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Illumina CEO Jay Flatley on How to Keep an Edge in the Fast-Paced World of Gene Sequencing

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the way we hope. Ion Torrent is an interesting approach; it’s another one that gets rid of lasers and dyes and relies on electrical detection. It has its set of challenges, but it’s a very interesting, directionally interesting, technology.

Starlight, if you want to take a single molecule in the existing regime of technology, is probably the most interesting. If you’re still using lasers and dyes, I think it’s going to be huge competition for PacBio. It puts PacBio in a really challenging spot if [Life Tech] is successful with Starlight.

X: Is it harder for you guys to maintain an innovation edge when you become a bigger company?

JF: We hope not. It’s characteristic, for sure, of companies as they grow, that they generally regress to the mean in lots of ways. As CEO, my No. 1 job is to make sure that doesn’t happen. We work really hard to make sure that we out-innovate all competitors, including the startups. It takes a lot of work, and it’s an organizational challenge to do it, but so far we have been successful. As long as I remain CEO that’s something I’m going to be really pushing on. We have to remain agile, we have to make decisions quickly, we can’t get bogged down in bureaucracy. It’s a challenge in a large company to prevent that.

X: This period of innovation, how long do you think this will last before sequencing becomes commoditized?

JF: At least five years, if not 10. After that point in time, sequencing will become so routine that you’ll be focused on low-cost provider technology. It will be very mature, and much of the value will be in the informatics and distribution of the data, how you manage the data, deliver it. Those market pieces will become increasingly important. In the mid-term, we clearly have identified that as sequencing cost goes down, sample prep and bioinformatics become unbelievably important in the cost equation. We’ll put a lot of energy in those areas, because there’s a potential bottleneck on the back end if we don’t solve the bioinformatics problem. Similarly, when you think about doing millions of samples, you have to have sample prep that’s close to trivial.

X: How do you continue to keep the innovative edge for the next five to 10 years? Is it a combination of internal R&D and strategic investments in interesting startups, or a combination?

JF: It’s a combination. We certainly are investing very heavily in sequencing. You saw it with our HiSeq launch, and what we’ve been able to do to keep our own road map going. We will make strategic investments like with Oxford, and we’ll make the occasional acquisition like Avantome. So I think it will be a pieced-together strategy of those three things. One of the things that’s important for Illumina is that we remain the kind of company that other small companies would like to be part of. If they had to be part of somebody else, we’d want to be the one they’d pick. That has to do with a culture, and our external perception of how innovative and creative we are, and the kind of attention we pay if we get into an acquisition discussion. In some of the acquisitions we’ve made, the feedback we’ve gotten is that we deal with that process much more effectively than the larger companies do. And that’s important for us to maintain.

X: One of the things Paul Schimmel brought up at the Xconomy event [March 31] was that the pace of data coming off these machines is far faster and greater than our ability to make sense of it with informatics. Why hasn’t somebody stepped up and become the Illumina of bioinformatics? Or will Illumina become the Illumina of bioinformatics?

JF: It’s a great question. There are a couple pieces to the answer. One is that from a venture capital perspective, if you look historically at bioinformatics companies, it’s road kill. There’s almost no examples of very successful bioinformatics companies. The main reason is that people don’t want to pay for software. It doesn’t have the perceived value that instruments or reagents have. So people are used to the $29 price point for software, or less. Now it’s the 99 cent app. The mentality that people have just doesn’t support a big business. That tends to push you more toward the model where it’s done by the large existing companies, like Microsoft, Oracle or Google, or it’s done in the companies developing the sequencing technology like us and Life [Technologies]. There will continue to be little startups, but the chance of developing a billion-dollar company? That’s close to zero, I think.

The other comment I’d make about the data streams, I’d say one thing. We’ve done a lot of work to reduce the volume of data from when we started. As the throughput has gone up by a factor of 100, data coming to a disk drive is less than it even was three years ago. That’s because of pre-processing, before it has to be written to a disk. So from a data volume management standpoint, the market is keeping up there. The challenge is in creating actionable information from the data. That’s really the big issue. Frankly, it’s a challenge everybody will face in the next couple years.

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