Illumina Affordable Gene Sequencing

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A month ago, Illumina said it was reorganizing into two divisions—a life-sciences unit that will develop and market machines and tools, and a new diagnostic-business unit that will develop tests to find cancer, diabetes, and heart disease.

The diagnostic unit has developed a partnership with DeCode Genetics in Iceland, a leading gene-hunting company that has discovered markers linked to heart attacks, restless legs syndrome, and other medical problems. Many of these genes were discovered using an Illumina system that fills a large room in DeCode's Reykjavík headquarters.

Flatley is supplying the gene-reading arrays for 23andMe, the new online-genetic-testing company funded in part with Google money—which bestows Web 2.0 buzz on Illumina and makes the company stand out in the rather stodgy biotech industry. Illumina technology is also the backbone of DeCodeMe, DeCode's online answer to 23andMe.

In addition, Illumina announced the settlement, in January, of a patent-infringement suit with archrival Affymetrix. That company had sued Illumina in 2004 and won the first round at trial in March 2007, the jury awarding Affymetrix $16.7 million. Illumina appealed and was facing a second round of trials this month that might have cost it tens of millions of dollars or more, but opted to settle for $90 million, admitting no liability.

"This is a one-time payment that covers the past, present, and future," Flatley says. Illumina did not admit liability.  "We wanted this to go away and not be a distraction," Flatley says.

While Illumina is poised to compete in three markets—arrays, diagnostics, and next-gen sequencing—it is also taking on a host of feisty competitors in what is promising to be a wild ride during the next three or four years. These competitors include, besides Affymetrix, Applied Biosystems Group, Celera Group, Helicos BioSciences, and Roche Diagnostics.

Over the past two years, investors have responded to Illumina's expansion by more than doubling the value of the stock, giving the company a market cap of just more than $3 billion.

The stock shot up $13 in January on news of the lawsuit settlement and company reorganization, and has been dipping and bobbing near this high during the past month.

"Genomics is coming of age, and we're the first to fully integrate the different technologies," Flatley says. "We are in the best position to lead this industry."

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