Illumina Inc. (NASDAQ:ILMN) Q2 2015 Earnings Conference Call - Final Transcript
Jul 21, 2015 • 05:00 pm ET
Our first question comes from the line of Tycho Peterson with JP Morgan.
Thanks. Actually, Jay, I want to see if you can elaborate a little bit on your comments on the array market? I mean if we think about this, you've stepped up your R&D there, you've talked about bio bank contracts and you did do the Neogen agreement. So I'm just curious as to why you think that market is going to be down mid to high-single digits?
Jay T. Flatley
Well, I mean the comps are tough on the array market overall and a lot of it has to do with pricing, Tycho. Our unit volumes continue to increase in general in the array business, but pricing is becoming increasingly aggressive there. The bio banks to do the large-scale projects that they want to do are only enabled at pretty aggressive price points. So I think it's that combination that's causing us to predict the array business to be down overall. We had a good order quarter in arrays, but a lot of that is going to be in backlog and shipped out over the next two to four quarters.
Okay. And then if we think about kind of swing factors for the back half of the year and things that could drive upside on the revenue line, you've got population sequencing, NIPT. On the HiSeq 3000, HiSeq 4000 uptick, that's another thing that potentially could accelerate quite a bit. Maybe just talk a little bit about the dynamics of HiSeq 2500 customers because you have rapid run mode in the HiSeq 2500, but not the HiSeq 3000, HiSeq 4000, so what percent of those customers do you think pulled out? And I guess what are you telling customers on HiSeq 2500 in terms of phasing it out overall? Are you maintaining any commitment to servicing it for the next year? Or what are those discussions like?
Jay T. Flatley
Well, we have a long-term commitment to servicing any instrument that we put in the field and we typically will do that for five years to seven years after we stop shipping it. So even after we declare something no longer available for sale, we'll continue to support it for a long time, so there's no concern there. We did see, in the quarter, a great shift toward the HiSeq 4000, which is what we predicted would happen, the performance of that instrument, the price per base, the pattern, the flow cell roadmap are all important ingredients for people to move to the HiSeq 4000. You can almost think of it as a slightly de-rated X that's allowed to run all applications.
So that was, we think, largely responsible for that shift. We do think over the next year to two that the people buying the HiSeq 2500s will gradually decrease, and it'll, in some sense, obsolete itself. But the one feature that we have on the HiSeq 2500 that customers like a lot is that rapid run feature. So we're taking a look