ILMN - Earnings call transcript Q4 2019

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Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2019 Illumina Earnings Conference. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to introduce your host for today's conference, Ms. Jacquie Ross, Illumina Investor Relations.

Jacquie Ross

Good afternoon everyone and welcome to our earnings call for the 2019 fourth quarter and full year.

we we of the commentary the commercial after today, after results on call question-and-answer activity, close a the market which the will financial review released our session. During host will and offer

If earnings it you've Investor section can the at website the release, of in not our chance found illumina.com. review a Relations had to be

state Officer. Participating of results. update and Sam Officer; and Chief for Executive brief Sam and Illumina today business a Chief our will Francis Financial will be on financial provide Francis the deSouza, President our will Samad review

call audio XXXX. section archived be protected This during is is forward-looking will of being Private website. results the our under our the recorded our Investors made Litigation portion and the regarding call that Reform activity Act all and statements today's in will It Securities intent be of financial commercial

uncertainties risks are available obligation may those these materially from subject statements or are statements. most To and to events that upon Forward-looking discussed. could the understand and with Illumina and including the differ, that you statements XX-Q results to risks assumes the uncertainties, no differ to files and cause forward-looking actual documents Illumina Commission, Exchange based or Securities and projected update recent we refer Forms better Illumina's results actual All to XX-K. information current

call Francis. to turn over that, I will the now With

Francis deSouza

softer quarter revenue with IVD included array growth than quarter Good DTC system consumable Jacquie. of fourth and XX% than fourth XXXX you, afternoon million, than Thank This revenue stronger revenue. more expected sequencing to weaker up a everyone. and year-over-year had Highlights offset revenue. from non-DTC end sequencing $XXX Illumina XXXX. expected and of the partnership XX% solid

be While than delivered some are quarter. variation to revenue pleased mix industry, have we expected in higher always fourth expected in the dynamic should our of

sequencing NovaSeq more of July up than in last year. $X.X we X% set shipped in generated higher shipments, line slightly first than data We $X history. For high-throughput XXX systems, and in information. grew We with XX%, consumables, demand time, the of highlighting guidance most the billion, Illumina our we total than approximately genomic revenue rapidly increased surpassed Illumina's sequencing and revenue sequencers growing billion goal $X X,XXX consumable for by XXXX. XXXX XXXX, sequencing of XX%, the delivered with including Total the billion more for achieved and

Back since the which operating the by fourth UK of was consumable part more indeed in at now quarter, quarter. than to in We the and driven was level is fourth Biobank, NovaSeq the the at scale. highest NovaSeq highest pull-through year its platform the launched, systems XXX shipped

quarter this more number we we XXXX. was the in of As twice shipped expected, the than first

range million pull-through targeting we pull-through system $X.X approximately And system NovaSeq NovaSeq looking forward, a $X.X $X.X per to XXXX. are in per million XXXX million. for was of

the As time HiSeq we installed Illumina Outside a the and XXX as HiSeq launch. expected, this there year, review, NovaSeq had currently were This of installed in base active of an of approximately to indicating At below the identified first X,XXX. reported enter the since HiSeq the in NovaSeq's XXX base. approximately XXXX. systems our list, customer inactive approximately decommissions were been to included review previously that fourth year, review million quarter decline for HiSeq fourth end completed consumables our we $XXX of continue in

XXXX due timing. year. shipments, XX% to approximately for mid-throughput, XXXX and installed to customer a from global has quarter shipments than quarter continues almost to expected were up NextSeq of a X,XXX. of about record in grow, number Demand shipments last lower delivered now Moving a NextSeqDx NextSeq and base Fourth represented of

quarter again oncology by once sequencing and driven for NIPT. It NextSeq was revenue, a record consumable

to was $XXX,XXX at system NextSeq from per the quarter and $XXX,XXX target improved lower range. of last pull-through the end

the of launch range sizeable new when XXXX base NextSeq our have we target of our will systems. a and installed pull-through XXXX the we With new systems, update NextSeq

to NextSeq expect ship We approximately XXX XXXXs year. this XXXXs and

While expect NextSeqDx of strong, unique remain new our to we most regulatory approved the prospects transition given the will systems, pipeline to NextSeq the system. positioning XXX

looking are this forward that pleased shipping very We our have to and quarter the are XXXXs to announce NextSeq first received orders. we already later first

in placements where exceed the below the to low revenue system to was primarily XXXX. was in our August continues Earlier strength expect this to for expectations XXXX. system due China to which quarter, to NMPA approved MiSeqDx we China by the Moving with throughput, in MiSeqDx of Japan, the expectations was our month, by the in contribute Demand MiniSeq. particular fourth cleared in PMDA

consumable to $XX,XXX to $XX,XXX a range. our MiSeq pull was to of $XX,XXX, through of and $XX,XXX pull record at end it through target Turning low grew the was the closer throughput range MiniSeq quarter. low revenue to consumables,

Back to grew in sequencing consumables, or total $X.X revenue million over XXXX. of XX% $XXX billion

consumable oncology, our of clinical, for disease sequencing which health, genetic XX% testing includes reproductive and other. and were for over shipments Just

Profiling. In consumables XX% approximately faster adoption grew approximately represent panels grew than clinical consumables to total million. continues XXXX of million XXXX in Oncology consumables $XXX total, of about to due or in and clinical to Comprehensive XX% increased sequencing about including $XXX total Genomic sequencing

demand to coverage As diagnostics, FoundationOne grow. receive more CDx like tests Illumina as companion for continues and sequencing GuardantXXX

a rate the coverage volume and China. growing had EMEA more in U.S., continues consumable to VeriSeq XX% drive clinical represented Guardant’s in health to NIPT again our adoption and due broader solution NIPT Reproductive utilization Additionally, growth, grow consumables, China. increased growth in sequencing Reproductive sequencing once continued trials, of compared reflecting EMEA, testing. XX% oncology primarily where modest health more at in sample LUNAR, little a to like than in

almost is genomic within from over related which with from over slightly testing of like companies collaborating genetic countries average. pharma offer who and diagnosis among toward Ambry, has companies to help clinical, disease grew built genetic by of partners find includes clinical tests to portion like sequencing revenue the also driven working of XX% disease a consumable disease It to and which genetic revenue is is Growth our other testing, genetic XXX,XXX tailored Finally, cures. repository tests. clinical below XXX Centogene, patients patients’ a diagnose

Turning over XX% applied, to our consumable and of shipments just sequencing of represented under $X.X shipments. research billion

a As cancer. by genetic grew disease driven over includes Program. XXXX in disease group, the genomics and Biobank and XX% as UK research Genetic Million research such Veteran population initiatives the

into initiative also was is access helping Jude Children’s research The cloud whole contributor building cancer. St. includes researchers XX,XXX and pediatric genomes team patients insights Jude genetic survivors, causes of gain to a Hospital. projects database the Cancer pediatric St. of a to growth and strong like Research at the to valuable

Infectious which diseases. include Research, Testing. sequencing to and is the Biology Japan collaboration categories Molecular research between Global and in Asia Network Infectious Disease, J-GRID, projects research countries Other like Cell Research for utilizes Disease Microbiology, This on nine a and microbial includes Africa, Illumina Initiative and

$XXX partially sequencing revenue fourth this zero the of which was from same of to ahead by offset other, declined, services XX% and ramp-up the upfront Moving the revenue XXXX as year Roche driven a from million later quarter the in clinical quarter expected, up almost year. GeL of deal, largely by ago, to

in of XXXX And customers, by same growth part genetic XX% million, the $XXX in array finally, delivered down offset direct-to-consumer revenue quarter our headwinds due in from disease arrays to continued from research.

Sam, novel coronavirus to the like hand over on to the I’d comment outbreak. I Before call

colleagues with our families thoughts been has focus communities in and the China, impacted. immediate and are our Our

step of been publish few coronavirus the of a to is Over first into help the the enable identify last manage Illumina diagnostic have profile critical weeks, coronavirus engaged to development used the in genomic Illumina already and and ways has Scientists the public ultimately number which of potential to vaccines. tests the databases, outbreak. sequencers a

and necessary Testing training. Our with Coronavirus working the actively to team prepare provide CDC is labs Chinese NGS Protocols

global We working NGS supply and chain with to protocols plan with it consumables programs as delivered that this novel to ensure available quickly the also coronavirus to infectious our collaborations threat. as this are mobilizes labs sequencing to We and fight as to and providing address with these coronavirus share epidemic. customers community sequencing we’re to novel ensure team to disease testing those are support philanthropic by it is who working need consumables systems exploring Further, possible. to

With to the call that, Sam. over I’ll hand

Sam Samad

Thanks, Francis.

year-over-year of of XX% in revenue microarrays. revenue XXXX decline XXXX, offset $XXX revenue to compared while $XXX growth and XX% sequencing and or consumable quarter system sequencing, to in of to by down XX% represented quarter the fourth XX% XX% quarter $XXX in million year. by of last compared Sequencing quarter XX% to sequencing $XXX revenue revenue of XX% grew the grew slightly fourth year. the XX% last million sequentially discussed, As down million, Total driven was a compared fourth same million total grew from over

proactively active to to installed sequencing we identify reviewing systems, counts regards base are systems. With the

and have MiniSeq. work MiSeq now the reviewing NextSeq, We completed are HiSeq, for and

bases installed or in those two next the as revise the we analysis. quarter will We complete

the in revenue change any not does reported this way. Importantly,

do decrease, However, system we system while expect counts increase. will the therefore pull-through to per

but million of quarter results lower of and quarter, fourth with in $XX Sequencing GeL lower fourth in Arrays the revenue of volumes represented other the compared recently the total quarter fourth service of revenue year-over-year. down million XX% licensing sequentially quarter milestone due IVD was Fourth up and and to the included $XXX quarter, upfront payment XX% partnership. revenue XXXX XXXX. to the XX% announced fourth XX% Roche to associated in in an and

the Array XX% from down but or quarter but sequentially down of from customer. modestly customer a were holiday Array the $X DTC season, ahead consumables million down million up due due year. to grew $X of strong were sequentially, last Array services ramping $X quarter lower were sequentially XXXX. seasonality systems and to particularly demand fourth $X million $XX down our million year-over-year with same one DTC million from

the year-over-year in Americas growth sequencing research the now prior headwinds. X% IVD with consumables from an The by quarter, the full X% quarter Moving in revenue XX% with from Biobank, offset grew stocking with contribution revenue of including prior clinical. partnership in growth is grew a to quarter sequencing associated EMEA in grew revenue, mode. regional the with year and partially quarter, XX% China in delivered in Greater comp very a slower tariff-related XXXX. versus strong record region quarter UK strong offsetting XXXX, easy which production DTC year with prior results, growth from fourth year China

by sequencing genetic of driven microbiology research from APJ revenue up growth disease and fourth of year-over-year. and driving Finally, million consumable both quarter $XX sequentially X% was XXXX, the

For grew X%. full region year, the the

and to operating and will shareholders. Illumina compensation. results non-GAAP to note available that be Moving you found highlight measures, data reconciliation I share on encourage all stock-based can release income that in references per of results subsequent to gross include and the margin supplementary which I website. review non-GAAP the earnings attributable GAAP expenses. to the refer today’s our net Please to these

line in margin partially approximately addition XXX quarter, to the offset over roughly Year-over-year, expectations with was Non-GAAP service in DTC points to third gross development production revenue, and lab and by offset and quarter XX.X% margin volumes. IVD absorption product increased with compared fourth and product partially variances to of lower in service basis non-GAAP licensing points decreased lower primarily higher mix. XXX due IVD and licensing gross mix by basis revenue, development

was XXXX, last down were tax due better OpEx was $XX of mix of operating quarter. to XX.X% than Non-GAAP $XXX from million Non-GAAP year income in margin of and operating last therefore jurisdictions. end expected spend higher up quarter and The timing reflecting largely towards of the than were expenses rate XX.X% the from various XX%, from non-GAAP tax of up million the weighted third the expected. quarter

fourth net or income $X.XX per share, income GAAP was quarter $XXX net million of diluted diluted $XXX was $X.XX or share. XXXX, non-GAAP per million the For and

items. This million Cash Chain from to to optimize by our flow sheet million, a our capital. in helped by is $XX and Moving part an $XXX working decline initiative, Supply in was Operations and inventory. cash of operations part flow balance led organizations, sequential

our XX $X.X to the $XX free in quarter, cash in available approximately days last fourth under for ended investments. million days plan. quarter $XX And of repurchased stock and repurchases million expenditures billion DSO million quarter. cash year with million. $XXX share leaving capital the compared We of current and we equivalents, XX flow were Fourth $XXX short-term was cash,

average weighted diluted share for Our the was count quarter XXX million.

year increase representing $X.XX XXXX the approximately in full midpoint. guidance, of range to an at to to expect we XX% or billion grow the X% to of $XXX billion $X.XX revenue million Moving

to XXXX, new the weakness QX. to revenue in just in below in ongoing launch, QX, QX, XX% DTC, XX% Given are linearity approximately QX, expecting similar suggests we XX% approximately of revenue and system be and approximately which in in XX%

sequencing midpoint to XXXX range, NextSeq offsetting to This the XXXX in our down revenue we our XXXX includes around at of than revenue XX%. expect we and consumable For sequencing NovaSeq and And system the step grow the year-over-year revenue full expect sequencing guidance grow year launch more reflecting approximately expected XX%. growth NextSeq shipments.

also expect other roughly sequencing to And flat we be year-over-year. and service

approximately array ongoing approximately represented expect to revenue revenue in weakness about DTC reflecting decreased total We revenue in array that XX% in XXXX be and down XX% Note DTC. to XXXX. of XX%

approximately to For XX%. XXXX, we DTC represent expect

a driven high clinical to teens, in From grow the regional we perspective China sequencing. expect by

full We non-GAAP be line year XXXX. expect margin roughly with gross to in

be expect XX%; repeat XXXX XXXX a margin discrete than tax benefits XXXX. operating approximately full and the rate are We XXXX year in one-time in higher due not to to be to expect expected number we that to tax of

expect $X.XX, to of about flat XXXX we We and earnings therefore the shares XXXX. GAAP outstanding $X.XX be share in non-GAAP range to compared QX the per $X.XX of earnings And per expect diluted to in $X. to in share range

that, Note a earlier the to termination BioSciences the month, Pacific PacBio. Illumina termination this fee million $XX following of reverse agreement merger paid

Additionally, a continuation Illumina or this in $XX least in within The impact will of of raises valuation million timeframe. reflected pending amounts is enters these advances quarter. guidance, given control to that Illumina PacBio if these be payments at repayable a pay agreement of change may $XXX EPS our not the million

Moving the of to quarter XXXX. first

a expected consider a million adjust basis reset and $X.XX expenses increase points revenue NextSeq to first as of due We be revenue expect following be non-GAAP $X.XX year. percentage of basis launch. their And sequential between at XXXX to million XXX total we and approximately as be plans start EPS to and $XXX the $XXX Non-GAAP expect our to GAAP quarter on are to accrual bonus our operating $X.XX. the customers the primarily EPS between and $X.XX, to

that, over call to hand I’ll back the With Francis.

Francis deSouza

Thank you, Sam.

sequencing is where strong we the XXXX. a the in to year, The with start of our middle We’re UK visibility in services at contracted to to popgen GEL and off provide a are Biobank scale, relative sequencing ago. were we strengthening year significantly starting

most Edico XXXX just cell cost integrate our pipeline to density the highest NextSeq ago. the the NGS system in we date to hardware-accelerated, system users. and driving mid-throughput any XXXX. acquired launched We The gigabase cluster per And the of offers innovative flow best-in-class that months fully NextSeq our system, we with succeeded for target down ambitious with XX

solution We’re adoption. updates TruSight that look Suite, Software launch. on diagnoses it and about barriers our potentially genetic simplifies transformative excited reduces a disease I to sharing forward to after

our TruSight clinical deliver to the We and partnerships Qiagen, both on sequencing through available including extend clinical companies, And the XXX our world’s systems. progressing leading continue Roche, TSO we are clinical-grade IVD capabilities expanding our to menu are portfolio, NIPT most and regulatory. with Adaptive, and compelling through

coupled discover of to As clear. and patients the applications, physician This, growing enable benefit greater with and volumes adoption, customers by increasingly genomic insights information at emerging awareness our will is from more new across more sequencing the promise genomics. biological clinical depths of utility growing becoming and community

to With that, invite Q&A. the start operator, I’ll the

Operator

Instructions] comes from with JPMorgan. Your Peterson [Operator of line you. first Thank the question Tycho

line Your is open.

Tycho Peterson

to try quick ask I’ll thanks. just up couple ones a Hey, front. of

the fourth fees up On like million. million milestone? the you can Roche It the quantify to quarter, $XX partnership $XX looks stepped

where you different NovaSeq ahead looked to in the remainder decline NovaSeq the fourth relied the XQ instruments, fourth off the a upgrade ASPs revenues, doing coming are So Roche in in instrument try was did quarter? quarter. HiSeq It looking of And anything on that of to you then all like cycle? catalyze pricing on terms bit

question. that’s the first So

cycle NextSeq, two installed those is out market market? rolled to or it as into the get you systems that, curious on expansion about think then base as And upgrade the Thanks. new an just

Sam Samad

Yes, thanks Tycho.

So this is Sam.

expected, On terms other. or we quantify didn’t sequencing than so didn’t so I another that. It than million But in Roche. and milestone, than line sequencing of quantify better the come how $XX exactly in in came and did we that of say, would was Roche better approximately the expected much in better expected QX,

majority that we that which You QX can was about the revenues in had by driven Roche. IVD as it think of

take your can can with the Francis as that so question we have XXXX a NovaSeq, that look We’ve you regards it it’s to I’ll second ASP. and your ASP giving ASP that regards anything by special second is reducing and this we have – that NextSeq. customers. a on around orders With also we the one NovaSeq natural the at emerging markets at the With that which in we’re around well, to doing any discounts usually lower lower of or UK to had or question, reducing a not multiunit on driven some UK – then the What comment giving across number Biobank have Biobank, placements placements have ASP. price

dynamics there when but on price the specific some with across orders lowering of So, it’s the natural our you board. nothing multiunit customers, place

Francis deSouza

Tycho. Sam. Thanks, Hi,

NextSeq the we’re you XXXX NextSeq for XXX XXXX launches cycle in and where to today. to from XXXX In of we customers that year. demand the the upgrade going expect this as the XXXX out quarter NextSeq then base come the terms That’s already NextSeq we after, launches of and focusing, the for target this bulk the be later an of NextSeq are pointed

MiSeq the orders customers and couple we of of from and we highlighted bolus customers buying starting quarters XXXX. are NextSeq instruments, to up bigger that MiSeq customers. we’re We smaller looking at that – see a those XXXX that expect to be ago NextSeq also expect migrating We come some a to expect

a a at There’s the And but customers be chance to number very the the where number. small XXXX, expect there we from. to likely NextSeq that that’s a of HiSeq look be that’s might of so customers small come that bulk

Operator

the comes UBS. of question Brennan Dan next from Your with line

Your open. line is

Dan Brennan

Great, taking question. thanks the for

the XXXX. us So to the year you being help down? upgraded the by of being have just wanted much and in of it on the of give you’re level I kind about more the little a Can of kind on of some how color color placements center NovaSeqs, of base any down end expect you install talking on kind more

since by to baked of kind guidance consumable kind secondly, giving then you consumables there? more related of just What’s HiSeq XXXX? granularity in your in consumables within And HiSeq are

Francis deSouza

numbers the cycle, the transition. base so the half if so the upgrade customer that HiSeq X HiSeq, are we of has NovaSeq right, started All under how believe We look playing here’s out. at NovaSeq

And so we base the install to to between over that have play out still and XXXX That’s we of HiSeqs. half go. end of now going when life

to And the so that’s happen. we expect numbers

of NovaSeqs, third was in a of especially terms number placements, excited given year of the year is In something really last strong about, of NovaSeq cycle. the upgrade it’s which year very that NovaSeq terms the we’re

we We similarly that come expect to quite expect over this and play number that couple the naturally, of years. to year next down out

Sam Samad

come haven’t expectation, to than come think, will continue we information given to not on specifics And continue giving the on expect HiSeq you HiSeq heard with number million prepared that HiSeq consumables we’re What you in is. pull was the I or remarks and quarter, on $XXX the from for even regards down, what ranges were but would what level to in terms that consumables through. in Dan, dollar for as expect of a less HiSeq, intuitively through down, we’ve mentioned to that as backed away of We’ve XXXX obviously giving consumables pull on they specific QX, total consumables. the

Operator

Research. from comes Beuchaw next Your line Wolfe Steve question with of the

open. Your line is

Steve Beuchaw

time on want Hi, one on ask good I launch. for the afternoon. the one NextSeq and here. to China thanks And

what question of – one dynamics the few an we not just that to a speak environment appreciate the relates ago easier wonder to or of considers. back it dating balance around I what you to have maybe comps. as is extent now in And between for I is view there a growth that that a viral weeks there’s As broader funding factor China. opposed that to expectation course given recovery you’ve outbreak that the given some of if to then China, the you’re seeing could

they higher to price the NovaSeq given a trajectory then or now we’re this also on that fair NovaSeq system? unimpacted appreciate orders per customers how into, And that comfortable pretty owners? who it by cell? being buyers weeks that the secondarily, NextSeq flow might Is and How are attractive on launch, say few early, the as were I thinking largely about throughput are still a your we using the PX NextSeq G dynamics Thanks. with be

Sam Samad

I’ll I’ll to Steve. thanks the NextSeq question start the so and China with get question. then Yes,

what QX in but that In and looking for, a on a we knew it saw terms year-on-year and friendly we seeing would of of growth China good based was China we’re we little are from be growth lumpy. comp,

this of markets this we to expecting, primarily a oncology to specifically terms expect for that’s us in China China. driven year, And to continue very in as play more going out and that be clinical year. we growth In area from be said, are strong the to continues we

that In safe. the can priorities I’ll our families with sure our foremost, making our are by and of doing thoughts to that we’re terms of say help and everything one impacted to coronavirus, are stay virus teams make one the and top the and are sure we communities first of

investors. the QX for either to year. the the clarity, call of And we impact in we’ll plays of too certainly terms communicate In get financial early transparently financial it’s as this with as that more out, or impact

impact China. cancer hospitals, thought grows to NIPT and impact. to that the testing we be there call through As possible if avoid could in patients to But way impact the an epidemic if too it’s it’s start early and that going to

And that watch see. to with again, communicate So you situation. we going we’re what we’ll continue to

deeply working on engaged the are coronavirus. in We

teams, the as world. around with teams have that well Chinese teams on working around CDC as We the the world CDC

legacy are it. in of HiSeq thinking NextSeq and how our customers then the And launch of high the some throughput about terms especially customers,

be appeal upgrading for a customers, That’s the expect of XXXX the to throughput So interest that bolus upgrade the of customers. to are ground, to The said, NextSeq interest MiSeq be XXXX There’s but going what going we’ve and NextSeq little but not existing if cycle. NextSeq to very as little done NextSeq, the the from tried and some we look I the customers really NovaSeq of at and high output output is overlap. existing at that is we’ve look there’s you cover you reason the the to from much.

So output with very go flow with to if gigabases output. the you low the flow – high NextSeq at the the end of NovaSeq of high you the end of through prime at a the you cell if get gigabases. an go the And XXXX, output XXX can you XXX of cells, get can

a so And there’s there. gap clear

self smaller can you the with will throughput we that flow base. the NextSeq the most our think XXXX appeal And go And so cell and – mid XXXX throughput high customer customers, and of NextSeq you will on to identify. NovaSeq continue to

Operator

Bill the Quirk Piper Your Sandler. next from of line with comes question

is Your open. line

Bill Quirk

afternoon good and Thanks Great. everybody.

coming that impact what business next thinking couple think region XX% at on years, back the there are MERS, the your a possibly of Thanks, – option test to several growth for say, then it quickly overall our And How think, monitoring relative in as relative outbreaks, noninvasive happens, things east as very should year study So about And to there’s separately, guys. the well current during the clinical XXXX the of any we to coronavirus. if outbreak did like, to other and to screening example. situations about coronavirus, the two the so, have trending oncology that analogous inflect on taking online. look business maybe I of innovative to or was middle you ago.

Francis deSouza

Bill. you, Thank

oncology touching emerging And on then specifically, So potential about will opportunity clinical the I the talk impacts the the I’ll and first screening on of talk coronavirus. rate. growth about opportunities market, the monitoring

So we based oncology bulk of get is the panels testing, using that in today, clinical various NGS the frankly, the testing, are coming therapy customers from revenue of from of clinical terms bulk that for of oncology growth, selection. types and the

And oncology, the early still so the of its that’s see But most market. clinical the It’s at revenue it’s stages. frankly, part of we’re that bulk penetrated that oncology sort clinical penetrated. the of X% about still in

As other clinical larger look potentially much see screening. opportunities in oncology, exciting the and we at coming we really and opportunities from areas monitoring

little doing along monitoring of to very, customers maybe than cancer. opportunity for early are a stages, The of liquid bit further and the out really opportunity Guardant monitor exciting a screening are and like work in some is for seeing there. starting them play Both GRAIL Phenom very, a look nascent we’re the to where biopsies MRD recurrence of of to today, effectiveness and use the therapy the very

Screening And starting from I in bit last for into Phenom and the customers results you’ve future to over look little the like revenue starting few opportunity that had exciting. publishing nascent, we’re so again, early at earlier, when a been very but GRAIL that chance know, super and sell don’t months have ASCO see like tests Guardant their hugely stage, the years. a we to it is if are ESMO. at growth represents and to Again, large space. think this a us potential companies

results false But low able positive they studies example, the rates. are – to show for GRAIL have that in very those

their numbers false So cancer. maybe and X.X% types specificity XX positive indicate levels of less than or over rates high different of

end represents those revenue big companies very So also represents not a maybe Illumina. for years. terms But for having and in of that’ll play of study the opportunity of a sometime a very in and Obviously, they’re about test year. life out, this impact terms future much that’s something stage, human this but year, talking that market year, they’re in opportunity on meaningful still in next

how different a and about and played terms at the looked ahead market SARS out that’s testing. If the in art bit MERS bit state of think further we out. the because coronavirus a little And played it’s out. you NGS playing And little of is

will way out, this play The roles is that this we outbreak. of play coronavirus number and think a critical NGS combating will

of out number the RTPCR, the be ways. first diagnostics ultimately used already and patients seen believe and create then of play specific available be to it we testing will initially be cures. needed line reference done will NGS will with virus a in develop to NGS sequence help where we’ve While One, used publicly

for So we previously already started strength confirm We It’ll outbreaks, important patients. that the in be And MERS detecting be genome. not and for with SARS we to And to the be saw tracking see with it used also, play we’ll that this SARS. that in be that of and outbreak. terms used saw used in very with that immunological viral will Ebola. in then novel other out just saw will also yes, mutations surveillance, we coronavirus which

then we resort inconclusive patients NGS with as also expect be And finally, testing, used to last tests.

So we but patient with be viruses RTPCR a symptoms, for when tests like symptoms used. are example, NGS negative for with also to the similar other coronavirus. expect then And influenza, suspicious test for presents in

that’s point what view on based previous of And with outbreaks. we’ve our seen

around now. CDC and teams our with earlier, around in and we’re world I with December CDC As the engaged working said teams are been for the the currently in working, world China teams example, have

this sure outbreak. is also and globally that testing with monitor available collaborations NGS organizations to philanthropic engaged We’re to make

Sam Samad

clinical of And points question. your maybe to back data the initial oncology well as Bill, a to emphasize on business couple and

around grew they so points consumables for just and top we in XX% that, average in over for oncology, at above so terms And our sequencing average, consumables also grew approximately grew growth. clinical oncology oncology, – the above clinical look data sequencing comments some of So in XXXX, of earlier, XX%. above our that our the – oncology when terms customers in by also oncology

Operator

line Your next Derik De of of question Bank the with Bruin America. from comes

is line open. Your

Derik De Bruin

questions. of Hi. couple Hey, afternoon. a Good

you a talk is sort it. the Or of NovaSeq to million HiSeq something like question, XXXX $X.X the those not else million for are did per decommissions. the little surprised leads for about number more? that which sort talk the outsourcing about The guide I’m bit consumable using and just by customers sort they to box. of buy NextSeq surprised that and first of the $X.X next see can was into now about that labs one, more Are

are isn’t and why Novaseq – are is. customer those than higher wondering, just number coming that I’m I’m instruments So HiSeq down, your it just if surprised

Sam Samad

right. All

you, thank Derik. So

number. Let me the with decommissioning start HiSeq

So that’s our visibility a getting customers are getting on closer customers the our using focus result the how putting we’re more of into to instrument.

the instruments are we looking so not active, really are which time instruments, which active. some instruments And to spent

out new a us what for being used it’s So field. instruments are understanding, model in the

number the total So XXX what got last year. isn’t decommissioned

ones is that’s the instruments are number which say, are in a How is are what a came of just being sort about ones out to used, to field. So used okay, lot, XXX. of less? largely we down they’ve are catch the The about that all have being we we And which used been total inactive. out feel XXX

estimated. revenue the anything had are there model old actually to our what in and per are instruments that, does from customers the and we’re pull-through change actually model have that is than terms HiSeq using active fewer doesn’t getting of utilized the previous the field at being had higher consumable, labs more in that than estimated ones instrument those It is mean it the

both active So that we they were some when aren’t and those doing inactive they outsourcing have customers more. using they instruments looked at the aren’t more, still instruments different, it, anything

so of that plays the it how And out. dynamic

Derik, million XXXX your our per regards of In is question, for second terms $X.X so million yes, to guide to pull-through NovaSeq, with $X.X instrument.

the as was quarter pull-through million the of performance in see pleased that mention we NovaSeq XXXX in with in terms on for the We’re record QX. $X.X we was year a that very

we because in of XXXX, NovaSeq and that S Our SX some the cell. are flow expectation the of throughput and launch newer customers seeing using even now over customers convert Prime and with in lower the fourth start move those year as

instrument. average. fourth lower the guide. for of for launch those natural in year that’s million $X.X million impacting see throughput to driver start That’s the customers from the pull-through will But $X.X You to the the

Francis deSouza

as In addition smaller be we this out guide continue year coming customers to will the and to of the NHS influence popgen that’s large of gave. like for Biobank running online online. that’s There these an to some of commissioning well sequence really part expect UK running, some as reason customers really Sam offsetting pointed see in you full come the the force, we as happening

will that’ll that year. play be the so on And this factor offsetting

Operator

the of from with line Stifel. comes Arias question Dan next Your

open. is line Your

Dan Arias

back rationale But then the Back on acquire for that upgraded XXXX. X,XXX customers context of Apologies to to afternoon, questions. Francis can and the wanted the a here. the unit of like really just thinking to Good Thanks around XXXX and seemed the Nova capacity launch in option it the you the it. to higher for not wait have the a cold of for little guys. bit to talk NextSeq, just

the captured of flow to I’m the – So this in later this And anything curious for we about I’m you that in in be more XXXX. expect you I’m maybe I should which launch can terms then much way being about Thanks. to say how just PX demand curious guess configuration cell year, specific different. see timing, relatedly,

Francis deSouza

Sure. better I first. will And NextSeq your hope cold answer soon. I question gets the

the I’ll do of PX. talk why and buy XXXX, So customers the expect if about the majority then to XXXX we

we’ve is So the many, of used the one higher having, lower strategy instruments and that times. end many

have XXXX, pointed the XXXX, So with HiSeq X,XXX. you we the NovaSeq out XXXX,

And a us is to have are HiSeq allows We teams do with this XXXX, XXXX. conversation customers the start point. sales our it lower that price to what allows

talked our priced some lower But majority cases that’s have out instrument, is instances, what but happens the played instrument, lower be priced And customers the the as about of the those buying out, able been for conversation. end a the it’s they that to of that decade, start conversation do to important I can And going pointed in up so vast strategy. buy right. they reps higher instrument. in that everyone And back you

play are of is flow NextSeq. we customers the cell, quarters full comparable buy PX a be this the way can is the XXXX output of who’s set that excited first NextSeq fact to that they for the to of today’s to going about out terms couple In cell the flow

make workflows the old machine. compare the can machine equivalent new new output can from an the they equivalent machine to using – So on they

the by and lot PX. their attracted future buy very But going of are higher NextSeq economics to associated output to the a that customers the our with and we the do expect instrument will with be an business eye

towards timing, public year. now the the the specs that In come and flow though end said, that of Obviously expect of we terms now. of public cell to it's are we

planned for. something So know it's that customers we’ve about been

Operator

question next Cowen. Schenkel comes Doug line with from Your of the

is line Your open.

Doug Schenkel

good Hey, afternoon.

So just couple of NovaSeq. a on things

looking guys below some you access to those back, compare which of tracking a I'm the just below customers think larger quarters. with consumable reduction per to How over little large moving is being in last million guidance of $XXX Nova. that And point guess, that's have $X.X programs completed HiSeq if Nova. I few $X.X to million, been now just revenue regarding First, for XXXX? wondering pull-through per where of bit box HiSeq indicative those projects the increasingly consumable I largely on does at this million and

topics the So back like those looking to are I'd cover.

ahead, assumption there some And that replace. are then reducing in NovaSeq that potential HiSeq’s function out the cannibalization? placements trying to XXXX a looking are function hedge to XXXX of A versus of the is that lower the of for number there's Nova

the replacement on little in for the of little outlook all a future? would actually above. And structural a bit on NovaSeq the function there you. chemistry anything being the Thank on year a finally, more just implementing of prevent higher a or from having end in is. maybe bit or blue-green what you like is NovaSeq So maybe of rollout visibility the A that platform

Sam Samad

for question. the Doug Thanks,

one regards XXXX we be transition Francis it million instrument. second $X.X communicated and and for year the XXXX, is to million $X.X we $X.X So forward, the full that so to I'll going to start And With pull-through million. with I'll NovaSeq, to the expect for third. in first per

So the what we essentially, in the equivalent to range high end XXXX. of saw in

exactly I on it's question your to regard HiSeq, think right. with And

we cycle of are transitioning cycle, and the transitions this deeper where into HiSeq to HiSeq from this over instrument. moves As deeper we new this NovaSeq into as work customers as and get on completes to over get some upgrade

You we've expect to do which obviously, is stay on expect that and HiSeq, indicated to continue see come is XXXX free. down NovaSeq to see consumable what HiSeq we down consumables consumables come in

Francis deSouza

couldn't year, terms Is lower on to then be asked any about you And we've this of placements? years a NovaSeq asked, had things. why then of blue-green why asked structural are couple a NovaSeq Doug that in there that expecting to structural and being cannibalization NovaSeq? in reason implemented the we other by it you chemistry strong is two there? the given influenced, future reason And you very back or NextSeq be back placements, One,

the we this after work NovaSeq cycle in NovaSeq go looked at labs, really So smaller the year, the terms be is see of to year done in we core of this upgrade terms placements, as to right.

with got SX So new year S and then last that pricing. that's upgrade with cycle the activated SX’s Prime,

the a And the more so to as pipeline at we this small we full the of core look year, labs. be it expect with onesies lot twosies

teams. dynamic so to and And our customer sales in be the expect in we our that's playing out base

like number than with the result last smaller example. purchases the in multiunit a And big so will QX, QX of that some you customers that's total year in UK saw Biobank for

the expect compared the placement So that's driver one being units. last down terms we of And frankly number instead be deals to to units two more year. XX to year placements, biggest doing of in this

very there's overlap capital the expect target the of and NovaSeq. and price terms also output. much in of g different We in but NextSeq the terms no between costs cannibalization both They terms points, in don't and of the per

self And together, very so those to when easy you for variables three add it's customers select.

have And the new sample you don't superior if purchase the NovaSeq, NovaSeq running flow PX do superior never you NextSeq you If the XXXX a a to get you that the allow even the get economics. cost volume if you have will in to And to to so you always sample NovaSeq. will go sample still because you you have on the volume, go it with economics volume. cell,

the of that there's targeting. little are in segments terms So very overlap

maybe don't So expect some, there we but much.

view And blue-green isn't reason, the anywhere. a can’t frankly component use any. toolkit but answer And we why then the question there as that now. in architectural our core is about chemistry, your We NovaSeq, structural

on XXXX the the into component. built NextSeq core that's acceleration other based do architectural technology, we NovaSeq, XXXX also we elements for hardware As and toolkit in example, Edico you that another of things saw

up And the put for design frankly, decide sort instrument toolkit, no the there's future is both something internally. in down show next whether an active portfolio. it we show always and can’t why in up out. reason debate have better will any What the we our point of and does that's of up that if the And instruments

in structural or So at print we show throughput a future those components out, any reason as version given instrument. up high components design point, no we’re going, the the lower best absolutely we'll a you a have point instrument there's couldn't but pick why throughput of

Operator

Puneet Leerink. question next Your SVB Souda with from line of the comes

is open. line Your

Puneet Souda

Thanks. Francis. Hi, Yes.

question NHS my a of visibility was the So into the you view better clinical is, ramp to and level there. first get hoping I have

half that of clinical made around project, appreciate were You is largest. comments to XXX,XXX And expect laid not out in This second if in second patients year? samples earlier. by million ramping X the one target. XXX,XXX expecting largest that you sequenced what XXXX I we potential And How year. that the NHS had should do to we of half this bridge this the genomes the

XXXX get I around NextSeq, uptake. completely comments on your And

and to customers, But NextSeq’s just NextSeq XXXX validated expectation that those using diagnostic are wanted in instruments for instruments new you. it. Any chemistry, those thoughts have instruments them customers these and or in smaller diagnostic labs. some are on of are to Dx? terms Dx? I NextSeq MiSeq’s, Appreciate the upgrade understand, same suggesting checks given the settings Thank Our of your what's given academic that among

Sam Samad

Sure. Puneet. Thank you,

being And that. genomes to three is, that's of XXX,XXX you bridge talking for how the the Hancock comment NHS have talked million got you so the and we've XXX,XXX on then how fact whereas questions. One about on year. looking Secretary to about I've also an give So back done, X the samples, update bridge that half ramp

the asked NextSeq of will especially the be and NextSeq And about for upgrade customers cycle. talking part also Dx You upgrade this about Dx whether that cycle, instruments.

the that things announced the So at with you contract are lab frankly. the how in testing services, progressing, a update to we've over terms provide we with of have the few we happy for JPMorgan given NHS. the signed GeL genomic the last NHS, lab are services months, Since testing

plans review deeply engaged. teams a leadership are We forward. in California Our going here hosted to

as how very feel So ramp things tracking NHS. for we about in now the are terms of the good of

expect sort of see going that So midyear we to forward.

be ramp to And bottoms get sequenced. a that is to said first you team there. we've what XXX,XXX The scaling genomic done we've up And how phase XXX,XXX genomes that, up publicly analysis on of is up standard the over and to testing middle genetic with starting diseases is types when year be care for we of XX going different just a the of cancers, the four NHS.

million of standard XX population, for care to XX So the people. million UK

lot obviously than XX more than diseases are But four a genetic and there a cancers. lot more

the more out for four really diseases we X,XXX they’re to NHS so Hancock driving XX to is there Secretary, want about UK be roll the cancers. more and are lot And awfully this ambitious diseases There how genetic genetic not than entire population. are

be a That’s helpful you lower five how costs, but like timeframe, a with of what the that’s And as path other and ambition. yet not to more buildup committed a so as for testing areas at million. well the genomic get do across genetic that’s outcomes better start committed indications, when diseases, to you happens cancer number across expand you could as that this

NHS ramp. So the that’s

you pipeline that are than the or to now. is will one In keep DX made, on in DX. today you a the terms is assay out built expect the customer won’t to which a you DX, in to you the And NextSeq that market point lot a you we goes upgrade right buy that around of using will NextSeq or buy expect of NextSeq DX, box. our the validated workflows have may that either a And and if likely XXXX XXXX path play you look way cases, we the the you have not, especially purchasing NextSeq cleared DX be actually more you you have new or cleared are a the

instrument when certainly and the announced out eye for comes gets to And keep DX XXXX so and you’ll market. XXXX an

boxes, adds foreseeable DX future, be But capacity NextSeq for your will DX the boxes.

pipeline to NextSeq And so we XXXX don’t driving NextSeq now. XXXX expect right the those be and customers for

Operator

the from Donnelly Citi. comes question Patrick with next Your line of

Your open. line is

Patrick Donnelly

just well maybe about on talked looking where a big was linearity growth EPS guidance XQ year-over-year maybe Thanks, kind revenue pretty of below color bit Sam, there. the came X% guys. obviously decline. only side, more for of the you Street on just the

talk more? just you a that can bit So through

that Obviously outs. to into And start. top the the of of that saw year initiatives then those timing of of on have on in guidance revenues full XXXX, the some side, some some push we yet visibility PopSeq

much the particularly number? XXX,XXX just downside or that upside talk the can confidence me from either numbers, that to Thanks. that see level Biobank. How shift, from UK we and Let

Sam Samad

look QX, the When number, think way, all years of the thanks question we across QX we’ve other we the but the not we Patrick. think where QX, XXXX, When is also about across first all, mean, about Sure. this and had instruments as of by for I unlike launches.

we I different know going to XXXX, NovaSeq is So to instrument, a back saw is but similar the in linearity very XXXX. what

come a of back after much weaker have that doesn’t very exist business obviously because both that what well QX year we year. the of and holidays, we DTC business when a also you specifically instrument the obviously comparing the QX. if and where QX big that placements, two across looking, you’re three factors think as the about of and have And then into QX big drive QX, in NovaSeq sequencing of have some samples QX step is the for seen from versus or in DTC decline lower consumables if usually QX, we you’re well. processing across seasonality And the because QX past is seasonality most performance up versus One this the the

of out another QX And for with then will available will until come shipments finally not in constrained you new have and launch NextSeq key fact the QX. instruments in the the instruments to factor be are waiting new customers that XXXX pausing, the is because late NextSeq

NextSeq in QX. much So you will shipments have overall fewer

QX are the drive those into sequential factors QX. that the key So decline from

the the you that think we will rest ramp about launch the up. have XXXX As of to year, obviously NextSeq continues

across placements instrument for will the have year. up You ramp NovaSeq

about. the that You population genomics we talked opportunities have will

full continue of year. continue have the will those But also year, of middle that XXX,XXX at the JPMorgan and the across that we about GeL to to mode talked us in is of the starting Biobank the in samples full starting UK the process expectations So NHS then production process we you middle shared with year. the the in commissioning all around and

obviously XXXX So expect I ramp have we confidence the constrained course QX of is we in the big that plays with for reasons but NextSeq launch XXXX, a had that that the unlike but obviously And before. over it’s launch we’ve other mentioned. years part the not that,

Operator

the from comes of Fargo. question Wells next line Leonard Dan with Your

Your open. line is

Dan Leonard

you. Thank

Just on expectations. back PopSeq wanted to those circle

XXXX? drive Francis, that the numbers Biobank, be you’ve All really and disclosure those to some comprehensive XXXX to in are you into or how fold could Sam are offer ones permission or there going is three the NHS, three of meeting and those that disclosure UK material the coming other gotten that Us in are So flagged, programs the are three the

Sam Samad

Maybe can chime I’ll in start well. and Francis as

So to talk talked this we provide is projects not to we to have the about them. are to sure about we we PopGen and wanted this we year disclose. is the key three on want permission make last what year focus projects that specific and about and This PopGen very visibility about those key

last All we to which that’s when And project, expect this obviously which we samples as start now to talking will And So point of that the was points in big with want year. well. commissioning to and NHS it say UK XXXX, NHS Us, we’re to number get the and which of continue associated of as all it. and that have clarity all talking and XXXX agreement a and with we was GeL has start going the started also we to across Biobank, pleased process to

There UK financials. genomics started XXXX Biobank other within are initiatives the And too. has population our

talking specifically our be those. of not Those about part will are business. We

Some focus have but really XXXX, XXXX, expect on of three to them we started the of those ones. we in in key to material wanted some start

Dan Leonard

you. Thank

Operator

your question the Jack of from – comes Meehan line final Barclays. with Your comes next question

open. is line Your

Jack Meehan

afternoon. you. Thank Good

potential to an on was way Just hoping Illumina round just the maybe of update innovate long-read deal. going market. that like hoping, out, Illumina’s following give could conclusion was you strategy need I PacBio, sequencing. us the into is I a It to seems their in

level some in So you’re like some forward? is terms other And maybe just you can big things maybe moving strategy priority the R&D? the How us around working Thanks. of of give a on the comfort prioritization this what’s versus of clinical? of

Francis deSouza

Yes, sure.

me Let Jack. answer me let that

market market it’s short-reads will us, So, whether markets market for big believe intersect capability that capability an and oncology representing be new market for future be long-read two testing long-read a markets the species or for honest. novo The sequencing, so and need aren’t that of to we really that long-read really continue don’t very sequencing sequencing about the and the X% the foreseeable sequencing the technology big in that overall for markets market. adjacent NIPT little, long-read the overall the will de suited need to

market the complimentary believe to short-read representing about continue the will a market. X% sequencing to that market of we So overall be

our of excited know technology. we bulk in the that accelerate at terrific were to are fantastic about about effect technologists. terrific knock for at market, we and a in What that is what teams that good teams because there operations what’s And down machine for PacBio new market wanted have once we the that engineering engineering price, driving is short-read because do on was and species the a we deal a species, do for cost sequencing try market example, sequence the and our good is on you that you

the market ways market moving now. And more is going that the to so, clinical which we’re move part market opportunities. in look it’s small it But comparison larger the overall much market. dwarfs than quickly opportunity, than to a for long-read of to sequencing to is It much, continue

we of for tradeoffs oncology internally, market. close forward, do to long-read the we it’s testing the even think example, that about spending So not in more when market would terms drive versus

markets. far on have our long-read working that higher we’ve public to that, programs the be, about to both short-read the us clinical core work internally, fact and said and markets continue Having markets, on away, we’re But the those priority the internally. been the for research continues own going we we’re that to

Operator

back There the turn this no are will presenters. time. questions the further I at over call to

Jacquie Ross

you. Thank

reminder, forward the call our we the following section call update at webcast in a This concludes available us of and the next our of will to replay you fiscal this look our a As close joining Investors today. the be quarter. website. first of for Thank

Operator

Ladies participating. you and Thank concludes gentlemen, this today’s call. conference for

You may disconnect. now

Illumina (ILMN) 29 Jan 202019 Q4 Earnings call transcript