Illumina Shows its Stuff to Wall Street, Stock Still Slides

11/7/08Follow @xconomy

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The day is also coming when the Illumina tools are going to be used for selecting patients whose genes make them more or less likely to benefit from expensive biotech drugs. Drugs for rheumatoid arthritis, like Amgen’s etanercept (Enbrel), and Abbott Laboratories’ adalimumab (Humira) typically are very helpful for about 30 percent of patients, and don’t really work at all for another 30 percent, Gregersen said. Companies haven’t shown much interest in genetic screening of patients to pick responders, but that’s starting to change, and it’s likely the FDA will someday require these kinds of studies to avoid another disaster with rare side effects like those seen with Merck’s Vioxx, he said.

“There is an unstoppable tsunami of applications,” of genetic analyses coming, Gregersen said.

One analyst, Doug Schenkel of Cowen & Co., asked whether it’s too difficult to get access to patient samples to do the kind of wide-ranging studies of large numbers of people that Gregersen was referring to. Patients in clinical trials not only need to give informed consent before taking an experimental drug, but need to give separate consent to allow their DNA to be analyzed. That usually takes 15 to 30 minutes for a nurse to do, and can take extra effort to get cleared by an institutional review board that monitors the ethics of clinical studies. “It isn’t cheap,” to do these kinds of genetics studies, Gregersen says. But he added that recent efforts by people like Harvard geneticist George Church, who has put his DNA profile on the Internet, is taking away some of the stigma that might chill this line of research.

Illumina insists the challenges can be overcome, and big dollar opportunities lie ahead. The market for its instruments with life sciences researchers is worth $2.6 billion a year, followed by another $1 billion a year opportunity in agriculture applications like crops and livestock, said Tristan Orpin, Illumina’s senior vice president of commercial operations. The company is also making a play in the $3 billion molecular diagnostics market, including more refined early detection of cancer. One more market segment—albeit one that’s younger and harder to define, Orpin said—is consumer genetics. That’s the field where companies like Mountain View, CA-based 23andMe (led by Anne Wojcicki, the wife of Google co-founder Sergey Brin) sells tests to help patients gauge their risk of developing certain diseases later in life.

Illumina’s chief financial officer, Christian Henry, suggested the company might use its $700 million cash horde to buy other companies if the opportunity is right. So far the company hasn’t needed it for operations. Henry forecasts the company will increase its revenue by 20 percent to 30 percent a year over the next three years, and that it will close 2008 with a profit of 84 to 87 cents a share. Then again, if the markets keep turning down, and customers get gun-shy about buying $450,000 machines for cool new experiments, $700 million looks like a pretty decent rainy-day fund.

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