Illumina, Inc.

Hello and welcome to the Illumina Q3 2021 earnings call. Following the presentation today, we will have a Q&A session. If you would like to register a question, please press star followed by the number one on your telephone keypads. I would now like to hand the conference over to Brian Blanchett. So, Brian, please go ahead.

Good afternoon, everyone, and welcome to our earnings call for the third quarter of 2021. During the call today, we will review the financial results released after the close of market and offer commentary on our commercial activity, after which we will host a question and answer session. If you have not had the chance to review the earnings release, it can be found on the Investor Relations section of our website at Illumina.com. Participating for Illumina today will be Francis D'Souza, President and Chief Executive Officer, and Sam Samad, Chief Financial Officer. Also joining us today is Bob Ragusa, Chief Executive Officer of Braille. Francis will provide an update on the state of Illumina's business. Bob will provide updates on Grail's business. And Sam will review both Core Illumina and Grail financial results. This call is being recorded, and the audio portion will be archived in the investor section of our website. It is our intent that all forward-looking statements regarding our financial results and the commercial activity made during today's call will be protected under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties. Actual events or results may differ materially from those projected or discussed. All forward-looking statements are based upon current available information, and Illumina assumes no obligation to update these statements. To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that Illumina files with the Securities Exchange Commission, including Illumina's most recent forms 10-Q and 10-K. With that, I now turn the call over to Frances. Thank you, Brian, and good afternoon, everyone.

Illumina's third quarter was another exceptionally strong quarter, with $1.108 billion in revenue, up 40% year over year, and, once again, significantly ahead of expectations. Our customer base continues to expand rapidly, and in the first three quarters of 2021, we added 50% more new customers than in all of 2020 or 2019. Because of this strength across our business, we're raising our full-year revenue growth outlook for the third quarter in a row to approximately 36%. This is approximately double the growth rate and $567 million higher than the midpoint of the range we guided to at the beginning of the year. I will talk through the third quarter results for Core Illumina, as defined as Illumina other than Grail, and then I'll turn the call over to Bob Ragusa, the CEO of our Grail subsidiary, to cover the Grail business. Core Illumina revenue was $1.106 billion. Sequencing instrument revenue was up 65% year over year, and we exited the quarter with a record instrument backlog, a positive leading indicator for future revenue. Sequencing activity in the quarter was also strong, with sequencing consumable revenue up 45% year-over-year, setting a new record. Our high-throughput platform order volume is accelerating. Oncology testing, population sequencing, and drug discovery initiatives drove record novacy consumable and instrument shipments. Oncology testing customers represented the highest proportion of NovaSeq shipments for the quarter, as large oncology testing labs added to their fleets to support expanded reimbursement for therapy selection testing. Drug discovery is emerging as a new application for high-throughput sequencing, with opportunities across common diseases ranging from obesity to aging. Our mid-throughput platforms also drove growth and expanded our install base. In the third quarter, over 50% of NextSeq 1000 and 2000 placements were new to Illumina customers or to customers upgrading from low-throughput instruments. These instruments continue to unlock new applications. Researchers at Tulane School of Medicine are using the NextSeq 2000 for single-cell experiments focused on infection and inflammation. The team is working to develop inhaled vaccines for pneumonia and use single-cell RNA-Seq on an X-Seq 2000 to study the immune cells elicited by this vaccine platform in a recent paper published in Science Immunology. Bench top platforms also saw significant growth year-over-year, with the highest number of MySeq shipments since Q4 2015. MiSeq, coupled with our COVID-Seq 96-sample assay, is enabling labs around the world to engage in local pathogen surveillance. This quarter, MiSeq placements in both Argentina and Brazil brought COVID surveillance to local communities in conjunction with broader national programs. Now, turning to clinical and research and applied segments, oncology testing, our largest market segment, had another record quarter. Sequencing is becoming the standard of care in therapy selection, which is driving robust demand for Illumina sequencers. And our oncology testing customers are rapidly scaling their fleets in response. Reimbursement for genetic testing for therapy selection continues to expand, with over 70% of insured lives in the US now covered for these tests. Additionally, there are over 60 targeted and immunotherapy treatments currently on the market. highlighting the power of comprehensive genomic profiling in matching patients to treatments. TruSight Oncology 500, our research use-only comprehensive genomic profiling assay, had another record quarter, with over 340 customers now using the assay in their labs. In September, we announced a CDX partnership with Merck to develop and commercialize tests leveraging TSO500 content and an HRD status based on Myriad's MyChoice in patients with ovarian cancer. Approximately 300,000 women around the world will be diagnosed each year with ovarian cancer, the fifth deadliest cancer for women. This partnership will help these patients access additional treatment options with the goal of improving care. In reproductive health, we saw another quarter of strong year-over-year growth. Almost 80% of pregnancies in the U.S. are now covered for non-invasive prenatal testing. And we're seeing additional progress as states begin to incorporate the ACOG guideline revision from last year into their prenatal screening programs. In California, the prenatal screening program is being revised to include non-invasive prenatal testing, and the state has now issued a request for proposal. NIPT is increasingly being incorporated into guidelines outside the U.S. as well. In September, the Italian Ministry of Health issued new guidelines supporting the use of NIPT in a contingent model. With the continued momentum in coverage and guidelines, our end-to-end VeriSeq V2 solution is gaining traction across global markets. Genetic disease testing also posted another strong quarter, as broad reimbursement and compelling clinical utility data drive a shift to whole genome sequencing. This quarter, the results of the groundbreaking NICU-Seq trial, co-authored by Illumina scientists, were published in JAMA Pediatrics. The randomized, time-delayed trial demonstrated that clinical whole genome sequencing drives a two-fold improvement in both diagnostic efficacy and change of clinical management for acutely ill newborns. We are working to ensure that families and NICU patients around the world can access these tests In the U.S., Michigan recently became the first state to offer rapid whole genome sequencing to acutely ill infants and children, regardless of insurance. And other states like California and Florida are making progress in this direction as well. Outside the U.S., last week we announced a pilot program in Israel to implement whole genome sequencing for critically ill infants suspected of having a genetic disorder and neonatal intensive care units. This program will accelerate time to diagnosis for these patients and support rapid clinical decision-making. Turning to our research and applied segments, we saw another strong quarter of sequential and year-over-year growth. The 30-plus population genomics initiatives that we support around the world drove growth in the quarter. The accuracy and scalability of our sequencing platforms combined with our end-to-end solutions like Illumina Connected Analytics make Illumina an ideal partner for large sequencing initiatives. The value of these population programs is expanding across clinical outcomes, research, and drug discovery. This traction is generating significant interest and investment for additional programs like Our Future Health. the UK's largest ever research program focused on developing new ways to detect, treat, and prevent disease. Just yesterday, we announced that Illumina-connected analytic solutions are being used by HostSeq, part of the Canadian COVID-19 Genomics Network. Our sequencing and bioinformatics solutions will be used to identify biomarkers that can help predict potential risk of serious disease. and support the development of novel therapeutics to combat COVID-19. We anticipate these types of population programs will become increasingly critical to innovation, as their findings translate into greater use of sequencing in clinical workflows and actionable data for drug discovery. We're already seeing this with the initial data from the UK Biobank, as the program concludes. Regeneron is utilizing the UK Biobank data in multiple ways, including to find more than 500 genes with variant trait associations linked to higher risk of diseases like hypertension, asthma, and liver disease, and as part of their data set to create new obesity medicines in partnership with AstraZeneca. And companies like Relay Therapeutics are utilizing genomic data, along with AI and machine learning, to advance drug discovery. COVID surveillance drove $55 million in sequencing shipments in the quarter, of which $15 million were instrument purchases, as concerns about variants continue to heighten the focus on surveillance efforts. we see the infrastructure for COVID surveillance as the foundation for broader pathogen surveillance to increase around the world. For example, SIRI, a new genomic facility in South Africa, was launched this quarter with capabilities to bolster the pandemic and epidemic response across Africa. With resources like this in place, sequencing data from 51 of the 54 countries in Africa is now available in GISAID. and a total of 50,000 SARS-CoV-2 geomes have been sequenced, two months ahead of Africa CDC's schedule. Turning to Grail, in August we closed our acquisition, which we believe will help accelerate patient access and affordability for multi-cancer early detection screening. I am delighted to introduce Bob Ragusa on his first call as Grail's CEO. Bob most recently served as Illumina's chief operations officer, and he has more than 30 years of experience in genomics. He played a critical role in providing the sequencing systems for the Human Genome Project and was responsible for significantly scaling Illumina's business in more than 140 countries and enabled the first NovaSeq shipments. With his decades of deep expertise, Bob is uniquely positioned to lead GRAIL during a time of extraordinary growth and discovery. I will now turn the call over to Bob to discuss GRAIL's business updates.