Salli Schwartz
Vice President, Investor Relations at Illumina
Good afternoon, everyone, and welcome to our earnings call for the first quarter of 2022. During the call today, we will review the financial results released after the close of the market and offer commentary on our commercial activity, after which we will host a question-and-answer session. If you have not had a chance to review the earnings release, it can be found in the Investor Relations section of our website at illumina.com. Participating for Illumina today will be Francis deSouza, President and Chief Executive Officer; and Sam Samad, Chief Financial Officer. Francis will provide an update on the state of Illumina's business and Sam will review our financial results, which include GRAIL.
As a reminder, pending the outcome of the European Commission's investigation into Illumina's acquisition of GRAIL, the commission has adopted an order requiring Illumina and GRAIL to be held and operated as distinct and separate entities for an interim period. Compliance with the order is monitored by an independent monitoring trustee. During this period, Illumina and GRAIL are not permitted to share confidential business information unless legally required, and GRAIL must be run independently exclusively in the best interest of GRAIL. Commercial interactions between the two companies must be undertaken at arm's length. This call is being recorded, and the audio portion will be archived in the Investors section of our website. It is our intent that all forward-looking statements regarding our financial results and 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 and Exchange Commission. including Illumina's most recent Forms 10-Q and 10-K.
With that, I will now turn the call over to Francis. Thank you, Salli. Good afternoon, everyone. We maintained strong momentum across regions and markets in the first quarter. We saw particular strength in oncology, genetic disease testing and infectious disease and achieved record quarterly performance in the Americas and APJ. I'll share an overview of our results as well as our progress across our portfolio and markets before turning it over to Sam for additional detail. Before I begin, I'd like to extend my thoughts to everyone dealing with the war in the Ukraine, and we will continue to support humanitarian efforts to help the affected communities. Starting with our financial results. First quarter revenue of approximately $1.22 billion increased 12% year-over-year. We received record orders in the quarter with sequencing consumables orders surpassing $1 billion for the first time and we exited the quarter with record total backlog, a great leading indicator for upcoming quarters. Turning now to performance across our platforms. Sequencing instrument shipments grew more than 20% year-over-year in the first quarter. We shipped a record number of NovaSeqs and received record NovaSeq consumables orders, demonstrating both strong demand in the instruments sixth year since launch and addition to our substantial installed base for future consumables revenue. More than half of NovaSeq shipments were to clinical customers and we saw particular strength in oncology testing as high throughput sequencing and comprehensive genomic profiling become increasingly critical to cancer patient care. In mid-throughput, the installed base of NextSeq 1000 2000 instruments has now exceeded 1,000. Additionally, Q1 shipments for the P1 flow cell that we launched in the fourth quarter of 2021 nearly doubled our expectations. We're seeing strong adoption of the P1 flow cell from both new customers and customers moving up the throughput spectrum as well as broad kit utilization from existing NextSeq 1000, 2000 users due to the P1 flow cell's efficiency and cost effectiveness. Our low throughput platforms also continued to perform well and provide a great entry point to sequencing. More than one-third of shipments in the first quarter were to new to Illumina customers, further increasing our installed base and enabling adoption of sequencing across a broad customer network. Looking now at our markets. Oncology testing sequencing consumables grew almost 20% year-over-year, as we continue to help democratize sequencing in this critical area of health care. In March, we received CE IVD approval for TruSight Oncology comprehensive in Europe. This new in vitro diagnostic comprehensive genomic profiling kit, is the first distributed IVD for both DNA and RNA. TSO Comp IVD, covers a range of mutations and biomarkers associated with the European Society for Medical Oncology guidelines, maximizing opportunities to find actionable information from each patient's biopsy. We're pleased with the early reception and excitement from customers across the EU. And we look forward to introducing TSO Comp IVD in other markets, including Japan, where we recently applied for regulatory approval. The TSO Comp IVD offering will build upon the incredible expansion we're seeing globally for TSO 500, which grew nearly 120% year-over-year in Q1. Also in oncology, customer and provider interest for Galleri, GRAIL's groundbreaking multi-cancer early detection blood test is growing. To date, Galleri has been prescribed by more than 2,400 prescribing physicians and GRAIL has entered into 34 partnerships with health systems, employers and insurers who are investing in multi-cancer early detection to improve outcomes. This includes GRAIL's recent partnership with Point32Health, the combined organization of Harvard Pilgrim Health Care and Tufts Health Plan. Point32Health's 2-phased pilot of Galleri marks GRAIL first collaboration with a commercial health plan in the US. Last week, GRAIL also announced a multiyear partnership with Munich Re Life US to provide Galleri as part of Munich Re's commitment to advancing cancer early detection and treatment. Munich Re and GRAIL will collaborate to enable carriers and distributors to offer Galleri to existing policyholders who are at high risk of cancer such as those aged 50 and older. Also, the NHS Galleri trial continues to progress, with more than 90,000 of the planned 140,000 participants enrolled. To support the increasing interest around Galleri and to further their R&D efforts, the GRAIL team has almost doubled in the last eight months to more than 850 employees, with another almost 250 job openings. Looking ahead, GRAIL plans to expand its existing sales force for Galleri to reinforce launch traction and drive continued market adoption. Turning to our other markets. Genetic disease testing had another record quarter as we enable expanding coverage and utilization of whole genome sequencing or WGS globally. In the US, critically ill infants are now eligible for WGS in California, Oregon and Maryland through Medicaid, providing coverage for an additional 17 million lives. And last week, we announced an agreement with Germany's Hannover Medical School to implement the use of WGS for critically ill children suspected of having a genetic or rare disease. This project, like our collaborations with other children's hospitals around the world helps demonstrate how WGS can support earlier diagnosis and treatment for children in neonatal and pediatric intensive care. In reproductive health, coverage, reimbursement and evidence generation continue to increase, particularly in Europe. Both Spain and Italy have expanded coverage for noninvasive prenatal testing, or NIPT, with Germany likely doing so as well later this year. In infectious disease and microbiology, we saw a record quarter with incremental global investments in pathogen identification monitoring and resistance. While this was driven by COVID surveillance, we are also seeing traction for other pathogens, including tuberculosis. In March, the Milken Institute called for a network of multisector stakeholders to collaborate on data, insights and responses for early disease outbreaks. In the same month, the World Health Organization announced a 10-year strategy to use the power of genomics for global pan pathogen surveillance, demonstrating the growing trend for broader pathogen monitoring. For example, FIND, a Geneva-based Global Alliance for Diagnostics, established Seq&Treat, a global initiative using sequencing for drug-resistant tuberculosis which affects nearly 0.5 million people globally each year. We're providing instruments to help Seq&Treat accelerate discovery for the half of patients with drug-resistant tuberculosis who are not currently successfully treated. In our research and applied markets, we continue to see genomic research expanding across applications and disease states. Lab budgets, specifically for NGS are increasing, including for both academic labs growing approximately 9.5% and pharmaceutical and industry labs growing at approximately 14%. As part of our efforts to support growth in genomic research, we recently partnered with Allelica to provide cutting-edge polygenic risk score digital tools to our customers. With Allelica's software, researchers can better identify individuals with high genetic susceptibility for developing life-threatening diseases. Also in research, increasing utilization and demand for multi-omics, particularly proteomics is driving sequencing growth and opportunities. Our partnership with SomaLogic to codevelop a high plexity, high sensitivity and high specificity proteomics assay is progressing well. Together, we look forward to empowering the next generation of novel insights. Another fast developing area is the integration of multiomic and genomic data into drug development and clinical trials. Drug development R&D spend is more than $123 billion annually, yet more than 90% of drugs that enter Phase I clinical trials fail to reach clinical approval, with fewer than 70 entering the market each year. A main contributor to this high failure rate is target selection, where genomic-based methods can more than double success rates and dramatically improve cost and speed to market. Because more than 85% of the human proteome cannot currently be targeted pharmacologically, we are excited to support genetic lead discovery and emerging drug modalities that could significantly expand the total number of potential therapeutic targets. In addition to our partnership with Nashville Biosciences, today, we announced a partnership with Deerfield Management. This first of its kind collaboration will combine Illumina's genetic and AI-led approach to discovery with Deerfield's expertise in preclinical and clinical development. Together, we plan to translate genetic insights into new therapies across diseases with unmet medical needs and drive a step change in the pace and efficiency of drug development. This will ultimately help more patients access potentially life-changing therapies. We also recently announced a collaboration with Janssen to accelerate development of precision medicines. This includes developing companion diagnostics across our new TSO Comp IVD and exploring discovery and research initiatives for drug and biomarker targets across disease states. These collaborations are a few of what we expect will be many pharmaceutical strategic partnerships, leveraging the power of Illumina to create precision medicine at scale. Overall, we were pleased with our first quarter performance, including 20% sequencing instruments growth and sequencing consumables orders surpassing $1 billion for the first time. The significant ongoing growth in our installed base as well as our record backlog exiting the quarter lay the groundwork for continued acceleration of our business in the coming quarters. I'm also really excited about the work we're doing with our collaboration partners. These efforts underpin our ongoing progress in driving sequencing trends to improve human health. I'll now turn the call over to Sam to discuss additional details on our results and outlook. Sam?