ILMN - Earnings call transcript Q2 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2020 Illumina Earnings Conference. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to introduce your host for today's conference, Ms. Relations. Investor Illumina, Ross, Jacquie

Jacquie Ross

Good afternoon XXXX us our for and quarter results. thanks second joining for everyone

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

Officer Financial an and President review earnings Francis be update Participating Investor Chief you've different to of hosting Officer. Relations and If on results. the our had of Francis for will number be can website are chance last locations. a it not financial Samad, illumina.com. Illumina Sam section will today found deSouza, review at our Sam to Chief release, a will call quarter, we our share business in Executive our from Similar the and

our there archived made So XXXX. call This portion being Litigation or bear us during please the the statements commercial intent with will protected Private regarding in today's any financial Investors of under It will technical Reform challenges results the Securities activity be our pauses. are of and Act that all recorded website. audio be is forward-looking and call our is if section

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

Francis deSouza

afternoon Good everyone for Jackie. you, and us you today. joining thank Thank

an tough engine expansion. been our to see of that was other we for and how proud innovation aggressive context the we future plan. nonetheless, XXXX stepped But pivoted execution support how second our through the I've our strong in foundation was have environment pandemic. further each up this customers, a flex expected, the our to strengthens and quarter employees have how already of original communities quarter in have what in As supported current

the ago. remain today focused on second sequencing, To navigate which our disruption, Illumina and opportunity anything it larger near-term and we summarize for As was outlook. long-term we if months X the quarter is than experience for

the XX% as Our second the quarter world down revenue customers pandemic. ago, by our $XXX of from year continue around was million impacted be a to

and Further, and third in revenue the indicators are for expect the barring recovery fourth development floor the gradual quarter quarters. of an we the second We unexpected seeing in growth sequential represent of course the year. pandemic, revenue should the

be shelter-in-place which to despite Second, than business remains more our visits, restrictions. patient lower research, more impacted continues by ongoing resilient clinical

Third, infectious COVID-XX than as authorization with emerging and quickly long-term three area for went workflows, to an test Illumina disease XX responded COVIDSeq, software in focus our is diagnostic additional has concept days. for less including from tools which genomics.

and quarter in these contributed to quarter. so the modestly Given revenue second encouraged the we we're far seeing are the timing, very third by in interest the

Finally expanding. is that sequencing opportunity and importantly, long-term most believe the for we

XXXXX experience surveillance. infectious short-term the of a insights. could adoption genomic impact is our While UK to customers' the disease routine tests ultimately use study Studies value and for into on this operate, genomic awareness negative is patient had of accelerate ability COVID-XX has clinical shared the appreciation GEL's in and broadening of including

run rates get how recovery run encouraged we their and Sequencing rate quarter our momentum consumable the into last placements the move customers some are at therefore, we half above our the system depends clinical quickly second of as sequencing of fourth business said, are sequentially half consumables, shipments. activities of the customers to are increased back their NovaSeq of year. most up which Looking improving Sequencing from correlated higher second year. XXXX the or with of shelter-in-place in specifically, including make our labs. remain by on into the revenue That and

quarter Additionally, genomics NextSeq XXXX initiatives shipments forward. to beat move our continuing expectations. second Population are

of beyond from meaningfully could All vaccines, of and for second of received development a role at virus the the Sequencing related stage year. genotyping interactions the the virulence. respect the necessary transmission the of has treatment pandemic, this of example, us, in half critical for will quarter. the sequencing dynamics FDA and the screening to later continues and and with and play is in diagnosis to virus, start adoption scale transmission both and IDE more and host we the effective sequencing the COVID-XX understanding SARS-CoV-X earlier and And between research,

addition a the increased early emergency first the received towards to This better We we're for In provides community [Indiscernible], COVIDSeq transmission to can growing interest of from and end to of NGS-based this launch end few intends through the sequence and scale in critical COVID-XX. to example, sequencing help samples. the customers a for of information or for and a in understanding outbreaks. FDA NovaSeq most full diagnostic X contribute addition, COVIDSeq, diagnostic testing developed for XXXX. towards our to quarter viral diagnostic no, end be use the urgently and on runs seeing to in access screening control regional patterns leveraging testing the address yes capacity, Illumina quarter. To to positive second June authorization in order need shift capacity. the

could authorization who XX series of turnaround business testing COVIDSeq improve the NovaSeq immediate We of and current an In to will saliva, chain. RNA NextSeq. current continue supply adding experiencing existing COVID-XX of the which our supplement submitted term, that the This additional amendments we up our amendment method test to for have supply enable to test an the utility labs beyond to locally, with workflow, the derisk extend automation that providers days. and throughput test offer extraction add times lower derisk to will PCR chain by with a diagnostic are COVIDSeq extend the simplifies

COVIDSeq supply Looking scaling number discussion of than forward, a customers these with with dozens in and we are actively more with in of evaluating XX up, countries Illumina's COVIDSeq.

and diagnostic increase Institute completed example, in first For The clinical XX% of New interested available XX% virus. data to and Biology and Delhi COVIDSeq the the transmission of team compared is validation to be monitor just testing, integrative can to also Genomics genome as and of front-line gaining the means in used while a COVIDSeq PCR. to X% viral access their than in more that sensitivity between an reported increase yield of of

initiative. important to which will X we underscores for Helix recipients In COVIDSeq, funding were we NIH's acceleration diagnostic Ginkgo pleased from fall addition and based sequencing flu that of tests increasingly potential beyond are scale diagnostics head believe among rapid of the to into PCR, be as and testing the This the we diversify the season.

$XXX But program Thurgood Testing black China cases, we down decline. to and million be for Fund announced screening labs. up the with resources some COVID-XX closures our some of campus growth Fund Clinical, week a return week. expectation will consistent through a to pandemic to of the that levels, however, and were plans by weeks are to seen All clear to quarter, relatively research line testing. and to College impacted was in reproductive State and our it EMEA Marshall extended by Negro lab with a sequentially research College the still starting sequentially, sequential institutions for adopted. other reallocation testing million the reduced a year-over-year colleges widely regions headwinds ago a regional few COVID-XX market by initiatives revenue while how results. Research closures, is it pre-COVID-XX Delaware screening; PCR headwinds number for for Back in that largely America shown sequencing amongst to third testing and to third educators And at and has test some develop the example, Oncology historically continue universities the modest academic and by driven pilot Moving the within to University, with in customers' research universities, programs non-sequencing into quarter. both closures also prolonged with expect reflected last based partnership were United the resources below some remains students quarter. diagnostic improving. X,XXX programs screening or institutes research both with Family. in with its driven revenue and consumables. but for health. resilience declines redirected driven of were with clinical $X to the temporary started by scale significant operations was is COVID-XX. expectations

and but COVID-XX, are shelter-in-place Americas the some to restrictions. government more dollar Compared more largest $XXX academic million expected, was last $XXX levels. with customers April, to the most operating from region, quarter samples associated from pre-COVID-XX million. are lower labs with saw down impact reporting resuming Clinical resilient below operations, be clinical continues well to sequential and still As

region in as the of revenue compared million Finally, XXXX second the reported $XX activity. Asia-Pacific million $XX of quarter research to reduced labs

level than activity. rates customer this consumable of It's many as the before. clear to sequencing directly not lower navigate track you general that to view; that continue a indicator pandemic, are But Moving correlated is while to an this sequencing inventory customers run we revenue. remind maintaining of

quarter reproductive recovery week. of the week clinical, this seeing was the shipments at resilient, and by run end one The continues we're to of run in said, recovery, run most run but April shared of rates. is result, XX% Within of of second quarter to are Clinical fourth the in rates the lagging QX significant in of year, the XX% from rate. we rate followed Oncology. revenue a the variation with be for That year. trend 'XX the last that run clinical, volume modest health average As the therefore about

rate April than by significantly among second clinical. pandemic. at quarter rates QX about XX% 'XX Moving to remains of to clearly but more improved end rate, Weekly from XX% run about are the customers run run impacted the of research the research, variable

to been positive has releases portfolio broader quality and underlying expectations that has use support new product from virtual customers' have a done strength reporting design. to team outperform has data as excellent acquisitions enhance the Illumina systems world, team and intended come speaks new and continues disruption further opportunity. XXXX the of sequencers to our installing our of priorities and well and very job shift as on the customers of ease our against which application to been execute the our feedback and up engineering commercial customers that with market with terrific product Illumina. the expect running, to organization they our the Despite with expand Early unavoidable, While strategic NextSeq the are getting

showing cell, in flow are track for launch. quarter a interest customers the continued remains Additionally, fourth PX on which

As based Suite accelerate reimbursement to-find obtained helps is through noted growing genomic genomic And hours. emergency Software Software time testing. potentially labs of variants regulatory R&D and believe the June, earlier, conditions. and Software first highlighting time We July, there of millions sequencing Suite part hard- sort quickly condition. identify suspected we customers TruSight The new that launched from broad to transformative genetic for disease TruSight disease care for become TruSight early early genetic already COVID-XX to diagnostic standard the versatile Suite capabilities. of of In we in genetic weeks newborns a could this a authorization for to offered insights for over a use that enables our to test

clinical technology lab DNA the which continue generated that identify improves we our time store, With other entire each this mind, as the in to BlueBee amounts brings the workflow. solutions for proprietary July prep Dragon improved year. the of the and data almost that adoption that even by analytics efficiency to in more genomic the we workflow, data the and genomic closed customers' that feet of we sharing has in sequencers. software software reagent and of to by continue acquisitions announced new and existing two data. in XX%. landfills free will important June combined solutions insights which footprint the find efficiencies, grows, with enhance from from reduces workflow. be into ways end Most and accelerates analyze Enancio stored address This we as compression and bottlenecks result our and reduces important to but divert data fivefold cubic users lossless of scalability sequencing received our of sequencing manage, both Illumina's PCR At feedback will As packaging platform context foam storage and nonetheless, help positive offers are in software recently, to to and directly on sequencing of vast samples. the across library Outside our new packaging time prep XXX,XXX innovation extract clinical we our integrated opportunity workflow, resulted much which ability sustainable processing

to for pricing the pleased cycles, The longer market. announced I'm our some in high Finally, features NovaSeq throughput and new reagent deliver extra performance lead kits. life our shelf new reagent enhanced and kits extending

Additionally, more customers. offers adoption sequencing any in These commitment Sam over sequencing, the genome to detail. statistical intensive single ongoing bringing larger to increase like reach studies. for discuss more all kit that, the deeper Illumina's the innovation pricing hand applications to new a enable the NovaSeq financials With it to accessible data for and cohorts more sequencing, $XXX whole-genome power changes of and cell our biopsy, to user, liquid represent I'll into

Sam Samad

Thanks, Francis.

quarter impacted customers with as particular. for and revenue increased $XX sequencing discussed, NextSeq XX% than year-over-year shipments. Total expected million of stronger XXXX million the research NovaSeq, $XXX of NextSeq ahead system sequentially. MiSeq, our declined XXXX, all MiniSeq second to revenue our As expectations Shipments was in slightly pandemic

to research infectious and cell, see adoption single XXXX NextSeq pathology including Research. across broad including COVID-XX testing, and range oncology clinical a continue We of molecular disease applications

quarter, Sequencing $XXX roughly were most greater systems interest, among customers. consumable represented sequencing the quarter service revenue Of levels. new-to-Illumina shipments second the to and research revenue impact was sequencing of was the million been XX% pre-COVID the clinical below have operating For cumulatively conversion, NextSeq total quarter and legacy customers. to down given of sequentially with its and sequencing addition close revenue of the market headwinds. XXXX new shipped still DTC pandemic consumable revenue lower customers COVID-XX we're NextSeq down a consumables $XX XX% due other many seeing revenue. Sequencing and from of to licensing the our in was represented down XX% sequencing quarter same lower $XX first due million the XXXX, million, lower million of Total revenue. last the array XX% to revenue of to in to from Overall, year part year-over-year due service was total and seasonality down expectations related $XXX revenue and normal date,

for up from quarter. tax Non-GAAP of mix quarter million share to the be to include non-GAAP operating a the measures, lower the The a supplementary all on stock-based cost the P&L, adjustment higher than second XX.X% margin Non-GAAP the subsequent to compensation. shareholders. to references account to GAAP results tax stock-based XXXX. to always, year non-GAAP of of down freight net and from income the I expected release XX.X% both and Due down than last through to and revenue earnings in prior rate. I Moving encourage as $X higher with expenses you data quarter rate expected $XX today's refer were costs was margin of reconciliation million which non-GAAP due XX.X% basis. less associated will in and compensation operating highlight from EPS the higher Non-GAAP an sequential leverage lower with was jurisdictions these as Please to per results $XXX to pandemic. and our projections. a due generated last quarter XX.X% that was of available fixed can of expense note found review year-over-year which website. XXXX first lower income was million updated that gross This Illumina lower attributable on and

per share. share was $X.XX tax results per For share two XXXX, or basis, $XX quarter diluted income a was or of items. net the diluted million for and non-GAAP per On include GAAP second our income $X.XX $X.XX million net $XX discrete expense GAAP

offset for The first the case California and a of Altera credits relates asset the to tax against allowance reflects of second investments. per established include by determined valuation which payments. these a finalization is equity R&D unrealized deferred tax the other This court which share-based share intercompany in on income, gains $XX basis million cost-sharing compensation be included partially from must $X.XX from

$XXX due from days flow XX quarter were compared cash DSO was quarter, second last operations million. capital the million, was billion days revenue ended and million of repurchased common of cash $XX $XXX XX part $X.X therefore stock. less and with expenditures equivalents million in in and to short-term cash, $XXX in We linearity We flow the free Additionally, revenue. to approximately lower favorable quarter cash investments.

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

under share our available million for $XXX plan. have repurchases current We

XXXX our XXXX. diluted notes count of XXXX. quarter reminder, included since effects dilutive our been second average have a convertible of through September Additionally, And July became in the the from convertible X the as share notes XX,

Directionally, continue believe We makes the that the the in the sequencing clinical research expect year reported or we and our and full challenging outlooks around to to at time. the COVID-XX particular second we XX% for the it provide customers severity in quarter. uncertainties improve modestly pandemic this customers that on quarterly of that has from duration to impact run can volumes our share

research cautious improve to over the XX% volumes For the in remain applied, second reported and we run expect and modestly quarter.

slightly sequencing expect on a to revenue and re-revenue sequential to expect grow We flat basis we instrument the up. be to modestly

In region in expect third quarter. in regional we growth terms sequential of the every performance,

regions flat. XXXX, we quickly will regions of be regions with to others, all quarter to in APJ about be are certainly be across compared than expected revenue third some recovering and lower is to more which expect exception the all While there the when headwinds of

activity non-GAAP to driven non-GAAP gross EPS in expenses be a by modestly gradual XXXX an in margin in second expect higher a improvement driven quarter. the reopen reflecting performance-based in to and second sequential part increased to primarily compensation in of second For quarter we increase third quarter compared quarter XXXX, the of to and the revenue, operating adjustment as the labs decline stock-based adjustment service compensation the field by the in non-GAAP

While quarter, grow we expenses pursue we we sequentially R&D utilizing the remain in opportunities. to to about third our invest growth and projects where invest. This means expect in operating and to continuing deliberate sheet balance thoughtful

As a same over the headwinds. With I'll this have capital genomic technology at hand and short-term time, expenditures pausing invest discretionary we of other will we we or back innovation in leader, believe in by revenue certain call areas to balance But delaying spend. the obligation regardless other to Francis. limiting that, an

Francis deSouza

you, Thank Sam.

disruption pandemic, bullish as navigate we The as the on as Illumina. as more While ever the ahead remains for the we and will the that combat the opportunity partner are as surveillance Innovation efforts sequencing-based and is continue applications pandemic internally for near-term focus. to is screening comes capabilities and North need research disease remain long-term to expanding is continue contributing ensure to innovate challenging opportunity our for into sequencing to of most this surveillance our infectious to impactful. whatever as global diagnostics, and customers Star we with well applications research, combination

are continue gold Q&A. sequencing start the to flexibility position competitive in unwavering pandemic customers our protect and the My injunction to property we progress intellectual to can and work employees pandemic, as here technology pipeline market. beyond through this the our helping commitment we remain is United Our together. innovation who standard products in our thanks our preliminary we And looking to to deliver States. investing and to the resilience strong With recent that, appropriately with and demonstrating our to

Operator

Tycho JPMorgan. comes Peterson question first from Your Instructions] [Operator

Tycho Peterson

on around of thank you. some COVID the there, you numbers help you if us put know wondering I but Francis, don't out opportunity. things can have I'm couple testing a Hey, guidance

Thank there the the scale just Similarly any more a you're about on down think us XX you magnitude and can and the that up us talk China but And the -- Can then catch half. it there that surprise a when meaningfully at wondering is give the if have was genomes, XX%, be obviously, which in of you in framework bit back percentage thinking countries. there. on half you scaling the talked talked you may you done curious to how just about given the and I'm been I'm to was year up about the growth? could of of if and those dozen back return you. on recovery delays, beginning that customers about XXX,XXX that PopSeq of lastly could You the what of opportunity. year,

Francis deSouza

Okay.

let's each those Tycho. through So, order, in go of

talk we in let's and scale how that first COVID expect So the to second about half.

QX. QX, build and As in revenue very base are in modeling In to then to the sequencing to modeling we are customers little our screening but little half -- year. of areas we certainty use of surveillance. that start are areas to related QX, our we a QX, in prepared we expect expect to there Those looking that COVID revenue the number and remarks, and saw are said in back we research, into ramping COVID-related diagnostics, start where contribute in the revenue

genomic where looking they On scale understand are the that happening XX,XXX NHS in GEL severity that in or the the and There's COVID to projects they're research CanCOGeN sequencing side, also start are patients to infection. drivers Canada projects the of the of there what got are and a QX. like will GMI. QX them project at number with in Examples what's example include off into UK in kicked for of QX

up we to diagnostic just and Diagnostics a the then side, diagnostic scale example up [indiscernible]; their and QX. On begin so and like capabilities ramp Helix, capabilities we to have to QX their scale started are Garden up customers for we to Ginkgo, them customers starting to they've expect scale have number in that all in of UCLA,

One initiatives. includes that customers University out Delaware at are some State screening-based happening rolling of example Back have a as at Back offering to looking School also part to or what's We back the a one to getting XXXX mentioned screen they week safely customers students where with part and about educators as as are I remarks, working people our in of school. into of Work

people are back to this there it's of starting it are how and imagine it big track And outcomes getting seen up pandemic. quite safety you adopted the really fairly of those QX and a put initiatives as of to a initiatives a epidemiology infrastructure surveillance the remains that And that will then, if gets there that together as helping at QX, be school. so way and it also are beyond number last scale get looking can to to range looking pandemic, over

So work for surveillance there for the up is a of around in happening example, CDC's terms example infrastructure. setting

are So those starting year. is to diagnostics, there heading four screening so the That the terms was the research, but question. surveillance little again end There buckets. far, in revenue towards the is of very and first ramp in QX and of

PopGen it about talk The big question, take initiatives. some second was though around [ph] of the

with In now of sequencing the that was course was really GEL-related The from revenue there any they IDE QX, where ramp and talked received QX -- put the start and but rate project Biobank significantly more the us, [ph], to in UK of it focused ramping terms and terms had, in we over is about. just the on that we pause in UK looking I are in didn't up continue has then down really meaningfully of run it QX, ramp project year. up has expect all progress to that sequencing to the but QX, the The in in on NHS was from and it focused of see where FDA there associated QX.

to sort for is a are closed being or a although repurposed it where down its the market, what seeing normal, China headwind is in testing. was are the operating real of lower lot of research question, terms think in and phenomena of back still China, In capacity work either labs we where the we're COVID-related or your of which a was part academic way there China last seeing I at

so that, the saw in research clinical side both, strength to down. the in market market, research in more the continues of market. relative from business Having the said China we and and the oncology, to resilience so be And NIPT China seeing we're in

Sam Samad

actually seeing We as in would China well, clinical growth that I And add the side on we're in year-over-year. sequentially just and Yes. QX. Tycho, saw

impacted So but either quarter. definitely clinical of help as side closures resilience the The market the didn't on with in associated by the heavily closures. China, in the in resurgence Beijing the well that research

Operator

Your Beuchaw next question Research. from comes from Wolfe Steve

Steve Beuchaw

has and on. all is as Hi, I call right? demand deferral. have it. do elaborate world understanding here. good guess afternoon challenging I and wonder a to versus right pretty little is the indicators, why now. we how things extent is academic I demand destruction But it's about, the to wanted Two mean what of think It environment, what that with nothing One to good In way lead academic, to Illumina; it's I you for is sort do time thanks just this the think is, I'll a on touch I two a bit. I'd

though projects are And universities some remarks prepared the being into on does talk that mean larger. right the that that's out their everything funding you lot the about these function or to in the simply your that but second to given now, the then, is funding the going a comment if in that I about So, to some get you is deferred the into will. about a future you in -- itself, ask point entirety want I Francis, what extent the of as at thing future. set, TAM of in are on suggested a your challenges of made academic cases, there, that the funding point -- concerned know it's it's And hard don't facing out people for you lab, are that early think

to talk points metrics do wonder you I'm you. you day would that likely or into the activity in but elaborate us this lead to activity, What you're a view give that of seeing I some indicators, out months quarters Thank just looking TAM to actually and it are to how track track as that. or you the to sequencing project on are So the sure if on that could you of their do or what that intuition mostly that is future is be at weeks it is is bit. quoting you've lot are how perspective already a larger, a little the you number touched you're willing about emerge terms day of

Francis deSouza

you Steve. question. the Thank Sure, for

two it. are parts there So to

they projects that but they deadline they're back telling are work. and are a part are is back what is to the for those the first to the or deferred it. being we're Steve, do shelter-in-place us be those is research projects, lab, whether from deadlines it around pick the being feedback are funding their come is told will the projects aren't to COVID canceled get there are how the expect The projects canceled, around related academic either that up the we unable associated in them and right deferred, work. [indiscernible] and dollars being what markets they to even our in But to in do to cases part expect are we they're now, intend about the to with do out though and do cases many The people getting we of -- being working because to on being happen need and in research being initiatives research non-sequencing where pushed there or customers thinking that as at in, deferred allow they're we home

them to And our so from are projects getting we're the on clear pause and that pick up. those is they back feedback expect customers

community our are funding result customers pandemic. a is there that the we what in mix is as research addition, In coming the of the hearing additional into from

understand response are to they to genomics market, associated disease are that's is the seeing a things severely more or for by whole into the host so with or is. some do And research with other being dollars research of more whether the what pandemic allocated the why people driving it's impacted host money example that

And so right those about they to now. are how thinking plan projects

is In base NIH addition, they the to US are $X.X increase directly about pretty obviously early the billion; very telling are budget example us also of COVID around proposal. of NHGRI, that things the to proposals of around work, budgets NIH signals the like a about And in an positive an that for increase it into are includes billion the early $XX on first so related which initiatives. the increase genomics funding related as proposes that but substantial

the take about of the the on dollar they positive now. research the to larger will why because people with or able reason because seem in us as that with back to plan larger we to we so, deeper thinking signals genome academic can now their come want And about they they emission comeback projects are the sequencing $XXX part them appropriately they go and cohorts. projects be broader in research and right academic to cope That's the introduced very

there is about so a they do come when definitely of back. thinking they And what lot

first the part was your that of So question.

of the over we're in few months. there TAM of is role Second that look scale understanding around, about up the part in talked -- pandemic? the more you disease. infectious talked oncology genomic primarily to overall us that's role based, need that's host. There in talked been addressable What's for disease because going the If like and so think for to is explore it's important new in changed that, we impact a to warning really the What's right. some much had network new track that University. Illumina. things going an certainly network you as that January for or quarters have about the of forward in diagnostics. reproductive attacks your fairly for in diagnostic would of PCR Helix existing few market pathogen of expanded Coronavirus last said bio entirely some about It's need we to surveillance months outbreak number the that's becoming market genomics changing have very opportunity talked to much much things that's but and the the need you've clearly by really like disease research, the and And has epidemiology like sequencing-based in that's things need research population. we capability as global real about starting the around because that's for look is There antimicrobial for very disease. is to about health, that the it's to opportunity how an that that's to and comes ago, the this and understanding system. part be of for market the it and a a testing I viral clear or And its schools today, before, is And always And interaction a there up virus, a and coming represents question a Ginkgo and heard early right. infectious December that it us you a There better and areas also transmission of the around testing is how market also clear new, larger genomics and if diagnostic I is our system for ours to opportunity happening of in is a of what's safe there and looking an surveillance of thinking way so through customers virulence happening that's and able for accessible [ph] to real. new Delaware is terrorist about early But customers the durable a like a finally, be that example, understand makes new that there that last Illumina that and becoming opportunity in the a market we for the becoming scaling okay, infectious a going not impact virus needed we also so the a early that system forward. becoming is we it the really and genomics-related would to could a few forward, this months pathogen diagnostics we that genomics be and was then a really clinical for and there of environments something the that's seeing does opportunity an was the market it's as in that's infectious part if or lot over that's screening is resistance, work create months understands There's need We're clear even but warning on genomics. State really

place so from starting and And we now need into will be on. that's something put that's to that

So to that's a that's whole new part genomics. market introduced of the being

Operator

from comes from question Cowen. next Doug Your Schenkel

Doug Schenkel

to and on capital a equipment with Hey, outlook. I good question want the question on higher-level then ask the afternoon. start COVID

to little Yes, solutions should help there's COVID that So your debate develop commended be and while to efforts COVID. broadly starting appreciated. on widely

Illumina market per fair complexity big to it Ginkgo, fair for associated test setting can I ton likely think $X what both between going mind, Illumina community you the also in exciting ton is to COVID such they're have doing clinical the given approach how Ginkgo initiatives yet there do SwabSeq it's as the role in most as do the to read but that conclude no of is the per we've clinical to a many labs, well and is and solution to somewhere doing have investor really which sophisticated clinical as next how world Institute, approaches read sophisticated say all challenges. play about test. testing testing for think as are about opportunity generation perceived for We've in purposes, to while sequencing logistical are as that sequencer such a Massachusetts, true debate in the revenue NGS is sizing With there Broad about use try places sequencing. and we the that of maybe most those a by plans the volume like $X

you getting want comes and back volumes about up but the signs and did capital while think environment? lab in to in that the us year-over-year think labs, how to a to you the up and look thinking expected when you and that demand, going for what the little even it's It's possible, as I to capital. -- those outlook like about back ahead, thing are the of obviously you good you thinking second great activity than pick picking to they are when the a Thank talk second that of spending happen, it hear consumable half. quarter, back going The to tend get uncertainty better clinical just do given I hold if Are you. folks but instruments are are are lot

Francis deSouza

Thank you, Doug.

So that's question. work through the parts of the

of kind question was been. that on will majority of the NGS testing NGS part role first in testing done has play being the what around role the COVID how, is of real So of and PCR and the given

talk I'll start about So then equipment. and capital there

[indiscernible], COVID, that are question there again suited its look at terms to are In Research to research and online its no diagnostics, screening of its I that -- projects coming if uniquely research, NGS PCR. are surveillance. compared

and that projects really, they are the all talked about they they So I need new, incremental NGS. are

in wave on And the so year. over any those of and that of I no ramp that question the one will projects will course PCR. about, whether or on NGS be GMI there's testing first In Ireland already that the it's diagnostics, of talked done the was

elements up first all associated here read the the will in where you are areas now One the that why reasons all the The are turnaround pulled to ask reason you will it. the being is, -- happen few constraints sense it into NGS needed so up services you talk right right? supply the the constraints for be absolutely -- in supply that are in that when certainly scale on a for world the the in made capacity chain. as for testing and to of wave its to running competing PCR quickly US really labs is XX So, same testing, And scale is can that we when US, even testing now, chain there there plus in is, they the there times of labs some tell we're with in days PCR.

so -- resources. are about compete doesn't meeting and same for that are us to the chain supply labs testing talking modality And

tests doesn't they just on in for comes same they is turn will is need system so that's And to for there a a there because and they one NGS no why compete supply people that's down sizable look XX,XXX We talking testing. where need capacity; said a so chain. day that pretty the given lab significant for clearly were of expect and

So testing. that's diagnostic being pulled one reason into we're

data, some to a testing for things. getting we're reason or more positive do percentage people no, in get is they confirmatory One, get then is few PCR they on And viral diagnostic certain a example, to want transmission inform just want They negative testing, there that cases, confirmatory false some make problem sure some isn't a in information to they policy run want want don't [indiscernible] they in a want to information. Another negatives they happening. the just genome information cases of into do in pulled do help want for cases, somebody they the if so more diagnostic decisions. yes to the can

And so NGS too reason for their capacity. up to that scale looking they're

a SwabSeq are some or and and the obviously pulled those been diagnostic frankly, asked support yes you developed quick testing no answer all. being to has diagnostic COVIDSeq right. of we're into provide versus So, about them reasons we SwabSeq

different that so And SwabSeq of flavors there you ours. being test give various of implemented and that customers yes-no and it's a answer by are are it cheaper does

should you about think the low the flavor, for about to in that comes digits you a to the test $XX comes asked COVIDSeq, about can test think it's mid-single as sort that Illumina. is example to economics, it If customer depending of Illumina. per You on the using

diagnostics of so, why is NGS the pulled section. being into that is drivers the of And sort

at being help NextSeq, to enable you we've other launched and areas into now developed next to question pulled the to labs COVIDSeq end smaller and the filed amendment the on workflow of it Now had we're simpler the COVIDSeq testing. we COVID. EUA COVID two And run -- the The allows of QX. to with make that which to obviously, the for sort be just do

into out. so PCR the for only early, to is here looking some you there idea And like being and pulled we to research, It's happening they on about, play talked population, something it on screening diagnostics, are NGS you we're sequence we as again get talked NGS. of Because to high large about actually then identify see a for and can not PCR. that, the what you on very want pathogen do so healthy So a with to and we It's happens, some screen outbreak call testing. that to customers is do and do something pilots scale talked do need really about can scale you watching how the the our we're surveillance you for exciting pathogen, that's of are test. that, than on can use the And surveillance, more of again you and track of you need the get pathogen. a similarly transmission then from surveillance, want virus for genome to the the

real need the is surveillance so that is for And NGS. suited uniquely

capital In terms over to to Sam. equipment; it of I'm turn going

Sam Samad

Yes.

in performance So if QX. XXXX and I encouraged real really saw in can first jump we in by Doug, the I results of that mean all, quick, the on capital, NextSeq

-- the So, customers no What also really no know it absolutely you capital basically outright is and of expected customers hearing better great. that from than we're need feedback is we're hearing in equipment came or cancellations we be that given and inventories drew uncertainty, facing where for on capacity. and to They are delaying in they certain saw expected QX. have some I closures the significant pretty consumables down purchases been they also from mean that's

in terms revenue of seeing the we expecting terms our a increase So seeing but the They instruments that from definitely obviously interested for well. in not still placements, we're and delays, we're expectations the are cancellations. as half. expect We're sequential second of

Operator

Dan Brennan comes UBS. next from from Your question

Dan Brennan

Great, you. taking the I'll questions. for Quite Thanks wrap one. a into which thank couple,

the I is on that look QX the you improvement through know quarter and the is would the reported out has at of data hospital, modest, fairly think outlook in be sharper you're expecting being when of improvement believe been I I lot clinical the mean First just market, one a I better.

NovaSeq NGS to number So cycle on I'm to as open open really you up on you're expect, think offering kind seeing wondering weeks. then, to do upgrade not a faster Number do now little time and market would of that down the end are galvanize could you be the two, bit labs think just a three, on a And I'm clinical funding. schools of pricing, lower maybe just just you this may next you improvement kind number get the in smaller screening. things terms better I to is looking why one. maybe price just wondering of up with in back elaborate of the you couple could the COVID; think as for of $XXX

what little taking kind guys. more elaborate pointing it I So, this that XQ the maybe on become talked for point to time is to could for Francis, more of fact know of to that is you, your And when funnel. get you kind you're for is could bit maybe Delaware. a real you about screening you this

lot a terms interest, seeing the and screening you. you're any customers. from color of there's You of what in but Thank opportunity said

Francis deSouza

you, Dan. Thank Sure.

start So with the clinical let's market.

really look is has been of And NIPT clinical Sort there at the markets, the in NIPT, if dynamics and resilient. story what's not why actually market So faster. of happening two fairly you right?

for look the we NIPT we if saw example, in Americas, quarter-on-quarter market. actually at, in the So growth

in though overall see even you QX, to did QX from NIPT. went growth down revenues So for

part that's market, fairly part the that's been one So fairly to on consistent. resilient the of clinical and NIPT

cancer. tragedy people is more and NIPT aren't fewer what's aren't showing getting It's as that's they were a being less and at playing out and just not market, happening slowed research and what's where get just for is, down. oncology, oncology they're And is more look in. than with even going market broadly in are for happening, it's much cancer segment as oncology going is people that's is that If to that cancer the it's up a the it resilient though not you before, resilient they dynamic screened is diagnosed this the to in human us

isn't want matched appropriate so Now, to and the point, into screened tested away the will therapy. so will we and going go they people get at for some cancer do get get expect can

be So in that needs everybody, to help to happen. catch-up to be now. the that there but oncology it market, will there is won't some catch-up likely happen some needs Unfortunately

market. clinical the in out playing dynamics the that's So

resilience not NIPT some as on NIPT the side. resilience, as more oncology On and the but some side much certainly

Illumina the with to it's customers it larger they plan allows pricing, targeted the to point The whether or of our accessible that applications cell in we about price writing cohorts, is as are and dollar single we it's In this make our think What the genome new NovaSeq they sequencing release is grants terms wanted of $XXX this market to intent primarily think research projects for they them into larger deeper aware kit. more projects genome. or that does the come with labs. the be to the to planning back $XXX customers when the

this think from the maybe economics of NovaSeq. positive be that their incremental will I some core upgraded the to for haven't HiSeqs smaller labs terms an in yet

makes I economics the compelling. think more this even

be incremental cycle. in will it terms that think an I so driving And positive upgrade of

talking time. was vaccine to even who be to becoming a an I deployed, will least in at in available American, agree we're towards In that years. unfortunately is, to and as being the next of between an weeks screening, we talking two for the and being a sort between and this of there's individual go isn't terms public year, need couple some this runs year about go of the end the an optimistic away Because health scenario, somewhere reality I year a and maybe screening available of to going broadly people going school. to the [ph] meet he then

in to and environment we need where And and for that so there's going to that's have schools a is. the need time, safe be real that make sure safe work screening

of into that screening think year. the is need to of out sort going middle playing for even going I So be next

case rolled about Now, we've talked out. one being

them their number are it screening of we'll customers that and initiatives a working have be what doing. leave up they're to We to on about public

Operator

Leerink. comes question Puneet next SVX Your from from Souda

Puneet Souda

the Yes, hi, Francis. Thanks. question. taking Thanks for

this what's multiple we a I bit, core been into to to Illumina question you markets multiple with seen that but of get want grow have demand. just traditionally, seen that's the we here. and markets, driven of know via have of demand, elasticity I expansion I elasticity has little a So mean, covered

were sequencing of first markets You expansion. being fact the one blend ones some into to drove the whole-genome and in them that of market

so. that to these, sequencing of you starting at need you years, couple do to COVID research, but surveillance agree antigen you these truly see do to other markets understand you testing, a see speak, test. completely look Illumina these that obviously you of COVID the per can year COVID mean, elasticity just I'm for chase of and so of I demand absolutely over So the solutions think some markets care drive next or and TCR and I reaching point as that next that to surveillance $XX

So you do for I'm get view see of out trying about playing just elasticity your demand Illumina. you. here how Thank to

Francis deSouza

Yes. Thank you, Puneet.

So.

the that offering we to do think parts activate what COVID market. right need at sort parts make we I of that different -- market is of the of are the right points price different want price and to different have the point sure the

able business. have $XXX, viable we at were there market, let reimbursement are look of need do is offer where If test $XX more to you specific. to price which at part a be diagnostic points me the So is labs the and a

there where where or to reagents like SwabSeq dollars in the fit. the is the single-digit cost Illumina it COVIDSeq right so exactly them And something is is $XX

the that that market up that NGS. so for price -- unlocks opens And that's point

was Now never that market. an market NGS

PCR NGS. to was all is That a So this incremental market.

new $XX the so And you dollars is at $XXX available point. NGS open that to are test up need that to a of to now this all market, price and

that markets. to price could price price of of with it able a the that and large and very test, need to and need -- test. be pulling, be points kind so a with digits to to those lower get that you point. Screening market but price large Similar point needs that's to or same that activate may a low you point market mid-single that's that's you in And $XX Illumina, either sort even screening,

sustain be $XXX that how point sense thinking of of little there, market. point and if about is sort there bit measured higher point, surveillance about that's so and I think cohorts Now, can in makes not right and research thousands could genome so of the $XXX it samples. research but XXs in price even price the of the measured again where for and the in millions of the sort a we're higher the you're millions, thousands activates you're a because not market talking it Surveillance, doing price

with markets price and points about markets. those different we the so, And different having how to offerings activate are different that's thinking

Operator

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

Derik De Bruin

Hi, good afternoon.

that's spending. these inventories your of pressures the know has seen guess. the on And back drawn question research on in market. a I or the I mean, the into catch-up you back? come be some that I quarter, ones sequencing number third [ph], of chunk sort guess talking academic had they? centers. with I drawdowns expect government could and conversations So, we've back are comments or additional just spending about a -- money third some in want are a it ACS to Where for potential on the biomedical down the being of in some just And the some I second supporting and centers are we've quarter quarter do their people of about and goes the cutting and on organizations, philanthropy endowments, big go

are what or another So, fourth you question sort budget hearing about, Thanks. things personnel about I'm the goes just expecting this up you're sort any of pick the in potential flush sort academic of markets. into wondering of and quarter. cutbacks And in

Sam Samad

Yes.

hand driven Derik, to instrument thank about I'll for ways, expected me that really to. us the regards the NextSeq let the XXXX. played about question and With dynamics you favorable first inventories for all, over I academic talk talk So to as referred Francis to and a say out on of would I inventories mean, in side number QX by was you of

drawdown less On where get mean, the we side disrupted expected of need inventory things, talk had would than chains need have can the there the up. more What a chains obviously, as all research fact And become actually we fact really uncertain side think customers. the to they that performance lower by as that and that of sequencing look there fact is they believe our when first that also still don't the consumable say so so I is inventory. the have the they still closures by driven market. driven I is uncertainty, they supply in not is what couple uncertainty we we that forward, on visibility fact inventories supply They are to them. to stock was

a you really in activity inventories. so, at by look gap And to the there research it were side we on was definitely driven be, but we drawing activity down customers was expecting that levels when saw the where QX levels research

next few answer sequentially levels as improve consumables be prepared and that's activity see are did. going dynamic months grow what to inventory in see they're or dynamic predicting few stock clinical in we QX. quarters, terms and we on the Your we stage, different have we that's modestly at hard levels expecting activity said over destock, around what research will do dynamics play back to expect is or how inventory how predicting see what But -- Really, we whether explain expecting to Then number the we the terms this both seeing customers the we proxy customer out starting -- visibility, the in the remarks, are don't in to of and to are what of we really of that to in whether to of project, QX. question in QX we that we with next of we expect quarters. sequencing easier is just Derik terms a up, behavior dynamic we in of as how terms for it's QX do difficult

Francis deSouza

spend seeing Yes. researchers in government funding. in funding, And what to is we academic time then of of terms academic sort and are are more cases, getting some

longer a long to and as sheltered could bit people that little So use place are how prolong project certainty the sort the they have takes in of money. actually

definitely we seeing that. So are

not coming come some usual the are that's of money related though less and We sources. research into seeing COVID from more genomics

I including over year also from research, for $X.X proposal. global to the we come largest help try were we're COVID just with out example, the NIH increase That's the surveillance of in sets CDC, and $XXX million, XX next When surveillance well the money the million the into philanthropies an to to -- donation by the to US as working increase in this countries for seeing example talked of for the about NCRI. here NHGRI Africa proposal one one as we for philanthropies. So of did Asia network. But related funding deploy African proposal--

funders seeing people work. who also are genomics aren't usually We of

relationship interesting immune expansion response Microsoft for cooperation So, to between and of the sort Adaptive around between for the understanding example COVID. the example of

And so with COVID academic in overall, and seeing are interest we that associated philanthropy funding, still funding, government genomic research. funding

Operator

And our Research. Meehan last Nephron question from from comes Jack

Jack Meehan

you. Thank

a additional of Just follow-ups. couple had

I that as labs Thanks. think We've -- first research closures into on visibility Then you what customers think how the can give could they up some NGS it long that's like to clinical follow-up box. catch How of do the on think from level you but for will they the consumables. for long just you to just NextSeq heard the here, sure from XXX%. update what not your I'm the for roll that not? from side Can back time is turnaround took year-end testing look take of will you fit get some realistic out an us how think on COVIDSeq the COVID-XX? and a or place. Do needs by

Sam Samad

as XX% all the very COVIDSeq regards the talk is can the it I'm of wrong terms you based potential activity on a to to in that's To in and at and response the our QX. we QX, the XXX% to QX. thank then in in and the at as well, terms this to are I that virus modestly earlier, restrictions get and stage went that's to as we That's terms quickly Francis and sequentially should the direction think on we to to forward, and the That levels But that right here be place about in as proxy, that. were visibility and go I'll NextSeq But also your US about that Again, expectations things in we were depends ramp we rates see levels many of have of our in direction improve about on not and the this of virus. it in what we to We proactive improve all improvement you saw and assumption really expect mentioned again network an and space this of terms modest that but base is improvement in around back about shelter turnaround. Jack that going I question is for average that answer sort Maybe the in Jack, stage. in gradual we QX the to run at preferring connected can't with activity is the see in you talk question. response research something talked essentially applies way factors Research. to to albeit clinical the thinking is sequencers

Francis deSouza

XX-hour of NextSeq, allows implementing in then, that on depends at NextSeq are the a have customers' really time is intent it customer. to your in-house workflow and the on turnaround our of but in The the to turnaround [ph]. course it And time Jack, able be obviously in frame, Yes. sites on COVIDSeq depends question that terms the that test

Operator

over Ross I for turn will to remarks. back now closing Jacquie the call

Jacquie Ross

Thanks, Mike.

press of we today. the joining website, Thank fiscal you concludes of Investors the and this our us as for following quarter. replay section look a a as third as well next contained call dial-in instructions webcast reminder, a release. will close the in be available our call This As to forward our in of the today's update

Operator

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

may You now disconnect.

Illumina (ILMN) 7 Aug 202020 Q2 Earnings call transcript