ILMN (IL/N)/QGENF (U/N): Demand for
products increasing
At the Goldman Sachs Conference, ILMN management was optimistic about its ability to
gain market share in the genotyping and gene expression markets. The company plans to
turn profitable in H1/05. We maintain our In-Line based on its broad technologies, rapid
sales growth, and increasing dominance in the genotyping market. Risks to our view
include weak demand from service customers, slower than expected sales, dependence on
financial markets and litigation with ABI. Qiagen outlined the large potential of nucleic
acid purification products. Management reiterated the strong Q1/04 results. We maintain
our Underperform rating while awaiting solid evidence on a rebound in the demand for
life sciences products. The risks to our rating are rapid reacceleration in sales and better
margins. Our coverage view is Neutral.
ILMN (IL/N)- New product launches on track
1. BeadLabs- Illumina announced the sale of its ninth BeadLab to the University of
Southern California. The BeadLabs sell for $1-2MM. Management estimates that there
are 25-30 potential customers.
2. BeadStation 500G- In Q4/03, Illumina launched BeadStation 500G a benchtop
instrument for genotype analysis by individual and core laboratories. The BeadStation
allows 200,000 genotypes per day when used with the new Sentrix Arrays and cost
$250,000 per system. During Q1/04, Illumina shipped its first two BeadStations.
3. Gene expression product- In January 2004, Illumina announced its intent to offer two
whole genome gene expression chips on its Sentrix BeadChip platform starting in
mid-2004. One chip has the capacity to analyze six discrete whole human genomes at
once, while the other can compare up to 8 samples in parallel against the 22,000 genes
sequenced in a third party database. In the gene expression market, Illumina intends to
target middle- market customers conducting experiments on 100-1,000 genes. Relative to
the SNP genotyping systems, the gene expression systems can be installed more quickly
thereby shortening the sales cycle versus the genotyping systems. In addition, Illumina is
using its oligonucleotide sales force to sell its gene expression products, which should
improve profitability.
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I, Maykin Ho, PhD, hereby certify that all of the views expressed in this repor |
