San Diego Business Journal

ILLUMINA INC.

President and CEO: Jay T. Flatley.

Revenue: $903 million for the year ended Jan. 3, 2011; $666 million for the year ended Jan. 3, 2010.

Net income: $125 million in 2011; $72 million in 2010.

No. of local employees: 1,850.

Headquarters: University Towne Center area.

Year founded: 1998.

Stock symbol and exchange: ILMN on the Nasdaq.

Company description: A maker of sequencing devices and related services used in human genome research.

Key factors for success: Illumina is an innovator developing new pathways to broaden the market for its products and services in sequencing the human genome, as well as plant and animal species.

Illumina Inc., which ranks No. 4 on the San Diego Business Journal’s list of Largest Public Companies, makes genetic analysis equipment that helps shed light on the innards of the human DNA. Among peers, it’s in the driver’s seat.

Illumina’s HiSeq sequencer, brought to market in early 2010, allows scientists to peer into the genes, answering their questions in quicker time at lower costs. The machines are also very accurate.

The machines have proven popular with government and academic research scientists as well as with commercial researchers, such as those in Big Pharma.

After years of ups and downs in its financial reports, Illumina appears to have found favor with investors on Wall Street.

Profits grew 32 percent in 2010 to $1.06 a share after falling 14 percent in 2009.

Over the past five years, sales have jumped 389 percent to $902.74 million compared with $184.59 million in 2006, and the company appears headed for a record 2011 in both sales and profits.

It had a market cap of $8 billion as of year-end 2010.

Upsurge in Investors

The share price reached a 52-week high of $76.81 on May 10, enjoying an upsurge in professional investors in the genomic research sector.

Seeking Alpha, an online stock picking publication, notes that “prices for technology drop quickly and dramatically, meaning Illumina will have to offer better quality products to justify higher pricing, and thus maintain margins.

“If another firm can develop better technology quicker than Illumina, the firm’s advantage will quickly disappear,” said the service.

But President and Chief Executive Officer Jay T. Flatley has countered in his public comments that Illumina will continue to innovate to stay a step ahead of the competition.

For example, the company is introducing the MiSeq, a lower cost sequencer for use in small clinical labs, at a price point of $125,000.

It is a follow-on product to the popular HiSeq machine that’s less than two years old.

“This system is really focused to bring sequencing technology to the masses,” said Flatley. “It takes sequencing to the personal realm.

“We think our product offering continues to show how we are the best in the industry,” Flatley told an investors conference in Boston in early May. “We’ve got the highest performing product in the market with the HiSeq and the next revolution of new technology with the MiSeq.”

Affordable Technology

He said the MiSeq would be able to sequence an individual patient’s genome for around $1,000, which makes the technology affordable for curious individuals and tight-fisted health care plans.

“We’re building a very strong order book for the system,” said Flatley, noting that Illumina will start selling MiSeq in the summer, hitting full production in the fall and winter.

In May, the company announced a genetic data network in which researchers can access a network of Illumina customers who are already using the company’s sequencers.

The cost to analyze a genome will be $5,000 for projects that involve 10 or more samples, or $4,000 for 50 or more samples.

Before the announcement, Illumina charged $10,000 to sequence an individual genome if it involved a research project.

Mapping Genes of Vertebrates

Illumina is also partnering with the nonprofit J. Craig Venter Institute to map the genes of 10,000 vertebrates, including fish and reptiles as well as mammals, by 2015. The information will be made available for research for such activities as preserving endangered species.

Gail Naughton, former dean of the San Diego State University business program who is leaving to pursue her own startup in hair restoration, says that the company has been successful in helping scientists pursue research into potential treatments involving sequencing of the human genome.

“They provide not only a variety of research tools, but they also provide services to their customers, the laboratories, which allows them to get their work done in a quick and efficient manner,” said Naughton. “They are truly innovators.”

Tom York is a contributing editor for the San Diego Business Journal.