. 13 in a special presentation that it plans to shift from a cost per gigabase model to charging for complete end-to-end sequencing.
“We refer to this as to total cost of workflow,” said Illumina CEO Jacob Thaysen. “Illumina is uniquely positioned to provide this value at scale.”

Thaysen explained that the genomics industry has “reached an important pivot point,” where sequencing is now not always the “main cost of getting high-quality answers to biology questions.”

The new pricing strategy will focus on reducing the main drivers of cost in producing whole genome and single cell sequencing. According to Illumina, 40% of the cost of a whole genome is sequencing, while 45% of the cost is in the data analysis and interpretation.
“So from a cost perspective, there is more value in driving down the cost of interpretation and infomatics – ideally in concert with sequencing costs,” Thaysen said.

In producing sequencing, a next-generation sequencing (NGS) method that analyzes the nucleic acid sequence information of individual cells, sample preparation accounts for 50% of the cost. Illumina’s acquisition last month of Fluent BioSciences addresses that part of the workflow, Thaysen said. In late 2023, Illumina also acquired NGS bioinformatics software company Partek.

“Illumina has made organic and inorganic investments to expand our reach into proteomics, single cell and software that supports and enhances visualizations,” he added.
Those investments are already paying off. In conjunction with the strategy update, Illumina also announced announcing a new research partnership with the Broad Institute of MIT and Harvard to advance single-cell sequencing and accelerate adoption of high-capacity single-cell experiments, leveraging Illumina’s newly acquired Fluent technology.

Q2 Earnings ‘Ahead of Expectations’

With its new strategy, Illumina expects high single-digit revenue growth by 2027 with “a clear strategy to get there with distinct building blocks,” Thaysen said.

Areas where the company looks to build includes the liquid biopsy market, which Thaysen described as “an $800 million opportunity today for Illumina,” that is expected to grow “at 34 CAGR over the years.”

Illumina is also planning to focus on adding a new main customer group: pharma, “which has historically been underserved,” Thaysen said.

The new corporate strategy comes at a time when Illumina is starting to turn a corner following a tumultuous year for the company. In June, Illumina completed its divesture of GRAIL, an Illumina spinout that the company later required, prompting antitrust actions by regulators in the U.S. and EU. The controversy led to the ouster of former CEO Francis deSouza. Thaysen was named CEO in September of last year.

In addition to the GRAIL controversy, Illumina has also seen a steady decline in business since a peak during the pandemic when healthcare around the world utilized the value of sequencing. In August 2021, shares of ILMN reached just above $500. Shares or ILMN are currently trading around $122.

“We have the right strategy to return to growth and increase our profitability,” said Illumina CFO Ankur Dhingra at the Aug. 13 presentation. “Looking ahead, we expect to see accelerating revenue growth over the next three years while also delivering differentiated earnings expansion.”

Investors are also expecting growth. Following the strategy update, investment bank TD Cowen upgraded Illumina’s stock rating from Hold to Buy and set a target price for ILMN at $144. Shares jumped around 2% on the news.

Illumina’s strategy update follows the company’s Q2 earnings report that “delivered results ahead of our expectations in the quarter,” Thaysen said.

Although Illumina’s Q2 earnings of $1.09 billion came in 6% below Q2 2023, it was 3% up from this year’s first quarter. Still, the company lowered its fiscal year guidance by 2% to 3%.

Thaysen highlighted Illumina’s “solid” consumable sales to existing customers but pointed out that “instrument demand has softened in a constrained funding environment.”
He added that Illumina is making progress on its “excellence initiatives and will deliver expanded margins this year.”

Illumina
FOUNDED: 1998
CEO: Jacob Thaysen
HEADQUARTERS: San Diego
EMPLOYEES: 9,000+
BUSINESS: DNA sequencing
STOCK: ILMN (Nasdaq)
REVENUE: $4.5 billion (FY 2023)
WEBSITE: www.illumina.com
NOTABLE: Illumina is the largest biotech employer in the region.