Illumina recently courted investors with a presentation on how their new product R&D pipeline is going to resurrect the Illumina stock price
HOT TAKE: Illumina seemingly resuscitates the 'academic' playbook to get back to growth.
Back on August 13th, Illumina provided a strategy update to show investors that they have a plan to get back to growth.
If you remember, there was a bit of a dust-up during the COVID years where Illumina bought Grail for $8B, there was a post-COVID crash, Grail became valued at $2-4B, and the Illumina stock price cratered.
Grail may not have directly led to the freefall of Illumina's stock price since basically every healthcare and life sciences company suffered serious declines in their stock prices.
But the decision to move forward with the acquisition of Grail in the face of intense regulatory scrutiny was a bone headed move and bad decisions, compounded with the macroeconomic environment, led to a 75% decline in Illumina's stock price.
This triggered activist investor Carl Icahn to step in to prevent the bleeding and Icahn was pretty successful in shaking up Illumina's C-suite and board of directors leading to the resignation of CEO Francis DeSouza, CTO Alex Aravanis, and CMO Phil Febbo.
With a clean slate at the top, Illumina hired Jacob Thaysen from Agilent to be the new CEO in September 2023 and promoted long-time Illumina employee, Steve Barnard, to CTO. Thaysen also brought in his own CFO, Ankur Dhingra, from Agilent in April of this year.
Thaysen and the new executive team have had a giant task ahead of them. Investors and everyone else, frankly, have been interested in seeing the company move past the Grail drama so that it could get back to its former position as a life sciences darling.
And with the spinning out of Grail this past June, it makes a lot of sense for Illumina to present a strategy update and their vision for what the company intends to do post Grail.
If you're interested in hearing the presentation, Illumina posted it on their investor website. It's a solid 2 hours, and very investor-y which is to say it's full of meaningless buzz words and lacks important details around how they're actually going to realize the plan.
But there's still some good high-level stuff in there!
The presentation (here are the slides if you'd like to scroll through them) began with Thaysen introducing himself and his overall vision for the future of Illumina which as far as I can tell is to Make Illumina Great Again (sorry...).
They plan to do this by growing the research, clinical and pharma markets by providing easy and accessible tools for these segments to generate high quality data.
Thaysen highlighted the need to move into multi-omics and expand their product portfolio beyond just sequencing genomes and transcriptomes.
But he also has an entire slide in the deck about transitioning the sequencing conversation from cost per gig to 'Total Cost of Workflow.'
I wonder how successful they'll be in making that transition since the majority of customers don't use them to service an entire workflow, they just use them as the tool to produce base calls.
And this is going to be a tricky argument to make when everyone else continues to focus on cost per gig as the competitive talking point.
I can see why Illumina wants to focus on a 'workflow' cost conversation since the sequencing component is quickly becoming one of the cheapest parts of the process and taking the cost focus off of cost per gig could help their bottom line if people buy this distraction.
But I think for them to be able to effectively make this workflow argument they need to actually provide boxed workflows.
While it's true they have most of the components to provide end-to-end workflows (except they never talk about sample extraction?), they really only have a handful of truly end-to-end products like their IVD cystic fibrosis assay.
Figuring out how to create seamless and fully integrated workflows within their platform could be an important growth driver in their future, especially if they're fully kitted IVD solutions that allow hospitals and small labs to continue doing diagnostics in the face of the impending FDA LDT rule.
With respect to new applications, CTO Steve Barnard covered some new developments they were working on including a 10 minute on-flowcell library prep.
Barnard made some interesting claims about this new process being able to haplotype, access pseudogenes, call structural variants and ended by saying that he thinks this process will become the de facto clinical genome.
I'm skeptical.
We've been here before, we all know the limitations of short-reads, and just because you can sometimes pick up a structural variant doesn't mean you can always do it or access all variant classes.
An on-flowcell library prep is pretty interesting, though, and it feels like this development is a response to a similar setup that was announced by Element a few months ago except theirs also included the ability to perform on-flowcell exome capture.
Reducing hands-on time and the number of complicated technical steps in sequencing should help with reproducibility and its also a requirement for the transition of high throughput sequencing into moderate complexity labs within hospitals where most staff are familiar with sample-to-answer systems.
But this wasn't the only thing Barnard talked about.
He also mentioned new products for 5-base sequencing to get at methylation.
They're certainly behind the pack in this domain since Oxford Nanopore and PacBio can both do methylation, and Biomodal already offers kits for 6 base sequencing workflows on Illumina systems.
How their methylation solution will stack up against these others remains to be seen.
He covered their recent acquisition of Fluent and their simple to use single-cell sequencing protocol, and he mentioned their collaboration with SomaLogic to develop a 10,000 target proteomics assay.
Finally, he discussed their acquisition of Partek and the integration of their Partek Flow multi-omic data analysis package.
But I think the most disappointing aspect of Barnard's presentation was that it was focused primarily on academic applications and mostly development work being done with third parties or acquisitions.
The presentation overall was heavily research focused, and while he and Thaysen said the words 'clinical' multiple times, there was no reference to the regulatory sea change that will be happening in the US over the next 4-5 years.
Things didn't improve when Ankur Dhingra presented the financial outlook and strategy which boiled down the overall vision that Thaysen and Barnard presented to:
1) We're going to try to convert as many customers to the NovaSeq X as possible
2) New applications will be research focused multiomics assays
3) We're going to expand our informatics and services efforts (because they're high margin).
If anything, this vision feels like the Illumina that everyone was familiar with circa 2010 when the focus was on building instrument capacity and providing informatics tools to make analysis more accessible.
The lack of a clinical focus was also somewhat troubling for me since I think there's a huge opportunity right now to be the solution that allows customers to continue doing diagnostics in the face of increased FDA regulation.
I'd love to see an end-to-end benchtop genome box with IVD approval.
Even if short-reads aren't the ideal platform for doing clinical genomics, creating a simple to use product that gets decentralized genomes into more people's hands would be a major win for patients and for Illumina.
If there's anything to learn from Thermo, it's that bringing end-to-end FDA approved products to the clinic can be very lucrative, even if they're not the perfect solution.
Ultimately, I think the strategic vision Illumina presented is super boring, but boring is exactly what we all need from them right now.
Brian Krueger