China's Booming Genetic-Testing Market Is Lighting Up Illumina

(Bloomberg) -- China’s rapidly increasing appetite for DNA-reading technology is leading to boom times for companies that can help unravel genetic code.

In recent years China has been doubling down on genetic science as it seeks to build up its domestic biotechnology sector. While the U.S. has been slow to begin human clinical trials using the gene-editing technology CRISPR-Cas9, in China several such trials are underway. The country is also quietly at work building the world’s biggest DNA database.

That is expected to yield a windfall in coming years for companies like U.S. DNA-sequencing giant Illumina Inc., which late Monday reported much stronger sales than analysts expected and boosted its revenue and earnings outlook for the year.

Shares of the company, up 32 percent this year through Monday’s close, rose as much as 9.5 percent on Tuesday for the biggest single-day gain in nearly a year.

Illumina is the dominant maker of DNA sequencers and its technology is used in drug discovery, medicine, biological research and consumer testing, and China is one of its fastest-growing markets. The San Diego-based firm said shipments to that country rose 42 percent compared to the same quarter last year, hitting a record even when discounting a $13 million stocking order placed in advance of expected U.S. trade tariffs.

“China continues to be a very exciting market for us,” said Illumina Chief Executive Officer Francis deSouza on a conference call with investors Monday. “It’s already our second largest country market.”

Illumina’s strong performance there was driven by research areas including oncology and reproductive health, as well as noninvasive prenatal testing. China’s market for direct-to-consumer DNA testing -- of the sort done by U.S. companies like 23andMe Inc. and Ancestry -- is also poised to take off, deSouza said on the call.

“We have a number of companies that we’re seeing now ramping up their DTC capabilities there,” deSouza said, adding that the consumer genetics market in Korea and Japan also looks promising.

Illumina’s sales in the Asia-Pacific region, including China, Australia, New Zealand, Japan, South Korea and India, grew 32 percent in the second quarter. Revenue in the Americas rose 19 percent, and Europe, Africa and the Middle East had combined sales growth of 36 percent.

Rivals Circling

China’s DNA sequencing market, worth about 7.2 billion yuan ($1.05 billion) last year, is forecast to grow to 18.3 billion yuan in 2022, according to recent estimates by Beijing-based CCID Consulting. That prospect has spurred a flurry of activity among Western firms betting they are well-positioned to capitalize on it.

In April, Illumina agreed to work with the Chinese personal-genomics company WeGene to establish a microarray laboratory in Asia. WeGene plans to use Illumina’s technology to develop an ancestry analysis of the 56 major ethnic groups in China. Meanwhile, Illumina’s biggest rival, U.K.-based Oxford Nanopore Technologies Ltd., is considering a dual London-Hong Kong stock market listing.

Illumina, founded in 1998, has machines that have made decoding the human genome quicker and cheaper. Its HiSeq, unveiled in 2014, made headlines with its promise of sequencing a whole human genome for $1,000. The NovaSeq, introduced last year, can perform the same feat in an hour and is expected to eventually drop the price to just $100, according to the company.

To contact the reporter on this story: Kristen V. Brown in San Francisco at kbrown340@bloomberg.net

To contact the editors responsible for this story: Drew Armstrong at darmstrong17@bloomberg.net, Timothy Annett

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