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Feb 20, 2013 (4 years and 1 month ago)

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Investment Prospectus


12/5/2009


Prepared by:

Kung Chiao

James
Sun

Joseph Wheeler

Javier Zuniga














9885 Towne Centre Drive

San Diego, CA

92121

Phone: 858
-
202
-
4500

Fax: 858
-
587
-
4297

Web Site:
http://www.illumina.com


Sector: Healthcare

Industry: Biotechnology

Market Cap: $4.1 Billion (11/13/09)

Sector Market Cap: $1,885.4 Billion (11/13/09)

Industry Market Cap: $225.8 Billion (11/13/09)

WW
Employee headcount: 1
,
536 (12/28/08)


History


Illumina was founded in April of 1998 by David Walt, Ph.D., CW Group (Larry Bock), John Stuelpnagel,
D.V.M., Anthony Czarnik, Ph.D., and Mark Chee, Ph.
D. using exclusive Beadarray technology licensed from
Tufts University.


Illumina’s customers include
l
eading genomic research centers,
academic

institutions
, pharmaceutical

companies
,
clinical research organizations,
and biotechnology
companies
.



Highlights


2001

Genotyping services with first contract with GlaxosmithKline

2002

Released SNP genotyping com
mercial system

2003

Released gene expression profiling

2004

Benchtop BeadStation system available for mainstream laboratories and researchers

DASL Assay available, a new approach for generating gene expression profiles from partially
degraded RNA samples

2005

Three genome products: whole
-
genome expression microarrays, Infinium Assay, whole
-
genome
expression arrays for mouse

2006

HumanHap300* Genotyping BeadChip, HumanHap550* BeadChip, HumanHap650Y *BeadChip
(*represents 100kx marker on single microarray)


Genotyping and gene expression services

2007

Digital Gene Expression launched

BeadXpress system launched

2008

Infinium BovineSNP50 BeadChip released

Illumina sequences first African human genome


Acquisitions

2005

CyVera Corporation



Molecular diagnostics

2006

Solexa



Gene sequencing technology

2008

Avantome, Inc.


Low end genome analyzer market and diagnostics market



Vision


To be the leading provider of integrated solutions that advance
the understanding of genetics and health.


Management Team


Jay

T.

Flatley

President & Chief Executive Officer


Prior to his appointment in 1999 as president and chief executive officer of Illumina, Jay was the president
and chief executive officer of Molecular Dynamics, later acquired by Amersham Pharmacia Biotech

and
now a part of GE Healthcare. As a co
-
founder and member of the board of directors for Molecular
Dynamics he led the Company to its initial public offering in 1993. While there, he also helped Molecular
Dynamics develop and launch over 15 major instrum
entation systems, including the first capillary
-
based
DNA sequencer.


Jay received a B.A. in economics from Claremont McKenna College and a B.S. and M.S. (summa cum
laude) in industrial engineering from Stanford University.


Christian

G.

Cabou

Senior Vice
President & General Counsel


Christian (Chris) Cabou joined Illumina in May 2006. Chris has worldwide responsibility for all legal and
intellectual property matters and is also Illumina’s code of ethics compliance officer.


Chris received a J.D. from Nort
hwestern University School of Law in addition to a M.E.M. from
Northwestern University. Chris was awarded an M.S.E.E. (equivalent) from the Conservatoire National des
Arts et Métiers and a B.S. (equivalent) from the Lycée Technique d'Etat.


Gregory

F.

Heat
h,

Ph.D.

Senior Vice President & General Manager, Diagnostics Business Unit


Greg Heath is responsible for managing Illumina’s emerging diagnostics business, specifically overseeing
the development of diagnostic content for the BeadXpress system, and ultim
ately for the Illumina’s
sequencing platform.


Greg has more than 20 years of experience in the diagnostics field, including launching the first FDA
-
approved microarray for diagnostic use. Greg joined Illumina from Roche Molecular Systems where he
held a
number of senior executive positions including head of clinical genomics, senior vice president of
global product marketing, senior vice president of global marketing and business development, and most
recently, senior vice president of global business. In

this last role, Greg was responsible for new product
development and global marketing activities for the infectious disease, blood screening, genetics and
oncology portfolios. Greg was also responsible for the PCR licensing, industrial business, and busin
ess
development programs. From 2000

2003, Greg was head of business development and licensing for the
diagnostics division of F. Hoffman La Roche in Basel and led the strategic planning, business development,
and licensing activities of the molecular diagn
ostics, centralized diagnostics, applied science, near patient
testing, and diabetes care business areas. Prior to this, Greg held numerous roles in marketing and
business development with Roche Diagnostics’ U.S. affiliate.


Greg graduated with a B.S. in
psychology from Illinois State University and an M.A. in experimental
psychology from Hollins College. He earned a Ph.D. in experimental psychology from Virginia
Commonwealth University and completed his post
-
doctoral work in behavioral pharmacology at Mic
higan
State University. Outside of his work at Illumina, Greg has also published more than 25 articles in science
and business and participates in various internal and external leadership programs.

Christian

Henry

Senior Vice President, Corporate Developme
nt & Chief Financial Officer


Christian Henry joined Illumina in June 2005, and is responsible for worldwide financial operations,
controllership functions, and facilities management.


Christian served previously as chief financial officer for Tickets.com
, a publicly
-
traded online ticket
provider, which was recently acquired by Major League Baseball Advanced Media, LP. Prior to his career
with Tickets.com, Christian was vice president of finance and corporate controller for Affymetrix, Inc.,
where he overs
aw accounting, planning, SEC and management reporting, treasury, and risk management.
He previously held a similar position at Nektar Therapeutics (formerly Inhale Therapeutic Systems, Inc.).


Christian earned a B.A in biochemistry and cell biology from th
e University of California and an M.B.A.
from the University of California.

Joel

McComb

Senior Vice President & General Manager, Life Sciences Business Unit


Joel McComb is responsible for managing all products and services related to the research market,
namely
the BeadArray, VeraCode, and sequencing product lines.


Joel joined Illumina from GE Healthcare where he held a number of executive positions including his most
recent position as president of the interventional medicine business. Responsible for a

$700 million
division of GE Healthcare, the interventional medicine group provided a broad collection of products for
the hospital interventional operating suite and physician's office with applications in cardiology,
neurology, and oncology. Prior to thi
s role, Joel was president of life sciences discovery systems, a $600
million division at GE Healthcare. In this role, Joel had responsibility for product development,
manufacturing, service, global sales and marketing, information systems, quality, busine
ss development,
and program management for molecular biology, genomics, proteomic, and cellular imaging products.
From 2001

2004 Joel was president, chief executive officer, and board member of Innovadyne
Technologies. He was responsible for the strategy a
nd implementation of all operations, beginning with
the startup of Innovadyne through its subsequent sale as a profitable business to Gilson, Inc. Prior to
Innovadyne, Joel held various positions at Beckman Coulter, including roles as general manager of th
e
primary care diagnostic division and director of corporate business development. As general manager,
Joel was responsible for leading Beckman Coulter's $100 million primary care diagnostics division, which
included the former SmithKline diagnostics busin
esses.


Joel received a B.S. in genetics from the University of California, Davis and an M.B.A from the Golden Gate
University.

Tristan

B.

Orpin

Senior Vice President, Commercial Operations


Tristan Orpin joined Illumina in December 2002 in the role of vi
ce president of worldwide sales, and in
January 2007 was promoted to senior vice president of commercial operations.


Before joining Illumina, Tristan held positions at Sequenom including vice president of sales and
marketing from August 2001 to November
2002 and director of sales and marketing from September
1999 to August 2001. For more than a decade prior Tristan served in several senior sales and marketing
positions at Bio
-
Rad Laboratories.


Tristan earned a B.S. in genetics and biochemistry with firs
t class honors from the University of
Melbourne.

Mostafa

Ronaghi,

Ph.D.

Senior Vice President & Chief Technology Officer


Mostafa Ronaghi, Ph.D., joined Illumina in August 2008 and is responsible for leading internal research
programs and evaluating new te
chnologies for the Company.


Mostafa is an experienced entrepreneur and was involved in the start
-
up of four life sciences companies.
In 2007, Mostafa co
-
founded Avantome, a privately
-
held sequencing company. Before this, he co
-
founded
NextBio, a search e
ngine for life science data. In 2001, Mostafa co
-
founded ParAllele Bioscience, which
was eventually acquired by Affymetrix, Inc., and was involved in the development and commercialization
of highly multiplexed technology for genetic testing. In 1997, he co
-
founded Pyrosequencing AB, which
was renamed to Biotage in 2003, and led the company to a successful initial public offering in June 2000
on the Stockholm Stock Exchange. Mostafa was a principal investigator at Stanford University from 2002

2008 and focus
ed on the development of novel tools for molecular diagnostic applications. He serves on
the board of directors of Microchip Biotechnologies, NextBio, and Aurora Biofuels.


Mostafa earned his Ph.D. from the Royal Institute of Technology in Sweden. Mostafa
holds more than 20
pending and issued patents and has written more than 50 peer
-
reviewed publications in journals and
books.


Board Of Directors

William

H.

Rastetter, Ph.D.

Chairman


William Rastetter has been an Illumina board of director since November
1998 and non
-
executive
chairman since January 2005. Bill is currently executive chairman of Biogen Idec, Inc. He served as
chairman and chief executive officer of IDEC Pharmaceuticals Corporation until its 2003 merger with
Biogen, preceded by several other

senior positions at the company. From 1984 to 1986, Bill was director
of corporate Ventures at Genentech, where he had earlier held scientific positions. He held a series of
faculty positions at the Massachusetts Institute of Technology from 1975 to 1982.


Bill has a bachelor of science degree in chemistry from the Massachusetts Institute of Technology, and
received master of art and doctorate degrees in chemistry from Harvard University.

Jay

T.

Flatley


Jay Flatley is president and chief executive officer

of Illumina. Prior to his appointment in 1999, Jay was
the president and chief executive officer of Molecular Dynamics, later acquired by Amersham Pharmacia
Biotech in 1998 and now a part of GE Healthcare. Jay, who was a founder and member of the board of

directors for Molecular Dynamics, led the company to its initial public offering in 1993 and helped the
Company develop and launch over 15 major instrumentation systems, including the world's first capillary
-
based DNA sequencer.


Prior to joining Molecula
r Dynamics, Jay was vice president of engineering and strategic planning for
Plexus Computers, a manufacturer of high
-
performance Unix super
-
microcomputers. Before his career at
Plexus, Jay was executive vice president for Manning Technologies and held var
ious manufacturing
positions while working for the Autolab division of Spectra Physics.


Jay received a bachelor of art degree in economics from Claremont McKenna College (Claremont, CA) and
a bachelor of science and master of science (summa cum laude) in

industrial engineering from Stanford
University (Stanford, CA). Currently, he serves as a member for both the board of directors for Illumina
and GenVault Corporation.

Blaine

Bowman


Blaine Bowman is the former president and chief executive officer of Dio
nex Corporation. He joined
Dionex in 1977, and served as president and chief executive officer from 1980 until 2002. From 2002
through 2005, he served as the chairman of Dionex. Before joining Dionex, Blaine was a management
consultant with McKinsey and Co
mpany and a product engineer at Motorola Semiconductor Products
Division. Blaine currently serves as a director on the boards of Dionex Corporation, Molecular Devices
Corporation, and Cell Biosciences Corporation. He is also the lead director for Molecular

Devices and Cell
Biosciences.


Blaine holds a bachelor of science in physics from Brigham Young University, and a master of business
administration from Stanford University Graduate School of Business.

Daniel

M.

Bradbury


Daniel Bradbury has been an Illum
ina board of director since January 2004. Currently, Daniel is president
and chief executive officer of Amylin Pharmaceuticals Inc. in San Diego, CA. At Amylin he has served as
president and chief operating officer since June 2003 and a director since June

2006. Prior to his
promotion in June 2003, he was executive vice president since June 2000. He is a member of the board of
directors of Novacea, PhRMA, BIOCOM, the Keck Graduate Institute’s board of trustees, and the San
Diego Regional Economic Developmen
t Corporation. Daniel is a member of the Royal Pharmaceutical
Society of Great Britain and serves on the UCSD Rady School of Management’s advisory council.


Daniel obtained a bachelor of pharmacy degree from Nottingham University and a diploma in
managemen
t studies from Harrow and Ealing Colleges of Higher Education.

Karin

Eastham


Karin Eastham has been an Illumina board of director since August 2004. Karin is currently executive vice
president, chief operating officer, and a member of the board of trustee
s of The Burnham Institute for
Medical Research. She also serves as board of director for Amylin Pharmaceuticals, Tercica, SGX
Pharmaceuticals, and Cyntellect. Prior to joining The Burnham Institute in 2004, Karin was senior vice
president, chief financial

officer, and secretary of Diversa Corporation. She previously held similar
positions with CombiChem, Inc., Cytel Corporation, and Boehringer Mannheim Diagnostics.


Karin received both bachelor of science and master of business administration degrees from
Indiana
University, and is a certified public accountant.

Jack

Goldstein, Ph.D.


Jack Goldstein has been an Illumina board of director since June 2006. Jack was president and chief
operating officer of Chiron Corporation until its acquisition by Novartis i
n April 2006. Before Chiron, he
spent two years as a general partner at Windamere Venture Partners preceded by four years at Applied
Imaging Corporation, first as president and chief executive officer and later as chairman. Jack spent over a
decade at Orth
o Diagnostic Systems, a Johnson & Johnson company, in various executive positions
including four years as president. He was earlier vice president of research and development at a division
of Baxter Healthcare Corporation.


Jack earned a bachelor of art d
egree in biology from Rider University, a master of science degree in
immunology, and doctorate. in microbiology from St. John’s University. He sits on the board of directors
of Orasure Technologies Inc.

Paul

C.

Grint, M.D.


Paul Grint is chief medical off
icer and head of development at Kalypsys. He has more than 18 years of
experience in biologics and small molecule drug development, marked by the successful development of
numerous commercial products in the fields of infectious disease, immunology, and on
cology. Prior to
joining Kalypsys, Paul was senior vice president and chief medical officer of Zephyr Sciences Inc. He held
similar positions at Pfizer in La Jolla, CA, IDEC Pharmaceuticals and Schering
-
Plough. Paul began his
pharmaceutical career at the W
ellcome Research Laboratories in the United Kingdom.


Paul received a medical degree from the University of London, St. Bartholomew's Hospital Medical
College in London. He is a fellow of the Royal College of Pathologists, a member of numerous professional

and medical societies, and the author, or coauthor of over 50 publications. Paul is also a member of the
advisory board of CovX and the advisory council of the Keck Graduate Institute.

David

R.

Walt, Ph.D.


David Walt, one of Illumina’s co
-
founders, has
been an Illumina board of director and chairman of the
Company’s scientific advisory board since June 1998. He has also been the Robinson Professor of
Chemistry at Tufts University since September 1995. David has published over 150 papers and holds over
40

patents.


David earned a bachelor of science in chemistry from the University of Michigan and received a doctorate
in chemical biology from the State University of New York at Stony Brook.

Roy

Whitfield


Roy Whitfield is the former president, chief execu
tive, and chairman of Incyte Corporation. Roy co
-
founded Incyte in 1989 and served as its chief executive until 2001 and as chairman of the board from
2001 until 2003. In 1997, Roy was named Northern California Entrepreneur of the Year for life sciences.
F
rom 1984 to 1989, Roy held general management and business development positions with Technicon
Instruments Corporation, a medical instrumentation company, and its predecessor company, Cooper
Biomedical, Inc., a biopharmaceutical and medical diagnostics co
mpany. Prior to his work at Technicon,
Roy spent seven years in the Boston Consulting Group’s international management consulting practice.


Roy earned a bachelor of administration degree in mathematics from Oxford University and a master of
business admi
nistration degree from Stanford University Graduate School of Business. He currently serves
as a director of Incyte Corporation, Nektar Therapeutics, Inc., and three privately held biotechnology
companies.


Core
Products

Genome Analyzer


The Genome
Analyzer IIx offers a unique combination of 2 x 100 bp read length and >300 million reads
per flow cell with the simplest and fastest workflow. The highest raw accuracy and the largest number of
perfect reads enables a broad range of high
-
throughput sequen
cing applications. Power your discoveries
and generate highly accurate results in a week with the Genome Analyzer IIx.



iScanSQ

iScanSQ is the first system to integrate the high
-
throughput capability of genotyping and gene expression
microarrays with the

flexibly and resolution of next
-
generation sequencing. With the addition of the SQ
Module, the iScan system now offers a convenient and economical gateway to the power of next
-
generation sequencing.


The iScan System is a cutting
-
edge, high
-
resolution, s
canner that supports rapid, sensitive, and accurate
imaging of Illumina's array
-
based genetic analysis products. The system features a high signal
-
to
-
noise
ratio, high sensitivity, an excellent limit of detection, and a broad dynamic range leading to excep
tionally
high data quality.


The BeadXpress Reader is ideal for small and high
-
throughput labs conducting low
-

to mid
-
plex molecular
testing studies that need robust, multiplexed
-
based assays. The Reader employs a dual
-
color laser
detection system to iden
tify the unique holographic code inscribed in each VeraCode microbead and to
detect the signal intensity associated with each bead


Intellectual Property

Patent portfolio as of February 1, 2009, includes ownership or exclusive licenses to 135 issued paten
ts and
169 pending U.S, patents. Patents related to arrays, assays, oligo synthesis, sequencing technology,
instruments and chemical detection technologies will expire between 2010 and 2026.

Geographic Location

Employee headcount for R&D: 406

Location


Approximate

Square Feet

Operation

San Diego, CA



289,300




R&D, Manufacturing, Storage,

Distribution and Administrative

Hayward, CA


148,000




R&D, Manufacturing and Administrative

Singapore


36,100




Manufacturing and Administrative

Little Chesterford,
U.K

28,500




R&D, Manufacturing and Administrative

Tokyo, Japan


9,800




Sales and Administrative

Netherlands


9,300




Distribution and Administrative

Melbourne, Australia

3,900




Sales and Administrative

Competitive
Landscape

Competitors include companies that offer products and services for the sequencing, SNP genotyping, and
gene expression markets. Namely,
Affymetrix, Agilent, Beckman Coulter, Complete Genomics, Fluidigm,
GE

Corp., Life Technologies, Luminex, Pac
ific Biosciences, Roche Diagnostics and Sequenom

are the
current

main competitors. We anticipate intense competition from these companies as they develop new
or improved products. We may also face competition from new companies as they enter the market w
ith
new technologies. It is also worth noting that some competitors have greater financial and personnel
resources, broader product lines, a more established customer base

and more experience in research and
development. Furthermore, it is possible that
existing customers or partners in the life sciences or
pharmaceutical areas to enter the market by developing competing products. For these reasons, it is
imperative to that our products maintain a competitive advantage in the areas of throughput, cost, a
nd
accuracy.


The race to commercialize full genome sequencing for personalized healthcare is one of the long term
goals, but competitors such as
Life Technologies
,
Pacific Biosciences
, and
Complete Genomics

are also
pursuing the same objective. With affordable
full genome sequencing and a better understanding of
correlation between genetic variants and disease, the healthcare industry will be evolutionized.

Technology

Illumina’s innovative,

array
-
based solutions for DNA, RNA, and protein analysis serve as tools for
disease research, drug development, and the development of molecular tests in the clinic. The
company is principally focused on the research and development of DNA and RNA Assays.

It also
focused on the development, manufacturing and marketing integrated systems for the analysis
of genetic variation and biological function through its various technologies. The technology
includes BeadArray Technology, Sequencing Technology, VeraCod
e Technology and Oligator
Technology.



BeadArray Technology
: A fundamentally different approach to high
-
density microarrays

Illumina’s BeadArray Technology is based on 3
-
micron silica beads that self assemble in
microwells on either of two substrates: fibe
r optic bundles or planar silica slides. When
randomly assembled on one of these two substrates, the beads have a uniform spacing of ~5.7
microns. Each bead is covered with hundreds of thousands of copies of a specific
oligonucleotide that act as the captu
re sequences in one of Illumina’s assays. BeadArray
technology is utilized in Illumina's iScan System for a broad range of DNA and RNA analysis
applications.

BeadArray technology is deployed on either of two multi
-
sample array formats for DNA or RNA
-
analys
is applications. The 96
-
sample Array Matrix format is used in Illumina's GoldenGate
Genotyping, DASL Gene Expression, and Focused Arrays applications.The BeadChip format is
used in Illumina's Infinium Genotyping, DASL Gene Expression, and Focused Arrays ap
plications.



Sequencing Technology
: A method for highly economical, scalable sequencing
applications with unparalleled data density

This breakthrough platform is based on massively parallel sequencing of millions of fragments
using our proprietary reversib
le terminator
-
based sequencing chemistry. This novel sequencing
technology, together with the Illumina Genome Analyzer, offers a highly robust, accurate, and
scalable system that sets a new standard for productivity, cost
-
effectiveness, and accuracy
among
next
-
generation sequencing technologies.

Illumina Sequencing technology relies on the attachment of randomly fragmented genomic DNA
to a planar, optically transparent surface. Attached DNA fragments are extended and bridge
amplified to create an ultra
-
high

density sequencing flow cell with hundreds of millions of
clusters, each containing ~1,000 copies of the same template. These templates are sequenced
using a robust four
-
color DNA sequencing by synthesis technology that employs reversible
terminators with

removable fluorescent dyes. This novel approach ensures high accuracy and
true base
-
by
-
base sequencing, eliminating sequence
-
context specific errors and enabling
sequencing through homopolymers and repetitive sequences.

High
-
sensitivity fluorescence detec
tion is achieved using laser excitation and total internal
reflection optics. Sequence reads are aligned against a reference genome and genetic
differences are called using specially developed data analysis pipeline software. Alternative
sample preparation

methods allow the same system to be used for a range of applications
including DNA Sequencing, Transcriptome Analysis, and Gene Regulation Analysis.

After completion of the first read, the templates can be regenerated
in situ

to enable a second
75+ bp rea
d from the opposite end of the fragments. The Paired
-
End Module directs the
regeneration and amplification operations to prepare the templates for the second round of
sequencing. First, the newly sequenced strands are stripped off and the complementary str
ands
are bridge amplified to form clusters. Once the original templates are cleaved and removed, the
reverse strands undergo sequencing by synthesis. The second round of sequencing occurs at the
opposite end of the templates, generating 75+ bp reads for a
total of > 33 Gb of paired
-
end data
per run.



VeraCode Technology
: Enabling a broad range of multiplexing options for RNA, DNA and
protein applications

Illumina’s VeraCode technology leverages the power of digital holographic codes to provide a
robust dete
ction method for multiplex assays requiring high precision, accuracy, and speed.
Comprised of cylindrical glass microbeads measuring 240 microns in length by 28 microns in
diameter, VeraCode microbeads provide an ideal surface for numerous bioassays includ
ing
genotyping, gene expression, and protein
-
based assays. Illumina’s proprietary technology
precisely embeds digital holographic elements within each microbead to create unique bead
types. Each microbead can easily carry high
-
density codes (24
-
bit), for v
irtually unlimited
development of bead types.

When excited by a laser, each VeraCode bead emits a unique code image, allowing for quick and
specific detection by Illumina’s BeadXpress Reader System. Depending on desired multiplex
levels, assays are created

by pooling microbeads with code diversities from one to several
hundred. VeraCode beads are highly stable and the digital coding provides customizable tracking
of not only the target(s) of interest, but also of critical identifiers such as sample ID, labo
ratory
ID, and reagent kits.



Oligator Technology
: World
-
class oligo manufacturing and quality fueling the Illumina
product offering

Illumina's proprietary Oligator oligonucleotide synthesis technology provides industry
-
leading
quality and throughput.
Complemented by a highly automated, fully integrated manufacturing
facility, we are capable of synthesizing more than 4 million bases per day.


Strategy


Illumina’s goal is to make our Genome Analyzer, BeadArray and BeadXpress platforms the
industry standa
rds for products and services addressing the genetic analysis markets.
To achieve
this goal, w
e follow the “razor and blades” approach in our business model, selling the stations at low
margins in order to obtain a larger footprint in these markets for our platforms and then sell our arrays,
reagents and other consumables as our main revenue stream
s. Strategically,
we are:



focusing on emerging high
-
growth markets;



seeking new and complementary technologies through strategic acquisitions and other
investments;



expanding our technologies into multiple product lines, applications and market
segment
s; and



strengthening our technological leadership.


High Growth Markets

We are currently positioned in three primary markets:
next
-
generation sequencing, mid
-
to
-
high
-
complexity microarrays for genotyping and gene expression, and the “applied markets,

the majority of which are comprised of agricultural research.

Next
-
generation sequencing is the most rapidly growing of these three markets. It is fueled by
private and public funding, new global initiatives to broadly characterize genetic variation, an
d
the migration of legacy genetic applications to sequencing based technologies.
The iScan
sequencing module
will pose a threat to
competitors

among smaller institutions given lower
upfront costs and functionality with existing array platforms
. Also, p
ric
e and ease of use is
always a factor and we believe Harmonia's ability to

interface with iScan and offer array
functionality as well could be the Trojan Horse for
us

in this segment of the market."

We are also entering a fourth market,
molecular diagnostic
s. The molecular diagnostic market is
currently estimated at nearly $3 billion with the potential to grow to over $5 billion by 2012.
This market assessment covers regulated assays and reagents, and does not factor in laboratory
-
developed tests, which acco
unt for a significant portion of the total market. The primary growth
drivers in the molecular diagnostics market are the continued discovery of genetic markers with
proven clinical utility, the increasing adoption of genetic based diagnostic tests, and th
e
expansion of reimbursement programs to include a greater number of approved diagnostic
tests.
Our
Veracode technology platform is ideally suited to provide a cost
-
effective, high
-
throughput, mid
-

to low
-
multiplex solution to the molecular diagnostic mark
et.


Acquisitions and Investments

We believe our DNA sequencing systems, coupled with complementary technologies from
strategic investments, including the acquisition of Avantome and our collaborative alliance with
Oxford Nanopore Technologies will enable

us to address numerous market segments with
innovative solutions.

We also have an
ongoing collaboration with leading researchers to select the highest
-
value markers from
the 1000 Genomes Project for the next wave of genome
-
wide association studies (GWAS).

This array
content will facilitate testing new scientific hypotheses, including the impact of rare variants, CNVs, and
other non
-
SNP markers on diseases and traits.

One of our principal contributions to this collaboration is
the Infinium whole
-
genome gen
otyping platform, offering products capable of analyzing up to five million
(5M) variants per sample.

Researchers who begin studies now using Illumina’s whole
-
genome genotyping
products will have exclusive access to supplemental arrays that build from the

Omni content to the full
5M variants. Customers on this preferred path will have the ability to incrementally interrogate novel sets
of SNPs as they are released into public databases, prior to the release of the full 5M variant array. As
with Illumina’s
previous whole
-
genome genotyping arrays, the new products will offer the high
performance necessary for robust CNV detection, together with greater density of coverage enabling
association of rare variants with diseases or traits.

With the reduction in co
st for sequencing an entire genome, another partnership that we have entered
into is with deCODE Genetics so as to target the market of private consumers. We have set up a joint
development agreement to develop tests for genes linked to heart attacks, typ
e 2 diabetes, and breast
cancer. Other partnerships in addition to deCODE Genetics are with the Mayo Clinic for screening several
complex diseases and with the Children’s Hospital of Eastern Ontario for screening children for various
genetic disorders.


E
xpanding Technologies

We’ve significantly expanded our fleet of Genome Analyzers to ramp up our sequencing capabilities in
whole genome, whole exome, and whole transcriptome analysis
. This

technology’s accuracy, ease of use
and scalability, as well as con
tinued system improvements have recently enabled us to generate multiple
runs with more than 50 gigabases of high quality sequence data.”


The new sequencing module for the

iScan array
, Harmonia,
combines the sequencing chemistry of the
company’s Genome
Analyzer with the iScan Reader of its iScan array system
, and is scheduled to launch in
the second quarter of 2010
.
New performance
specifications

indicate that

the iScan sequencing module
will generate more than 20 gigabases of sequence data per run and g
enerate 2 x 75
-
base paired
-
end
reads


up from initial expectations of 3 gigabases of data per run and a read length of 2 x 50 bases.
W
e
think
Harmonia could help expand the
next
-
generation sequencing market towards 2,000 systems
globally, up from our esti
mate of 900 currently

in use in the NGS market
.


Strengthening Technology Leadership

Illumina’s

internal R&D
is

beginning to push the boundaries of
the
Genome Analyzer sequencer in terms
of density, in terms of cycle times, and in terms of accuracy
.
Through this, we are striving

to drive the cost
of sequencing down so that it supplants microarrays
and
other forms of biological analysis.

Also, to position ourselves to take advantage of market forces coming out of a weak quarter, Illumina is
looking at

22 million new SNPs put in the 1000 Genomes datab
ase. The
advent of chips containing new
rare variation content drawn from sources like the 1000

Genomes Project, will be a key driver in the
market and w
e are continuing to push the technology as far as we

can, and conferring with the best
people we can to determine what the best
products are.


Company Financials

Valuation

The Market capitalization of Illumina is $3.5 billion with approximately 125.09
million shares outstanding. Currently the trailing P/E r
atio is 38.93 and the forward
P/E for the fiscal year ending on December 2010 is 25.22

Income Statement

The company revenue is 2008 was $573.2 million, up from $366.8 million in 2007.
In the same year 93% of the revenue came from product revenue while 7% c
ame
from service and other revenue. Cost of product revenue was 34% of revenue (up
from 33% in 2007), while research and development was only 17% of revenue
(down from 20% in 2007). Income from operations and net income was $80.5
million and $40.5 million
respectively. In contrast, in 2007 the company reported a
loss from operations of
$301.2 million

and net loss of $278.3 primarily due to non
recurring expenses related to the acquisition of Solexa. In 2009 the company has
reported revenue of $485.8 million and a profit of $60.5 million year to date.

Balance Sheet

As of the end of the third quarter o
f FY 2009 Illumina had $1,541.7
million
in total
assets
,

and
$
539.6

million

in total liabilities
. Also as of the end of the third quarter of
FY 2009, the company has $238.5 million in cash and cash equivalent assets. It also
has $1031.3 million
in current
assets
. Also, its current ratio as of the end of the third
quarter FY 2009 is a healthy 2.5.

Cash Flow statement

Total Cash Flow f
rom Operating Activities was 87,882

in 2008. However, total Cash
Flows fr
om Investing Activities was
-

$277.2 million mainly

due to investments of
156.9 million. Additionally, t
otal Cash Flows f
rom Financing Activities was $337.6
million mainly due $
319.2 originated from the sale of stock.



As of the end of

the third quarter of FY 2009 Illumina

had a change in cash and cash
e
quivalents of
-

$136.7 million mainly due to
-

$272.1 million from investment
activities.

Growth

The gene expression and genotyping markets are relatively new, so the technology
used on these markets is evolving rapidly. It is estimated that the gene expre
ssion
market is about $800 million and increasing 7 to 10% annually. Also, it is estimated
that the genotyping market is about $500 million and expanding 35 to 40%
annually.

Also, recent purchases by the Broad Institute genomics research center in
Cambrid
ge
, MA, and the Genomic Medicine Institute in Korea of 29 genome
analyzers reflect the ability of Illumina to gain market share and expand its install
base.

As a result, financial analysts give Illumina a very positive outlook on the
upcoming years. The average analyst revenue estimate is $654.3 million for the
2009 fiscal year and $813.6 for fiscal year 2010. This represents a growth estimate
of 14.2% and 24
.3% respectively.

Stock Performance

Illumina stock performance for the last 5 years


Comparison of Illumina stock price performance and S&P Biotech ETF (XBI)