Illumina Leads Race for Gene-Sequencing Payday

You might be wondering what happened to the health revolution that was supposed
to be kicked off by the mapping of the human genome a decade ago.   Not much
the promise of conquering disease by targeting bad genes has fallen flatter than
Charlie Sheen's "My Violent Torpedo of Truth/Defeat is Not an Option"
tour. The problem is the technology, or lack of it. Up to now, the equipment
simply hasnt been powerful enough to decode the genes that cause diseases like
cancer, lupus and autism. After all, there are 6 billion chemical letters that
make up the DNA double helix at the center of every cell. And compounding the
challenge are 20,000 genes that tell the body how to make nearly everything in
our bodies. Several companies are laboring to help gene sequencing realize its
potential by driving down its cost and complexity.  If successful, they could
reap the rewards of a market that is expected to grow from more than $1 billion
currently to $3.6 billion in just a few years. One industry observer predicts
that If gene scanning ever becomes a mainstream technology like radiology, the
market could explode to $100 billion annually.  Illumina (Nasdaq: ILMN ) is
leading the way.  One analyst likened the company to Apple (Nasdaq: AAPL ) for
its ability to replace its products even before they become stale.  Earlier
this year, Illumina said it plans a summer rollout of a compact, less costly
personal sequencing system, known as MiSeq.  Costing about $125,000, MiSeq will
be the most affordable next-generation sequencing platform available, according
to the company. Even with introduction of MiSeq, the majority of company sales
for the near term will continue to be generated by its large machines,
particularly the HiSeq 200, which is a favorite of academics. Business obviously
has been brisk. In 2010, Illumina sales climbed 45% to more than $261 million
and its operating profit rose more than 36%. In 2011, the company expects sales
to grow 20%. With results like these, it's little wonder that investors have
flocked to Illumina. In the past year, the company's shares have just about
doubled to $70, far outpacing both the Dow and Nasdaq. However, investors might
want to proceed with caution given that now Illumina trades at a stratospheric
price-to-earnings ratio of more than 80.   Life Technologies (Nasdaq: LIFE )
actually beat its San Diego neighbor to the market with a compact device last
December when it launched its Personal Genome Machine sequencer. The system was
developed by the company's Ion Torrent unit, which Life Technologies acquired
earlier in 2010 for $375 million.  Investors haven't been jumping for joy
since the launch. Life Technologies' shares are down this year, even though
the company said it expects the impact of the Ion Torrent acquisition to have no
impact on 2011 earnings. Others seeking to unseat Illumina at the top of the
gene sequencing ladder include Roche and Pacific Biosciences (Nasdaq: PABC ),
which is about to commercialize its first sequencing product. Since going public
late last year, Pacific Biosciences shares are off more than 30%. Still hanging
in there is Affymetrix (Nasdaq: AFFX ), which has been around since 1992. Once
the poster boy for gene sequencing, Affymetrix has fallen on hard times. Just
over a decade ago, the company's shares hit $160, a far cry from the sub-$6 it
trades for today.