ILMN
#Sure.
Let's talk about both.
In terms of our guidance for the year, the reason we feel confident with 12%, even though I said that we're looking at the big deals in Europe and applying a probability-based view on them is that we are seeing slightly stronger than expected pipelines coming out of both the Americas and forecast coming out of both the Americas and Asia.
We in general do apply some probability weighting to deals across the globe, but we have leaders that have been in place longer in EMEA and in APAC, and so we feel like we have a much better handle on where those deals are, and what their likelihood of closing is.
We applied a little bit of a heavier weighting, probability weighting in Europe than we do right now in the Americas and in APAC, until we have the team on the ground and have some track record behind us, in terms of the forecasting there.
But the strength in Asia and Americas, they more than compensate for that, from our perspective.
In terms of Helix and the consumer business, the way we set Helix up is that Helix goes out and recruits direct to consumer businesses, to build on the Helix platform.
The intent is that anybody who is looking to set up a direct to consumer genomics business will go talk to Helix.
And there are incredibly compelling reasons about why you would want to go to Helix and get set up with Helix, rather than set up your own sequencing lab environment, your own informatics pipeline, your own operation.
If, however, a customer feels like Helix is not the right fit for them, and they can certainly buy from us equipment and consumables.
We do have customers that are outside Helix, that are direct to consumer.
They are terrific customers, and we're going to continue to support them going forward.
I don't think there's really any direct channel conflict because of the segmentation.
Customers that have an array-based genotyping panel that they want to continue with, clearly we can service that, but any customer who wants to take advantage of not just the infrastructure point that <UNK> made, but also the opportunity to do Exome plus, would clearly be directed to Helix.
So it's segmented, based on the actual product.
Yes.
Good question, because China is emerging as one of our top country markets, already, and is driving strong growth for us.
If we look at the dynamics play out in that market, the market in China is primarily a clinical market, and so we look at where the demand is coming from.
There is a lot of demand from customers looking to set up NIPT operations in China.
We expected that to continue to be a growing segment for us.
We're also seeing some of those customers also enter the oncology space, but are also seeing pure play oncology providers that are emerging as customers of ours.
By and large, these are private companies, they are not necessarily government entities, that are being formed to go after those market opportunities.
In the last, in the recent past, we have seen the emergence of organizations that in some cases are primarily targeting work coming out of the Chinese PMI.
And those of the customers that are driving some of the X demand that we are seeing.
The oncology and NIPT customers are more likely to be buying the NextSeq from us, for example.
And we're seeing this new segment emerge around customers that are targeting projects from the Chinese PMI.
That question is a great one, because right now we are seeing as our business expands, we're getting requests across the board.
There are still segments of the market that want to continue to see us drive the costs of sequencing down, drive the throughput up, shorten turnaround time, and so there's still an elasticity in the market that customers want us to enable them to access.
And so, clearly, part of our portfolio is always going to be around delivering the world's best sequencing offering.
We're getting, though, requests from customers that are saying, that is not the whole problem for them.
Increasingly, we're seeing our clinical customers ask us to focus on helping them, for example, on the clinical reporting side.
And so as we look to how we want to evolve our portfolio over time, there are segments of the market where we're looking to provide the complete sample to answer solution, all the way down to potentially validate a clinical report.
And so for some segments, that's going to be the key enabling component of that segment.
And then in a bunch of cases, the enablers are things that we can influence indirectly.
And so working with the regulators, working with the payers on reimbursement, driving the data needed to demonstrate analytical clinical validity, and clinical utility, so those are things that are enabling to the market, that are not maybe directly driving our business today, but an area where we feel be can be productively involved, to help catalyze certain markets.
So, as our business has gotten bigger, there are a number of strategic levers that we're focused on, to drive the adoption of genomics in the various markets we're in.
Yes.
If we look at what's driving that business, with all the puts and takes, but some of the dynamics like the Chinese PMI that we said really drove a significant chunk of the X demand, we expect net-net those dynamics to be positive exiting 2016, and to continue to drive that level of orders as we exit the year.
As we look forward I think that we feel that the pull-throughs will remain in the ranges that we talked about.
As we look at the instruments we've placed, we have new instruments that are coming online, and those obviously will take a little while to ramp up, depending on which instrument you're buying.
But we're also seeing instruments that are moving towards the high-end of the utilization across our portfolio.
And so I expect that range to be fairly stable, going forward.
I guess the only caveat that we talked about is that there's some volatility associated with the X pull-through, depending on how a single order coming in a quarter can move that number one way or another, and so we expanded the range a little bit.
But other than that, we expect those ranges to stay stable.
<UNK> you specifically expressed a couple year time frame.
I think if you think out beyond that, the only potential dynamic that could move in the positive direction would be population sequencing projects layering on top of each other.
But that's not in the time frame you specified.
Yes.
During the quarter, we actually did see the revenue from Japan increase slightly compared to the prior year, but we still think that, I'll start by saying that Japan is not a big part of our revenue today.
I think it's about 3% of our revenue today.
So it's a small part of our revenue, and it's unlikely to move the needle one way or another.
We see a gradual strengthening of the environment there, but it is gradual.
Yes, <UNK>, so, obviously we don't guide to specific levels generally, specific segments generally.
But we feel that given the trend that we're seeing now in arrays, we would give that perspective to you, that double-digit.
We've been seeing that start to form.
We mentioned it last quarter.
We said it was an emerging bright spot, but we need to see a little bit more of a trend.
With the orders that we saw last quarter and the quarter before, and the products this year, we had already been contemplating this potential array growth, we just didn't want to provide a number until we felt more comfortable, so it doesn't really change our guidance.
And it doesn't offset necessarily on the sequencing side.
Is been contemplated for ---+
Sure.
There are a few parts to how we think growth is going to come out of the instrument market.
One is over, and we seen this before, one of the big drivers of growth there is the upgrade cycle.
If you look at our entire portfolio, over time, each of those instruments needs to be upgraded, and whenever we can drive a big upgrade cycle, that contributes to growth.
Now, in previous years where we've had one instrument, you would have a single big upgrade cycle that would drive a lot of growth.
Clearly now, we have a much bigger portfolio, and so while any one upgrade cycle will drive growth, that will play out over multiple instruments, rather than a single big upgrade cycle.
There is, we believe, opportunity, further opportunity in placing clinical boxes, and so you'll see us continue to look to get clearance in the various markets around the world.
We are very optimistic on the clinical market being a driver of purchases of ---+ new purchase of our instruments.
And then in the longer-term, we do expect to see the low end of the market to drive instrument growth.
And so we talked about Firefly and the instrument we are launching at the end of next year.
We believe that there are a number of segments that will be new to sequencing, that will be opened up by Firefly.
So there are tens of thousands of labs, for example around the world, that the majority, the vast majority of which don't use sequencing at all, and they are capital constrained, and in some cases, they are sample constrained, so that a purchase of even a MiniSeq or a MiSeq really doesn't make sense for them today, but Firefly would be perfect for that market.
So, we see a number of markets that we think a low end sequencer would be very attractive for, and that would all be incremental instrument revenue.
Yes, the GRAIL team is making really good progress.
They continue to build out their team, so as you remember, a nucleus of people moved over from Illumina to GRAIL, and that team has done a really good job adding really world-class talent in addition to that team.
They've made really good progress, and are continuing to make good progress in developing the assay, and are on track to have that done by the end of this year.
And the team is hard at work on designing their clinical trial.
We don't have any new updates to provide right now, and we will make sure we get it out as we do.
Yes.
So the way that market is playing out is, in a number of cases, what we do is, when we sign up a new customer, we allow them to market their services, even before they have their lab set up.
And we will process the samples for them in our Korea lab.
And for that, we charge them a test send out fee, and that drives test send out revenue for us.
That's good revenue, but it is an on-ramp for them to have their own lab.
And while we are processing their samples, a lot of these customers are actively building out their own lab, and over time, the intent is to move the samples from being processed by us to being run by the customers themselves in their own labs.
To do that, they obviously have to buy instruments as well as consumables from us, and so that's what you see playing out in that market.
In addition to instrument purchases and consumable purchases, they pay us a test fee associated with getting access to the intellectual property we have around NIPT.
And so the way you see that market working then is we'll sign up a customer.
You will see a test send out revenue stream show up to us, and over time that gets replaced by instrument, consumable and test fees.
And the way that plays out in gross margin is it generally only has an impact when we have underutilization in our services labs, which we did see a little bit of a headwind for that this quarter, as customers migrated the tests to in-house, and we have overcapacity for a while, which it takes a while to fill and therefore under absorption of overhead.
And that's what you see a little gross margin headwind, but it's not that significant this quarter.
Yes.
I will help you take that one as well.
They are both growing businesses, so they are both going to ramp during the rest of this year.
That's partially offset by a higher non-controlling interest charge on GRAIL because of the recent restructuring of the shares, so no change there, in terms of our forward-looking perspective on the dilution from Helix and GRAIL together.
I do think was there another part of the question.
There was a part for this year, and on a go-forward basis.
Yes.
And on a going forward basis, we haven't provided any official guidance on that yet.
Directionally we've talked about a couple of options, and we'll come back when we've completed our budgeting, with more detail on that.
The GRAIL and Helix are both tied into the overall Illumina budgeting cycle, and so we're starting to get into the thick of that right now.
Yes.
So, a little bit of all of the above.
Typically, the people buying HiSeqs are not new to Illumina customers.
Typically, we have been working with a lot of these customers already.
We understand their business, and the demands on their business, and that's what allows us to project when we think they'll be needing instruments and work with them, on when they will need instruments.
So, in some cases, it's grant applications that are in.
In some cases, it's people that are looking at their budgets for the year and using their end of year budgets to buy HiSeqs.
In some cases, they are just ramping up their business, and that's when they'll need the new instruments.
But in the majority of cases, these are customers that are already customers of ours, and that we have been working with for a while.
Actually it doesn't really matter as long as they are replacing those older HiSeqs with newer instruments.
And so as <UNK> mentioned earlier, with respect to the utilization analysis we do, that we've seen an uptick in the available capacity, and so that's net of those reductions in older instruments.
Even with that, we're seeing the capacity going up as customers buy the new higher throughput instruments.
So, it's probably not fruitful to try to predict where that's going, to that's why it doesn't matter as long as it's replacement.
Which is generally is.
Thank you, operator.
As a reminder, a replay of this call will be available as a webcast in the investor section of our website, as well as through the dial-in instructions contained in today's earnings release.
Thank you for joining us today.
This concludes our call, and we look forward to our next update following the close of the third fiscal quarter.
