Illumina unveils new DNA sequencing machines; can it out-innovate its competition?

“Baymax, sequence my DNA and diagnose my disease…” Twenty years ago, that would have cost you over $100 million. Thanks to technological advancements, it’ll soon cost $200.

Gene/DNA sequencing is the process of analyzing your DNA — which can help speed up drug development and research and help diagnose rare diseases (i.e., cancer).

More than just reading your ancestry…

One company nearly controls the space (~90% market share). Illumina (NASDAQ:ILMN) develops and manufactures machines that read a person’s genetic code.

• So like, 23andMe? Kinda. While 23andMe reads a small part of your DNA, Illumina’s machines read it all.
• It’s significantly more expensive (~$1M+ per machine), and their customers include researchers and labs.

But it’s been ~5 years since Illumina announced a new product line. So you bet investors were excited for their product launch announcement this week.

On their investor day, they revealed their next-generation DNA sequencing machines — which are expected to cut the cost of sequencing a genome by two-thirds.

Slicing up Illumina’s recent purchase

$ILMN was valued at $77B at its 2021 peak before markets began crashing — sending it down 58%. The drop coincided with a major acquisition that investors weren’t happy about:

• In 2021, Illumina announced the acquisition of cancer testing firm GRAIL for $7.1B.
• Investors wanted the acquisition to fall through so much that $ILMN jumped when regulators announced plans to block the purchase.

The deal closed, but Illumina could be forced to sell GRAIL. The biotech industry is also in a deep bear market — drying up funding for biotech startups and lowering demand for Illumina’s products.

Investors: Illumina needs to move fast

Customers have built their labs around Illumina’s products — which makes it costly to switch. Still, competition is coming as key Illumina patents expire this year.

• Ultima Genomics is expected to deliver a machine in 2023 that can sequence a genome for $100 — half the price of Illumina’s new machines.
• Illumina’s sales in the recent quarter grew 3.2% from last year — but are down from its 77% growth in the same quarter of 2021.

Per Bloomberg journalist Angelica Peebles, lower pricing won’t “radically transform things overnight.” Issues still include access and whether insurers will pay up.