Illumina Should Dominate in High-Throughput Sequencing

Illumina’s announced partnerships with IBM’s Watson and Philips help shore up the firm's data-analysis capabilities and clinical diagnostic marketing efforts, respectively, but the announcement of a new sequencer called NovaSeq is the biggest news. Although NovaSeq utilizes Illumina’s core sequencing-by-synthesis technology, its new platform architecture represents a new chapter in technological advancement that should eventually replace Illumina’s older high-throughput HiSeq product line. NovaSeq offers a number of critical improvements in ease of use, testing versatility, faster run times, and lower operating costs thanks to an assortment of newly engineered high-density flow cells, improved two-channel chemistry and optics, and other improvements.

While NovaSeq doesn’t necessarily alter Illumina’s growth trajectory, in our view, it does exemplify Illumina’s ability to stay a step ahead of competition. The NovaSeq should help ensure Illumina’s dominant position in the high-throughput-customer segment of the market over the next few years. The less penetrated clinical market still represents a larger market opportunity for Illumina, but more competition in this lower-throughput segment and more complex reimbursement issues remain challenges for the firm. Management hopes to launch the previously announced FireFly sequencer later this year; combined with other marketing efforts, this should help Illumina address some of the hurdles among this customer group.

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