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Is Cancer the Biggest Opportunity Ahead for Illumina, Inc.?

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Although the company's 6% year-over-year growth in the first quarter is disappointing, the slowdown could be temporary. That's because slowing sales are being blamed on the timing of orders and operational missteps in Europe, both of which are being addressed. Since growth in Asia and the Americas is still clocking in at a double-digit rate, fixing Europe could put the company back on track soon. As a result, management still expects full-year sales to climb by 12% this year.

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Image source: Illumina.

Tapping an emerging market

The company's potential to expand in oncology is one reason why management doesn't appear to be too worried about its future growth prospects.

Increasingly, gene-sequencing technology is being used by cancer researchers to develop new medicines and transform patient treatment. Using this technology, researchers can determine specific mutations in genes that promote cancer, and doctors can determine which drugs are most likely to work in cancer patients.

For example, gene research has led to the discovery of mutations to the BRCA gene, a gene that suppresses cancer tumor growth; because BRCA mutations have been shown to increase the risk of breast cancer and ovarian cancer in patients, women are proactively testing for them. It's also leading to medicines that specifically target these mutations.

Gene sequencing has also led to advances in other cancer indications. Celgene 's widely used multiple myeloma drug Revlimid has been proven to be highly successful in myelodysplastic syndrome patients who are missing chromosome 5, and epidermal growth factor receptor (EGFR) testing is used to help identify lung cancer patients who might respond well to a certain class of drugs called tyrosine kinase inhibitors.

Illumina's plans to tap a meaningful share of the clinical market for gene-based cancer therapy are collaborative.

Illumina is developing panels and instruments that are more useful to cancer researchers, and it's partnering with pharmaceutical companies to develop companion diagnostics for cancer medicines. For example, Amgen Inc. has teamed up with Illumina to use Illumina's TruSight Tumor 15 kit to develop new cancer drugs. TruSight Tumor 15 uses next-generation sequencing technology to assess 15 genes commonly mutated in solid tumors.

If Illumina can successfully expand beyond research into the in-vitro diagnostic market, and establish itself as a maker of tools that allow doctors to prescribe the ideal drug for each individual's specific cancer, it could help usher in a new era of cancer care.

Measuring the impact

If Illumina's products become a standard of care in oncology, then the market potential for the company could be massive.

Worldwide, 12.7 million new cases of cancer are diagnosed every year, including 1.7 million cases in the United States. Because cancer is so common, over $100 billion is spent on cancer medicine annually.

Given the sheer size of this market, Illumina thinks that the market potential for gene sequencing in oncology could be as high as $12 billion, or roughly six times the company's current annualized sales. If it can win even a small slice of that market, that would be needle-moving for the company and its investors.

Looking ahead

Illumina's potential in cancer isn't limited to companion diagnostics, either. Earlier this year, management disclosed a new start-up named Grail that plans to use deep sequencing to diagnose cancer in earlier stages than ever before.

Using deep-sequencing technology to identify circulating tumor DNA originating in cancer cells, Grail may be able to help millions of people discover their cancers sooner, when they're most easily treated.

The market for early cancer diagnosis could be even bigger than the market for Illumina's other oncology programs. The market for Grail in detecting cancers of stage 2 and higher in high-risk patients could be $20 billion, according to Illumina.

Add that $20 billion opportunity to the $12 billion opportunity in clinical oncology, and you can see why it may make sense to stick with Illumina in long-term portfolios. These markets won't generate massive sales for the company overnight, but they could make Illumina into a much larger company over the next 10 years. If so, then picking up shares after this recent sell-off might be savvy.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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