The San Diego-based company makes the workhorse machines that sequence genomes—the full set of genetic instructions for making bacteria, plants, animals, and humans. The decoding tools run around the clock in academic labs all over the world. As researchers race to develop DNA-based technologies that detect genetic abnormalities in developing fetuses, variations that drive tumors, and much more, Illumina shows no signs of letting up.
The company predicted a year ago that the total addressable market for sequencing will skyrocket almost 10-fold to $20 billion. Now it says that number was too small. Analysts see essentially nothing and nobody getting in the way. A year ago, a Goldman Sachs analyst predicted that Illumina would capture 75% of that exploding sequencing market, all the way out to 2020. “We continue to see ILMN as a best-in-class growth story that is well positioned for multiple additional years of double-digit growth ahead,” said Vamil Divan, an analyst at Credit Suisse, in a recent note.
I spoke with Illumina CEO Jay Flatley last week in a wide-ranging interview about the future of genomics, how the company maintains its edge, and the challenges he sees ahead. For the full conversation, subscribers can go to Timmerman Report. (Forbes also had a story about Illumina last August by Matthew Herper).
Luke Timmerman: You reported earnings recently, and there’s not much new there. You’ve reported 14 consecutive quarters of sequential revenue growth. You beat Wall Street expectations every quarter. You’re worth something like $28 billion, about five times what you were five years ago. People often use the word ‘dominant’ to describe your position in the market. What’s your next act?
Jay Flatley: The total addressable market we talked about 15 months ago in our analyst day was $20 billion. If you were to ask us what we think it is today, it’s substantially bigger. That’s really driven by the emergence of new market opportunities. It’s related to expansion of the reproductive health space, as well as oncology, consumer, and population sequencing. Those are four really gigantic markets out there that we’re really just beginning to scratch the surface of.
LT: People tend to know more about the reproductive health market, particularly the non-invasive prenatal screening, and the oncology applications, but not as much about the other two. Can you explain a bit more what you see there?
JF: The first we abbreviate as GEL, as in the Genomics England project to sequence 100,000 people in the U.K. We won that project to develop the infrastructure to do that sequencing and much of the data management. It’s focused in two areas. One is rare disease in kids, and the other is oncology. The notion here is that it’s really a precursor to understand the health economics of why sequencing helps improve healthcare, both in quality of outcome, and in reducing overall cost. Presuming we meet the objectives of this three-year study--and it’s truly a pilot--then the program will expand substantially and sequence many more people in the U.K.
In the U.S., President Obama announced the Precision Medicine initiative. It’s somewhat similar to what GEL is doing, but is structured somewhat differently. It has 100,000 people they want to analyze and sequence. They want to understand how to use genomic data and other test data to improve health outcomes.
Around the globe there are a growing number of these. These two are the first examples.
LT: You’re now in a position to take on these kind of ambitious projects. A lot of people in the industry are kind of amazed at how you’ve gotten there. But you obviously have to worry about things too. What do you worry about as the CEO of Illumina?
JF: We’re always paranoid about competition, and we should be, no matter what our position is and how good it is. We’re probably in a better position now than we’ve ever been in our history. But we worry a lot about regulatory questions, and particularly because they are different in different parts of the world. Understanding how we manage the different regulatory scenarios, and how we continue to push the good uses of sequencing and do everything we can to prevent the more nefarious potential uses of sequencing, is something we’re spending increasing amounts of time on, particularly as we start doing very large projects.
We also think about the Chinese market opportunity. It’s a massive market opportunity, but a very challenging marketplace to do business.
The last thing I spend a lot of my time on is thinking about how we manage the growth of our company. That includes how we protect the culture we have, which we think is unique in many ways for a company of our size [3,700 employees]. That extends to how we get people, build out facilities, and really manage across a global infrastructure.
LT: That reminds me of when we talked a few years ago, you said your No. 1 job as CEO was to make sure Illumina held on to a technology advantage, and that you didn’t get so big that you got out-innovated, or out-maneuvered by smaller, nimbler competitors. We’ve seen that happen many times before in business history. It hasn’t happened to you guys. Is there something about the way your organization is set up, either structurally or culturally, that’s enabled you to hold on to that leading position?
JF: I think there are some things that are critically important to our success. No. 1, the thing we always talk about is that we’re technical at the top. We think it’s very important that the people who lead our company, which you might think of as my top 20 to 50 executives, have technology backgrounds. That could be science, engineering, software, or whatever it is. To be the winner in this business, you can’t just be a good general manager. We contrast it, for example, with a good GE general manager. They believe their talent doesn’t matter if they are managing a refrigerator factory or a locomotive factory. It’s all about general management. We don’t believe that, at least for our markets.
One of the other really important things we did, early on, was structured our product development process in a way where we could very efficiently run a large number of projects simultaneously. That is what has given us the ability to scale, in size and complexity and number of products, and still be able to manage that with a limited number of top executives. That’s because of how we empower our teams to go off and do great things. They only have to come back to us under a very fixed set of circumstances. We [in management] can set the strategy and direction and talk about specifications. They can do the execution, which they are really good at.
Also on Forbes:
