See below for ILMN earnings conference call quotes courtesy of Seeking Alpha transcript, with some minor edits for clarity (analyst questions are in italics). Illumina $ILMN and Complete Genomics $GNOM are two keys players in the business of providing contract-based human whole genome sequencing.
Disclosure: I am currently long GNOM shares.
Disclosure: I am currently long GNOM shares.
"In our FastTrack Services business, we had record orders in Q2 resulting from booking approximately 3500 genomes...expect our success in genome bookings to continue in Q3. During the quarter, we launched the RapidTrack Full Genome Sequencing Service, a new offering that will deliver a whole human genome in less than 2 weeks. This premium service offers the fastest sample to data turnaround time to any whole genome sequencing service available today. Currently, we expect this service to be interesting to those research groups that needs samples analyzed quickly, to meet project deadlines or to submit grants and proof of principle studies. We've received several orders testing our RUO [Research Use Only] process with an eye towards qualifying this service under CLIA before the end of the year."
Talking about your services business and 3500 genomes, what's the pricing looking like in that? And how do we think about the order book for that? Are you seeing more outsourcing? Are you picking up more contracts? Just can you talk about this? Particularly as you kind of launch new products, you're going to need faster turnaround.
We're seeing a lot of those genomes come in that are cancer genomes. And actually a fairly high percentage are from cancer sites. And many of these are nontraditional sequencing centers, so they're places that you wouldn't typically expect to have installations of 5 or 10 HiSeqs. The other kind of deal we see are ones that want relatively fast turnaround and don't have an existing infrastructure. So they don't want to buy instruments and take 6 months to set up a sequencing factory. They want to get all their samples in and turned around in 3 or 4 months, and I think that's driving it in part. In terms of pricing, it's probably down a little bit in overall ASP from what we saw over the past couple of quarters, but I think it's beginning to flatten out some.
I was wondering if you've seen a meaningful step up in your services business associated with a faster turnaround due to the 2500?
I'd say not yet, and a couple reasons for that. One, it's a little early since we announced it pretty recently. The second reason is that when we announced it, we announced a limited capacity because we didn't want to load up our services lab with a lot of 2500s until we understand what the market demand is. So I don't recall it exactly what the number is, but I think we announced ...5 to 10 a week is the maximum we could do. And so that's the most we would book. So it's not a high percentage in the overall samples. And we're going to use that here for the first couple of months. We get assessment of how big the market demand is on the RUO side. And we will launch this into CLIA, and then we'll start adding 2500s to track the market demand. So for those reasons, I think it's too early to really understand what the total demand might look like.
Is that your expectation that the CLIA part of it will really drive demand in that business, not really the RUO side?
I think the CLIA will become more important, yes...Those are the types of genomes where there's a medical reason for it to be rushed through. And there are a great many cases per RUO genomes as well but I think there are fewer than the clinical cases.
Going back to Ross' earlier point about how customers might be thinking about dealing with the uncertainty in the back half. Could they be thinking about service as a more viable option given the faster turnaround now, versus actually buying instruments and consumables? Would that be an option to sort of deal with?
Well, they could, but the faster turnaround cost more per genome. So the economics aren't in their favor there. I mean, it's variable cost, so they don't have to put out the capital. But it overall spends more money with -- per genome with Illumina. So I'd be surprised if too many customers make that decision. Some might.
Talking about your services business and 3500 genomes, what's the pricing looking like in that? And how do we think about the order book for that? Are you seeing more outsourcing? Are you picking up more contracts? Just can you talk about this? Particularly as you kind of launch new products, you're going to need faster turnaround.
We're seeing a lot of those genomes come in that are cancer genomes. And actually a fairly high percentage are from cancer sites. And many of these are nontraditional sequencing centers, so they're places that you wouldn't typically expect to have installations of 5 or 10 HiSeqs. The other kind of deal we see are ones that want relatively fast turnaround and don't have an existing infrastructure. So they don't want to buy instruments and take 6 months to set up a sequencing factory. They want to get all their samples in and turned around in 3 or 4 months, and I think that's driving it in part. In terms of pricing, it's probably down a little bit in overall ASP from what we saw over the past couple of quarters, but I think it's beginning to flatten out some.
I was wondering if you've seen a meaningful step up in your services business associated with a faster turnaround due to the 2500?
I'd say not yet, and a couple reasons for that. One, it's a little early since we announced it pretty recently. The second reason is that when we announced it, we announced a limited capacity because we didn't want to load up our services lab with a lot of 2500s until we understand what the market demand is. So I don't recall it exactly what the number is, but I think we announced ...5 to 10 a week is the maximum we could do. And so that's the most we would book. So it's not a high percentage in the overall samples. And we're going to use that here for the first couple of months. We get assessment of how big the market demand is on the RUO side. And we will launch this into CLIA, and then we'll start adding 2500s to track the market demand. So for those reasons, I think it's too early to really understand what the total demand might look like.
Is that your expectation that the CLIA part of it will really drive demand in that business, not really the RUO side?
I think the CLIA will become more important, yes...Those are the types of genomes where there's a medical reason for it to be rushed through. And there are a great many cases per RUO genomes as well but I think there are fewer than the clinical cases.
Going back to Ross' earlier point about how customers might be thinking about dealing with the uncertainty in the back half. Could they be thinking about service as a more viable option given the faster turnaround now, versus actually buying instruments and consumables? Would that be an option to sort of deal with?
Well, they could, but the faster turnaround cost more per genome. So the economics aren't in their favor there. I mean, it's variable cost, so they don't have to put out the capital. But it overall spends more money with -- per genome with Illumina. So I'd be surprised if too many customers make that decision. Some might.
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