Perfect! Good morning, everyone. This is Rachel Vatnsdal with the Life Science Tools and Diagnostics team. I'm here with Illumina up on stage. So as these sessions are, it's going to be 40 minutes, roughly 20 minutes of presentations up front, and then followed by 20 minutes of Q&A. With that, I will pass it off to Jacob.
Thanks. Thanks, Rachel, and for JP Morgan for hosting us here today and for all of you joining us here in the room. I am Jacob Thaysen, the CEO of Illumina, and as a reminder, our presentation today includes some very exciting things here, including forward-looking statements, non-GAAP measures, and information about their relations to GAAP measures. Please refer to our SEC filings for presentation of risks. Also, please review the statements of our whole separate requirements related to GRAIL. GRAIL must be held and operated separately and independently from Illumina, related to the order of the European Commission, which prohibited our acquisition of GRAIL.
Today, I will cover four areas in my presentation, and first, I would like to talk to you a little bit about the overview and why I'm excited to be here and why I think the core business is has very long legs. Secondly, I'd like to share with you the preliminary Q4 and full year 2023 results. Third, I would like to share our priorities for 2024, and fourth, I will talk about the path ahead and why we are incredibly excited about the future for Illumina. Okay, so let's get started with an overview. First and foremost, the mission of Illumina is to improve the human health by unlocking the power of the genome. And this mission really gets the whole Illumina team together and truly also summarizes why I joined Illumina here a few months ago.
I've been impressed by the past few months when I've talked to many of our employees about their commitment to support our customers and drive genomics forward. As I've shared with the, I really share the passion that the Illumina team have for sequencing, and I see that we are really the center of the global transformation of genomics in the future also. Our ability to improve patient outcomes and have made us the trusted partners serving research and clinical customers. As we will discuss today, and I will share with you, Illumina has a significant opportunity in front of us.
The infrastructure we built over the last 25 years, our global reach, our compelling offerings around the world, and our deep partnership with many of our customers, and our deep commitment to disciplined innovation, will continue to drive genomics and multi-omics forward for decades. So in 2023, Core Illumina delivered more than $4.4 billion in revenue and continue with strong positive cash flows. As I've shared with you, Illumina's core business is highly compelling to me. In fact, this is why I'm here, and I'm confident that we're very well positioned to grow. Our team of more than 9,000 people are serving more than 9,000 customers out there in large and attractive markets in more than 160 countries around the world.
We have distinguished ourselves through innovation, and we have more than 9,800 patents out there, which constitutes around 800 patent families. Our technology is regularly referenced in scientific papers and also medical publications. We serve both the clinical and research customers across the globe, and we have an unmet scale, differentiation, and diversification. All right, let's talk a little bit about the results here for Q4 and 2023. First and foremost, I'm very pleased to announce that we have Q4 results ahead of our expectations, which was primarily driven by the NovaSeq X instruments and our consumable sales. Consolidated revenue was up approximately $1.12 billion, up approximately 3% versus last year, and non-GAAP operating margin of approximately 3.8% for the quarter.
Core revenue for Q4 was approximately $1.09 billion, up 2% from prior year, and with a non-GAAP operating margin of approximately 18% for the quarter. You can also see the full year results, in the right side of the slide. Following the late launch, late 2022 launch of the NovaSeq X, we had a very strong year for high-throughput instruments, with more than 400 instruments placed across both the NovaSeq X and the NovaSeq 6000. So let's talk a little bit about NovaSeq X. The NovaSeq X has actually been the most successful launch in the history of Illumina.
We have received 900 orders since launch, and we have shipped 390 orders since launch, and we have shipped 352 instruments in 2023, and thereby also entering 2024 with a healthy backlog of 238 instruments. We saw higher-than-expected growth in the X consumables in Q4, especially following the launch of our 25B flow cell. While we will continue to place new instruments, our focus in 2024 will be much about ensuring that our customers are successful with the instruments they already purchased and drive, of course, a lot of sequencing on those instruments. This will, of course, drive momentum for consumables in 2024 and beyond. But our focus is beyond the NovaSeq X.
We are seeing actually that we have now more than 25,000 instruments placed out there, so a significant installed base and supporting many customers each day. In fact, each year we're placing a lot of instruments, and this year we placed more than 2,200 instruments out there. Our offering is going throughout the spectrum, the throughput spectrum, and with our built-in informatics, including the DRAGEN, we allow for optimized and efficient data management analysis. In fact, I actually think that our informatics is a well-kept secret and something that really differentiates us going forward also. We also have a diagnostic portfolio that also scales through the spectrum, and which really enable our customers to stay on DX cleared instruments as they scale and being successful.
The ecosystem we have built over the years allows for seamless scaling of our customers from low throughput to mid throughput, whether they are in the clinical or the research space. And let's talk a little bit about the ecosystem, which I'm very excited about, and in fact, I'm very excited about the things we can do with that ecosystem. I truly believe there's a big opportunity for us to really go and be a full provider and end-to-end solution provider, really going for sample to insights. And over the last few months, when I've spoken to customers, this is something they're really excited to work with us on. They want to focus, of course, optimizing application, driving the research, and not focusing on building workflows, productivity, ease of use, and so on.
This is something that we do very well, and we can really focus on innovation to drive through. This will drive, of course, more sequencing and allow our customers to be very successful also. We are already doing that. So we have already, and we have been known for innovation for decades here, and we're committed to continue with that. I'm really proud of what we came out with in late Q4 with the launch of the 25B flow cell, which was highly anticipated by our customers and truly unleashes the full power of the NovaSeq X. As we move into 2024 here, we will continue to add products that will strengthen our leadership around the world.
Now, with the XLEAP-SBS chemistry, which we'll make available on the NextSeq 1K and 2 K instrument platform out there. This will drive both better performance, faster turnaround times, higher quality, and of course, to a lower cost, which I'm sure will be exciting a lot of our customers, which can be directly enabled on the total installed base of 1K and 2K instruments. We will also continue to make inorganic investments, and I'm happy to announce here that we have recently acquired a company called Partek, which is specialized multi-omics software solution that expands our tertiary capabilities and elevate our value in our software portfolio. As I mentioned before, informatics is key to us. It's something that differentiates us. It is something we're very committed to drive, both for genomics and multi-omics going forward.
I'd also like to announce that, or talk about the announcement we made last week in collaboration with Nashville Biosciences, that we announced three new members to the Alliance for Genomic Discovery, including now BMS, GSK, and Novo Nordisk. These companies joined the founding members, AbbVie, Amgen, AstraZeneca, Bayer, and Merck, in co-founding the whole-genome sequencing of more than 250,000 whole genome sequence samples. Combining that with longitudinal health data, of course, anonymized, allows these companies to mine the data, of course, to... And I think that will actually change how we think about drug discovery, how we treatment plans, but actually healthcare going forward. So I'm really excited about that, and I think there's much more to come with these initiatives and beyond. So all these efforts will of course, continue to drive our momentum in 2024 and beyond.
But for 2024, our preliminary view is that our results will look very similar to 2023, as I also shared in our Q3 earnings. I'm very encouraged by the recent positive macroeconomic headlines, and I hope that this will drive momentum in our industry going forward. But until then, we expect our customers to remain cautious and constrained in their purchasing decisions. This will translate into modest instrument purchases, project scopes, and new tests and applications that they have built. But if and when the market continues to improve, we are very well positioned to accelerate growth and drive momentum. As I previously mentioned, we will provide more insights on our guidance and in our Q4 and full year earnings call, which will be scheduled for February 8. All right, let's talk a little bit about 2024.
So I've set three main priorities with the Illumina management team, and these priorities are intended to drive accelerated value creation here for the full enterprise. First, we will always put our customers first, and we will drive commercial excellence, growing our installed base, especially with the NovaSeq X, and supporting our customer sequencing activities. We'll continue to do partnerships and initiatives that can drive even more activities. Secondly, we will stay highly focused on operational excellence. This will include greater rigor throughout the P&L, improving our margins and greater productivity, even focusing also on other areas where we can reduce cost. And third, we're working very, very diligently to resolve GRAIL as quickly as possible. So let me spend a few minutes going into a little more details for each of them.
As I mentioned earlier, we're very pleased with the launch of the NovaSeq X, and it will continue to be a driver for our growth over the next years. While we are very excited, we are also still very early in the adoption curve, and we expect that over time, most of our NovaSeq 6000 customers will transition to the X. We also expect to see fleet expansion here in 2024, where customers has placed initial orders are now ready to scale their operations on the NovaSeq X. However, we do expect that we will have less instrument placements, NovaSeq X instrument placement in 2024 than we had in 2023, primarily driven by the big backlog that we entered into 2023 with.
But we do expect to continue to see gain in momentum gain in incoming orders during the year. And longer term, we also expect new to high throughput to enter into the X, and thereby also see many more customers that today are not doing high throughput sequencing, will also be joining the X. So, but even though we will place and continue to play instruments out there, as I mentioned before, our key focus is to make our customers successful, and of course, ensuring that they are successful in driving sequencing activities. And early adopters of the NovaSeq X is, in fact, planning to do so. And while we see more instruments coming online, this will certainly drive elasticity.
The lower cost, but also the many more applications that you now can run on the NovaSeq X, and now we allow for different workflows to run on different of the flow, on the lanes in the flow cell, allows for both lower cost but also much more complex analysis to be done. Many more - many of our customers are just seeing that the lower cost is driving opportunity to drive many more samples through. But we also see other customers interested in additional omics analysis that gain deeper insights on the sample. So I'm seeing one customer also in the research space, that is using this to better understand in better detail on single cell.
So they're running, they're running bulk RNA on one lane, and they're running single-cell RNA on other lanes and combining all that information and create deeper insights that could not have been done before. And now, because of the workflow that allows to be done on the NovaSeq X, but also the cost, can now fully be evaluated. We're also seeing customers increasing intensity. We're seeing customers, especially in the clinical space, that have been focusing on cancer, that's been sequencing on tissue. Samples are now shifting over to liquid biopsy, which have much higher sequencing intensity. I'm confident that the rollout of the X will position Illumina to unlock much greater demand elasticity over time. For me, it is a matter of when and not if.
So, as I mentioned, we'll continue to have first, our priority on supporting our customers. But we're also highly committed to drive strong discipline in how we run our own operations. As some of you know, in early 2023, we announced our commitment to reduce $100 million of cost in our cost structures, and I'm really pleased to see how the Illumina team came together, really enabled themselves, and really took out much more cost, in fact, approximately $175 million. This was done by reducing headcount across the company, but also streamlining processes, rationalizing our global footprint, working with third-party vendor to reduce the spend, and accelerating our IT optimization efforts. And this year, we will continue to drive productivity throughout our supply chain.
But most recently, also, we have implemented a portfolio optimization strategy that will be more focused on specific innovation that had the highest impact on our customers. We'll continue to be very committed to innovation, but we'll be very deliberate, deliberate about where we make our investments and where we don't. In 2023, you will continue to see that we continue to evaluate where we should and where we should not focus our efforts, and you will see that will have impact in 2024, and we'll continue to focus in areas where we can, can improve our operations, because both to improve productivity, but also to be more predictable in how we run the business. And finally, as you have seen, we have taken a number of steps to move quickly to resolve GRAIL. Most recently, on December seventeenth, we announced that we will divest GRAIL.
Consistent with the European divestiture order, we have the opportunity to either do a third-party sales or a capital market transaction, and we have the goal of finalizing the term by end of Q2 in 2024. As you're aware, potential outcomes might impact our balance sheets, and while it's too early to provide guidance on the specific details, we're certainly working to minimize any impacts. Illumina is evaluating sponsors that could potentially provide financial support if needed. To the extent Illumina needs to provide funding, we will be more likely to issue debt while continue to prioritize our investment grades rating grades. With that, I would like to conclude my remarks today by telling you a little bit about Illumina's path ahead. First and foremost, Illumina is building momentum, and the future is bright.
I'm certainly very excited to be a part of the leadership team and to drive Illumina's attractive core business, both in research and the clinical markets. The NovaSeq X is gonna unlock significant elasticity over the next several years and will drive next wave of innovation at our customers, which will benefit patients and healthcare globally. More broadly, Illumina's strong innovation roadmap will tee up a wave of progress and growth, and we'll continue to be known for innovation while working in a discipline, disciplined way that drives our margins. In other words, Illumina will drive operational excellence and deliver on the earnings power of the Illumina's core business. Thank you, everyone. I appreciate you joining the presentation today, and I look forward to share more time with you over the next few days and our upcoming Q4 and full-year earnings call here at February eighth. Thank you.
Perfect. Thank you, Jacob. So just to kick it off, as the new CEO, I was wondering if you could talk about what really interested you in Illumina, and then now that you've been in the role for a few months and you've got to see the organization from the inside, can you talk about some of your near-term priorities for the business and really lay out what you'd like to accomplish in the first year or two?
... Yeah, so, so I've been in this industry for more than 20 years, and I've always been excited seeing from outside Illumina and really saw Illumina, what the commitment has been to sequencing and really drive healthcare forward. So, when I got the call and got the opportunity to join Illumina, I felt this was highly aligned, where my passion is really genomics, but also fighting diseases, especially cancer. And I really felt that this was a great opportunity to come and be a part of a great company. So been here the last few months now. I've been excited to both talk to a lot of customers, but certainly also a lot of our own employees.
I'm continuing to see the excitement and the commitment. Clearly, we've been through some rough times here over the past few years, but I see a strong commitment for everyone in Illumina to get beyond that and get back to the growth that I truly believe we're just in the starting point of. What excites me a lot with my big R&D heart is also getting access and see the R&D engine, which is running on a very high gear, and I'm very excited to see the innovation that will come from us over the next few years. Focus will be, of course, to be successful with our customers, really focus and make sure that our customers are going to be the hero in the laboratories.
Especially with the NovaSeq X, which I think has a tremendous opportunity to, again, go out there, drive elasticity, but more importantly, actually allow for new applications that will again drive improved patient outcome and health around this world. That's what excites me most.
Perfect. That's helpful. And then you noted that impressive pre-announcement this morning with, you know, really solid NovaSeq X placements. So can you just walk us through what really drove the performance that quarter?
Yeah.
Also, can you just talk about it from an orders perspective? How did the budget flush dynamics play out relative to your expectations? Was any of the success from pull forward, and really, how should we think about that 4Q number?
Yeah, I think we saw a lot of great things happening in Q4, but it was probably less about the budget flush. We only saw small of that, but generally speaking, as I mentioned before, we actually have a very strong pipelines of the NovaSeq X. And we started to see customers that purchased one. A few instruments started to make multiple purchases also. So we started to see that we were expecting a total of 330-340 instruments in placements in this year, and we actually saw more than 350. So clearly, momentum there in the placements we were very pleased with.
But also, we saw bigger, better pick-up in consumable spend, especially after we launched the 25B, which has been a sought-after flow cell from our customers, that they can now really start to get those big programs up and running that they've been excited about. Joydeep, you have more to add here?
No, I think really the strength of the NovaSeq X consumable starting to flow through finally is really a good positive momentum that we should see in subsequent quarters as well.
Perfect. Helpful. And then, you know, I just want to touch on some of the comments you gave us around 2024 on your 3Q earnings call. So initially, you know, Illumina gave an early outlook for 2024, calling for flat revenue and EPS.
Yeah.
So is that still in the cards, in your view? And if so, can you really elaborate on some of the drivers of this outlook for flat top line in 2024? How do we think about the H1 versus H2 dynamics? You know, that's a common trend that we're hearing across the industry. And then that mix of instrument placements versus consumable scale-up as well.
Yeah. So let me start here, and then I will have Joydeep join in, jump in also. First of all, we didn't make any comments about EPS. What we have been mentioning is our top-line revenue growth, but also our operating margins, which we believe for the core business is going to be flat. I think we do see some positive headlines in the macro, but the fact is still that most of our customers are cautious and conservative in their purchasing decision. I don't think that's something that is unique for Illumina. That is, across the industry. We don't, at this point, are differentiating between H1 and H2 .
I think if you just rewind the clock, to, you know, one year, you would see there was a lot of conversations about first year would be tough, and the second year would be better, for many companies, and that didn't turn out to be the case, as we all know today. So I think we just stay and, and at this point and, and see that there are some macroeconomic, headwinds right now, and, and that's what we therefore be a little bit conservative in our outlook because our customers are conservative in their purchasing decision. Should that change during the year, we are extremely well positioned to drive the momentum. So you have more?
No, I think, I think you're right. From a macroeconomic standpoint, no difference in the H1 and the H2 . There's obviously some seasonality that comes in every year, and you'll expect to see some similar dynamics on that. The only thing that I would say differentiates H1 and H2 is continued expected ramp-up on the utilization of the X, right? So you will see some difference in H1 and H2 on that front.
That's helpful. Then I want to follow up on that comment around the macro backdrop. Obviously, you know, it's kind of been a transition year. That difficult macro backdrop has pressured everyone in this sector.
Yeah.
So, you know, can you talk about some of the trends that you've seen? Have you noticed any differences in the last few months here from a macro standpoint? And then how have those impacts differed between your clinical and your research customers as well?
Yeah, I think both, the macro... I mean, during 2023, you have both impact in the clinical and the research customers. I think some of our clinical customers that is still on the verge of being profitable, maybe historically would accelerate more spending to accelerate applications onto the new platforms. I think that was the case when the 6000 came out. That has changed, so people are a little more cautious about where they spend their money, so that has clearly impacted a little bit, the transitioning onto the X. I think also in the research segment, it's somewhat the same. When the economy is slower, there's also less funding available, which has impacted that a little bit.
We do, however, see both segments, and we see a lot of sequencing activity ramping up. So we do expect to see improvements over the next period of time... Did you?
No, I think you covered it.
Yeah.
Perfect. Then I just wanted to ask on the market performance. So, you know, one of the things that investors are kind of grappling with is, is there a slowdown in the overall sequencing market? So can you walk us through how is Illumina thinking about that long-term growth of the sequencing market? Is there any indications that the fundamentals have changed? And then what gives you confidence in that long-term outlook for the underlying-
Yeah
... sequencing market?
Well, I think still we are in the early stages. As I said, I think we're still in the genomic transformation. If you look at all parameters and all types of indication of how many patients out there is being sequenced when they have a disease, genomics or a cancer disease, it's still very few. When you move on to, from, you know, solid tumor onto liquid biopsy, that is a significant increase in sequencing. When you see more and more diseases being relevant for sequencing, you will see that, MRD is a big up-and-coming opportunity that we're still just scratching the surface on, and also early detection of cancers, which is going to drive demand many years and likely decades ahead.
So, you know, maybe right now, we're starting, we're seeing a little bit that inflection where we go through from one platform to the other. But if you look at long term, there is absolutely no doubt in my mind that, that we will see tremendous opportunity, not only for Illumina, but the whole industry over the next decade, and probably decades to come. So, Joydeep, any, any additional on that?
I'll just add, I think sequencing, you know, we believe truly will disrupt industries. And Jacob, you talked about drug discovery and, and where the Nash Bio Alliance with multiple pharma coming in is really at the cusp of using genomics and frankly, multi-omics, much more in drug discovery. So you're gonna - that's gonna lead to a step change. I think on the clinical side, not only is, you know, we expect the cost of sequencing coming down, spurring more samples coming in, but you got to realize that human biology and diseases are complicated, right? So people are going to require larger panels. It's not just monogenic things. They're going to need larger panels to pinpoint exactly what ails specific patients.
There is more disruption coming, and I think you're seeing that come in with, you know, our customers going after larger and larger panels to lock down exactly what ails the patient. So we expect that to continue, and I agree with Jacob, we're very early in that transition of the cycle.
Great. That's helpful. Then sticking on that long-term view, so given the number of moving pieces in recent months and new management team-
Mm-hmm
... how should we really think about the last Analyst Day's long-term guidance? You guys had pointed to mid-teens growth rate, for example, and some margin profile as well. So would you say some of those long-term targets are still in the realm of possibility at this point?
Well, I would say it this way, that we are still working. I'm still working with the team to solidify and identify exactly our strategic direction going forward. And it's something that I take and the leadership team takes very serious. I think we would like to take our time to make sure we have great confidence in what we go out and present and commit to all of you. As I said, I still believe there is significant growth in front of us, but I'm not ready to provide any numbers at this point. If you look at our margins, I don't see any reasons why we wouldn't be able to get back into historic margin numbers in the future also.
Perfect. That's helpful. Then I want to shift over to the topic of price elasticity of demand. So, you know, it's been a key topic of conversation amongst the investor community in regards to NovaSeq X. So starting with that research end market, what dynamics have you seen so far for customers that have purchased the X? Are there any differences in behavior with research customers for this launch versus the NovaSeq 6000 launch in that same timeframe?
So let me jump into that. So I, you know, I think the NovaSeq X, as we mentioned in our Q4 earnings call, really has led to already, even though it's early stages, right? The expected sort of spurt in demand and demand elasticity. We expect that to continue. We see a difference in customers and on the elasticity of customers that have adopted the X versus not. So that's a good positive sign that, you know, as more customers adopt the X, you're going to see more of that. I think research versus clinical, you will obviously research customers transition a lot faster, so you see that elasticity come up a lot faster in them.
For clinical overall, at a customer dynamic, because of validated assays, that transition is a little bit more more gradual. You know, the main difference between 2017, 2018, and now really is the macroeconomic condition, right? If we, if we look back at 2017, you did not have high inflation, you did not have the interest rate constraints. So although we see that interest level in fact be even larger, as Jacob mentioned, right? I mean, we placed close to 400 high-throughput instruments in a high-interest, high-inflation-
Mm-hmm
... environment. So that should give you a clue of how strong this demand and the interest is on the X. But you are going to see a little bit of a tempering of the speed at which this ramp-up comes in till macroeconomic conditions improve. And I totally agree with Jacob, right? It's a question of when, not if. We are seeing that interest on the when side. And then maybe the last thing, I mean, obviously, you link the elasticity. So okay, you're saying you're seeing elasticity while revenue is going up. And, you know, part of that is when customers transition to a new instrument where we've had a step change in pricing, right?
That first year for a particular customer, you're, you're going to see the growth in sequencing offset a little bit by the drop in price. But in subsequent years, that goes away, right? So you just keep seeing the elasticity go up multiple - over multiple years. But, you know, and
... after year one, you don't see that same level of price reduction come through. So that's just a little bit of the dynamic that explains why we're seeing elasticity but not seeing that revenue go up.
Great, that's helpful. And then I wanted to touch on China here.
Mm.
So obviously, China has also been impacted by some of this macroeconomic conditions that we're facing in 2023 and into 2024. Also, there's been areas like increased competition in the region as well.
Mm.
So can you kind of talk about where you are in the process in terms of China, and when we could see a potential recovery there? How are you working alongside or working against the competitive factors? And then how confident are you in the success of this strategy in the region?
Yeah, so as you mentioned, China is certainly seeing some challenges right now. I think that's beyond sequencing, but generally speaking, the market is certainly being challenged over the past years. We continue to see a lot of opportunities in China. In fact, a lot of the Chinese companies are really wants to work with Illumina. They've seen Illumina over the last decades being the one that drives innovation, but also a certainty in the high quality. And especially when you are sitting with patients, they really are looking to Illumina to help them support that. But I think also that China's China is changing in the way that you need to have Made in China.
You need to have more clarity on what it means to be a Chinese player, and it's something that we are focusing on a lot. China is approximately 10% of our business, and we actually expect that the China business will still be challenged in 2024, while we get through kind of and realign our strategy and get more Made in China, and then we expect to improve performance in 2025 and beyond.
Great, that's helpful. And then I wanted to spend a minute here on GRAIL. You guys gave us some nice info in the presentation.
Mm.
But, you know, specifically, what type of divestment options are most likely at this point? And then how is Illumina thinking about GRAIL from a valuation standpoint, especially given, you know, some of the moving pieces there? And then how does that come into the valuation equation and potential net outcome for Illumina?
Yeah, I know, Joydeep, you're spending some time on this, so why don't you take this one?
Yeah, look, we're early, right? So, one piece is we have clearly made the decision now to move down the path of divestiture. I think you saw us announce that late December. The process right now is we are all options are on the table. Very broadly, you have two classes. There's a sale option versus a capital markets transaction that we think will take the form of a spin or some sort of sponsored spin. At this point, it's too early for us to talk about potential valuations and to let the market drive that process. I think in terms of timing, we expect that the terms of a divestiture, we're targeting to get those terms finalized by the end of Q2 of 2024.
Helpful. And then, just spending a minute here on competition. In the last few years, we've seen a number of competitors emerge-
Mm
... in both the mid and high throughput markets for short-read sequencing. So as the leader in this space, can you kind of discuss what is Illumina seeing from some of these competitor dynamics and the effects on pricing as well on the instrument side within that mid to high throughput range?
Yeah, I think, I mean, I think it's very natural for all companies to have competition out there, and I think Illumina have had competition all the way through its history and done very well against competition. We will continue to focus on supporting our customers, making sure that we drive innovation out there to really support our customers and make them successful. I think what is gonna be key here going forward is that there's been... And we have actually trained the whole world about reducing the cost per sequencing over the last decades. And why is that? That's because that was the absolutely number one parameter in the, you can say, what it costs for the whole workflow sequencing.
But now, as that is coming down, the workflow becomes much more important, and we see customers that are much more interested now to focus on how can you reduce the full cost in the full end-to-end, and thereby increase productivity, ease of use, and thereby drive new applications on. So this singular focus on also only the cost of sequencing is gonna be less relevant in the future, where the focus on the cost of sequencing across the whole workflow is gonna be tremendously more important. And Illumina and building a whole workflow, all things included, building all together and the investment that needs to go into that, both for the sample prep, automation here, sequencing, informatics, pipelines, and so on, is a big investment that very few companies can do only with the scale and breadth that we have.
And thereby, I actually think that we will do very well out there. So, you know, I encourage the competition. I think it is great for the industry, I think it's great for our customers, and it keeps us on our toes, and I love that. I love winning, but what I more love than that is to go out there and make a difference for our customers every day.
Perfect. That's helpful. One more question just on the market positioning here. So for long-read sequencing, those capabilities have dramatically improved the last few years across the market, and they're starting to gain traction with customers. So can you kind of talk about how does Illumina view about the long-term interplay between long-read and short-read-
Mm-hmm
... sequencing, especially just given there's some view out there that long-read is going to continue to eat up short-read from a market perspective?
Yeah, no, I think that, there is—there's room for everyone here, and I think long-read certainly has its applications where it's, where it's important, and therefore, also, we are investing into long-read technologies. But I think we just need to start from a little bit different place instead of talking technology. Let's talk about the samples here. And I think the most important or the growth and where we see most samples coming from is either FFPE for solid tumors, which is already fragmented DNA, or also for liquid biopsies, which is also fragmented DNA. And hence, it will require—it's really more aligned with short-read technologies, and thereby, short will be the vast majority of sequencing right now, but also in the future and where most growth will come from.
But, Joydeep, I think we've also looked at PopGen techniques, programs, and so on, and what have you seen there?
Yeah, I mean, it's very similar, you know, partial cohorts, right, within the larger cohort. So, you know, some larger programs where we've had hundreds of thousands of samples, the long-read piece of it is only limited to 10,000, so less than 10% of the overall population of analyses. And we see the same kind of thing, right? It's a complementary approach. It's not one replacing the other. And I think that will continue for the reasons that not only Jacob mentioned, that, you know, long-read is not able to address some of these things. The existing technologies require large quantities of DNA. And of course, then there's the cost component of it, right?
If you're getting most of the answers with a technology that's severalfold cheaper, there's no need to try and get into long-reads, other than the specific answers that you cannot get with short-reads.
Perfect. And then just on NovaSeq X, you know, just given the year recently ended, how should we think about NovaSeq X's order book as we head into 2024? And then you also recently launched the 25B flow cell, so how should we think about that impacting pull-through expectations?
Joydeep, you wanna speak to that? Yeah, so I think the. You know, in terms of the order book, Jacob mentioned we have a backlog of 38 instruments going into next year, and we also have a very healthy pipeline of orders that we can convert in 2024, right? The 25B, we see that as very positive. It has been. You know, we launched it in late 2023, and of course, we also revamped some of the capabilities in the 10B flow cell. So in conjunction, we saw a nice, healthy uptick of the X consumables flow finally starting to pick up in late 2023, and we expect that momentum to continue into 2024.
Perfect. With that, unfortunately, we are out of time. Thank you so much for joining us-
Thank you very much.
Thank you to everyone in the room.
Thank you.