Over the past 12 months spending cuts at National Institutes of Health (NIH) have raised doubts about its ability to continue increasing investment in next-generation sequencing (NGS) at the rate seen in recent years. Yet this week brought two pieces of news that suggest NIH is backing more and more NGS projects.
Firstly, Illumina ($ILMN)--one of the companies most at risk if NIH cuts investment in NGS--posted financial results that beat analyst expectations for the eighth quarter in a row. Strong demand for NGS instruments and reagents underpinned the growth, with Illumina shipping 100 of its HiSeq platforms in the quarter, a figure it has surpassed just four times since the product launched in early 2010. The strong demand came despite budget cuts at NIH, which funds many of the academic labs Illumina supplies.
Sales to biopharma companies supplemented the academia business, and Illumina expects demand from both to remain strong for the foreseeable future. "We certainly have seen increased demand for instrument purchases for the routine research going on in the biopharmaceutical industry. The world just needs to do more and more sequencing. The demand for sequencing over the next 5 years is going to be absolutely enormous," Illumina CEO Jason Flatley said in a conference call with investors. Illumina stock closed up 10% following release of the results.
A possible reason Illumina has continued to thrive through the NIH cuts was uncovered by Tim Evans, an analyst at Wells Fargo. Evans analyzed the database of NIH-funded research projects to understand how the agency allocated its cash over the past year. Spending on NGS projects continued its rapid growth, with the 67% rise surpassing the rate seen from 2008 to 2012. Evans speculates the commitment to NGS means NIH investment in alternative technologies is falling. Other countries are also getting deeper into sequencing. This week Illumina revealed it is supporting the United Kingdom genome sequencing project.