The annual JP Morgan Healthcare conference held in early January is a major investor conference for health care companies, including instrument and lab-product companies. Several such companies presented business and strategy updates at the conference, highlighting their successes of the past year and plans for 2015. The information in this article is based on online presentations from the conference.

Research and Diagnostics

A number of instrument companies highlighted the balance of their businesses between the research/applied market, and the diagnostics market. Illumina and Affymetrix were among the companies discussing both aspects of their businesses.

Illumina announced several new products and updated its financial outlook during its conference presentation (see IBO 1/15/15). Although the company is quickly expanding into diagnostic applications, research instrumentation remains its core growth driver and a continued focus. This was illustrated by the success of the HiSeq X Ten System. Illumina President and CEO Jay Flatley lauded the success of the firm’s HiSeq X Ten System, introduced a year ago, calling it the “single biggest contributor to the company’s outperformance” in 2014. The company has sold 201 units to 18 customers and has an installed base as of January of 134 units. Mr. Flatley highlighted the growth of the population-sequencing market, which it plans to grow through the introduction of the five-unit HiSeq X Five System, priced at $6 million, with incremental units priced at $1.2 million each.

Further expanding the HiSeq family, Illumina introduced the HiSeq 3000 and 4000 sequencers, which utilize the pattern flow-cell technology found in the HiSeq Ten. The double flow-cell HiSeq 4000 allows for 1.5 Tb of output or 5 billion reads in about three-and-a-half days and is priced at $900,000. The single flow-cell HiSeq 3000 produces half the output and is priced at $740,000. The company expects customers with older HiSeq 2500 systems to upgrade to the new systems. Mr. Flatley stated that he expects a typical customer will own multiple versions of the HiSeq family with use driven by time requirements and cost.

Introduced last year at the conference, Illumina’s NextSeq now has an installed based of over 500 units. Second-generation chemistry, featuring an improved error rate, will begin shipping this quarter. The NextSeq will join the MiSeq Dx as one of the firm’s FDA-regulated sequencers, with Illumina planning to obtain FDA clearance for the system late this year or early next year. Another new diagnostic product to be introduced this year is a complete solution for sequencer-based HLA testing for transplant diagnostics.

In addition to expanding the use of sequencing in multiple diagnostics markets, Illumina also continues to further the use of microarrays in those markets. At the conference, Illumina announced the NextSeq 550, a combined microarray scanner and sequencing platform addressing cytogenetic and karyomapping applications. The company continues to target the reproductive-health market on multiple fronts. With an eye toward addressing the nascent average-risk market for noninvasive prenatal testing (NIPT), the company plans to launch the 48-sample VeriSeq NIPT assay for the NextSeq, with a CE marking expected this year.

The company also continues to grow its diagnostics business with new markets. Mr. Flatley announced the development of liquid-biopsy technology, with which it will work with academic and pharmaceutical partners. The company’s goal is to introduce a research-use-only kit by year end and develop data for FDA submission.

Like Illumina, Affymetrix is focused on both the research/applied market, while at the same time transferring it technology to diagnostic markets. At the JP Morgan Healthcare conference, Affymetrix President and CEO Frank Witney, PhD, announced that the company is now entering the third phase of the its three-phase strategic plan. In this phase, the company will focus on translational medicine and molecular diagnostics for reproductive health, genotyping and single cell analysis to increase revenue growth. Other goals include increased profitability and leveraging free cash flow for M&A.

Opportunities in the microarray market exist across research, applied and diagnostics applications, specifically, cytogenetics, agricultural biotechnology and biobanking. In the research market, Dr. Witney highlighted the company’s introduction of single-cell analysis assays. The assays are part of the company’s eBioscience antibody-based platform, which also includes immunoassays and flow cytometry assays, which made up about 4% of 2014 revenues.

Like Illumina, Affymetrix is focused on reproductive health for diagnostics applications, including cytogenetics and NIPT; however, their business is built solely on microarrays. Its cytogenetics business includes over 350 accounts. Likewise, Mr. Witney described plans to utilize its microarray technology. Also using microarrays, the company is developing its genotyping technology for the HLA market (see page 10), with plans for tumor-profiling applications. The firm is also pursuing opportunities in molecular pathology.

Service

Several companies highlighted their service businesses during their JP Morgan Healthcare Conference presentations, emphasizing the untapped potential for the market. PerkinElmer disclosed that revenues from its OneSource business totaled $160 million in 2014, with a compound annual growth rate of 12% over five years. The business will be transferred from the company’s Environmental Health segment to its Human Health segment starting this quarter. PerkinElmer President and CEO Rob Friel noted that the service business is a differentiator, as is its informatics business.

Another company discussing service opportunities was Mettler-Toledo. Executive Vice President William Donnelly disclosed that, for the total company, only 10%–15% of its installed base is under a service contract. Service revenue is currently growing in the high single digits.

Likewise, VWR noted the growth opportunity for its service business, VWRCATALYST, which now accounts for 3% of total revenues and is growing double digits. The service revenue is highly concentrated among VWR’s key accounts, which consist of its top 40 customers and accounts for 25% of sales. VWRCATALYST services include research support, lab services and operations service. The company has 900 associates on site at 240 customer locations.