Illumina Shows its Stuff to Wall Street, Stock Still Slides

11/7/08Follow @xconomy

San Diego’s Illumina has a pretty amazing story to tell about exponential growth. The maker of genetic analysis tools has beaten or matched Wall Street earnings forecasts for a dozen quarters in a row. It has grown from 239 employees in 2004 to an estimated 1,604 by the end of this year. But when it invited investment analysts to its headquarters yesterday for an in-depth rundown on the state of the company, Illumina’s stock fell 5 percent on another lousy day for the markets.

The Wall Street crowd apparently thinks it’s a tough economy for selling super-sophisticated genome analysis machines, which cost more than $450,000 fully-equipped, plus as much as $200,000 a year in consumable supplies to keep them running. Since Illumina (NASDAQ: ILMN) did a 2-for-1 stock split on Sept. 23, its value has sunk 33 percent, to $27.71 at the close Thursday.

CEO Jay Flatley painted a broad picture of what Illumina does in his opening remarks at analyst day, which I watched on a webcast. It makes tools for high-speed DNA sequencing, genotyping of a segment of an individual’s genetic code, and tests that examine to what extent an individual’s genes are dialed on or off. By bringing down the cost of full genome sequencing to less than $100,000, Illumina is one of the companies that has been ushering in the era personalized medicine, along with its competitors, Foster, City, CA-based Applied Biosystems, Roche, and Cambridge, MA-based Helicos Biosciences. Illumina’s new goal is to bring that price down to $10,000, Flatley said.

“It’s within our sights,” he told analysts.

Getting there isn’t easy. Illumina has had struggles to manufacture its arrays to keep up with demand, mostly from government, academic, and hospital labs, Flatley says. It placed special emphasis—unusual for a Wall Street presentation—on its initiatives to recruit and develop enough talented workers to keep up with its rapid-fire growth.

To give a sense of where that growth is coming from, Illumina brought in Peter Gregersen of the Feinstein Institute for Medical Research on New York’s Long Island. Gregersen, who does genetic research for autoimmune diseases like rheumatoid arthritis, gave a fascinating talk about how the new tools are enabling him to ask new questions.

Autoimmune diseases are a bunch of conditions in which the immune system goes haywire and starts attacking healthy tissue instead of foreign invaders like viruses and bacteria. These diseases affect millions of people—about one in 20 people in the country—with rheumatoid arthritis, lupus, multiple sclerosis, Type 1 diabetes, and inflammatory bowel disease, to name a few, Gregersen said. Their causes aren’t really known, although researchers suspect multiple genes play a role. For rheumatoid arthritis, about 10 genes are thought to be responsible, and for lupus it’s 20, he said.

By looking broadly at the genetic profiles of patients with these diseases—and with costs coming down to the point where large numbers of patients can feasibly be sequenced—new sequencing tools will lead researchers to much deeper understanding of these diseases. “This is an engine of hypothesis generation,” Gregersen said. … Next Page »

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