“Baymax, sequence my DNA and diagnose my disease…” Twenty years ago, that would have cost you over $100 million. Thanks to technological advancements, it’ll soon cost $200.

Gene/DNA sequencing is the process of analyzing your DNA — which can help speed up drug development and research and help diagnose rare diseases (i.e., cancer).

More than just reading your ancestry…

One company nearly controls the space (~90% market share). Illumina (NASDAQ:ILMN) develops and manufactures machines that read a person’s genetic code.

• So like, 23andMe? Kinda. While 23andMe reads a small part of your DNA, Illumina’s machines read it all.
• It’s significantly more expensive (~$1M+ per machine), and their customers include researchers and labs.

But it’s been ~5 years since Illumina announced a new product line. So you bet investors were excited for their product launch announcement this week.

On their investor day, they revealed their next-generation DNA sequencing machines — which are expected to cut the cost of sequencing a genome by two-thirds.

Slicing up Illumina’s recent purchase

ILMN

was valued at $77B at its 2021 peak before markets began crashing — sending it down 58%. The drop coincided with a major acquisition that investors weren’t happy about:

• In 2021, Illumina announced the acquisition of cancer testing firm GRAIL for $7.1B.
• Investors wanted the acquisition to fall through so much thatILMN
  jumped when regulators announced plans to block the purchase.

The deal closed, but Illumina could be forced to sell GRAIL. The biotech industry is also in a deep bear market — drying up funding for biotech startups and lowering demand for Illumina’s products.

Investors: Illumina needs to move fast

Customers have built their labs around Illumina’s products — which makes it costly to switch. Still, competition is coming as key Illumina patents expire this year.

• Ultima Genomics is expected to deliver a machine in 2023 that can sequence a genome for $100 — half the price of Illumina’s new machines.
• Illumina’s sales in the recent quarter grew 3.2% from last year — but are down from its 77% growth in the same quarter of 2021.

Per Bloomberg journalist Angelica Peebles, lower pricing won’t “radically transform things overnight.” Issues still include access and whether insurers will pay up.