Good day, ladies and gentlemen, and welcome to the fourth quarter 2021 Illumina earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would like to now pass the conference over to Salli Schwartz, Vice President of Investor Relations.
Good afternoon, everyone, and welcome to our earnings call for the fourth quarter and full year 2021. During the call today, we will review the financial results released after the close of the market and offer commentary on our commercial activities, 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 be held and operated as distinct and separate entities for an interim period. Compliance with the order is monitored by a 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 interests 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 Investor 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. I'm excited to share with you how our commitment to innovation is driving growth and unlocking the power of the genome. My comments will cover a few key areas, starting with our strong finish and exceptional results for 2021, followed by how our platforms and markets drove those results. I'll then conclude by highlighting a few of the many trends that will support our momentum and continued growth in 2022 and beyond. Let's start with our financial results for both the fourth quarter and full year 2021. Fourth quarter revenue of approximately $1.2 billion increased 26% year-over-year, with strong growth across both instruments and consumables, and across all regions.
2021 revenue of more than $4.5 billion increased 40% year-over-year, reflecting 76% growth in sequencing instruments and 43% growth in sequencing consumables. We're seeing record demand for our instruments across the throughput spectrum and across geographies. In 2021, we shipped more than 3,200 sequencing instruments and added more than 930 new instrument customers, over 50% more than in 2020 or 2019. Delving now into each of our platforms, starting with high throughput. We shipped 384 NovaSeq units in 2021, with more than one-third of those instruments for oncology testing. Approximately 50% of NovaSeq orders in 2021 were to new-to-high-throughput or new-to-Illumina customers.
2021 NovaSeq consumable pull-through of more than $1.3 million per instrument was the highest ever average, even with over double the placements compared to last year. Moving to mid-throughput, in 2021, we shipped more than 1,100 NextSeq systems, surpassing 1,000 for the first time and nearly doubling 2020 shipments. This volume was driven by growing NextSeq 550 demand in clinical applications like oncology testing and reproductive health, as well as NextSeq 1000 and 2000 demand as customers expand into multi-omic applications. More than 20% of NextSeq 1000 and 2000 units this year were placed with new-to-Illumina customers, as we continue to see new customers using higher throughput applications. For low throughput, in 2021, we shipped more than 1,600 units, another record, driven in part by the addition of more than 700 new customers.
Looking at our continued strong growth through the lens of our markets. Our clinical markets currently include testing for oncology, reproductive health, and genetic disease. In 2021, our consumable shipments to clinical markets grew 42%, driven in particular by oncology testing, where many customers are building out comprehensive genomic profiling or CGP and expanding into liquid biopsy and monitoring. We continue to see expanding opportunities for our oncology products globally, including new studies launching in Europe and Asia with our research use only TruSight Oncology 500 assay. For example, our recent joint research project with the National Cancer Center Japan will develop personalized cancer treatments for patients with nasopharyngeal carcinoma, a cancer that occurs more frequently in Asia.
Our partnership with the Jean Perrin Center at the Clermont-Ferrand University Hospital in France will assess the clinical value of CGP in patients with late-stage disease compared to the current standard of care. Also in oncology, GRAIL continues to see strong momentum. GRAIL launched the Galleri test last year as the first clinically validated multi-cancer early detection test to be available to patients and providers. Galleri can detect more than 50 types of cancer, most of which have no current screening. It's great to see the initial market reception with multiple large employers and payers adopting Galleri and more than 1,500 prescribing partners, including participation from leading health systems like the NHS, the Mayo Clinic, and the Cleveland Clinic. The team continues to collaborate with pharmaceutical partners like AstraZeneca, Amgen, and Bristol Myers Squibb on potential new innovations in the post-diagnostic space.
Finally, the recent initiatives launched in the U.S. and EU to beat cancer are very encouraging. The National Cancer Moonshot Initiative and Europe's Beating Cancer Plan highlight the increasing recognition of early detection as a critical component in the fight against cancer. Illumina is deeply committed to supporting all early detection, oncology testing, and treatment initiatives to improve care and save lives. Beyond oncology, reproductive health also had a strong year in 2021. This was driven in part by revised American College of Obstetricians and Gynecologists, or ACOG, guidelines enabling genetic testing coverage for all U.S. pregnancies, as well as increasing adoption of our VeriSeq and NIPT v2 product globally.
Our third clinical market, genetic disease testing, saw tremendous growth and additional evidence generation in 2021, with significant publications in both the New England Journal of Medicine and JAMA Pediatrics affirming the clinical utility of whole genome sequencing, or WGS, for critically ill children. In 2022, we're already seeing an increase in coverage with California, Oregon, and Maryland Medicaid initiating coverage for WGS in the NICU setting. Expansion of programs for WGS in NICU settings are also occurring globally, including our recent project with Germany's Hannover Medical School to implement the use of WGS in NICU patients. This program contributes to a growing body of evidence from other countries, including the United Kingdom and Australia, as well as in states across the U.S., showing that WGS offers significant benefits for diagnosis of genetic disease in critically ill infants, along with cost efficiencies for health systems.
Turning to our research and applied markets, consumables grew 43% in 2021, driven by projects like All of Us, along with ongoing COVID surveillance efforts that contributed approximately $220 million in total revenue. I'd now like to spend a few minutes on three key trends that will drive long-term growth. First is the continued deepening and expansion of Illumina's addressable markets. We're seeing further penetration of our existing markets through increased access and adoption. The use of sequencing is proliferating globally across applications, and new initiatives continue to integrate genomics into national healthcare systems. Our technology and genomics expertise are enabling programs like Our Future Health, the U.K.'s largest ever health research program, that will deliver genetic analysis of DNA samples from up to 5 million volunteers.
This data will be used for a variety of potential discoveries, including new signals to detect diseases earlier, new ways to better predict high-risk populations for diseases, and new personalized therapies or tools to delay diseases or change the course of their progression. We're excited to play a role in this project as the genotyping partner for the program. We also continue to support a growing global COVID-19 surveillance network that will extend to broader pan-pathogen and genomic epidemiology work. This infrastructure is already being used to study other infectious diseases. For example, in South Africa, Dr. Tulio de Oliveira's team at CERI, the Centre for Epidemic Response and Innovation, is using their fleet of sequencers to study other communicable diseases like HIV and malaria. We expect additional opportunities for epidemiology applications in the future as global funding for pathogen surveillance and research expands.
New sequencing applications and opportunities are growing and evolving rapidly, including in multiple nascent spaces like multiomics and drug development. We're supporting the spectrum of multiomic applications across our instruments, including proteomics, where our co-development partnership with SomaLogic is off to a strong start. We're also catalyzing growth in drug discovery, where genomic-based methods can dramatically improve speed to market, success rates, and costs. In addition to our partnership with Nashville Biosciences, we're collaborating with the Montreal Neurological Institute-Hospital, Takeda, and Roche to enable large-scale analysis of patient data and identify promising targets for drug development in neurological diseases. Programs like Our Future Health, growing applications, and increasing global access will support long-term adoption of NGS. The new markets we're opening, like drug discovery, will further enable adoption while also improving data equity and the integration of genomics into healthcare.
We're experiencing this increasing demand for genomics as we enter 2022, with our instrument backlog almost twice the size it was entering 2021. A second trend is the multifaceted growth in our customer base. Our existing customers are growing their instrument fleet. We're also seeing increasing numbers of customers new to Illumina. As a result, our install base has grown to more than 20,000 instruments at the end of 2021. A third trend is the demand for even greater data generation. In 2021, an average Illumina high-throughput customer generated approximately four times more data than in 2017. This will continue as customers need more complete genomic information and as NGS becomes standard in clinical settings.
These shifts will increase the number of projects, number of samples per project, and the depth of sequencing per sample, as multiple tests are run per patient and as samples are used for reads across high-intensity applications like multiomics. This demand for higher throughput sequencing will in turn continue to drive further growth in our sequencing consumables revenue. For 2021, between our consumables and services, more than 80% of our revenue is recurring in nature. This more predictable and profitable revenue stream provides a tremendous base to invest into the business and drive future growth. Illumina's 2021 performance and significant momentum entering 2022 demonstrate our strong position to support our customers and partners as these trends accelerate genomics in healthcare. I'll now turn the call over to Sam to highlight additional details on our results and operations, as well as discuss our guidance for 2022. Sam?
Thanks, Francis. As a reminder, our fourth quarter financial results include the consolidated financial results for GRAIL. I'll start by reviewing our consolidated financial results, followed by segment results for Core Illumina and GRAIL, and conclude with our outlook for 2022. I will be highlighting non-GAAP results, which include stock-based compensation. I encourage you to review the GAAP reconciliation of these non-GAAP measures, which can be found in today's release and in the supplementary data available on our website. Our record fourth quarter revenue again exceeded our expectations due to continued strength in our core business, with consolidated revenue growing 26% year-over-year to $1.198 billion. For the fourth quarter, GAAP net income was $112 million, or $0.71 per diluted share.
Non-GAAP net income was $117 million, or $0.75 per diluted share, which included $0.66 of dilution from GRAIL operating losses and $0.09 of incremental dilution from the 9.8 million shares issued to fund the GRAIL acquisition. Our non-GAAP tax rate was 15.6%, which decreased 280 basis points year-over-year, primarily due to a more favorable mix of earnings in jurisdictions with lower statutory tax rates. Our weighted average diluted share count for the quarter was approximately 157 million. Moving to segment results, I will start by highlighting the financial results of Core Illumina.
Core Illumina revenue grew 25% year-over-year to $1.193 billion, driven by another quarter of record shipments for both clinical and research, with notable strength in oncology testing, genetic disease testing, and population genomics. Core Illumina sequencing consumables revenue grew 32% year-over-year to $792 million, driven by record NovaSeq consumable shipments resulting from the significant growth in installed base and strong pull-through that again exceeded our guidance range. Sequencing instruments revenue for Core Illumina grew 35% year-over-year to $191 million, driven by record NovaSeq shipments due to continued new to high throughput customer adoption and accelerating demand in oncology testing. NextSeq 1000 2000 shipments also reached a new high in the quarter, and there was strong growth across all mid and low throughput systems year-over-year.
We are entering 2022 with a strong sequencing instrument backlog that is almost double the backlog entering 2021. Revenue from COVID-19 surveillance again exceeded our expectations, driven by the sustained focus on variant tracking due to the emergence of the Omicron variant. During the fourth quarter, COVID-19 surveillance contributed approximately $42 million in sequencing consumables revenue and $8 million in incremental instrument revenue. Core Illumina sequencing service and other revenue of $106 million was flat year-over-year as revenue growth from instrument service contracts and lab services was offset by lower IVD partnership revenue.
Moving to regional results for Core Illumina, revenue for the Americas region was $619 million, growing 25% compared to the prior year period, driven by clinical demand in oncology testing, strength in genetic disease research for pharma and population genomics initiatives like All of Us and COVID surveillance testing. EMEA delivered revenue of $350 million, representing 23% growth year-over-year, driven by strength in emerging markets, population genomics initiatives, and COVID surveillance testing. Greater China revenue was $121 million, representing growth of 26% year-over-year due to continued clinical strength in the region, driven by the growing installed base in hospitals.
Finally, APJ revenue of $103 million grew 34% year-over-year, driven by record NovaSeq placements and continued momentum in clinical markets, including genetic disease testing and oncology testing. Moving to the rest of the Core Illumina P&L, Core Illumina non-GAAP gross margin of 71.6% increased 470 basis points year-over-year due primarily to increased fixed cost leverage on higher volume. Core Illumina non-GAAP operating expenses of $580 million were up $141 million year-over-year due primarily to headcount growth, increased performance-based compensation expenses, higher one-time partnership-related expenses, and increased project spend driven by investments we are making in R&D and operations to support the growth and scale of our business.
Non-GAAP operating expenses for the quarter were higher than expected due to higher variable compensation expense and higher partnership expense compared to previous expectations. Core Illumina non-GAAP other expense of $8 million was $28 million lower than other income in Q4 2020 due to lower interest income on short-term investments liquidated to fund the GRAIL acquisition, as well as interest expense on the term notes issued in Q1 2021. Transitioning to the financial results of GRAIL. GRAIL revenue of $10 million for the quarter consisted of Galleri test fees and MRD partnership revenue. GRAIL non-GAAP operating expenses totaled $131 million for the quarter, which consisted primarily of expenses related to headcount and clinical trials. Moving to consolidated cash flow and balance sheet items. Cash flow from operations was $282 million.
DSO was 49 days compared to 50 days last quarter, driven by revenue linearity. Fourth quarter 2021 capital expenditures were $70 million and free cash flow was $212 million. We did not repurchase any common stock in the fourth quarter. We ended the quarter with approximately $1.3 billion in cash equivalents, and short-term investments. Moving now to 2022 guidance. We expect full year 2022 consolidated revenue to grow 14%-16% to approximately $5.16 billion-$5.25 billion. We expect full year 2022 Core Illumina revenue to grow 13%-15% to approximately $5.11 billion-$5.2 billion. GRAIL expects its revenue to be in the range of $70 million-$90 million for 2022, consisting primarily of Galleri test fees.
For fiscal 2022, at the midpoint of our revenue guidance range, we expect Core Illumina sequencing revenue to grow approximately 15% year-over-year, driven by accelerating demand in our base business. This includes intercompany sales to GRAIL of approximately $25 million, which are eliminated in consolidation. We expect Core Illumina sequencing instrument growth of approximately 10% year-over-year, driven by continued strength in NovaSeq and NextSeq placements. We expect Core Illumina sequencing consumables growth of approximately 18% year-over-year, driven by our growing instruments installed base and strong utilization by our customers.
We expect this strength to span our platforms, and we are raising our pull-through guidance for NovaSeq to a range of $1.2 million-$1.3 million per system for 2022. We expect pull-through for NextSeq 1000 and 2000 in the range of $130,000-$180,000 per system in 2022, and pull-through for NextSeq 550 in the range of $100,000-$150,000 per system. For MiSeq, we expect pull-through in the range of $35,000-$45,000 per system. For MiniSeq, we expect pull-through in the range of $20,000-$25,000 per system. We also expect revenue from COVID surveillance in the range of $130 million-$150 million in 2022.
We expect consolidated non-GAAP operating margin in the range of 15.5%-16% and Core Illumina non-GAAP operating margin of approximately 28% for 2022. We also expect a consolidated non-GAAP tax rate of approximately 19%. We expect consolidated non-GAAP earnings per diluted share in the range of $4-$4.20, which includes dilution from GRAIL of $3.75, including GRAIL operating loss dilution of approximately $3.25 and incremental dilution of approximately $0.50 from the 9.8 million shares issued to fund the GRAIL acquisition in line with previous expectations. Finally, we expect diluted shares outstanding for fiscal 2022 to be approximately 159 million shares.
For the first quarter of 2022 for consolidated Illumina, we expect revenue to increase 10%-12% year-over-year from the first quarter of 2021. This represents a sequential increase from the fourth quarter of 2021, reflecting a strong start to the year. We expect non-GAAP operating margin to increase approximately 300 basis points sequentially, primarily due to a decrease in operating expenses. We expect non-GAAP tax rate to be in line with our full-year 2022 guidance of approximately 19%. We expect diluted shares outstanding to be in line with our full-year 2022 guidance of approximately 159 million shares. For Core Illumina, we expect non-GAAP operating margin in Q1 to be in line with our full-year 2022 guidance of approximately 28%. I'll now hand the call back over to Francis for his final remarks.
Thanks, Sam. To close, I'd like to thank our teams, our network of partners, and the extraordinary scientists and clinicians we serve. I am incredibly excited for the many opportunities ahead. Today, more than 1 billion people are covered for genomic testing globally, and we expect this number to double within 5 years as genomics accelerates the adoption and potential of personalized medicine. Illumina will continue to support the growing number of patients around the world accessing the life-saving benefits of genomics, from oncology therapy selection to reproductive health, genetic disease testing, and pathogen surveillance. We will also continue to push genomics to new frontiers like drug development and proteomics. Additionally, we will enable discovery across these existing and new markets with a pipeline of innovative products and solutions developed in collaboration with our customers.
It has been fantastic to see the strong interest and excitement across our customer base for our latest developments, including our breakthrough Chemistry X and our Infinity long-read technology. We expect to not only directly address unmet market needs but also revolutionize what scientists and clinicians can expect from sequencing. Together, we're enabling genomic-based discoveries that can transform healthcare and ultimately provide a brighter future for human health. I'll now invite the operator to open for Q&A. Operator?
Absolutely. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, please press star one. If you're streaming this conference, please dial in and press star one. If you are on a speakerphone, please remember to disconnect your handset, or excuse me, please remember to disconnect and use your handset. As a reminder, please limit yourself to one question so that we can accommodate as many analysts as possible. You are welcome to re-enter the queue if you have additional questions. Our first question goes to Dan Brennan with Cowen. Dan, your line is open. You can go ahead.
Great. Thanks. Thanks for the questions. Congrats obviously on the quarter. I wanted to ask a question on the new products. Obviously, we're going to hear a lot more about this this fall, but as you would expect, there's material interest in Chemistry X and Infinity, particularly in light of some of the expected competitive launches that'll be coming between now and around AGBT. I'm just wondering, you know, you've laid out some, you know, basic metrics on read length, accuracy, and speed, and you talked about revolutionizing things, and unmet needs. I was hoping, Francis, that you could provide a little bit more color about maybe how we can think about these products?
Obviously, you're not going to give us new factors at this point, but particularly around some of the unmet needs that might be addressed and/or this idea of revolutionizing things because, you know, arguably Illumina's done a terrific job evolving their product portfolio, driving higher throughput, lower prices, but revolutionary sounds like a pretty big word for this product. Just wondering and hoping to try to get some more color. Thank you.
Yeah. Thanks, Dan. It has been fantastic, as I said, to see the reaction of our customers to both Chemistry X and the data we've provided so far on Infinity. Let me go through each of them a little bit. With Chemistry X, we've been keeping all of you in the loop over the years as we moved from the research phase then into product development and shared some of the early data maybe just over a year ago. As I said a couple of weeks ago, we're now moving Chemistry X from product development into manufacturing with a whole new manufacturing facility and sort of scaling up production. It's been terrific to see the progress and the innovations that are, you know, in Chemistry X.
As I said, this is a from the ground up rethink of our chemistry, probably the single biggest advance in our chemistry, since Solexa was created all those years ago. What this means for our customers and in terms of the industry is we can expect a step change in terms of the speed of the chemistry, and that'll translate into much faster turnaround times for the tests that our customers are running. That's especially relevant for not just very large scale research projects, but especially relevant in clinical settings, where you do want to get some of those results to patients more quickly. It means higher accuracy, and all of that combines to also enable a really exciting roadmap in terms of price per G.
W e've talked about the fact that we continue to be committed to really driving down the cost of sequencing to make it more accessible, and Chemistry X is a fundamental part of that. We're now entering manufacturing and we're closer to bringing that out into products than we've ever been. I've talked about the fact that this is going to be foundational to all new products coming out, and you know, there's no reason as we look at our existing portfolio why it may not make sense in some parts of our portfolio to have it in there as well.
In terms of Infinity, the excitement there is because we've sort of rethought, you know, how people think about long reads and short reads, and again, went back to first principles to say what customers don't want is they don't want two different platforms, one for short read and one for long read. What they're telling us is they want to take some of the best elements of what we've got in SBS, high accuracy, low cost, low input requirements, and apply that to all reads. When we looked at how we would rethink long reads, we brought some of the best of those elements in to say low input requirements, lower cost, maintain high accuracy, and they also want it to be a single molecule approach. They didn't want it to be a composite of multiple molecules.
The team has done a fantastic job innovating to deliver that in terms of our Infinity technology. You've seen some data from some of our customers. We've talked about the fact that we're bringing it to market later this year, and you'll continue to see more data and more information from us.
Our next question goes to Tycho Peterson with Jefferies . Tycho, your line is open. You can go ahead.
Hey, thanks. On guidance, 10% sequencing instrument growth, I'm just wondering if you could put a little bit more color around that. You know, obviously you've got the NovaSeq 6000Dx launch. How material do you think that could be? And then Francis, your comments a minute ago, you know, how do you avoid freezing the market ahead of, you know, Chemistry X being rolled out? And then a follow-up on GRAIL guidance as well. $70 million-$90 million is, you know, a big step up from $10 million in the fourth quarter. Can you just talk a little bit about scale-up plans and how you plan to get there?
Yeah. Maybe I can start, Tycho. This is Sam, and thanks for the questions about the guidance on instruments, and I'll just provide a couple of brief comments. I mean, first of all, let me say instruments in 2021 represented incredible performance. We're entering the year now in 2022 with a record backlog of instruments, so it gives us a lot of confidence about the guide, the 10%. As we think about, you know, some of the drivers behind this, you know, continued very strong placements of NovaSeq, continued very strong placements on the mid throughput side with NextSeq 2000, NextSeq 1000, and we've talked about in 2021 the record performance across those two platforms. Now there is a headwind, which is COVID surveillance.
We placed quite a few instruments for COVID surveillance in 2021, and we don't expect, frankly, to place instruments for COVID surveillance in 2022. That's a year-over-year headwind that's factored into the 10% growth in terms of the guide. For NovaSeq 6000Dx, that's a product that we're very excited to launch. It will be launched later this year. It does not represent a material impact in terms of growth for instruments in 2022. Francis. Yeah. Let's talk about, you know, Chemistry X and what that means in terms of our customers and how do we avoid, as you said, freezing the market potentially.
One of the exciting things we hear from our customers about being with Illumina is that you are, you know, you're part of this exciting roadmap and that you're not only, you know, getting access to what we provide today, but you know that we're gonna continue to innovate and bring new products out. For our customers, it's been exciting to watch this journey of Chemistry X develop and we've been, I think, good about sharing the data through this whole process so they know what's coming. They can get a sense for, you know, what it can mean for them. We don't have a new product announced, so there's nothing to freeze the market for.
Our customers also know that, you know, they've done this with us several times, that whenever we introduce a new product, we do have programs in place that involve trade-ins, or if you've already placed an order and it's, you know, it's in our backlog, you can switch that if you want to the new instrument. Over the years, we've developed a number of pretty robust programs around enabling a seamless upgrade for our customers.
Now, also, the other thing we've learned is, especially in the clinical markets, that when a new instrument comes out, typically some of our customers will buy, you know, one of the new instruments, for example, and use that to develop their new workflows to get familiar with the new instrument, and then plan an upgrade over a multi-year period. T Hat could still play out, that as we introduce a new instrument in the future, they may buy, you know, buy one to sort of get comfortable with it and then use that to plan an upgrade over a multi-year period.
Great.
In terms of GRAIL, you know, the momentum we're seeing with GRAIL has been terrific to watch. They are seeing traction, as we said, with employers. What's been interesting there is, you know, we expected traction with financial services companies, with tech companies, some of the companies that traditionally are more forward-leaning in terms of using benefits as a way to attract talent. What we are really excited about is that we're seeing customers across industries. You know, we've seen, as we said, large logistics players and transport players that have signed up to offer this benefit to their employees. That's been exciting to see. We're also really pleased with the number of prescribing providers that have now got experience with the Galleri test.
We said there are over 1,500 prescribing providers that ordered the test in 2021 last year going into this year. That's a great base of healthcare professionals that have some experience now with Galleri and should be more comfortable order it going forward. In terms of the guidance, most of the guidance for Galleri for GRAIL this year is Galleri. There is a component of it associated with MRD, but it is a smaller percentage. Now, you know, as we look at that number, you know, that could be a potential area for upside, and we'll keep watching the traction they're making in that space.
Our next question goes to Dan Arias with Stifel. Dan, your line is open. You can go ahead.
Afternoon, guys. Thanks. Francis, just back on Chemistry X, is there anything you can add there on the per gigabase economics that might be at play? How much cheaper do you think genome pricing could be for the NovaSeq crowd? For the mid and lower throughput users, should those folks also see a cost of sequencing decrease if they're running a NextSeq or a MiSeq? If I could just sneak in a second one, on the Nashville Biosciences Collaboration, what's the timeline for the 250,000 samples that I think you're sequencing there, and is that all whole genome? Thanks.
Yeah. Let me start with Chemistry X and what it could mean. We know just apples to apples, Chemistry One versus Chemistry X, that you will get significant cost reductions with Chemistry X. Now, ultimately, what that looks like depends on everything else you think. Ultimately, the final cost per key will be partial chemistry. We have to look at optics of the data path, all of that. It's a little early to say the specific impact. It depends on the entire technology therefore. To state more specific about what or when can give you the specifics of the price. We can be very confident that a giant part is a cost reduction with Chemistry X, but factor it out. I just have a specific, additional detail on when I use Nashville as I come to get there.
Francis, you were cutting in and out a little bit there. I don't know if you want to try to fix that or if you want to try to restate your answer there or anything like that.
Just a summary I'll say on Chemistry X is it gives us a big step forward in terms of delivering price reductions in terms of sequencing for our customers. But ultimately, the specific number will depend on the type of instrument we build it into, as well as the other components of the technology ecosystem that we build into that instrument, the data paths, the optics, and so on. You know, stay tuned as we get more specific, we'll share that with you.
Okay, great. That sounded much better. Our next question goes to Vijay Kumar with Evercore ISI. Vijay, your line is open. You can go ahead.
Hey, guys. Congrats on the print. I had a question on the guidance here. Sam, your Q1, you know, revenue guidance up sequentially, I guess we haven't seen that historically. Your guidance implies sequential ramp up throughout the year. I guess maybe just talk about the visibility you have. You know, I know you've made some comments around backlog being twice as high. Talk about the visibility into the guide and that, Francis. I think on the $70-$90 for GRAIL, is that the gross contribution? Is there some intercompany elimination in that number, or is that a net number? Is that a proxy for Galleri volumes? Thank you.
Yeah. Thanks, Vijay. Let me actually take both questions. I'll take the first one on the guide. You know, the visibility on the guide is good. I think we have a balanced guide, and we're very confident about achieving the guide that we have. With regards to Q1, you know, you are correct. We're entering the year with very strong momentum in Q1. I mean, the business is really very strong. We're seeing very strong momentum on clinical with oncology testing and genetic disease testing and NIPT, and our research markets are also robust. We have a very strong backlog, as we said, a record backlog, in fact, in terms of instruments. That's what's driving the Q1 momentum.
As we look forward towards the year, you know, this is a year that reflects a more, I would say, linearity that's more similar to prior to the pandemic, where we see a ramp or an increase in terms of sequential revenues throughout the year. There are a few things that we've considered in the guide that have been reflected in that 14%-16%, Vijay, that we have factored in, that we believe also de-risks the guide. Let me mention a couple of those. For instance, one is with regards to COVID surveillance. As I mentioned in the prepared remarks, we're assuming $130 million-$150 million in terms of COVID surveillance revenues. That's a step down from last year.
It's you know, at the midpoint, approximately $80 million of a step down. We've also reflected a step down in terms of population genomics driven by the termination of the UK Biobank, the finishing and the wrap-up of the UK Biobank. That's a step down in terms of population genomics revenues year-over-year. You know, NovaSeq is showing very, very strong pull-through, as we said.
In 2021, we exceeded $1.3 million per instrument, and we're reflecting a pull-through guidance range of $1.2 million-$1.3 million, you know, to make sure that we factor in these significant instruments that are coming into the installed base that will take some time to ramp up to those levels of pull-through that we saw across the average in 2021. In general, very confident about the guide, good visibility, and you know, but the backdrop to all of this is still a pandemic year here in year three and you know, the uncertainty that goes with that. With regards to GRAIL, the $70 million-$90 million, that's net GRAIL sales to their customers.
W e do have intercompany elimination of revenues that impact our total consolidated Illumina revenues. The $70 million-$90 million is the total end GRAIL sales to their customers. That's not impacted by intercompany. The sales from us to GRAIL show up on the core business, and then they're eliminated in the total consolidated view.
Our next question goes to Derik De Bruin with Bank of America. Derik, your line is open. You can go ahead.
Hi. Good afternoon. Thank you for taking my question. Two related questions. One, on the new platform you're alluding to, are you gonna take a HiSeq X approach and basically segment this and make it for, like, whole human genome or single-cell applications? Or are you gonna make it broadly accessible? Then a follow on that is, you know, I can certainly see elasticity of demand in the research markets. I mean, that clearly has been proven out. What are your assumptions for the clinical market as you lower price? What are your sort of, like, volume assumptions? I mean, don't you have to keep clinical pricing sort of at a premium for a while longer before you can really sort of see the volumes in there to make it up? Thanks.
Great. Thanks, Derik. Let's take both. You know, this new chemistry can be applied across, you know, the throughput spectrum. All options at this point are on the table. There are options, like you said, where we could create an instrument that targets and catalyzes a segment of the market. As you're alluding to, you know, HiSeq X was extraordinarily successful at opening up the whole genome sequencing market. That before, HiSeq X enabled a $1,000 price point, you know, a very small part of the market was whole genomes. After HiSeq X, you know, you've seen just an explosion in terms of the number of customers that could do whole genome sequencing and that did in fact do whole genome sequencing.
One of the options on the table that Chemistry X would allow us to do is, again, look for opportunities like that to catalyze certain segments of the market. I mean, you could imagine lots of parts of the markets that could be catalyzed. For example, you know, hypothetically, you could look at the single-cell market, and we hear from lots of customers that they would love to be able to do much larger experiments, you know, with using single cells. Something like Chemistry X could enable that part of the market. We also hear from our customers that they would love to run much larger experiments, targeting understanding the genomic drivers of neurological conditions like autism and Alzheimer's and Parkinson's.
You can imagine that this could enable, you know, some of those kinds of experiments. Again, it depends on where we decide to use this chemistry, but the benefits it provides, you know, in terms of lower cost, but also faster turnaround time. 'Cause one of the other things you could get with this chemistry is you could see scenarios where you can have certain tests being returned to customers within a single shift. That would be fundamentally enabling to some clinical applications. Even if the price was the same, just the ability to turn results around in a single eight-hour shift would open up potentially some segments of the market.
From our customer in terms of the price perspective, there are some parts of the clinical market where because we provide end-to-end solutions, we're already at the stage where the customers buy the product and it's priced in terms of a per report or a per sample fee. Those markets like NIPT, for example, or genetic disease diagnosis, are already enabled at the price point they are. It's not necessary that the per sample price needs to change because reimbursement's already in place, allowing our lab customers to have a profitable business in those areas. There are other clinical markets where the lower price point will be fundamentally enabling. That's sort of how we're thinking about, you know, the options in front of us with Chemistry X. Hi, operator. We're ready for the next question. Hi, operator.
Our next question goes to Kyle Mikson of Canaccord. Kyle, your line is connected. You may proceed.
Great. Thanks for taking the question. Just a two-part question. Most of these new kind of short read platforms are launching in the near term with like low to mid throughput capability, which is suitable for the clinical market, like hospitals and clinical research. I'm just wondering if that's gonna be an early focus for you as, you know, maybe that will eat into any clinical market share or growth in the near to medium term that, you know, the part of the market that's kind of underpenetrated right now. Then the second part of my question I wanted to ask was, you know, Francis, you mentioned earlier the Biden administration relaunched the Cancer Moonshot Initiative, and it references multi-cancer early detection tests, particularly involving, you know, studies or trials to accelerate development and market adoption of the MCED tests.
I'd just like to understand your level of confidence that the initiative is going to move the needle for the MCED industry overall. You know, importantly, could it improve the domestic or global perception of the merger specifically with GRAIL, obviously, and potentially have any downstream impact on the ongoing trials or reviews? Thanks.
One moment while we reconnect our speakers. Kyle, pardon that interruption, but could you repeat your question now that the speakers are connected?
Sure. Can you hear me?
We can.
We can.
Perfect. Okay. Yeah. The two-part question, the first of which was, most of these kind of competing new short read platforms that are launching in the near term are low to mid throughput, which is suitable for the clinical market. That's gonna be an early focus for these emerging companies. I'm just wondering if you think that's gonna eat into any of your clinical market share or growth in the near to medium term, given the area is still pretty underpenetrated. Then the second question I had was about GRAIL. The Cancer Moonshot Initiative that the Biden administration have announced recently mentions multi-cancer early detection tests.
I just want to understand if, you know, you think the initiative is gonna move the needle for the MCED industry overall, and could it improve the domestic or the global perception of the merger specifically and potentially have any downstream impact on the ongoing trials or reviews?
All right. We'll take both. The first question is around, you know, entrants in the low to mid throughput market and how we expect that to play out. Let me jump there first. I'll say, you know, obviously we have terrific products in that part of the market, and we just, you know, in the last couple of years, launched the NextSeq 1000, 2000 that are squarely targeted that space. We think they're especially well suited for the clinical markets because, you know, you have the from a cleared perspective, you know, the MiSeqDx, the NextSeq 550Dx that are workhorses already in the clinical market. And then you have the terrific price performance that you get out of the NextSeq 1000, 2000.
Those instruments, NextSeq 1000, 2000, represent the most powerful mid-throughput products on the market, even including some of the entrants that are coming in. I think that'll continue to provide very compelling value to our customers going forward. The other interesting dynamic though that we're seeing playing out in the market is more and more of the new customers coming in are coming in at higher ends of the portfolio than we've seen historically. What's playing out in the market is that the applications that are emerging for sequencing are more data-intensive and sequencing-intensive. They are high-intensity applications that are just demanding more sequencing and more and more performance power.
What that means is, I think, we saw this play out in the PC market, we saw this play out with iPhones, that you know, the devices just need to be more and more powerful. In fact, as somebody was telling me that, you know, is NovaSeq the new MiSeq? I think that's sort of the ethos we're seeing in the market, that there is this insatiable demand for more power. What we consider today, if you're targeting what's the low and mid-throughput today, you better show up with a lot of power because today, you know, the future low and mid will look a lot more like today's high-throughput market.
In terms of GRAIL and the Cancer Moonshot, you know, it's obviously great to have an increased national focus on cancer and bending the mortality curve for cancer. That's terrific to see. It's especially exciting to see a recognition that early detection of cancer, and specifically, you know, early detection of multiple cancers simultaneously, you know, a simple test are an important thrust in terms of this fight against cancer. Just the attention being put on this space, I think is great to see. We're gonna watch to see how that plays out in terms of, you know, additional funding or accelerated regulatory review or reimbursement. We feel it's all very helpful in terms of accelerating that market.
It's obviously especially helpful for GRAIL because GRAIL is the only product in the market today that, you know, can detect 50 cancers and identify tissue of origin. You know, that's obviously really exciting from a GRAIL perspective.
Okay. We will proceed in our questions. Our next question is from Sung Ji Nam of BTIG. Sung Ji, your line is connected. Please proceed.
Hi. Thanks for taking the question. Just on the GRAIL multi-cancer MRD test that you're expected to launch next year, was wondering if you might be able to comment on the performance characteristics against some of the single cancer MRD tests that are available on the market today. Could we expect potential interim data readouts throughout this year?
Yeah. The ultimate performance characteristics, you know, will be announced as the product gets launched, of course. You know, given the approach that GRAIL is taking, here are some of the things that we know already and some of the things that you can watch for. One is because it's leveraging the same underlying technology as the Galleri test, you know, this is a test that will be able to detect the recurrence of multiple types of cancer, not just a single cancer. That's really helpful because sometimes the cancer that emerges may not be the exact same cancer as a patient had before. GRAIL's approach will be able to detect that.
Because you're not depending on a tissue biopsy first to create the test for a patient, you should also be able to get the test into the patient's hands much faster than you would with approach that required a tissue biopsy. Another key metric to watch, which is very, very important for some patients, is how quickly a patient can get that test and have it ready for the patient. You know, the GRAIL approach, just you know, conceptually is much faster from that perspective, and so that's another key metric to watch for. Then, you know, in terms of the performance of the Galleri test in terms of sensitivity and specificity for early detection is it's really strong. You know, it has an extraordinarily low false positive rate.
Since the MRD test is gonna be leveraging the same technology, you know, that's something to watch for too, that they're bringing a lot of expertise around delivering this, you know, the screening test with high positive predictive value into the MRD market.
Sung Ji, does this answer your question?
Yes. Thank you.
Thank you, Sung Ji. Our next question is from Puneet Souda of SVB Leerink. Puneet, your line is connected. Please proceed.
Thanks. Francis and Sam, thanks for taking the question. I'll just ask two in one. First one is, I know you've been asked quite a bit about Chemistry X already, but I just wanna clarify that the, you know, benefit of the Chemistry X is equal across all applications from genome to exome to routine RNA-Seq to single cells. Just wanna make sure. Then does it get you closer to $100 genome or a $100 genome or meaningfully lower versus what a genome price is today? Lastly, if I could just wanna clarify on the 10 kilobase reads that you're getting with Infinity. Is that core technology still SBS? That's my understanding.
At the end of the day, you know, is this on the lower end of the long read sequencing read lengths that are being produced by native long reads? This is being viewed as a synthetic, so I just wanna make sure we're thinking about that correctly. Thank you.
Let me take, Puneet, your questions in order. First, Chemistry X. Is it specific to an application, or does it work across all applications? The answer is it works across all applications. This is a chemistry that is not tied to a specific application. You will get the benefits of this chemistry across any application you run on a sequencer that uses this chemistry. It absolutely is a big step forward in terms of price reduction. Depending on the form factor, depending on the instrument we put out, it'll be able to deliver, you know, a lower cost in that part of the market. Again, it's one component.
As you know, chemistry is one part of it, but it's a part that's gonna give us a big step forward, whatever, you know, form factor we choose to release this chemistry and whatever instrument type. In terms of Infinity, it is SBS, and one of the things we've heard loudly from customers is that they want a single platform that can scale up and down read lengths. What they don't want in their labs is multiple different technologies that have multiple different upfront workflows, that requires them to train techs differently, that have multiple input DNA requirements. Big requirement in this market is gonna be, can you have a single chemistry, a single sort of platform that scales up and down? That's what Infinity delivers.
It's on SBS, and so it gives you all the things that you already know and are familiar with SBS. You know, for our 8,000 customers and our, you know, 20,000 instruments in the field, that's really great news. In terms of the 10 KB, it's absolutely not a low rank, to be honest. It's exactly where, you know, some of the other long read players are in the market. You know, there are some that can go bigger than that, but that's not where the majority of the market is.
Got it. Thank you.
Thank you, Puneet. Our next question is from Tejas Savant of Morgan Stanley. Tejas, your line is connected. Please proceed with your question.
Hey, guys, good evening. A two-parter for you, Francis. Just a point of clarification first on Chemistry X. I think I heard you mention earlier that you might bring it to some parts of the existing portfolio as well. So just to put a finer point on that, does this mean that it could be backwards compatible, at least selectively? And then, second one on the GRAIL guide here, is it fair to assume sort of, you know, 85,000 tests at the midpoint, you know, using that sort of $950 list price, or are you assuming a lower effective ASP in your guidance assumptions?
Yeah. Thank you for that. Let me take the first question. You know, what I've said is we will be using Chemistry X for all new platforms going forward. To your point, there's no technical reason why selectively we couldn't bring Chemistry X to parts of the current portfolio. We don't have plans that we've announced around, you know, that at all, but technically speaking, you know, it's absolutely backwards compatible for some parts of our portfolio. Then the GRAIL-
Yeah, let me take that one, Francis. With regards to GRAIL, Tejas, and thanks for the question, by the way. No, I would not assume that actually. The price is, as you said, at approximately $950 range, but I would not assume that price is uniform across, you know, that full guide or the total revenue guide, because there could be different, you know, pricing assumptions depending on the collaborations, the partnerships that they have. I would not make that assumption around the test volume.
Tejas, does this answer your question?
Yes, that's good. Thank you.
Thank you, Tejas. Our next question is from Patrick Donnelly of Citi. Patrick, your line is connected. Please proceed.
Hey, guys. Thanks for taking the questions. It might be one for you, Sam, just in terms of the backlog. Obviously encouraging to hear it's almost double what it was coming in last year. Can you just talk about how much of that is just a natural organic build as the numbers get bigger versus any supply chain issues? Obviously that was a big topic a quarter ago. Do you feel like you're mostly past kind of the worst part, and what's the expectation there for the next couple quarters? Have things normalized a bit for you?
Yeah. I think the simple answer, Patrick, and thanks for the question, is really it's organic build. It's the strength of the business, it's the strength in terms of demand that we're seeing in clinical and the applications across clinical and research to some extent. You know, some of that backlog is instruments, some of it is consumable, so it's, you know, it reflects a broad base of our business. In terms of supply chain, to address your question, I mean, as we talked about last quarter, you know, obviously supply chain is more complicated these days with pandemic, with COVID, but we have taken a lot of steps and done a lot of initiatives to help preserve the continuity of the supply chain to make sure our customers have uninterrupted access to product.
We have not seen real disruptions in supply chain given some of these actions, you know, aside from very isolated cases that we see traditionally, but nothing unusual in terms of disruptions to supply chain. We've made sure that we've increased, you know, the amount of distribution center capacity that we have. We've increased safety stock on consumables. We've taken a lot of steps to ensure the integrity of the supply chain continues and that we can provide product to customers. I just wanna make sure that's clear.
Thank you, Patrick. Our next question is from Luke Sergott of Barclays. Luke, please proceed.
Great. Thanks for the questions. Can you give us an update on the EC deadline suspension and ultimately what that means? As you guys kind of walk through the timelines and the appeals process, just give us an idea of how you could see that playing out if things don't go your way, and then you appeal, and then again, just from a timing perspective. Lastly, I just wanted to get an idea of the margin characteristics here throughout the year and the guidance and really how we should be thinking about the pacing there.
Yeah. I'll take the first question, which is around timing the various regulatory you know processes underway. First, in terms of our phase two review with the European Commission, we are currently in the phase where we are in discussions around potential remedies that could work for this deal. The pause we're in right now gives both of us, both sides, time to sort of work through that and you know discuss potential remedies together. What that means is it pushes the timeline out a little bit. Initially, the timeline was that we expected to get to a decision by the end of March. It's now looking like that decision is a Q2 decision.
There's separately another process, as you know, going on in Europe around a case in Luxembourg looking at the jurisdictional issues associated here. That's a decision that's also likely in sort of the Q2-ish timeframe. We'll be watching for that. The hearing happened in Q4, and we're waiting for a decision in that timeframe. That's the timeframe associated with the processes in Europe. You know, if either of them go our way, we're done with the European part of the process, and we can start integrating. If the review doesn't go our way, there's still an appeal process that we could look at after that decision happens.
Luke, with regards to the margin evolution throughout the year, I mean, we'll provide more updates on that as we go forward. We gave you an update with regards to Q1 and what our guidance is for Q1 in terms of operating margins. We mentioned that Q1 is gonna be a 300 basis point improvement from Q4 sequentially across consolidated Illumina, and we said that Core Illumina in Q1 would be approximately 28%. Now, going forward, you know, we don't usually provide quarterly margin sort of comments, but we'll provide more updates as we go deeper into the year.
Okay. Thank you.
Thank you, Luke. Our next question is from John Sourbeer of UBS. John, please proceed.
Hi. Thanks for taking my question. So I think in the presentation maybe last month, you said around 40% of mid-throughput customers are currently in clinical, and I believe around similar for the low throughput. You know, any thoughts on what the outlook is for 2022 on these and, you know, what is the timeline it takes to get to 50-50 there?
You know, we have continued to see the percentage of our business targeted in the clinical continue to grow. If you look at our overall sequencing consumable revenue, you've seen that, you know, sort of steadily grow from the late 40s towards the mid-40s now, and that's continuing to grow. If you look at how last year played out, you know, you continue to see the clinical segments grow faster than the research segments. You know, those lines are steadily going in one direction only. In fact, last year, the largest single segment that we target became oncology testing. It's a clinical segment. That's likely to continue to be our largest segment for a long time.
That's overtaken, you know, genetic disease research, which for a very long time, as you know, was our largest segment. You know, we don't have a specific timeframe around when it crosses 50%, but it's definitely heading in that direction.
Yeah. There is one other dynamic, John, that I would add, you know.
Of total Illumina revenues. If you look over the last, I mean, to Francis's comments, if you look over the last three years, the growth of clinical has exceeded the growth of research. You know, that just reflects both markets are growing very robustly, but that just reflects the fact that clinical markets, you know, with regards to oncology testing, genetic disease testing, NIPT, have been growing really at an impressive clip.
Great. Thanks for taking the question.
You're welcome.
Thank you, John. There are no additional questions waiting at this time, so I'll hand the conference back over to Salli Schwartz for any closing remarks.
Thank you. As a reminder, a replay of this call will be available in the Investors section of our website. Thank you for joining us today. This concludes our call, and we look forward to our next update following the close of the first fiscal quarter of 2022.
This concludes the Illumina Q4 2021 earnings call. Thank you all for your participation. You may now disconnect your lines.