Illumina (NasdaqGS:ILMN) 2025 Conference November 19, 2025 09:20 AM ET Company ParticipantsJacob Thaysen - CEODoug Schenkel - Managing Director of Life Science Tools and DiagnosticsDoug SchenkelGood morning, everybody. I'm Doug Schenkel. I lead Wolfe Research's Life Science Tools and Diagnostic group. It's my pleasure to welcome Jacob Thaysen, CEO of Illumina. Jacob, thanks for being here.Jacob ThaysenJoshua, thanks for inviting us.Doug SchenkelFrom the company, not up on stage, but Ankur and Conor are here ...

Group 1 - The eighth Hongqiao International Economic Forum focused on "AI-Driven Digital Economy Innovation" and took place in Shanghai, resulting in 24 import procurement agreements with a total signing amount of approximately 14.5 billion RMB [1] - The China International Import Expo (CIIE) serves as a platform for multinational companies to showcase their products and for Chinese companies to procure efficiently, with buyer groups organized from various regions to connect directly with source enterprises [1] - The Zhejiang Provincial Trading Group's procurement list includes advanced equipment, energy resources, and agricultural products, highlighting the expansion of import trade by established foreign trade companies like Zhejiang Tuchu [1] Group 2 - Dian Diagnostics Technology Group signed a contract with Roche Diagnostics for the procurement of medical devices and diagnostic reagents, emphasizing the importance of CIIE for establishing partnerships with top global institutions [2] - The company aims to focus on precise procurement at the expo this year, particularly in innovative technologies in AI healthcare and multi-omics [2]

Core Insights - Illumina reported Q3 2025 revenue of $1.084 billion, flat year-over-year, slightly above market expectations, with clinical applications driving growth outside of China [1][3] - The company raised its full-year earnings forecast to a range of $4.27 billion to $4.31 billion, an increase of $200 million from previous guidance [12][33] - Illumina's stock surged by 24.76% following the positive earnings report and upward revision of guidance, reversing a downward trend [1][3] Financial Performance - Total revenue: $1.084 billion (year-over-year flat, constant currency flat) [3] - Product revenue: $927 million, up 1.4% year-over-year [3] - Service and other revenue: $157 million, down 5.4% year-over-year [3] - GAAP operating margin: 21.0%, Non-GAAP operating margin: 24.5% [3] - GAAP net income: $150 million, Non-GAAP net income: $206 million [3] - Earnings per share (EPS): GAAP $0.98, Non-GAAP $1.34 [3] - Operating cash flow: $284 million, free cash flow: $253 million [3] - Share repurchase: 1.2 million shares for a total of $120 million at an average price of $97.10 [3] Product and Technology Developments - Illumina launched several new products and technologies, including the 5-base Solution, Constellation Mapped Read, BioInsight, TruSight Oncology Comprehensive, and Illumina Protein Prep [3][4] - The company is extending its strategy from genomic sequencing to multi-omics and proteomics [4] Market and Regulatory Dynamics - The Chinese market is still affected by export restrictions and the "unreliable entity list," but Illumina achieved growth in other regions [5][22] - The company is focused on optimizing global supply and cost structures to mitigate geopolitical risks [5] Detailed Performance Analysis - NovaSeq X platform showed strong performance with over 55 units installed in Q3, aligning with the target of 50 to 60 units per quarter [15][19] - Approximately 78% of testing samples and 51% of revenue were generated through the X platform, indicating a rising conversion rate from NovaSeq 6000 to NovaSeq X [18][25] - Clinical market revenue from sequencing consumables grew at a double-digit rate year-over-year [20] Future Strategy - Illumina's strategic direction includes developing core sequencing business, accelerating X platform transition, and expanding multi-omics [28] - The company has made significant progress in these areas, including the launch of the Illumina Protein Prep product and the establishment of BioInsight for genomic data applications [31][32]

Core Insights - PacBio announced innovations to its Revio and Vega platforms, focusing on new SPRQ-Nx sequencing chemistry aimed at reducing sequencing costs and enhancing multiomic capabilities [1][8] - The beta testing for SPRQ-Nx on the Revio platform is set to begin in November 2025, with full commercial availability expected in 2026 [2] - The advancements are anticipated to significantly enhance PacBio's sequencing solutions business and strengthen its market position [2] Company Developments - The Revio systems with SPRQ-Nx are projected to deliver complete, multiomic native long-read genomes at the lowest market cost, achieved through multiple runs per instrument and nanofluidic chips [3][8] - PacBio's management believes the new pricing will enable researchers to utilize HiFi data for various applications, particularly in building robust AI models with large sample sizes [4] - An expanded partnership with seqWell was announced, allowing PacBio to distribute seqWell's LongPlex Multiplexing Kit, with global availability expected in 2026 [7] Industry Context - The global sequencing market was valued at approximately $15.54 billion in 2023 and is projected to reach about $62.48 billion by 2030, growing at a CAGR of 22.2% [6] - Factors driving this growth include increasing demand for gene therapy and consumer genomics, which are expected to benefit PacBio's business significantly [6] - PacBio's innovations are positioned to capitalize on the growing market potential, particularly in population genomics, where lower sequencing costs will facilitate broader studies [5][6] Competitive Landscape - Illumina, a key competitor, recently launched a novel 5-base solution aimed at enhancing biological research accuracy and reducing costs [9] - Qiagen received CE-IVDR certification for its syndromic testing systems and launched new long-read panels, strengthening its competitive position in the sequencing market [10] - 10x Genomics announced a partnership to automate workflows for single-cell research, indicating ongoing innovation and competition in the sequencing space [11]

Core Insights - Shanghai has officially released measures to promote high-quality development in the cosmetics industry, emphasizing technological empowerment, digital intelligence, and regulatory efficiency, making it the most supportive initiative in the country [1] Group 1: Technological Innovation and Support - The measures encourage technological innovation, with government departments actively enhancing service systems, including support for raw material innovation and application, accelerating research paradigm transformation, and promoting innovation through regulation [1] - Financial support is provided for the registration and filing of new cosmetic raw materials, with a maximum of 2 million yuan for registered materials and 500,000 yuan for filed materials, significantly boosting local companies' innovation capabilities [1] - Companies like Shanghai Jahwa, which has been developing herbal extracts since 1990, view the financial support as nearly double that of other provinces, stimulating deep innovation [1] Group 2: AI and Resource Integration - Shanghai's AI innovation advantages are supporting the local beauty industry, with companies like Rongxiushengsheng leveraging AI solutions for uniformity in essential oil extraction, thus enhancing production efficiency [2] - The measures promote the integration of artificial intelligence and multi-omics to drive innovations in organoids, 3D skin models, and cosmetic manufacturing processes, supported by unique AI resource incentives [2] Group 3: Regulatory Support and Industry Development - The measures aim to accelerate innovation through regulatory support, with the regulatory department providing proactive guidance to cosmetic companies developing medical devices, thus reducing the likelihood of application rejections [3] - Emphasis is placed on strengthening industrial infrastructure, with plans to add 30 million square meters of "smart manufacturing space" from 2023 to 2025, facilitating vertical factory developments for cosmetics companies [3] Group 4: Market Position and Brand Development - Shanghai holds a leading position in the high-end cosmetics industry, with 17 brands listed in the top 50 Chinese makeup brands by Hurun Research Institute, surpassing other cities [4] - Notable companies in Shanghai include Up Beauty, Shanghai Jahwa, and Lin Qingxuan, with some planning IPOs in Hong Kong [4]

Core Insights - BGI Genomics reported a significant recovery in profitability with a net profit of 5.78 million yuan in the first half of 2025, marking a year-on-year increase of 908.64% [1] - The company achieved total revenue of 1.63 billion yuan in the first half, with 960 million yuan generated in the second quarter alone [1] Revenue Breakdown - Precision medicine testing business generated 696 million yuan in overseas markets, reflecting a year-on-year growth of 4.80%, with notable growth in Southeast Asia and a doubling of revenue in emerging markets like Latin America and South Asia [1] - Reproductive health business revenue reached 426 million yuan, with a 15% increase in revenue from genetic disease testing within the tertiary prevention segment [1] - Multi-omics and synthetic business generated 279 million yuan, with single-cell sequencing revenue growing approximately 110% year-on-year [1] - Cancer and chronic disease prevention business revenue was 180 million yuan, with a renewal and launch of the colorectal cancer project expected in the second half of the year [1] - Infection prevention business revenue was 38 million yuan, with PTseq products based on targeted high-throughput sequencing technology seeing a remarkable growth of 242% [1] Technological Advancements - BGI Genomics launched the SIRO high-throughput sequencing AI and localized one-stop solution, enhancing data processing capabilities and supporting business expansion and research innovation [2] - The company introduced the "i99 Smart Health" multi-omics health management system, utilizing AI technology to provide personalized and precise health management solutions for users [2]

Core Viewpoint - The report highlights the financial performance and operational context of Shenzhen MGI Tech Co., Ltd. for the first half of 2025, emphasizing the challenges faced in the gene sequencing industry and the company's strategic positioning within it [1][5]. Financial Performance - The company's revenue for the first half of 2025 was approximately CNY 1.11 billion, a decrease of 7.90% compared to the same period in the previous year [5]. - The net profit attributable to shareholders was a loss of approximately CNY 103.54 million, an improvement from a loss of CNY 298.23 million in the previous year [5]. - The net cash flow from operating activities was negative at approximately CNY 150.06 million, showing a significant reduction in cash outflow compared to the previous year [5]. Industry Context - The gene sequencing industry is characterized by high concentration, with leading companies like MGI Tech, Illumina, and Thermo Fisher holding nearly 87% of the market share [6][7]. - High-throughput sequencing technology remains the dominant method in the industry due to its high throughput, accuracy, and cost-effectiveness, while single-molecule sequencing technologies are emerging as complementary solutions [6][7]. - The demand for smart laboratories is increasing, driven by the need for automation and efficiency in laboratory operations, particularly in clinical diagnostics and large-scale research [7][8]. Technological Advancements - The report notes the rapid development of multi-omics applications, with sequencing technologies being applied in clinical fields such as reproductive health, oncology, and infectious diseases [7]. - The integration of artificial intelligence in laboratory automation is expected to enhance experimental processes, leading to more intelligent and adaptive laboratory environments [8]. Regulatory and Market Dynamics - Global investments in life sciences research are increasing, with over 50 countries initiating national genome projects, which is expected to drive the demand for genomic sequencing services [9][10]. - Geopolitical tensions are impacting international collaborations and data access, necessitating companies to enhance their supply chain resilience and explore diversified markets [10].

Core Insights - The article discusses the transformation of genetic testing from a costly $30 billion human genome project to affordable options, enabling personalized health management and preventive care [2][4]. Group 1: Evolution of Genetic Testing - Genetic testing is shifting from disease treatment to prevention and health management, creating new consumer scenarios [2][3]. - The cost of genetic testing has significantly decreased, making it accessible to the public, with prices dropping from $30 billion to around 100 yuan [4][6]. Group 2: Personalized Health Management - Genetic testing can help tailor diet and exercise plans based on individual genetic profiles, enhancing health outcomes and reducing injury risks [2][3]. - Establishing a lifelong genetic health record allows for dynamic tracking of health risks and personalized medical interventions [3][4]. Group 3: Technological Advancements - The company focuses on original research and innovation in sequencing technology, achieving breakthroughs in accuracy, speed, and cost [9][10]. - The use of AI in genetic testing is expected to enhance data processing speed and quality, accelerating commercialization [14][15]. Group 4: Market Opportunities - The genetic testing market is poised for significant growth, with the potential to create a trillion-dollar health consumption market [4][5]. - The company aims to expand its market presence by providing customized solutions for various applications, including clinical and public health [5][11]. Group 5: Challenges and Future Directions - The main challenge is the mismatch between rapid technological advancements and public understanding of genetic testing [12][13]. - Future applications will focus on multi-omics and single-cell technologies to improve disease prediction and personalized treatment [14].

Financial Data and Key Metrics Changes - In Q2 2025, the company reported revenue of approximately $1,060,000,000, reflecting a year-over-year decline of about 3% on both constant currency and reported basis [20][21] - Non-GAAP operating margin was 23.8%, an increase of 160 basis points year-over-year, while non-GAAP EPS was $1.19, growing 9% year-over-year [27][28] - Non-GAAP gross margin was 69.4%, stable year-over-year, with a favorable product mix contributing to improved performance [26] Business Line Data and Key Metrics Changes - Sequencing consumables revenue was approximately flat year-over-year at $740,000,000, with high throughput consumables showing over 10% sequential growth [21][22] - Clinical markets now account for roughly 60% of total sequencing consumables, driven by comprehensive genomic profiling and sequencing-intensive applications [7][21] - Sequencing instruments revenue was down approximately 18% year-over-year, primarily due to budget constraints from research customers [24] Market Data and Key Metrics Changes - Greater China revenue was $63,000,000, slightly ahead of expectations but down $12,000,000 from 2024 [21] - The clinical segment is showing resilience, while the research environment in the U.S. remains constrained due to NIH funding uncertainties [9][19] - Total sequencing gigabases output on connected instruments grew over 30% year-over-year, driven by clinical strength [23] Company Strategy and Development Direction - The company aims for high single-digit revenue growth and to expand non-GAAP operating margin to 26% by 2027, focusing on core sequencing business growth and multiomics expansion [10][31] - The acquisition of Somologic for $350,000,000 is expected to enhance the company's proteomics capabilities and integrate with existing platforms [29][12] - The company is transitioning to a model that emphasizes delivering high-quality biological insights at the lowest end-to-end cost [10] Management's Comments on Operating Environment and Future Outlook - Management expressed caution for the second half of 2025 due to ongoing funding uncertainties in the U.S. research market, despite raising guidance for total company revenue growth [17][36] - The clinical market is expected to remain a significant growth driver, with increasing adoption of NGS in therapy selection and early detection [8][79] - Management remains focused on disciplined execution and innovation, with expectations for improved performance in 2026 and beyond [62][64] Other Important Information - The company repurchased approximately 4,500,000 shares for $380,000,000, with plans to continue share repurchases throughout the year [28][29] - The company ended the quarter with approximately $1,160,000,000 in cash and equivalents, maintaining a gross leverage of approximately 1.7x [30] Q&A Session Summary Question: Guidance change and its components - Management acknowledged the guidance change was influenced by FX and increased expectations for consumables, while instrumentation expectations were reduced due to research market constraints [39][43] Question: Customer behavior in anticipation of competition - Management emphasized a focus on customer engagement and innovation to remain competitive, particularly in the clinical space [47][49] Question: Pull forward of customer orders - Management indicated no significant pull forward in orders, with a normal quarter observed, and noted increased backlog for the NovaSeq X transition [53][55] Question: Clinical customer spending patterns - Management highlighted strong opportunities in the clinical market, with customers expanding tests rather than just reducing costs during the transition to NovaSeq X [80][82] Question: Instrument guidance and X placements - Management expects continued placements of NovaSeq X instruments, with a gradual transition rather than a sudden shift [88][90]

Core Viewpoint - The recent failure of Organon's candidate drug OG-6219 in Phase II clinical trials highlights the challenges in developing effective treatments for endometriosis, a condition affecting approximately 190 million women globally, with significant implications for the company's innovation pipeline and the broader market for pain management in women’s health [1][2][9]. Group 1: Market Demand and Supply - Endometriosis is a high-prevalence disease that causes severe pelvic pain and can lead to infertility, affecting about 1 in 10 women of reproductive age [1]. - Despite the significant treatment demand, there is a scarcity of new drugs, primarily due to the unclear underlying mechanisms of the disease, which complicates research and development [2][4]. - The complexity of individual patient factors, such as hormonal levels and inflammation, further complicates the development of effective treatments, leading to a low conversion rate for new mechanism drugs [2][4]. Group 2: Challenges in Drug Development - Existing treatments, such as NSAIDs, provide temporary relief but do not address the root cause of endometriosis, creating a high barrier for new drugs to demonstrate superior efficacy [2][3]. - High costs and side effects associated with approved drugs, such as AbbVie’s Orilissa and Pfizer’s Myfembree, have limited market acceptance [3][4]. - The failure of Organon’s OG-6219, which was expected to be a breakthrough treatment, underscores the difficulties in drug development within this therapeutic area [7][8]. Group 3: Organon's Position - Organon, formed from Merck's spinoff, aimed to innovate in women's health through acquisitions, including the purchase of Forendo Pharma for $750 million, which included OG-6219 [6]. - The failure of OG-6219 has significantly impacted Organon's innovation pipeline, leaving it with limited options for future development in endometriosis treatment [7][8]. - Despite the setback, Organon has expressed intentions to explore new treatment options for endometriosis, although the high difficulty and long timelines in this field pose significant challenges [8][12]. Group 4: Future Outlook - While the failure of OG-6219 is disappointing, the potential for innovation in endometriosis treatment remains, with ongoing research into alternative pathways and new compounds [10][11]. - Current research efforts are primarily focused on traditional pathways, but there are emerging explorations into novel approaches, such as cannabinoid therapies and inflammation-targeting strategies [11]. - A significant shift in the treatment landscape may require breakthroughs in technology and a renewed commitment from the industry to address the unmet medical needs of millions of women suffering from endometriosis [12].