Illumina, Inc. (ILMN) Presents at Bank of America Merrill Lynch Health Care Conference (Transcript)

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About: Illumina, Inc. (ILMN)
by: SA Transcripts
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Earning Call Audio

Illumina, Inc. (NASDAQ:ILMN) Bank of America Merrill Lynch Health Care Conference Call May 15, 2019 1:40 PM ET

Company Participants

Sam Samad - CFO

Conference Call Participants

Mike Ryskin - Bank of America Merrill Lynch

Mike Ryskin

Thanks for joining us. My name is Mike Ryskin. I'm on the Life Science Food and Diagnostics team here at Bank of America Merrill Lynch. I'm here on behalf of the senior analyst, Derik de Bruin, who unfortunately couldn't be here with us today, but he sends his regards and he's following along via the webcast. Joining us for the next session is Illumina. And here we're joined by Sam Samad. I think, we'll start with about 20, 25 minutes of fireside chat, and then we'll open up to the audience for Q&A.

I think there is an initial statement that you’ve got to read.

Sam Samad

Yes. Thanks, Mike, first of all, for inviting us, and pleasure to be here. Good morning, everybody.

So, I've been asked to remind you that my comments today could include forward-looking statements. You should refer to our SEC filings for a discussion of the risks and uncertainties that could cause results to differ materially from our current expectations. It is intent that all forward-looking statements regarding our financial results and commercial activity made during today's discussions will be protected under the private securities litigation Reform Act of 1995.

Question-and-Answer Session

Q - Mike Ryskin

Great. Thanks. Now, that out of the way, I think just to sort of set the stage here, if we could go through your first quarter results, sort of what you’ve seen in the first few months of the year. Obviously, there's going to be a lot of focus on the NovaSeq upgrade cycle and the story there. But, could you sort of lay out the groundwork of what you saw, sort of what came in relative to your initial expectations as you look back on the quarter?

Sam Samad

Yes, sure. So, I'll refer back to our comments, when we released the results for Q1. In general, we were pleased with Q1 results. They came in stronger than we expected. And to punctuate it in terms of what were some of the key drivers, maybe I'll talk about the different parts of the business. In general, in terms of sequencing revenues, we saw strength beyond what we expected in terms of sequencing. That was across sequencing consumables that came in stronger than what we expected, continued high throughput utilization, tracking to strong performance. And as well, we had on the sequencing, what we call the sequencing other line or the sequencing services. We had some benefits from some accelerated IP licensing revenues that we expected in the year, but happened in Q1 earlier than we expected. And also with the GEL project that we've been talking about for some time, even though that officially wrapped up in 2018 with 100,000 samples and now is in the process of transitioning to the NHS clinical initiative. But we still are seeing some samples coming through on the GEL side, as they wrap up this project. They still have some samples that they’re processes. So, sequencing revenues came in stronger than we expected.

In terms of microarrays, I think some of you have heard on the DTC side that there's been some, I would say, slowdown in DTC on the microarray side. So, let me put it this way. In terms of microarray DTC revenues, we actually had a record quarter in terms of samples processed in our microarray other line, but still that was a little bit lower than what we thought it was going to be. And then, in terms of -- that was offset actually by some strength in terms of microarray consumables, and some of the other non-DTC parts of the business, things like epigenetics and agrigenomics where we have some strength.

So, overall, just to paint the quarter, better than we expected, maybe the mix a little bit different. The only part that I didn't mention is the sequencing instruments line, where in general, it was very much in line with what we thought, maybe a handful of NovaSeq instruments that timing wise to list into later in the year. And so, that was the only notable thing there. So, but in general, stronger than we expected quarter, and the mix different than what we thought coming in, but pleased with the performance.

Mike Ryskin

Great. And following up on that last point on the instrument placements. How much of that timing is tied to customer readiness to accept this, whether it’s from on your end, how much visibility you have that this will come through in 2Q, 3Q? And you gave the initial guide that you expect to place twice as many NovaSeqs in 4Q versus 1Q, where is the flexibility in that and sort of what's driving the timing there?

Sam Samad

Yes. So, maybe to start with Q1, just to put it in perspective again. The shipments came in largely as we thought they would. We expected lighter shipments in Q1, a big step down in terms of -- from Q4 of ‘18 to Q1, and that's all driven by seasonality. Seasonality is a big factor. Q1 is usually our lightest quarter of the year in terms of sequencing instruments placements, and that's what we called going into Q1, and that's what effectively happened. But, in terms of the shipments that timing wise that slipped into the latter part of the year, we're talking about a handful of shipments here, so very few, so effectively less than five, to be precise.

In terms of the cadence, Mike, and thinking about the rest of the year. So, what we did say and what we communicated on our Q1 call is that we expected in Q4 to actually place almost twice the number of NovaSeqs that we placed in Q1. And that's driven by the fact again, if you look back to ‘18, we had a very strong Q4 in ‘18. We expect, usually as we start to go through and the ramp through the year that Q4 is our strongest quarter for the year. So, again, we expect that dynamics to play out in ‘19 as well.

In terms of total NovaSeq shipments for 2019, our expectation that we communicated in Q1 is that we would be roughly flat to maybe slightly increasing in terms of the shipments that we expect to place in 2019 versus the NovaSeq shipments that we placed in 2018.

In terms of the visibility that we have, I mean, obviously we have very good visibility with our customers in terms of both the orders that they're placing that are in our backlog, and also in terms of their expectation of what they're going to need over the course of the year. So, we have very good dialogue, very good visibility with our customers. We have a very healthy backlog going into Q2, and that consists across instruments and consumables. So, we have good confidence about the backlog, our ability to supply these instruments and also to meet the numbers that I just mentioned.

And then, in terms of the dynamics that you mentioned as to what drives that delay in terms of placements from one quarter to the next. I mean, again, when we're talking about a handful of shipments, and we're not really supply constrained in any way, it really is all up to the customers in terms of when they want to receive these shipments and sometimes you will have a few shipments, in this case less than five that slip from one quarter to the next.

Mike Ryskin

Great. And then, sticking on the NovaSeq for a second. You provided some additional color in the quarter in terms of utilization. You told us that for 2018, you saw about $1 million for instruments for the year; that's been a question that we’ve had for some time now in terms of what the pull-through on the box is. And I would imagine that’s driven largely by the higher volume customers, higher utilization making of the majority of that. And yet, recently you made some changes to the pricing for the S1 and S2 flow cells. You’ve introduced the S Prime. So, I would think that -- how does that point to your expectations for 2019 and 2020, in terms of utilization, the mix of the flow cells that are being -- that are going through the box?

Sam Samad

Sure. So, yes, I think, we surprised some people and we gave the pull-through number for NovaSeq in Q1. And we've always said, we're going to provide the pull-through number when we have a good representation in terms of an installed base, where the number is not really an outlier and it's going to change on a regular basis in terms of ebbing and flowing very significantly. It’s always going to ebb and flow, but as long as it's not an unrepresentative number. And we felt that the $1 million pull-through that we provided, which was the number for ‘18 is at this point now a good number to share. We won't share this on a regular basis quarterly. We will look to update this occasionally, but it's not going to be a number that we disclose every quarter. But the $1 million pull-through is what we shared and what we did say is that we expect this $1 million to increase over the course of 2019, we didn’t say by how much but we expect it to increase from $1 million.

Now, to talk about the dynamics below that and sort of punctuate again some of the key factors that are driving this. First of all, our top customers and I’m not going to tell you how many, but our top customers have sequencing consumable revenue growth of 40%, approximately 40% in Q1. So, we do have a dynamic where we have some of these large customers, and that’s what we’re defining as our top customer, big purchasers, that are really driving in a significant way this pull-through number. And that’s going to continue to be the case. Those are the really large genome centers have purchased, have very heavy utilizations, purchased a lot of consumables, and as I have just mentioned that the Q1 number had a pretty healthy growth.

To your question about, now that we’ve introduce the S Prime, now we’ve revisited the pricing strategy on the S1 and the S2 flow cells and we’ve revised those prices, because right now we’re focused on catalyzing the next wave of adoption of those HiSeq customers. And there is about 70% of HiSeq customers haven’t even begun their transition to NovaSeq. So, as we’ve revised -- as we’ve look to the strategy and revised the pricing on the S1 and S2 and now we’ve launched the S Prime, that’s what we expect now to drive the next level of adoption over the course of 2019. Could it impact pull-through on NovaSeq mathematically? Sure it could, there could be some drivers there. But, again, I anchor you to the fact that the top customers are really driving overwhelmingly that pull-through number and the utilization across those customers is what’s driving the pull-through number.

The one thing -- a couple of things I want to underscore also to wrap up. One is, pull-through is an output. I know, externally people get a little bit, very -- almost too focus on pull-through as the number. Pull-through is an output. It’s an output of how much customers are utilizing, consumables per box and how much they’re purchasing per box in terms of consumables. What’s more important about NovaSeq? The strategy that we’ve had from day one and that’s playing out and that we’re very pleased with is that it’s catalyzing adoption across a broad universe of consumers, and ones that have not even purchased high-through instruments before. We’ve talked consistently about the fact that roughly 30% -- we talked about this in 2018, roughly 30% of the orders are coming from customers that have not even done high-throughput sequencing before that are new to high-throughput sequencing. That’s the most important part is, how you’re catalyzing the adoption across the broad group of customers and not just the pull-through numbers.

And then, the last part is the fact that -- and we have data on this, is the fact that customers have purchased NovaSeq that moved from HiSeq to NovaSeq are purchasing and using more consumables, and in fact in a simple terms, are actually sequencing more. And that’s really encouraging for us.

Mike Ryskin

Great. And then, I mean, another point of additional color and clarity you broke out on the quarter was you sort of talked about your sequencing consumables and you looked at subsegment or I guess end-market application, whether it was oncology or reproductive health, basic research, you give us color on sort of your markets - not your market share, but the port -- the mix of your revenues, how that’s grown. Looking back to some of our notes from the 2014 Analyst Day and when you broke out the $20 billion TAM, you talked about oncology and IBT, et cetera. Fast forward five years, some markets have developed a lot faster than others, some of sort of left behind, some new ones completely cropped up by out of the blues, like liquid biopsy like the opportunity with the direct consumer market, like the populations genomic studies. Could you sort of reevaluate the landscape now and how -- what’s changed since then? What you see the incremental opportunities and sort of what story for the next couple of years that we should really be focusing on?

Sam Samad

Sure. Yes. That's a big question, but I'll try to address a big part of it. So, starting out, we did, again, I think surprised some people with the level of specificity that we gave around some applications, both in terms of clinical and research and sequencing consumable applications in 2018. So to ground everybody, what we did say is that, of our sequencing consumable dollars, in 2018, roughly 40% of that was in the clinical testing side of the business and roughly 60% was in research.

And in terms of clinical testing and the sequencing consumable growth in that segment, we saw 30% growth roughly in 2018. And in terms of research, we saw roughly 18% growth. So, as you can see, accelerating on the clinical side. And so, we're very, very pleased with that performance. Obviously, we had a focus on growing our clinical applications for some time. And as you could see, it's playing out. In terms of as I think about performance across some of those different clinical markets that you talked about, what's going out as we expected, what's not, so on, so forth.

Oncology is the biggest one, let’s -- and I'll go back to it, I'll talk about it a little bit. Oncology is the biggest opportunity and remains the biggest opportunity. And as we talked before, it's where the biggest opportunity for introducing NGS-based assays for clinical testing, and it remains the case. But, let me talk about some of the other clinical applications also that we're seeing, which are very important. I mean, you've got NIPT, so non-invasive prenatal testing, which is part of that 40% that I talked about earlier, in terms of sequencing consumable applications.

NIPT, we're seeing great progress, both in terms of regulatory approval, reimbursements. We have our VeriSeq NIPT CE-IVD assay in Europe, which is doing really well. We've got some countries now in Europe that have now -- that have full coverage for NIPT average risk pregnancies. In the U.S., coverage is roughly around the 47% mark in terms of average risk pregnancies. And we hope that that's going to increase with ACOG potentially looking at their guidelines. We do have 97% coverage in terms of high risk pregnancies.

So, when we think about NIPT, we've seen also very strong performance driven by additional reimbursement, Europe, in some cases, leading the way with 100% reimbursement in countries like Belgium and Netherlands, and so on. And we've seen progress in countries like Germany recently, as well, and in parts of Spain, and so on. So that part's really important.

If you think about genetic disease testing, which is way smaller than oncology, but also we're seeing some tremendous progress. It's smaller in terms of market size, but it's as important in terms of the impact on patients. And this is what we feel very strongly about is the fact that you have roughly 3% to 5% of children that are born that have some form of genetic disease. And sequencing as a technology can help essentially diagnose, potentially treat, in some cases introduce treatments, at an early age, which can help avoid complications. So, we've had some progress as well in terms of reimbursements. Whole exome -- in terms of whole exome sequencing, you've got around 58% reimbursement now for whole exome sequencing and genetic disease. And we -- recently in 2019, we've had CMS come out with a CPT code, basically anchoring the price of whole genome sequencing at $5,000, which is very, very important development in terms of the reimbursement in that space, because private payers will follow suit eventually.

So, going back full circle to oncology. Oncology is obviously, as I said, the biggest potential market. We've seen tremendous developments in terms of again, regulatory and reimbursement with panels getting reimbursement. We have the Guardant360 test now which has roughly about 150 million covered lives. And those all rely on sequencing based diagnostics. NGS-based assay are here to say in terms of driving, whether it's screening, whether it's therapy selection, management, treatment of cancer. And I think what some of you might know as well as that we're developing our own IVD, diagnostics TSO500, with pharma -- in partnership with two pharma companies that -- where we look to get approval reimbursement down the road as well, for to develop distributable diagnostics.

So, in terms of how it’s playing out, it’s as we expected, oncology is the biggest market, we're focused on it. There are some really other important markets in the clinical space. We've had some very good progress in clinical.

And then, the last thing I would say is, on the clinical story to your question, there are still some markets that we're not even -- we haven't even scratched the surface. I mean, when you think about infectious disease, when you think about cardiovascular, we haven't even started to look at those markets, but the opportunity is still there as we look forward. The fact of the matter is, and we mentioned this at JP Morgan, back in January, less than 0.02% of humans have been sequenced and less than 0.01% of species have been sequenced. And more than 99% of variants are still not even characterized. So, we've got so much tremendous room for discovery in these markets.

Mike Ryskin

One of the points you mentioned there, I mean the G360 test, we just came from their presentation. How do you think about the liquid biopsy world evolving? You talked about markets where you’re barely scratching the surface, still very nascent, still also being discussed as a very long-term story with the large TAM. So, obviously, you're very well-positioned there with some new technologies. So, how's that playing out, and so what do you see so far?

Sam Samad

Yes. I mean, again, it's a very important foundational element of the oncology market. And we think, there's a tremendous opportunity there. So, I started to talk about Guardant and the reimbursement that we're seeing or the covered lives that we're seeing in that space. I think there's other companies out there like GRAIL that have R&D, clinical trial phases that have some great potential, I think product down the road as well that we look forward to. So, I think that market is still, again, early days, but has tremendous opportunity in it.

Mike Ryskin

I think I’ll ask one or two more and then I’ll turn to the audience for questions. As of at least 30 minutes ago, when I last checked my phone, PacBio acquisition is still not closed, waiting for an update any day now. So, if you could provide us an update sort of your roadmap assuming a mid-summer close, as you’ve indicated. What's the expectation for the rest of 2019, 2020? What are some of the plans going down?

Sam Samad

Yes, sure. So, expectation wise, I mean, we still expect the transaction to close mid-year. And that's our current expectation. In terms of where we are, in the U.S. with the -- with the regulatory bodies here, we're in the secondary review, which is what we expected all along. And that's ongoing.

In terms of the UK with the CMA, we're in Phase 1 review. And nothing has changed from our previous disclosures and our previous statements where we said we expect the transaction to close mid-year. So, that's still on track. In terms of integration, which I think is the next part of your question as to how we think this is going to play out. I mean, we're really excited about this acquisition. The reason we are is those are markets that we haven't played in before. These are complementary markets, complementary technologies, we -- PacBio is a fantastic company with some very innovative technology. They've established a certain level of accuracy, now the Q30, even potentially Q40 accuracy where they -- we think this technology is really important, really important in markets as I said that we haven't played in so far, we haven't competed in directly.

The feedback from the customers is very positive. And a lot of their customers are also our customers. Usually what you see is you will have in a good portion of customers, you will have a number of Illumina instruments and you would have one fact PacBio instruments as well, because they are running both technologies simultaneously in some cases in -- for their uses. But, the customers are really, really, I would say, thrilled about this acquisition because they think that it’s going to essentially enable more discovery, which is what this acquisition was for.

When we think about the integration steps, I mean, it runs the gamut from the basics simplest things as to relocation of PacBio employees coming over, whether they come over to our sites or not, who stays who moves over to our site in Foster City in the Bay Area. But then, it could go to be a complex as how do we merge the applications, how we do, we look at the workflows to make sure that they are working on dual platforms, how do we make sure that we merge the analytics and the data on a single repository to make things simpler for our customers. The fact of the matter is it’s still early days and we’re still constrained in our ability to look at those things and do much on those things. But, what I can tell you is, over the course of -- after the acquisition closes, we are going to be looking at those details, we’re going to be looking at how we integrate both companies, integrate the R&D organizations. And what we’re really excited about though is the ability for our commercial organization to extend the reach where we can ensure that those products reach more of our customers because now we bring our scale to bear, and our manufacturing expertise and know-how and manufacturing scale to play a big part as well and driving innovations in their products as well.

Mike Ryskin

You mentioned the customer overlap. Do you have any specifics in terms of what the actual overlap numbers is between Illumina and PacBio particularly, and some of the high-end instruments, the HiSeq and the NovaSeq?

Sam Samad

I don’t have numbers in terms of what’s specific -- how many customers have both instruments. I know there is -- as I said, there is a healthy amount of customers that have both and they’re running certain applications where they need certain insights that are more suited for long reads, they will use PacBio instruments and they will complement that with short-read SBS sequencing that Illumina is suited for in a bigger more I would say production scale, because that’s what SBS is for. So -- but I can’t give you the specific numbers on customers, Mike.

Mike Ryskin

Questions from the audience?

Unidentified Analyst

[Question Inaudible]

Sam Samad

Sure. Yes. So, the question was about China and potential IP dynamics, competition and what we’re seeing in China, I think if I characterize that correctly. So, China is still very important market for us, has been, continues to be. I know there is a little bit of noise around tariff concerns right now that extends to many companies. And I think probably it has more of an impact economically than anything else. In Q1, our China growth rate was roughly 13%, but when you normalize for the impacts of tariffs between Q4 and Q1, because we had some shift from customers purchasing ahead of potential tariffs, actually our growth was closer to 20%, it was 19% to be precise. So, we’re still seeing some really good growth in terms of China -- in terms of China performance.

I think, your question was around competition as well and what we’re seeing in terms of competition in China. I mean, listen, BGI obviously is an important player in China. BGI has made some announcements recently around their technology. It's definitely a competitor that we look at closely and we observe and we monitor. We still compete very, very effectively in China; we still are very competitive in China. Having said this, the technology that BGI has talked about, and I don't want to minimize them in one -- in any way, because we take our competitors seriously. But, it has not necessarily been validated in a large commercial scale. It still specs that they have released themselves and have spoken publicly about, but customers haven't necessarily been able to validate those specs yet. And so, we still compete very effectively there.

The NIPT and oncology opportunity, so the clinical opportunity in China is very compelling opportunity. I mean, when you think about China, there's roughly, what 16 million, 17 million births a year. And the penetration is about 25% in terms of NIPT utilization and we compete with BGI in that space, and we compete very effectively. But, so, it's not just about the opportunity itself, but the penetration of that opportunity, because you still have 75% of births that are not utilizing NIPT.

Then, when you think about oncology, obviously, the incidence of oncology in China is quite alarming. And for the same reasons that I talked about, in general, in terms of the use of NGS-based assays, the use of clinical instruments, and the use of clinical assays to -- for therapy selection and treatments, that's going to be really important in China as well.

Unidentified Analyst

[Question Inaudible]

Sam Samad

Well, obviously, it’s -- IP protection is something we take really seriously and we vigorously defend our IP in different markets. So, yes, we have sued, filed an infringement lawsuit against BGI, first in Germany and then most recently, as you saw today, in Denmark. And that's just driven by the fact that we will continue to very much assert and defend our IP rights in different markets.

Mike Ryskin

On an earlier point, the China comment, in 2Q and 3Q of the last year, I believe you saw some pull-forward timing around the consumables as people were stalking and there was sort of the thought process at the time, it was ahead of some potential tariff increase, if you go to get that in. And now that we've had increased rhetoric on natural moves on tariffs in the last week or two, any expectation that could repeat in 2Q, 3Q this year, sort of how's that going to show up?

Sam Samad

Yes. So, let me talk about kind of the -- maybe the facts around this in terms of what we saw in ‘18 and then, I'll talk a little bit about potential dynamics for ‘19, although it's hard to say, it's always it's always difficult to predict what happens, both in terms of tariff retaliation or tariff placement on our side or their side, and also what it could impact in terms of products. But in terms of what happened in ‘18, there was never any tariffs placed on our consumables in ‘18. What you saw is some dynamics of customers fearing that there could be tariffs and purchasing ahead of that, because they felt -- since they had the demand and they have the ability to place these orders, they purchase ahead of potential tariffs. The only tariff that we saw placed on our products in 2018 was a 5% tariff on our instruments. And that's fairly minimal; we're not too concerned about that. But, that was the only tariff that we saw across our product line. There was none placed on consumables, they were excluded from the list. They're considered high technology items. And so, we're excluded from tariffs. Fast forward to ‘19, obviously, there's a lot of noise now in terms of tariffs being placed on our end on Chinese products, and the potential retaliation from China. Again, we have no reason to believe that there's any tariffs that are going to be placed on our consumables or that the tariffs would be increased on our instruments. So, far it's still 5% on our instruments from the 18 tariffs that were placed and none on consumables.

Could you see some customers potentially pre order, place orders ahead of potential tariffs because of concerns, again, because the demand is there? Yes, Mike, sure, that could happen. But, I'd be speculating, if I told you whether that's going to happen or not, but that's always a possibility. It's always a possibility with -- I wouldn’t say across all customers, but with potentially a few customers.

Unidentified Analyst

[Question Inaudible]

Sam Samad

So, where are we today, and what do we see and where is it coming out? Okay, let me see how I can address that. So, where are we today? Maybe just to kind of start with the facts and work my way from there. We started in 2014, we announced we're at -- we have a path to the $1,000 genome and we're going to get to the $1,000 genome. So, right now, the fact of the matter is we're in the sub $1,000 genome land. And not all customers get the same price. Customers get different prices, depending on how much they order. We have pricing grids that basically dictate a certain reduction in price, depending on the number of instruments that you play, and the number of consumables that you purchase across a given year. But, the fact of the matter is, we're in the sub-$1000 genome. NovaSeq was our introduction in 2017. We already were in that same price that we are with NovaSeq with the HiSeq X before it. So, that hasn't really changed. What NovaSeq did introduce is additional throughput, but at the same time in terms of $1 per gigabase price, it’s really commensurate with HiSeq X. The benefits of NovaSeq were first of all, the number of flow cells that you can operate across NovaSeq gave you the flexibility, but it also gave you a lot of potential improvements in terms of the technology that goes with the instruments, and also the accessibility of the instruments, much easier, much more turnaround time, much easier for a customer that's never sequenced before to start sequencing.

When we think about where are we going and how do we see that transition, and then the elasticity across different markets. Maybe that was your other question. We've announced in 2017 that we now have a path to $100 genome. And the $100 genome is going to be where we get to over a number of years. We didn't announce when that's going to happen. The fact of the matter is again, not every customer will get the same price. There are some markets that are much more elastic than other markets. I think where most of the elasticity is, is going to be in some research markets, for instance, where you can -- if you drive prices down, you can enable a lot more discovery. And that's our focus. Our focus is to make sure that we drive at the end of the day, our guiding light, our composed, so to speak, our true north is what helps drive discovery and access to more sequencing. And that's where we drive the price down. So, when we think about research markets, we look to drive the price down, because we think for finite budgets and for limited budgets, they can do a lot more sequencing and they can drive additional discovery that helps patients. Clinical markets, maybe less elastic. Obviously, price is important, but not nearly as important as research markets. So, our focus is constantly to innovate, to bring prices down. And the prices that we're bringing down are -- when we talk about the $1,000 genome, we're talking about the -- on the consumables side, in terms of what it takes to run a certain workflow and make sure that you’re doing full sequencing and that’s the cost of the consumables associated with it, which is what you mentioned earlier. And as I said, it differs across different customers, depending on how much they purchase.

Mike Ryskin

I’ll throw in one more before time is expires. Even with the PacBio acquisition, you still got plenty of capital available on the balance sheet. Is there anything in particular that you sort of take a look at the portfolio as it stands today, whether it’s from an unorganic perspective or from organic where there’s quote unquote whole in the portfolio that you’d like to address? So, how would you diversify or expand the mix going forward? And is there anything that you’re thinking on?

Sam Samad

Yes. I wouldn’t point to a single area. I would point to a general focus and then I’ll give you some examples on that. The general focus is whatever lowers the barriers of adoption of sequencing. It’s a very nascent, still nascent market. There is still a lot of opportunities that’s still on path, there is markets that we even haven’t started to play in. Whatever enables customers to sequence easier, more and drive discovery is where we’re focused, so, lowering the barriers of adoption of sequencing. Now that could be across the end-to-end workflow. So that could be across the starting point, which is library prep or it could be across informatics, which is be ending point, and then there is everything in between.

Obviously you talked about PacBio. We thought that we can develop certain markets and drive discovery in certain markets that we don’t compete today, and that’s why we made that acquisition.

When we think about the end-to-end workflow and potential lowering the barriers of adoption, I mean, I’ll give you some examples on library prep, where we have introduced innovations for instance Nextera DNA Flex, we introduced Nextera Enrichment. So, when you think about the -- whether it’s whole genome sequencing or whole exome sequencing, the simplification of the workflow, the reduction of turnaround time, the reduction of hands on time, those are very important innovations in that space where we focus some of our dollars to develop those innovations or some of our resources and R&D dollars.

When you think about the informatics space, that we think is going to be a very -- I would say, a bottleneck down the road, because think of all the data that’s coming off of those instruments and think of all the data that’s going to be -- need to be interpreted, needs to be stored et cetera. So, we made the Edico acquisition last year, which helps in terms of secondary analysis and helps translate from base calls to variant calls. We could be looking at other innovations in that space as well. Again, think of it, Mike, as the end-to-end workflow and how you ensure that customers can sequence easier, better and drive discovery.

Mike Ryskin

Great. Thanks. I think that’s a good place to stop as we’re running out of time.

Sam Samad

All right.

Mike Ryskin

Thanks so much.

Sam Samad

Thank you.

Mike Ryskin

I appreciate it.

Sam Samad

I appreciate it. Thank you.