Incorporated: 1998
NAIC: 334516 Analytical Laboratory Instrument Manufacturing
SIC: 3826 Analytical Instruments
Illumina, Inc., is a NASDAQ-listed company based in San Diego, California, that provides academic institutions and life sciences and pharmaceutical companies with tools and systems to test and analyze genes. Illumina's flagship system is based on its proprietary BeadArray technology, which uses fiber-optic bundles and specially prepared beads containing a different molecule or DNA sequence. By dipping the bundle into a test sample, a laser is able to detect which beads react to the sample. Thus, the beads self-assemble into arrays, providing researchers with the ability to do large-scale testing of genetic variations, providing clues to researchers seeking to better understand human genetics in order to develop drugs and methods to diagnose diseases. Illumina's complementary Oligator technology synthesizes oligonucleotides, single-stranded DNA fragments that are able to connect to the end of human DNA and provide further insights to researchers. Not only does Illumina technology assist in the development of treatments, it has the potential to help physicians determine whether a patient is likely to respond to a certain treatment or not.
Incorporation in 1998
Illumina was incorporated in April 1998; its founders included David R. Walt, John R. Stuelpnagel, Lawrence A. Bock, Anthony W. Czarnik, and Mark S. Chee. A chemistry professor at Tufts University, Walt developed the BeadArray technology in his laboratory. His work then came to the attention of venture capitalist Stuelpnagel, a man with a varied background. After receiving a degree in biochemistry and a doctorate in veterinary medicine from the University of California, Davis, he earned an M.B.A. from the University of California, Los Angeles. He then went to work for venture capital firm Catalyst Partners before joining Bock at another venture capital firm, CW Group. Bock was one of the pioneer investors in the biotechnology field, founding a dozen start-up companies in the industry. Stuelpnagel was attracted to Walt's technology because of an interest in the work of Affymetrix, Inc., a Santa Clara, California, company that had developed gene chip technology, which applied semiconductor manufacturing techniques to combinatorial chemistry in order to build large amounts of biological information on a quartz wafer. However, it was a painstaking process, and Stuelpnagel recognized that Walt's BeadArray was an alternative process that had the potential of eclipsing the work of Affymetrix.
Stuelpnagel and Bock negotiated an exclusive license with Walt and Tufts University and began bringing in others to found a new company that took the name Illumina. Chee, the former head of Affymetrix's genetics research unit, was brought in to help develop the BeadArray technology as vice-president of genomics. The last founder was Czarnik, the former vice-president of chemistry at Irori Quantum Microchemistry, who served as Illumina's chief scientific officer. Stuelpnagel, in the meantime, became acting president and CEO, and Walt became the chairman of the company's Scientific Advisory Board.
With seed money from CW Group and ARCH Venture Partners, the fledgling company acquired the rights to 13 necessary patents. It then set up shop in a 10,000-square-foot facility in San Diego with seven employees in the autumn of 1998 and began developing Illumina's core technology. Hired as vice-president of product development was Richard J. Pytelewski. Later in the year the company raised $8.5 million in its first major round of financing, with CW Group and ARCH being joined by Venrock Associates and Tredegar Investments.
Recruiting a New CEO: 1999
Stuelpnagel led Illumina until October 1999, when he successfully recruited Jay T. Flatley to fill the president and CEO positions on a permanent basis. With industrial engineering degrees from Stanford University and a B.A. in economics from Claremont McKenna College, Flatley was a seasoned life sciences executive. He cofounded Molecular Dynamics in the late 1980s and served as CEO from 1994 until September 1999, when the company was bought out. Flatley told Fortune, "The deal hadn't made me rich enough to stop working." Hence, after paying a visit to Illumina's operations and falling "in love" with the technology, Flatley was quick to accept Stuelpnagel's job offer.
According to Fortune, "Flatley knew that speed was the name of the game." He wasted no time moving on a number of fronts. A month after he took over, Illumina forged its first major collaboration arrangement with Applied Biosystems to develop, produce, and market certain array-based systems. As part of the deal, Applied Biosystems' parent company, PE Biosystems, bought a $5 million stake in Illumina. Another $28 million was raised through a private placement of stock in December 1999. Flatley prepared to take Illumina public.
Completion of Stock Offering: 2000
Flatley's decision to act quickly proved decisive. The stock markets, especially the tech-heavy NASDAQ, were beginning to falter in 2000, prompting some biotech start-ups to postpone their offerings, but undeterred, Illumina filed for its initial public offering (IPO). With Goldman Sachs & Co. acting as lead underwriter, Illumina completed its IPO in July 2000, raising more than $100 million. The company had started the year with $33 million in cash, and with this infusion of new capital Illumina possessed an ample nest egg not only to see it through the developmental stages of its technology but also to shelter it from the harsh equity market for the biotech sector that prevailed following its IPO. Illumina's stock price enjoyed an immediate bump, increasing from the offering price of $16 per share to as high as $38 on the first day. The price would grow even higher before trending downward. Yet by the start of 2002 the price dipped to $12 and by the autumn of that year it traded around the $4 mark, eventually bottoming out below $2. Because Illumina still had $80 million in cash, it did not need to raise more capital and the disappointing price of its stock had little impact.
With funding no concern, Illumina tripled its workforce to more than 100 in 2000 and exercised a lease to acquire a pair of buildings to provide the expanding company with 105,000 square feet of space. In addition to the amount of cash on hand, Illumina began generating revenue in 2001 after launching its FastTrack Genotyping Services. The first customer, signed in May of that year, was GlaxoSmithKline. Over the ensuing months, another half-dozen genotyping services agreements were signed. Illumina also moved into its new facility located on an eight-acre property that provided ample space for future growth. By the end of the year Illumina's headcount numbered 180. Although Illumina posted a $24.8 million net loss on revenues of $2.5 million in 2001, the vast majority of that amount, $20.7 million, was due to increased spending on research and development, an investment that would reap future dividends.
HapMap Project Lending Credibility: 2002
Illumina gained market credibility in 2002 when the International HapMap Project was launched to create a detailed map of genetic variations in hopes of speeding up the discovery of genes associated with common illnesses, such as diabetes and heart disease. Illumina was chosen to participate in HapMap and became one of five U.S. participants to receive funding, awarded a $9 million grant from the National Institutes of Health in October 2002. Earlier, in May, Illumina launched its BeadLab system, a fully integrated turn-key production SNP (single nucleotide polymorphism) genotyping system geared toward major genotyping facilities. The first sale was to The Wellcome Trust Sanger Institute, which would be responsible for one-quarter of the HapMap. In all, BeadLab would be used to complete more than 60 percent of the project's genotyping, its system used by several other participants as well. As a result, Illumina technology was able to prove itself in the marketplace, leading to increasing sales for the company.
The year 2002 was also marked by some controversy, when late in the year Applied Biosystems sued Illumina for breach of contract because the efforts of their collaboration were not included in the BeadLab system. Because Applied Biosystems' assay did not perform as well as expected, Illumina had opted to use its independently developed GoldenGate assay. The matter made its way through the courts and a year later a judge directed the matter to arbitration. A settlement was finally reached in August 2004, calling for Illumina to pay back $8.5 million of the $10 million invested by Applied Biosystems in research and development.
Revenues increased 300 percent to $10 million in 2002, and grew at a similar pace a year later, topping $28 million. Some of those sales in 2003 came from the introduction of a second microarray platform, Sentrix BeadChip, unveiled in the middle of the year. This format catered to smaller-scale projects. The year also saw the installation of six BeadLab systems around the world and the signing of 26 genotyping service agreements. To keep pace with the growing business, Illumina beefed up its Sales, Marketing, and Customer Solutions units, nearly doubling them in size.
Illumina's impressive growth pattern continued in 2004. Early in the year it introduced its new BeadStation Benchtop System, a small unit that could run both DNA and RNA analysis applications. Hoping to ink 20 genotyping service contracts during the year, the company booked 52. The goal of selling 20 systems was also greatly exceeded: By the end of 2004, Illumina shipped three BeadLabs and 42 benchtop BeadStations. For the year, revenues increased to $50.6 million and the company trimmed its net loss to $6.2 million.
First Acquisition: 2005
Illumina made its first acquisition in April 2005, paying $17.5 million in cash and stock for Connecticut-based CyVera Corporation, a developer of digital microbead technology that complemented Illumina's systems. CyVera offered lower-multiplex technology that could provide target validation and facilitate molecular test development. Illumina also launched several new products in 2005: the DASL Assay, used to generate gene expression profiles from degraded RNA samples; multi-sample, whole genome expression microarrays; the Infinium Assay, a new genotyping assay offering intelligent SNP selection and unlimited access to the genome; and the world's first whole-genome expression arrays for laboratory mice.
With revenues of $73.5 million, 2005 was a successful year for Illumina but would pale in comparison to 2006 when the company turned its first yearly profit, $40 million on sales of $184.6 million. During the year, the company launched 15 new products and increased the installed base of BeadArray Readers to 246. It also completed a secondary stock offering, raising another $97 million and in mid-November completed another acquisition, adding Solexa Inc. for about $512 million in stock. Based in Hayward, California, Solexa was a developer of cost-effective DNA sequencing machines that complemented what Illumina had to offer. According to the San Diego Union-Tribune, the merged company "will have all three pillars of modern genetic research; namely, tools used by academic and commercial researchers for gene sequencing, gene expression, and genotyping. Until now, Illumina's product line lacked tools for gene sequencing, while Solexa didn't offer instruments for genotyping." As a result, Illumina hoped to provide instruments that would not only increase the speed of genetic research but could also do so less expensively than rival systems. With revenues through the first three quarters of 2007 increasing by more than 80 percent over the same period the previous year, Illumina was ready to post another record year, and appeared poised to enjoy continued success for years to come.
Principal Subsidiaries
Illumina UK, Limited; Illumina GmbH; Illumina K.K.; Illumina Singapore Pte. Ltd.
Principal Competitors
Affymetrix, Inc.; Beckman Coulter, Inc.; Luminex Corporation.
Further Reading
Brown, Stuart F., "Soul of the New Gene Machines," Fortune, May 2, 2005, p. 113.
Crabtree, Penni, "Illumina's Stock Skyrockets After Hefty Earnings Report," San Diego Union-Tribune, July 20, 2006.
"The Illumina Story," Lab-on-a-Chip.com, August 31, 2005.
Pollack, Andrew, "A DNA Chip Maker Acquires Gene-Sequencing Company," New York Times, November 14, 2006, p. C3.
Rose, Craig D., "Illumina Buys Solexa in $650 Million Deal," San Diego Union-Tribune, November 14, 2006.
Shook, David, "Waiting for the Genomics Payoff," Business Week Online, October 15, 2002.
Somers, Terri, "Judge Says San Diego Biotech's Contract Dispute Should Go to Arbitration," San Diego Union-Tribune, December 20, 2003.
Welch, Mary, "Illumina Seeks $100M in IPO to Fund Work in Genetics," Bioworld, April 6, 2000.
Willett, Matthew, "Illumina Cashes In on Hot IPO Market with $96M Offering," Bioworld, August 1, 2000.
— Ed Dinger
