ILMN - Earnings call transcript Q3 2020

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Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2020 Illumina Earnings Conference. All lines have been placed on mute to prevent any background noise. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Thank you.

conference be this reminder, a call recorded. may As introduce for today's would now Ms. host to like I conference, your Juliet Cunningham, VP, Illumina Investor Relations. Please go ahead.

Juliet Cunningham

and results everyone third afternoon thanks us joining Good for quarter XXXX conference call. for our

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

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

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

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

Francis deSouza

sequentially a faster share the product that joining and quarter up high, you third for with quarter revenue clinical recovery the We to sequentially research Sequencing $XXX our revenue our rebound more strong expected in quarter the Good business Thank consumables our in thank XX% you, and period. and provide detailed throughput Sam down we prior everyone third was us both portfolio. in low Juliet. for XX% year grew today. and highlight with Sequencing grew afternoon Total of quarter a strength financials. compared second saw customers. the than XX% I'll compared mid to the XXXX. will and XX% across million,

growth effect. shipments sequentially. This build. and expect continued momentum was driven outperformed growing took continued we NextSeq NextSeq to have purchases of platforms. X% fourth nicely as from delaying Sequencing quarter. NovaSeq sequentially With shelter-in-place revenue NovaSeq growth throughput primarily policies mid in expectations QX year-over-year, and the by also and both consumables up with increased purchases customers some XX% and rebounded instruments

We growth each QX. to have the We're NovaSeq pleased quarter pipeline strong expect growth in NovaSeq shipments in fourth continue quarter with the a sequential QX. sequential in and with this entering since

from grew service Total our XX% third demand. as from quarter new-to-Illumina the recovering pleased applications quarter. direct-to-consumer coming launch Consistent pandemic flexible XXXX are of of XX% Microarray positive especially for the million other customers and of compared last to for we little the placements XXX $XX NovaSeq and over our of of throughput we've throughput $XX IVD sequentially cannibalization million to other the and the Approximately customers. HiSeq revenue and portfolio lower was XXXX demand NextSeq to successful NextSeq revenue revenue the feedback year. sequentially Strong customer had our success among related X% both NextSeq In addition, one-time in sequencers NextSeq began mid prior XXXX mid development exceeding We're year, quarter shipments these and of reflecting remaining third headwinds. the expectations, another in seen and expectations. conversions customers. with with without with record led due Sequencing one-third licensing

customer We in improvement research and saw both solid to Turning activity. clinical segments. our

and As run do NGS a an and directly use third general Oncology adoption XX% recommends tumor reminder, on activity. has NGS XXX Today, sequencing adopted providing levels. trials. European TSO panels these patients oncology, been TSO sequentially large to available. can pre-pandemic average profiling month recommendations treatment. based growing continue guidelines the an comprehensive The multi-gene the and of CDx to in revenue. option on first follow for outcomes. volumes patient this comprehensive became increasing the by by volumes the XX% by quarter TMB. determination that with sequencing metric can comprehensive tumor can of Clinical during to XXX run availability to test. these is for encouraged and the for the DNA Aetna Depending and for and million availability society customer quarter oncology. access of customers. to excited ESMO issue that demonstrate including signs in approval in will also liquid from encouraged utility large burden adoption of lives, use the panel solid for research who strength correlate for type of the of increased cancer technologies continued and from release approximately Liquid The rate detect and these patients biopsy cell XX FDA blood free society showed we the in for Liquid In both of recent FoundationOne coverage cancer year-over-year. intent provide Run cancer for comprehensive like or tests. from we're in XXXX as Reproductive the sampling only, panels understand NGS if investors quarter to genomic We're second and for track the assay NGS broaden to clinical We're help in clinical continue improve profiling indicator testing of payer Medical of profiling their are tumor and treatment. GuardantXXX Last activity. not liquid for Society not genomic CE-IVD-marked The to point the to scientific mutation covering biopsy NGS-based genomic sequencing Growing tissue a screen is more in labs provide ESMO, benefit broaden to which compared for cancer health announced

quarter In health of XXX% the averaged fact, during its third rate. run over reproductive pre-pandemic

already continue aligned be recommend reimbursement example, looked conditions. is in maternal areas prospects insurance on plus follow than women, expect covered NIPT to in the million its expect identify Medicaid the governments growth for an to genetic average the underserved in available sustained genome sequencing children also the the $XXX and this million and front. seeing We milestone, reimbursement the adding companies whole positive option diagnose the than guidance, us more organization cause Centene or lives lives the in its increasingly the Payer largest ACOG adopting continues covered Australia that all recently Recently, of to around the are coverage exome average at in coverage market. risk additional to of U.S. pregnant give it made having or U.S. to confidence Meaning a We're major Centene the globe baseline as sequencing an NIPT term lives U.S. as for reimburse managed medically risk never care recently guidelines, payers to and for sequencing under adding the risk. genome XX bring populations. whole ACOG'S have age start solid updated double decision intellectual suspected year. announced regardless to the promising. These U.S. of is genetic testing, will With we guidance grow. sustained progress growth disabilities. more to to this penetrated long and adoption to And will genetic disease In physicians, of more developments This

Australia. transmission sequencing which We increasing for funding believe most pathway case like NIH in is And and to of and level the COVID-XX virus seeing quarter, and take positive returning the in to pre-pandemic research in country. for tests genomics to the the of track its show surveillance We're testing. to from Within expectations. also all and shape XX% of Turning exceeded sequencing research, and improvement reopening, third average the their improvement using understanding the of aims runs role run Australia's term an COVID-XX our system, for NGS genomic in projects researchers in compared see to research the second tracking labs genomes use near we're likely is continued XX% infectious encouraged this quarter to increase national COVID-XX volumes. COVID-XX using across sequence its disease. first

be tests, testing will and continue served We with testing to capacity. primarily by COVID-XX PCR NGS supplemental believe providing antigen

we're material As the not such, COVID-XX factoring in revenue quarter the fourth contribution testing. from in to

On the progress. signs we're of genomics front, seeing promising population

received samples genome flow partner expected, second Biobank centers. started us to the of from as approval its FDA All And the in quarter. IDE to the from

We the quarter in expect into the fourth project to ramp and XXXX.

levels we expect and NHS later for During quarter. return we XXXX. medicine to and sequencing the to genomic commence And the UK services sequencing gradually to Biobank whole service sequencing quarter, continue third normal expect continued, to the into for this genome

hundred our its X Perhaps to from one million The and how wellness. the gradually thousand insight for military expects the health million expect And through ramp exposures current the the on Department of year. or believe We cross X Veterans markets most the U.S. new is programs been to NHS the create resilient project to The a and we quarters. personalities whole Million exciting the Program affect expanded over these aims the the of in Given opportunities end focus Veteran partner has sequencing genome of lifestyle face program Affairs few has veterans. initiatives expand will recently pandemic Illumina. on of targeted and genetics, before other and MVP. to popGen next provide milestone enrollment COVID, this

from markets to committed serve, agents, XXXX release quarter. longer the labs to version support version including it new innovation NovaSeq broadly This X.X and to more increased upgrade importantly, Hiseq to X.X extremely well are shelf to NovaSeq continuing and customers the incentives We NovaSeq. $XXX successful quality we XXXX additional were scores, by launches third with provides be which launched been to for our received lead reagents product the to improved life, during smaller and genome offers indices, labs most customers. available makes have help

they Europe For perform and to a and to potentially longer XXXX potential the read example, center new to enable information now perform for with collaborator. outsourcing COVID-XX meaning throughput the to in genome the was NovaSeq But able faster, cancer We're therapy. start for the Novaseq Center, scale, Maximus care reagents, preparing can its closer of oncology the products to largest launch antibody will patient. house, biotech with with genomic reach testing national purchase the the high children XXXX pediatric altering were sequencing princess to Canadian quarter. a development this NextSeq lines, company combined The in adopt

are continue customers projects to research for current These mission and also we cells launching shareholder workflows examples the XXXX in newest as cell routine entry NextSeq upgrade epigenetics the labs adopt future throughout Access customers are term our times. turnaround methods mid using value. faster to academic including to develop spatial ability using challenging on an sized of our and NextSeq Early plans, long already the field in how times flow platform PX these our execute throughput are and PX cell to flow advance enables quarter. lower single Other to transcriptomics. We're during with this the PX create enable to sequencing customers, core point XXXX.

to Now, third Sam the I'll discuss quarter call hand over to financials. the

Sam Samad

Francis. Thanks,

year-over-year, XXXX was compared second but the of discussed, quarter As XXXX. million, XX% increase third $XXX to the decline revenue XX% quarter a

sequentially, global high, both across compared $XXX recovery year over to encouraging $XXX up to impact the continued improvement X X% consumables returning of of While business, platforms. million pandemic XX% down and clinical Sequencing to reflected signs we of system was prior throughput Quarter-over-quarter growth per and through million revenue saw and within our With low customers. year. mid flow NovaSeq per the period. significant million research

$XXX consumables start of system with Our the quarter. NovaSeq in both versus mid sequencing of throughput and and the the expectations expectations the ahead our sequencing exceeding period our was at last platforms Total quarter mid-throughput grew revenue our year. million same of

quarter The quarter for NextSeq third record customer a NextSeq XXXX Dx was platform. demand mid-throughput driven shipments also and for by XXX the

over million $XX third XXXX of base. to of year over total XXXX, of our service XXX other to compared has revenue Illumina shipments and $XXX In revenue reflecting XX% was instruments nature fact, XX% represented growing sequencing Dx and NextSeq million was the of Total XXXX. shipments clinical date. NextSeq revenue. Sequencing represented lower customer shipped Since of quarter the

microarray primarily driven was from XX% million total $XX quarter revenue, by and related of the of Finally, headwinds. services reflecting lower XXXX, down revenue third consumables COVID-XX

the to was and region's, Americas million over the Sequential second XXXX. as of driven expectations by clinical customers and of or XX%.compared both $XXX ahead to activity reopen continued to Turning growth of $XXX clinical research was revenue grew labs increased. and quarter

strong grew grew with the sequentially $XX flat lead APJ China second revenue and and sequencing helping sequencing research to $XX demand $XX XXXX, recovery consumables delays driven revenue of the year-over-year quarter. quarter by of and EMEA compared million, started the instrument compared in second in compared to at strength quarter prior was after clinical clinical $XXX fact, and which driven both as million to year to $XX quarter In the in revenue XXXX. to of third period, sequential a consumables, million modestly with growth. customers. XXXX, year-over-year NIPT to the was grew compared million With second million strength up to by the rebound and placements. of roughly testing increased recover

higher to on and P&L, the Please non higher of expected of the supplementary compensation today's stock the adjustments Non GAAP our these reconciliation year-over-year to found in includes benefits quarter lower repeating lower will shareholders. not lower decline and operating references quarter to increase rate project associated the that XXXX last The Moving XX.X% compensation data the margin by were which compared revenue second project in non-GAAP to increased higher sequential to was XXXX, I expenses GAAP Non-GAAP offset Illumina measures, Sequential compared year attributable third per through website. a you to and pandemic. I results volume $XXX XX.X% driven IVD margin with partially primarily quarter year-over-year refer up due was spend GAAP year. decreased the subsequent in encourage of can income release XX.X%, growth spend earnings higher to as year, tax operating last share net effects of basis. quarter expense. reserves. as third available related same was results all to costs based expenses and by year, highlight and and of note last R&D were be was that non can release, related the by million and freight expenses operating an Non-GAAP compensation. travel. and of the from return partnership and gross quarter. you and this XX.X% XXXX, on driven quarter was GAAP the review to expected of both The prior Compared tax discrete prior

$X.XX was share. of net from diluted XXX the net the driver was $X.XX gap due non-GAAP or to gains $XXX between Other non income third investments income or difference GAAP marketable share. strategic quarter income $X our For net per net And million income on per from our was GAAP adjustments primarily equity for mark-to-market diluted the securities. million XXXX and main

$XXX cash, quarter, common capital million, investments. stock $XX DSX cash operations XX million ended billion short third to flow and days in the current the plan. $XXX increased due term hundred million. the repurchase approximately XX quarter, million free in expenditures quarter, our equivalents quarter We days to from Additionally, flow was $X.X repurchase and last part cash $XX compared cash for third were of $XXX under in collection. with with million the and remaining in We of of

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

As remainder guidance resurgence for not there recovery. pandemic, the provide we And virus uncertainties the year. to continue rate are around this will navigate and the still we therefore of of

volumes modest Additionally, this the expect in to we improve suggests continue flat of labs, XX% are correlate for not developments the will U.S. quarter. year-over-year. in sequencing we the data third will and revenue. regions that XX% the research lead to and and from third risk to steadily and levels, given fourth caution In we clinical new does customers with directly are growth which with from the shutdowns pandemic China Again, we respectively showing the the quarter, monitoring But that quarter run modestly growth to quarter returning activity. closely Consistent quarter Europe. their customers third increased in all expect the fourth the across APJ, sequential

For expect research to recovery the improve. placement. be revenue increasing service and sequencing on as continues Sequencing improvements of to instruments and other resulting genotyping sequentially quarter and fourth a currently and we sequential to direct and gradual sequentially, year modestly a being clinical basis expected in continue from as up is sequential to the consumables we see basis fourth of gradually Sequencing on modestly the XXXX, continued flat quarter the sequential and a consumer up strongest microarrays quarter activity for applications. instrument

for compared a to by some revenue and third closing tax hand reflecting and margins operating to the For compensation in mix that, in the part compared expect year. of offset prior the to call from improvements R&D non-GAAP we by and sequential primarily the operating instrument decline increase related driven prior gross expenses fourth back P&L, margin Sequential sequential non-GAAP expenses. increase I'll XXXX, with quarter EPS to expenses, sales. Francis in higher project an Non-GAAP rest With in the product roughly flat driven and quarter the related over contribution be quarter expenses, extra in by of remarks. gross week lower

Francis deSouza

Sam. Thanks

products in we've our global clinical and to platforms groundbreaking the the enabled transformative research care. paradigm consumables, that have tests leader patient the potential programs sequencing and for seen shift As

our for the and acquisition to new Upon Illumina within continued we a remain to to and NGS a expect and We acquisition years for transforming as of GRAIL forward the expect when acquire and GRAIL, our look the to a largest third genomics detection, second business cancer application closes. the agreement with patient quarter to to To supporting sequencing we've the One of clinical of of operate cancer come, survivability, consumables era We based have innovators technologies. potential continued half revenue access of of up growth, will early. definitive tests month, acquisition the to Last recovery planned is to revenue in largest second to cancer expect XXXX. colleagues in conclude, Illumina's detect close, the significant fourth that of GRAIL GRAIL committed announced of to customers to We ensuring our growth the early opportunities we our develop And consumables the who wish accelerated believe we quarter. division opening Illumina. seen. XXXX. in quarter impact for welcoming we the NGS ability our all compared close accelerate

foundation Importantly, oncology long call we're standard testing. up and good selection, And the importantly, into laying genomics strong disease that, term in With open care, to we're Q&A. NIPT, also that therapies, making most we we'll growth. and incorporating near believe Illumina's the progress, a for genetic of

Operator

roster. the just for pause compile We'll moment Instructions]. Q&A to [Operator a

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

Your line is open.

Doug Schenkel

The clearly was the guys. better most expected. questions. And you than for taking thank quarter afternoon, Good

base it is remarks you off a I reflecting base well Francis, of new QX. much seem was fair? on build wondering you if momentum QX, as moving build instances. of you Is Sam versus thought I'm prepared into that a just Based given this like heading does as this kind a that than you the your catch-up described forward? both sense of of how to on off a you've in is of guys think, you even probably for to better new have lot

Francis deSouza

Hi, Yes. Doug.

of it played quarter the If certainly first fair. on were that's this few think based better expected the how played I look we weeks than out, looking. we out how at quarter

the of and both what we the So activity an in acceleration sequencing research recovery the terms in over quarter saw was the course clinical customers. of our in

And new I think so, the we at a going that keep as baseline we will into we're QX. quarter, exited

it's to So us going fair I the to for accelerated create forward. that recovery baseline a say think new

Operator

Tycho Your with Peterson next the JP question comes Morgan. from line of

open. Your line is

Tycho Peterson

will have Hey, I'm things, instance then just on do thanks. hit hoped curious XX%? demand the instrument pricing ahead drive? I are on some you on a on use would? receipt. couple could as incremental that wondering the down will for consumable degree to genome to just what $XXX year, catalyze going you to the just bit that the when think it cut, buy no the of you forward you examples, reason projects we how that get into I'm kind a come much comment And grow? next still as think want you to if the elasticity on really of a and two back side, instruments to And highlighted that little it But of customers they're think

Francis deSouza

Yes, sure.

So questions. take of those let both me

elasticity first, around with of Version So X.X point, the Reagent. launch associated the

do, $XXX $XXX them in genome. access access core The some So labs catalyzed giving smaller genome. by and already to the to Version X.X had what was we the of to larger the quarter saw, the the aim effect labs really

release and market. was this do two So is things. the core of labs. to intent the the that One, smaller targeted And part a the elasticity to really unlock

thinking remarks. talked customers insource. we the prepared We saw are example about to bigger projects. so, And an that I that saw of that moving were about customers And in

core smaller was other this that segment catalyzed release thing the that in to cycle market, intended of do labs. an The was the upgrade

see we or on either older have. that instruments of customers started didn't so, were And examples to

when upgrade And demand well didn't because terms those going an out elasticity and bigger to continue for to buy are play cycles Novaseq. of of they in as Both the could that we HiSeq, expect of QX have they projects, on be And into In were it's bit dynamics to year. positive there release, as this point, so of those next So into a dynamics, market, initially play example, start of starting dynamics, of and quickly to be headwind. to driving release able playing case, that's or sequencers. it expect price catalyzing a lower though, a both into where new to typically out. very price we're we this short out point a the very how we is see a

really The can you instruments, was second the you good and maybe add were course I'll you instrument QX, from QX talked QX, around perspective. We question that the bigger talked shipments was an can increase we about really in it. than and pleased I year, to an start QX. throughout in compared of to saw prepared Sam, the activity that saw a remarks we little bit NovaSeq

turn see of in saw this plan we year provide continue Sam, over QX, instruments to to And the it strong more you shipments too. the base course I'll mid-throughput color. of growth from NovaSeq so the Maybe in over demand to and we

Sam Samad

pleased on we've instrument the and would a expect terms in NextSeq strong of then QX terms some given fact, revenues. We're declines, sequencing both Yes. And pipeline But resilience especially say sequentially through we've and QX, I of instrument I QX, instruments that We pause we're there pandemic. I really in the our would towards NovaSeq given that the expecting XXXX expecting year. for pandemic, in purchases. year-over-year as say, look for when as in seen been well. with NovaSeq. we the growth both would be instrument quarter mean the looks And growth of growth performance sequentially strongest the and in

Operator

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

open. is line Your

Derik De Bruin

of questions. Hi, good afternoon. Couple

a I in expense first been the big year. the obviously, the think second one, half the in operating of ramp there's

reason is of doing just XXXX. were about to comes of under risk sense were forward, I negative guess advantage? I'm can space, penetration us women And of manager give T&E covered into comes what I the And you eligible think of a think many in, even questions. the we NIPT would is higher, women As trying be mean, average risk some how back for high high travel were rolling how the we sense that as actually many But in? back for of going sort went testing? the I asked should into actually risk, the -- NIPT the a The expanding this get that coverage. some something taking about why

trying some and how Thank expanding? Just the think dynamics get for the can to feel we business you. about NIPT

Francis deSouza

I'll Maybe add some Sam color start and then Yes. can too.

over closely. And the In terms our to sure is to expenses, protect review high were the things been very one we that expenses operating we our course on. the has the of we year continue things to operating of of want philosophy do working make priority

pipeline. innovation rich our includes that So

And some so products, associated business. our in the we've protected projects upcoming with as well as long term investments

some of played the savings, But the sort areas we make naturally out of course those in form the where of those. other pandemic of could we've travel. protected for we've So looked reduced over

For think some next year. come you're those, of back right, example, I we'll

learn will more Sam comment so And about that.

good it's who have penetration obviously, NIPT But women example, in the in going it. are of to reasonably In terms regional NIPT, a of the a you for U.S. get terms for eligible story. very

as women eligible are So the who get their for majority test the part of do it pregnancy. of

And market does the for upside so, segment in test. represent actual up the average demand of the the risk in terms opening of meaningful that

Sam Samad

in we've regards incredibly add Francis's focused R&D the would Derik, time is until in own managing OpEx, for any and couple maybe quarters the below points. one not the to and of our of investment just our $XXX thing I say say diligent a our point year, been way question any operating by budget way. QX, to about the innovation in same in focused about The terms really pipeline. -- of Yes, we're in would three end the expense. impacting with But of expenses, I million of undercutting our for operating innovation And I terms thanks would our way but internal at up

up. below. XX% employees R&D of as we careful as in back We're scale managing eases certain disciplined That and we that hopefully into diligent continue start next forward, start And So that ramp like of things like year look expenses in the to terms up. travel, terms been have Things we'll be very again, to will would will yes, general, we've been well. I as projects have through pandemic into extremely say will expenses managing back year. there lab, in as today. this And about operating our increase But expenses. some have we come

Operator

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

line open. Your is

Puneet Souda

Hi, thanks comments on appreciate for Francis. well Thanks. And XQ, providing Sam, as that.

First just hours have the downs in Europe. potentially question, last down XX France within spread. can lock we locked and these And been recently,

Just do into run -- standard on XX% this if GRAIL. that contemplated And Could fourth I pandemic just sequencing also, and expect ask this diagnostic the you before? wanted in that? second is that then in see of adaptive time that's terms And research wondering if if sequencing a we customers versus And baked be managing more of described around rates to question, you your in different could expectations around levels? get you Europe for thoughts your to operations quarter? And guidance? your now given earlier here? as pre I

biopsy versus are actually that pre GRAIL of One significantly totally valued emerged is but week, key another is last acquisition revenue, appears GRAIL I that acquisitions cancer this since in higher it this thrive. liquid the -- questions approach to that took multi light of the week week. the that have Illumina recognize acquisition

of the here the if test, overall opportunity confidence elaborate, anything greater there's a you gives scale gallery a higher valuation? you technical and or or could of it. terms market Appreciate pen the So pre of performance studies anything cancer that in in or

Francis deSouza

Puneet. Thanks, Yes.

restrictions the U.S. question even So will start I Europe, the maybe around potential with in your

remarks, shutdowns As Obviously, we are mentioned that closely. on control. that least place, to pandemic the want prepared get we some restrictions. some monitoring signs taking we're all the there at potential additional are under so Europe definitely But in there see

QX. factored in for And terms so forward we're QX, for as We closely. monitoring our in of look expectations that that we

and learning levels, Research that we In of number the pandemic about virus, to was terms tracking in not when adapt instance, at not to sequencing for your improve was than you and say work the cautious at very point adapt? obviously that. really more about clinical more expect same time, both fact With with careful in getting being the pandemic of QX, the pre of those that. level evolves But that because to look QX back are customers and It's either open XX% of the XX% of in of labs on other about we a that in we're about said, I are to regards to operation. modestly, think of pandemic of fact of this in pre activity that or bit levels. April. sort XX% not do are compared more of now data how they're XX%, improve kind labs they some to QX based our completely

labs XX% that that globally. ahead, all mean they're But and in it's all either operations, open of total So open. are there the doesn't XX% restricted about systems fully or is full

that's in they So, and a factored expectation. ratcheting really up, are but, gradually cautious our into way, what's back

Sam Samad

And also going biopsy What attracted a a could fact next about we're commercial Medicine, then, over detection your that us consistent I question. players represents of We to And large approaches, of in having And this to approaches, the terms that cancer opportunity, this players market that in take GRAIL that many it's was single we certainly also test. about continue going of we expect will or to all the including other genomics of and talked on test. its to in customers, whether different role we play support we fact those decade and application like Thrive, Exact, liquid we Puneet comment and see largest And to the have the unique position likely players Foundation we cancer expect expect with but being And being talked performance multi cancer it's, such early to a have of forward. the GRAIL in terms market. closest by clinical characteristics forward. and or if Freenome having Guardant customers versus commercial a two. far to number different the because technological closest in market a of

They've undertaken looking in next also likely test So some market. to the And space. make that'll of year. by GRAIL its into launch first is the player clinical that them studies largest far the

and their of enrolled that with over XXX,XXX people And bolus the tests done quite then studies in have they test. remarkable so their of associated a And generated they've characteristics data the very performance are strong.

only to terms they represent rate that this best-in-class approval results which like has high sensitivity with XX% study positive the the is to this also at patients. really an product cancers, for market. of run does false too point in than time able the X%, XX less a in in What IDE deadliest the player a FDA being a So at of to have that they're return

they're Farber, working the Clinic, systems, some of Sutter the care Oregon so Health. health Cleveland, Intermountain system, including Health premier Dana the with Mayo System, And health

they study. returning hands of have patients gallery results And test the as already so their their to doctors part in of

approval so is And also that FDA having very attractive.

GRAIL. that As with price factored the into and all of obviously associated

Operator

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

Your is line open.

Dan Arias

while. would a in that China. a there? sounds that Good step you XQ? the haven't seen on there, in Is for of assuming that things Or that a flow sequencing? to be genotyping do ticking the there get over afternoon, in And picture there into should modest sequential for that's all built It there it into you're quarter, might a makes Did I Thank we be be growth assumption you. that work a follow-on. could this is Francis, consumables say that sample quick that going mix And XQ? begin that year if you some All like ask Us thinking should the year, material guys. up

XX move, back the to in I driving mid What's So the confidence the billion? up guess

Francis deSouza

Yes.

starts with Us. of All Let's

we're From expect the QX in perspective, to the we partner in those, to and sequencing well sets of all up then start centers step, For meaningfully flowing us actual important both because see it it's start to But going our more up All samples genotyping Us of to year. next genome activity. to into revenue a ramp contribution very modest. into expecting QX for All Us of

and means like. machine setup into [Indiscernible] is it setup, so going been the workflow has And that

and you again, up China. year. big can And a we step that's next And sets modest us into but believe then talk well contribution maybe so in going Sam, QX, about

Sam Samad

Yes.

the for Dan, So question. thanks

all. I of China say With would First we regards expect thing, QX. flattish to year-over-year performance in

China So for flat we said remarks, prepared increasing. slightly the and on APJ to

specifically for flattish So China, year-over-year. performance it's

In as general activity. calls definitely But instruments pleased in of PCR previous clinical Research strong well impacted, QX we've repurposing China. the well, about on had year as fact, been and the just we're been for clinical growing the by the strong of and towards impact bodes research. year-over-year. has pandemic, we've China, future some to-date performance testing, the talked China, which in that has that had with on performance work placements

confidence. with for there performance give so, that clinical And pleased sure. the And will us

Operator

Your next Morgan with question comes line from of Stanley. Savant the Tejas

Your line is open.

Tejas Savant

Thanks Hey, for the guys. time.

So a you, for Francis questions couple of and Sam.

sequencing XX% in back XXXX an you're into destocking and consumables first growth. of the some half quarter-over-quarter you play thinking screenings a sort sort as come quarter in here about then the a you Did quarter. that in On the line of online? the oncology, bolus are And dynamic how second add missed the of some fourth restocking

Francis deSouza

to AMR, had, our With customers some that that stocking Tejas. specifically performance so restocking? in in QX. destocks regards an and in we levels was Thanks Yes. QX, on Yes, impact

our restocking an not into increase QX. data that have been seen from back inventories there's or We in

this activity what we've track that see destocking are to purchasing and QX. they're that going the in really that essentially of our that through seen we with is we continue revenues, are really demand that customers QX to lot not they're expecting occurred of demand. but either. back can and at triangulating there customers, their in with have that Nor That they seen essentially we we've some the that a buying the restocking we've have, levels looked based back restocked So on

Sam Samad

important then, a And I you oncology. bring I think at if really we mean, up look point.

associated I that cancer. tragedies the frankly, pandemic aren't screened think are of with there going one people who, for to in is get the

walking they're with around cancer developing. so, And

means yet. point right? will their I associated dynamics will individuals, has out diagnosis year, up plays to two people play think catch catch One be But there cancer Unfortunately a there at be in that of there for some progressed. of or QX whether haven't with that are is sort who next those will up, that out. those that had

actually the that better In other dynamic through playing we're doing of addition, the is are that's out the course tests seeing blood based pandemic.

that the pandemic markets based have that is their blood the how tissue through the out, we based than the more offer if analysis. look providers proof service a service at playing business So do providers tests, resilient that

blood think the you're I through of playing one out type of so that's as cancer for starting the a And sample acceleration to course things pandemic testing. see is the an of

result the in acceleration an continue seeing liquid we think biopsies, out think we as which it's is coming growth but And not to in pandemic, years. play you're a dynamic. So the the of that'll of just durable a

Operator

Vijay Kumar with the Your question ISI. from of comes line next Evercore

Your line is open.

Vijay Kumar

that as close. curious One, Hey, here. should year? ones. about be And And second fail, thinking of guys. how Thanks next realize elaborate the this for but when deal I I about two given razor easier. question. maybe do that model, this, for think the systems misheard declines how Is taking you here, that comps I'm year play I year? system then guess curious. a perhaps on and this quick the my offset I'm placements consumables year? big half out investments should we for system the Should maybe this lower blade next are

Francis deSouza

Yes.

XXXX. bit that's closes. the XXXX, again, in GRAIL, and through associated on regulatory second half process. let then the as to But some yes, GRAIL. We've both of we the as information deal the about the frankly, And expecting a on we dilution saw have half talked of we'll are color. So little touch go with If for you we second add close the deal me more

obviously, of why placements -- we're is -- so blade instrument model. important the a encouraged out And by it's we terms that's we In recovery placements, seeing it you're that's of QX. the in we're instruments after got razor why right,

we the pipeline, the a certainly QX, the and both sign mid-throughput look the we NovaSeq walk going good important. into a as we're QX the to Similarly, seeing boxes very NextSeq, NextSeq the QX, as in specifically new in that into as the XXX portfolio, strength as part And and next well strength the us of XXXX, year. Dx so is for placements are

Operator

Your of line next comes question from Baird. Catherine Shelton with the

Your open. line is

Catherine Shelton

the an expect can for performance into I second, following Thanks to in year in for patients then believe move XXXX you all questions. study? completed Hi. next late when comers you timing parter guess, studies. as for any and degradation see I was data months. the XX And for that GRAIL expect enrollment population from of on we the And do this terms Thrive Pathfinder? GRAIL What's two [ph] screening study?

something or that next is likely see some into could So where that readout point we year a XXXX? at

Francis deSouza

Yes.

done other for we So a of studies. The that we so different far. Pathfinder don't is that GRAIL expect than talked study substantially to seen is about performance easy reason answer studies. have large provide scale And we the GRAIL the the number has data

So the CCGA study the had enrolled XX,XXX study. people in

of all phase that comers study. prospective a and second study study The was

same published The externally the data they've statistically size data. significant of performance they've given is done the test. the study, And on based so with

at So that. expect people early some mid-term to look reveal associated what with with consistent we Pathfinder while They're Pathfinder. the about data small signed generally fact, the different. And results expect. won't a in we we probably the results or anything of before the didn't And we deal, had of we group

we get so What part question? performance study different then next And of year to so the from far. final the don't that the seen results that characteristics you've second significantly was published are expect be

Sam Samad

Francis. Thrive, With

Francis deSouza

Yes.

is XX months ago. a a So about It's enrolled XXX,XXX Thrive study. women, fully prospective

and have of -- that given down, size it's far be pretty gone different. the fast. further similarly characteristics this not to in again, the studies we So And of expect validation significantly before, the again, performance it's terms

Operator

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

Your line is open.

Patrick Donnelly

those of particularly confidence to just you time, timeline the the that Us. near here Maybe of these XX,XXX with It's term. once think, slipped you've example, get to XQ get of your genomes guess, of trajectories about now. still you momentum in beginning of guys. similar I a the Obviously, talked in timelines, new can Thank we flowing some to launched? in what us at about the bigger you kind Thanks, first times few Great. PopSeq Can on whole just I encouraging on the talk kind on one projects gaining the to months. side. thinking you. off see are the those for And do All of trajectories All same six before? the year, talked Are the taking

Francis deSouza

Yes. ones, where those as now, It's of at population big four a studies, right?. we with we sort good And look I'll are the question. touch on

the UK the were, and stood already matter they are we either genome is, and of the better them then partner samples. still So be or get of veterans, have samples than to and UK to And FDA approval, all it's been we the of for have Biobank, last centers. the to the were its to majority That's getting where just up of to of just where that UK year, now a get back million us work all which much the us place example, a workflows NHS. up, flowing where into for volumes year, example, Biobank, out is walking next ramping

high going a they're back back all at year, the capacity, so look next entered March the and at starting if of the to into pulled year. UK of them, ramp I And because Biobank up they pandemic, actually it in equencing they

remarkably quickly. so, the confidence program fact increased million year, in And course its over We their that good, scope the and up veterans ability over have the of of fact, ramp are has been in to the conditions year. has talked the this about assuming resilient course we high

us we of flowing in are samples QX. of All took

actually up the next place NHS is it all of a And good year, really, then so scaling it pretty And going. about in to just be is UK getting terms which testing been that start dealing sequencing year, quarter. But this also has pandemic as to NHS are later been hold they're primarily doing. expected for has the they this the with on

believe going into start puts good And the to year. us in up a scale to so, we position that see next

as and a they that this to with end position and four, demand be all are feel processing had. up we ready that where across really So in pent will of deal good year, the they've samples up all them we scale

Operator

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

is line Your open.

Dan Leonard

you. Thank

Just margin a sequential into downtick the around the any then couple side. And secondly, One, you further philosophically about of you. downtick of on the on expense base in XXXX? budgeting thinking your the you the can the the Illumina acquisition, talk elaborate fourth line change the on Thank roll what's you anticipation can happening and both as gross driver GRAIL quarter? of expected

Francis deSouza

question. Yes, thanks, Dan, for the

QX first really of expected So QX downtick with to regards to gross was expectation. The all. from for our margin

than had our as also gross And -- some additional the that So, we margin some expectation. expenses some driven came slightly the And compensation some by have some was cost. additional freight additional better gross on organization. margin in at of expenses, in impact our or additional operations ramp on project well

material when not change that sequentially The So of QX, really XXXX. our approach. quarter the Really, that's mix expectations philosophy With budget, we negatively the for to and we that. is in outweighs the impacted regards consumables, think core downtick of that's by from about And the driven some a that Illumina, really and business terms by benefits perfect versus there's QX our strong, mostly fact it's have instrument the a expectation. mix.

time, continue diluted opportunity we're in to shareholder absolutely that the were going going that continue GRAIL, But time. committed. years, also at same core business It's are be continuing returns in business, we with to on the to and going to behind invest and compelling focused drive, we support committed we're have a generating We to over we're invest really that but to core few end the opportunity. next the to the --

major not for change our core So XXXX on a in philosophy budgeting business. the of terms

Operator

comes question Westenberg of with Guggenheim David the line next from Your Securities.

Your line is open.

David Westenberg

question. the taking for Thanks Hi.

specifically, then of up of term even you is expectations from a opportunity in quantify growth of is So, panels from moving to panels And a oncology terms your of Thank just we quantify long disqualify of growth -- sequencing Can you kind that that. growth? and of of kind Can hotspot appreciate to consumables, or much component double digit consumables. it's clinical there? and follow you. the testing maybe how

Francis deSouza

Yes. Sure, David.

by saying start I'll that. maybe So

we our that that side under But that about fact faster of business. entered consumables. is research talked clinical half business just talked of this As the we sequencing growing year, our business the about fact also significantly part our than of represents the we

to And be the so, the the cross is for expect biggest you forward. testing should that back. growth the sequencing those both from cross oncology therapy and majority Off market. of dollars those sequencing aren't and represents lines in part clinical in consumables consumables going sequencing of to once they our consumables they business going clinic, The from going selection

expect -- you so, we continue should to haven't forward. And that going

migration of for expect be You tools in do but a the TMB, expect part to have by to term panels, you clinic therapies. going panels number frankly, things, of the see too not as We from of that's smaller hot, number to continue biggest continue there, biomarker larger hotspots driven sequencing should long including but panels the a a forward. just numbers larger increasing use and to the of that for reasons to to the from and the in

that and but panels. to of require you therapy, you for with so, things momentum like it's not to larger look a at if months, to hotspots at add continues that Keytruda few prescribe in what need will to last say, just enough to look look at happened the And TMB, example, gene the use

take And so, that. you

TMB. forward. grow sequencing will about the revenue make more biomarkers You seeing then consumable all I component to of drive to the that to fact be the drive larger talked When bigger example, take and ASMO, momentum you're panels, for and use a continue faster, guidelines of that will like testing oncology will seeing. even momentum and which you're and therefore going sequencing And

Operator

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

line open. Your is

Dan Brennan

the taking you the upgrade that sense I haven't gotten this to customers guess could of smaller particularly are just your still price that and a HiSeq. the question. that quarter the ahead the you for we comments in strong of Francis, you light the remains of opportunity in give in that SSE saw. while, Thanks a cut about for us on demand Great. in

think are what that like look So how opportunity look opportunity, of that tracks do upgrade evolves kind Thanks. and color and this any quarter? regarding of the out? size And you early we as

Francis deSouza

Yes. Maybe qualitative our can a I'll with of start way that. through work we sort and view

ones of opportunity primary Version this that still both volume next the sort the when that are associated core to drop using haven't in So, is still Reagent, you talked starting X.X the with we the multi smaller for had And the to about they the frankly, which benefits we're labs. consumables They're NovaSeq cost. year segment justify activating, is because the with HiSeq. need the upgrade see upgrade the there

looking activate. it for so that. now I'll number turn them. Sam X.X the that over a we're of maybe terms It's And us give of to changes So base while to segment incidents, the you, of that's to the some been in economics color on customer a

Sam Samad

Dan, Yes. Maybe for I'll give, thanks the and question. the color

still to-date. NovaSeq more to know number when on still think seeing we about roughly this NovaSeq. XX%-ish I we give customers around will HiSeq we we haven't some for used metric But give coming new-to-Illumina NovaSeq first to time. NovaSeq provided so for specificity of that placements or expect launched the We're you year As customers. is from that the we take I placements, and the But

coming So around really or that's an of from We're sign a democratization done. seeing XX% that about NovaSeq capacity NovaSeq so great sequencing additional the has upgrades.

more taking that or those so customers just to capacity. upgrading from or are HiSeq So on existing, transition NovaSeq. roughly are then, And that continuing to customers XX% obviously

The going as So help talked to as well, V that's still going drive X.X also that. upgrade We're we will well. catalyze to will continue that see that that on. about

very So to good and encouraging still offset. room

Operator

at presenters for over questions turn time. back remarks. our are I'll any There closing this no it further to

Juliet Cunningham

fourth the website earnings forward for a the This quarter. be Investor concludes call And on joining as section, this through we of you. our in to in dial release. call Thank our the as Relations our progress call. will instructions updating you replay today. on the contained available today's reminder, look a well in you in And Thank as

Operator

Thank call. This you ladies conference concludes and today's gentlemen.

You may now disconnect.

Illumina (ILMN) 29 Oct 202020 Q3 Earnings call transcript