42nd Annual J.P. Morgan Healthcare Conference PDF Free Download
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© 2024 Illumina, Inc. All rights reserved.
CEO, Illumina
Jacob Thaysen, Ph.D.
42nd Annual
J.P. Morgan Healthcare Conference
January 9, 2024
Note Regarding GRAIL
The European Commission issued a decision to prohibit our acquisition of GRAIL in September 2022, and has adopted an order requiring Illumina
and GRAIL to be held and operated as distinct and separate entities. Compliance with the order is monitored by an independent Monitoring Trustee.
While the order is in place, Illumina and GRAIL are not permitted to share confidential business information except in cases in which a legal
requirement to obtain such information applies or is necessary in connection with our divestment of GRAIL, and GRAIL must be run independently
and exclusively in the best interests of GRAIL. Commercial interactions between the two companies must be undertaken at arm's length.
2
Forward Looking Statements
This release may contain forward-looking statements that involve risks and uncertainties. Among the important factors to which our business is
subject that could cause actual results to differ materially from those in any forward-looking statements are: (i) challenges inherent in developing,
manufacturing, and launching new products and services, (ii) our ability to further develop and commercialize our instruments, consumables, and
products; (iii) the European Commission’s prohibition of our acquisition of GRAIL, and the restorative measures imposed upon us that prohibit our
integration of GRAIL; (iv) the risk that disruptions from the consummation of our acquisition of GRAIL or any associated legal or regulatory
proceedings or obligations will harm our business, including current plans and operations; (vi) our ability to timely divest GRAIL, and the risk that the
terms of divestment are materially worse than the terms on which we acquired GRAIL, (vii) our ability to successfully partner with other companies
and organizations to develop new products, expand markets, and grow our business, (vii) the impact to our business and operating results of
macroeconomic factors, together with other factors detailed in our filings with the Securities and Exchange Commission, including our most recent
filings on Forms 10-K and 10-Q, or in information disclosed in public conference calls, the date and time of which are released beforehand. We
undertake no obligation, and do not intend, to update these forward-looking statements, to review or confirm analysts’ expectations, or to provide
interim reports or updates on the progress of the current quarter.
IIllumina Overview
3
Agenda
Reasons I Joined Illumina
4
Serving Customers
Across the
Research-Clinical
Continuum
Improving Patient
Outcomes in
Cancer & Other
Disease Areas
Unmatched
Global Reach &
Exceptional
Passion for the
Mission
Pushing the
Boundaries of
Technology &
Science to Enable
Biology at Scale
To improve human
health by unlocking the
power of the genome
Our Mission
55%
AMR
26%
Europe
9%
Greater
China
10%
AMEA
49%
Research
& Applied
51%
Clinical
End Markets2Geographies3
51%
Oncology
2%
Other
23%
NIPT
24%
GDT
Core Illumina is Operating from a Position of Strength
5
1 Preliminary Core Illumina FY’23 results.
2Core Illumina % of sequencing consumables shipments.
3Core Illumina % of revenue.
Scale1
Differentiation1
Diversification1
Revenue
~$4.4B
Countries with
regulatory approvals
86
Clinical Expertise Innovation Track Record
Patents across ~800
patent families
>9,800
Clinical Markets2
Covered lives
1.3B IVD / EUA registrations
1,200+ Publications
>450K
Customers
~9,500 Countries
>160 Employees
~9,300
6
II 2023 Preliminary Results
Q4’23 Results Exceed Expectations
7
Note: Preliminary FY’23 results. See appendix for reconciliations of these GAAP and non-GAAP financial measures.
1 Core Illumina revenue includes GRAIL intercompany revenue of ~$5 million and ~$27 million for Q4’23 and FY23, respectively, which is eliminated in consolidation.
Q4 2023 Preliminary Results FY 2023 Preliminary Results
~3.8%
Non-GAAP Operating Margin
Consolidated Illumina
~$1.12B
Revenue ~5.3%
Non-GAAP Operating Margin
Consolidated Illumina
~$4.50B
Revenue
~18.0%
Non-GAAP Operating Margin
Core Illumina
~$1.09B
Revenue1
~19.8%
Non-GAAP Operating Margin
Core Illumina
~$4.43B
Revenue1
~35%
Shipments to
Clinical Customers
~20%
Shipments to New-to-High-
Throughput Customers
12
More countries than
NovaSeq™ 60001
352
FY’23 Shipments
Compared to 330-340 expected
38
FY’23 Ending
Instrument Backlog
Shipments Support Greater Level of New Sequencing Activity
1 Reflects number of countries with orders in the first four quarters of shipments.
NovaSeq X: Most Successful High-Throughput Product Launch
We are encouraged with early signs for NovaSeq X utilization,
which positions us for consumables growth in 2024 and beyond 8
Cumulative Installations Top 25,000 Instruments
9
Note: Preliminary FY’23 results.
1 High-throughput metrics Exclude HiSeq.
2 Cumulative installed base includes instruments that have been shipped to customers and may include decommissioned or inactive instruments.
3 Reflects 2023 average annualized pull through per instrument.
High-Throughput1Mid-Throughput Low-Throughput
NovaSeq™XNovaSeq 6000 NextSeq™ 1k/2k NextSeq 500/550 MiSeq™ | MiniSeq™ | iSeq™ 100
352 ~60 ~625 ~260 ~920
352 ~1,880 ~2,195 ~5,440 ~15,200
Not Disclosed ~$840 ~$115 ~$90 ~$30 MiSeq | ~$20 MiniSeq
2023 Shipments
Cumulative
Installed Base2
Avg. Pull Through3
($ Thousands)
>25,000 Cumulative
installed base ~$2.8B 2023 consumables
revenue
>2,200 2023 total
instruments placed
10
1 Illumina Connected Insights (ICI) not available in all geographies. ICI supports user-defined tertiary analysis through application programming interface (API) calls to third-party knowledge sources.
Interpret
Analyze
Sequence
Prepare
Workflow
Steps
Illumina
Offerings
Integrated Workflow
Sequencing Run
Sequencing Instruments
Sample & Library Preparation
Library Prep Kits & Automation
Clarity LIMS™
Lab Management
Alignment & Variant Calling
Data & Workflow Management
DRAGEN™
Illumina Connected Analytics
BaseSpace™
Annotation &
Interpretation
Emedgene™
Illumina Connected Insights1
PrimateAI
Greater Focus on End-to-End Workflow
to Support Customers More Comprehensively
Delivering Innovation for Customers’ Future Needs
11
Note: ctDNA: circulating tumor DNA; MRD: molecular residual disease; WGS: whole genome sequencing.
1 Reflects availability of XLEAP-SBS on NextSeq 1k/2k P4 flow cell; XLEAP-SBS to become available on other flow cells later in 2024.
“X”-Related Launches
25B Flow Cell
Launched in Q4’23
1.5B Flow Cell
Q1’24
Other Releases XLEAP-SBS™
NextSeq™ 1k/2k
Illumina Complete
Long Reads® (ICLR)
Enrichment Panel
Q1’24
Q1’241
Alliance for Genomic Discovery Expansion
Announced as Members
8Pharma
Companies
For use in drug discovery and therapeutic development
250,000 WGS
Samples
MRD Assay Collaboration
WGS multi-cancer research solution that detects ctDNA to
better understand disease recurrence
Molecular Residual
Disease Assay
In Development
Will expand Illumina’s tertiary analysis capability and
elevate our software portfolio
Partek™ Acquisition
Specialized Multiomics
Software Solution
Acquired
Expect 2024 Core Illumina Revenue and
Operating Margin to be Similar to 2023
We remain focused on execution across the entire P&L 12
Key Revenue Expectations
▪Currently expect our customers will remain cautious and
constrained in their purchasing decisions; monitoring
geopolitical challenges, particularly in China
▪Solid interest and demand for NovaSeq™ X; difficult
comp due to 2023 launch year that had significant first-
year orders
▪Modest high-throughput sequencing consumables
growth as increased sales of NovaSeq X consumables
outpace continued decline in NovaSeq 6000
consumables
Key Operating Margin Considerations
Non-GAAP
Gross Margin
▪Favorable product mix
▪COGS savings initiatives
Non-GAAP
Operating Expenses
▪Savings from portfolio prioritization and
increased productivity offset by
▪Normalization of performance-based
compensation, plus merit increases and
inflation adjustments
13
III 2024 Priorities
2024 Priorities Overview
14
Focus on Operational
Excellence
▪Introduce greater rigor throughout the
P&L
▪Drive margins over time through
greater productivity
▪Evaluate additional areas for cost
savings while macroeconomic
challenges persist
Drive our Top Line
▪Grow placements of NovaSeq™ X and
all our instruments
▪Pursue partnerships and initiatives to
drive more sequencing activity
▪Enhance commercial processes to
generate increased customer value
and engagement
Resolve GRAIL as Quickly
as Possible
▪Recently announced that we will divest
GRAIL
▪Divestiture will be through a sale or a
capital markets transaction; goal of
finalizing terms by end of Q2 2024
▪Working to minimize divestiture impact
to our balance sheet
01 02 03
Expand NovaSeq X Placements Beyond Early Adopters
15
Note: As of FY’23.
Priority #1 | Drive the Top Line
~10%
~750 have one NovaSeq 6000, of which
Have purchased a
NovaSeq X
~40%
~250 have more than one NovaSeq 6000, of which
Have purchased
a NovaSeq X
Early in the Transition of our High Throughput Customer Base
NovaSeq™ X Adoption
Early Adopters Mainstream Late-Stage Of ~1,000 NovaSeq 6000 customers…
CUSTOMER EXAMPLE
A clinical genomics lab is moving samples to
the NovaSeq™ X to run larger projects to
develop new applications, including single-
cell proteomics
Note: ATAC: assay for transposase accessible chromatin; CGP: comprehensive genomic profiling; ctDNA: circulating tumor DNA; FFPE: formalin-fixed paraffin-embedded; WGBS: whole genome bisulfite sequencing; WGS: whole genome sequencing.
Drive Greater Sequencing Activity
We are confident we will see more sequencing activity over time – a matter of “when” not “if” 16
Priority #1 | Drive the Top Line
MORE SAMPLES MORE ANALYSES PER SAMPLE MORE DATA PER ANALYSIS
▪Clinical and longitudinal samples
▪Popgen and pharma discovery cohorts
▪Spatial and single cell analysis
▪Lower sample need and analysis
▪Multiomics: DNA, RNA, methylation, protein,
immune repertoire, etc.
▪Small panels to CGP
▪CGP to exomes; exomes to WGS
▪FFPE tissue to ctDNA
CUSTOMER EXAMPLE
A large academic lab is using the 25B flow
cell and NovaSeq X’s multiple lane
capabilities to unlock deeper single cell
studies, running bulk RNA, single cell RNA,
single cell ATAC and WGBS
CUSTOMER EXAMPLE
A genomics lab will leverage the NovaSeq X’s
faster turnaround time to transition their
sequencing from tissue to liquid biopsy,
which is more sequencing intensive
1.5x – 2.0x 1.5x – 3.0x 3.0x – 4.0x
Disciplined Approach to Improve the Quality of Earnings
We are embarking on a multi-year transformation to deliver operational excellence 17
Priority #2 | Deliver Operational Excellence
2023 2024+
Headcount Reductions
▪Reduced global workforce
Real Estate Rationalization
▪Fully exited i3 campus in San Diego, CA
▪Partially exited campus in Foster City, CA
▪Evaluating remaining real estate portfolio
Other Non-Labor Expenses
▪Rationalizing third-party vendor spend
▪Accelerating IT optimization efforts
Launching Programmatic
Efforts to Optimize Spending
COGS Cost Saving Program
▪Driving productivity improvements throughout our end-to-
end supply chain
Portfolio Optimization Strategy
▪Focused on bringing only the most impactful technologies
to market
Prioritized Investment Strategy
▪Evaluating our key investment areas and how we should
best pursue them
~$175M Run-Rate
Expense Savings
Ahead of original projection of >$100M
Announced Will Divest GRAIL
18
Priority #3 | Resolve GRAIL as Quickly as Possible
Recent UpdatesNext Steps
Balance Sheet Considerations
▪GRAIL divestiture to be executed through third-party sale or capital
markets transaction, with goal of finalizing terms by end of Q2’24
▪Engaging with interested parties who may participate through a
sponsorship or an outright sale
Form 10
Filed with the U.S. SEC on December 9th
European Court of Justice
Participated in hearing on December 12th
Divestiture Announcement
Announced decision to divest GRAIL on December 17th
▪Evaluating sponsors for potential funding needs
▪If Illumina is funding GRAIL, more likely to issue debt
▪Prioritize investment grade credit rating
▪Additional leverage capacity available on balance sheet as
GRAIL’s operating loss is removed
U.S. Fifth Court of Appeals
Received decision regarding FTC decision on December 15th
19
IV Our Path Ahead
Strong innovation roadmap will fuel next decade of growth
3
1New leadership is focused on the Core business
2NovaSeq™ X is unlocking multi-year demand elasticity
4Management is prioritizing operational excellence
5Core Illumina will deliver significant earnings power
20
To improve human
health by unlocking the
power of the genome
Our Mission
Illumina is Building Momentum
© 2024 Illumina, Inc. All rights reserved.
Appendix
Statement regarding use of non-GAAP financial measures
The company reports non-GAAP results for diluted earnings per share, net income, gross margin,
operating expenses, including research and development expense, selling general and administrative
expense, and from time to time, as applicable, legal contingencies and settlement, and goodwill and
intangible impairment, operating income (loss), operating margin, gross profit (loss), other income
(expense), tax provision, constant currency revenue growth, and free cash flow (on a consolidated and,
as applicable, segment basis for our Core Illumina and GRAIL segments) in addition to, and not as a
substitute for, or superior to, financial measures calculated in accordance with GAAP. The company’s
financial measures under GAAP include substantial charges such as amortization of acquired intangible
assets among others that are listed in the itemized reconciliations between GAAP and non-GAAP
financial measures included in this press release, as well as the effects of currency translation.
Management has excluded the effects of these items in non-GAAP measures to assist investors in
analyzing and assessing past and future operating performance, including in the non-GAAP measures
related to our Core Illumina and GRAIL segments. Additionally, non-GAAP net income and diluted
earnings per share are key components of the financial metrics utilized by the company’s board of
directors to measure, in part, management’s performance and determine significant elements of
management’s compensation.
The company encourages investors to carefully consider its results under GAAP, as well as its
supplemental non-GAAP information and the reconciliation between these presentations, to more fully
understand its business. Reconciliations between GAAP and non-GAAP results are presented in the
tables of this release.
Use of forward-looking statements
This release may contain forward-looking statements that involve risks and uncertainties. Among the
important factors to which our business is subject that could cause actual results to differ materially from
those in any forward-looking statements are: (i) the finalization of the accounting and audit procedures
necessary to report our financial results for the fourth quarter and fiscal year 2023; (ii) changes in the rate
of growth in the markets we serve; (iii) the volume, timing and mix of customer orders among our products
and services; (iv) our ability to adjust our operating expenses to align with our revenue expectations; (v)
our ability to manufacture robust instrumentation and consumables; (vi) the success of products and
services competitive with our own; (vii) challenges inherent in developing, manufacturing, and launching
new products and services, including expanding or modifying manufacturing operations and reliance on
third-party suppliers for critical components; (viii) the impact of recently launched or pre-announced
products and services on existing products and services; (ix) our ability to modify our business strategies
to accomplish our desired operational goals; (x) our ability to realize the anticipated benefits from prior or
future actions to streamline and improve our R&D processes, reduce our operating expenses and
maximize our revenue growth; (xi) our ability to further develop and commercialize our instruments,
consumables, and products; (xii) to deploy new products, services, and applications, and to expand the
markets for our technology platforms; (xiii) the risks and costs associated with our ongoing inability to
integrate GRAIL due to the transitional measures imposed on us by the European Commission as a result
of their prohibition of our acquisition of GRAIL and orders issued by the European Commission and the
Federal Trade Commission requiring that we divest GRAIL; (xiv) the risks and costs associated with the
expected divestment of GRAIL, including the possibility that the terms on which we divest all or a portion
of the assets or equity interests of GRAIL are materially worse than those on which we acquired GRAIL;
(xv) the risk that disruptions from the consummation of our acquisition of GRAIL and associated legal or
regulatory proceedings, including appeals, or obligations will harm our business, including current plans
and operations; (xvi) the risk of incurring additional fines associated with the consummation of our
acquisition of GRAIL; (xvii) our ability to obtain approval by third-party payors to reimburse patients for our
products; (xviii) our ability to obtain regulatory clearance for our products from government agencies; (xix)
our ability to successfully partner with other companies and organizations to develop new products,
expand markets, and grow our business; (xx) uncertainty, or adverse economic and business conditions,
including as a result of slowing or uncertain economic growth or armed conflict; (xxi) the application of
generally accepted accounting principles, which are highly complex and involve many subjective
assumptions, estimates, and judgments and (xxii) legislative, regulatory and economic developments,
together with other factors detailed in our filings with the Securities and Exchange Commission, including
our most recent filings on Forms 10-K and 10-Q, or in information disclosed in public conference calls, the
date and time of which are released beforehand. We undertake no obligation, and do not intend, to
update these forward-looking statements, to review or confirm analysts’ expectations, or to provide interim
reports or updates on the progress of the current quarter.
Illumina, Inc.
Preliminary Results of Operations - Non-GAAP
(unaudited)
Our performance and financial results are subject to risks and uncertainties, and actual results could differ materially
from the preliminary results set forth below. Some of the factors that could affect our financial results are included
from time to time in the public reports filed with the Securities and Exchange Commission (SEC), including Form 10-
K for the fiscal year ended January 1, 2023, filed with the SEC on February 17, 2023, Form 10-Q for the fiscal
quarter ended April 2, 2023, Form 10-Q for the fiscal quarter ended July 2, 2023, and Form 10-Q for the fiscal
quarter ended October 1, 2023. We assume no obligation to update any forward-looking statements or information.
The preliminary unaudited information included in the tables below is approximate and subject to change. We will
report our fourth quarter and full year fiscal 2023 results in February.
CONSOLIDATED RECONCILIATION BETWEEN PRELIMINARY GAAP AND NON-GAAP OPERATING MARGIN:
Fourth Quarter 2023
Fiscal Year 2023
Preliminary GAAP operating margin
(15.5)%
(24.0)%
Amortization of acquired intangible assets
4.4
4.3
Acquisition-related expenses (b)
3.0
2.5
Restructuring (d)
5.5
3.5
Contingent consideration liabilities (e)
5.2
(0.5)
Proxy contest
0.2
0.7
Goodwill and intangible (IPR&D) impairment (c)
0.5
18.4
Legal contingency and settlement (f)
0.5
0.4
Preliminary non-GAAP operating margin (a)
3.8%
5.3%
CORE ILLUMINA RECONCILIATION BETWEEN PRELIMINARY GAAP AND NON-GAAP OPERATING MARGIN:
Fourth Quarter 2023
Fiscal Year 2023
Preliminary GAAP operating margin - Core Illumina
2.4%
12.3%
Amortization of acquired intangible assets
1.3
1.3
Acquisition-related expenses (b)
2.3
2.0
Restructuring (d)
5.5
3.5
Contingent consideration liabilities (e)
5.3
(0.6)
Proxy contest
0.2
0.7
Intangible (IPR&D) impairment (c)
0.5
0.1
Legal contingency and settlement (f)
0.5
0.5
Preliminary non-GAAP operating margin - Core Illumina (a)
18.0%
19.8%
(a) Non-GAAP operating margin excludes the effects of the pro forma adjustments as detailed above. Management
has excluded the effects of these items in these measures to assist investors in analyzing and assessing past and
future operating performance, including in the non-GAAP measure related to our Core Illumina segment.
(b) Amounts consist primarily of legal expenses related to the acquisition of GRAIL.
(c) Amounts consist of goodwill impairment related to our GRAIL segment and IPR&D intangible asset impairments
related to our GRAIL and Core Illumina segments.
(d) Amounts consist primarily of lease and other asset impairments and employee severance costs related to
restructuring activities.
(e) Amounts consist of fair value adjustments for our contingent consideration liability related to GRAIL.
(f) The amount for Q4 2023 consisted of a gain related to a patent litigation settlement. The amount for YTD 2023
also consists of a loss related to a patent litigation settlement in Q1 2023, an adjustment recorded in Q2 2023 to our
accrual for the fine imposed by the European Commission in July 2023, and gains related to patent litigation
settlements in Q3 2023 and Q4 2023.
