Thanks so much for joining us. My name is Eve Burstein. I cover U.S. life science tools and diagnostics here at Bernstein. I'm delighted to be joined by our Illumina friends. So Ankur Dhingra, CFO, Salli Schwartz , head of IR. Ankur joined Illumina as CFO just a couple weeks ago, so, we're glad to have you right out of the gate.
Yes.
He's formerly CFO at Summit Therapeutics, and prior to that, CFO at CareDx, and spent a number of years at Agilent as well. Salli has been, what? Two and a half years?
Almost.
Almost. All right. Happy almost two and a half anniversary.
Thank you.
As the VP of Investor Relations at Illumina, and before that, she was head of Investor Relations and treasurer at MSCI, and she also spent a number of years with Moody's. So I'm excited. I have a lot of questions, but reminder to the audience, please feel free to submit questions via Pigeonhole. I'll be looking at it as we're doing the conversation, and I'll add them in. Great. With that, let's go ahead and get started. Ankur, do you wanna kick us off? Anything you want to say right off the bat?
Yeah, let me just speak to a couple of things. This would get into the details of the strategy, but, here's two points that we've been talking about, mainly the priorities that I have as I'm walking into the company, for this is now a month and a half now. And we've, Jacob and I have talked about the top three priorities here in the near term of getting back to growth as a company, that remains priority number one. The second one around driving operational excellence in the company. We'll talk a little bit about it during the Q&A, potentially, but my focus coming in as the CFO is to think about profitable growth of the company going forward. We are in the process of setting up what does baseline core Illumina look like.
You've seen it, a lot of it in our disclosures. But as we get ready for laying out a strategy in the latter part of this year, our focus remains on driving both the growth as well as, much higher levels of profitability, similar to what Illumina may have seen in the past. That remains my top area of focus. And then more short term, is around GRAIL. And I want to make a couple comments on that because everyone, including us, wants to get to a quick resolution to that and start focusing on the core business. We continue to take steps for both the scenarios, whether it is a spin or it is a sales scenario. We're running them both in parallel.
Our board is considering and has given us the pathway to continue to run those. You may see filings that we will have to make to be able to run both the scenarios together, including things like filing an amended Form 10 , including seeking approval from Nasdaq or SEC, while in parallel, we may also be talking to companies about the alternative scenario for sale as well. They will both run in parallel. Our intention is to get to a resolution here, as we've stated, within this quarter. And when we say quarter, I'm still thinking end of June. And we'll keep running both of those until we get to a point where it is a very clear decision that there is only one of them that is viable.
We will promptly communicate, and then set the pathway so that we can promptly execute on that as well. Both of the pathways require various regulatory approvals, and it's not a really short process. And what we didn't want to do was to pursue a single path, get to a point where we feel it is not viable anymore, and then start the second path. Both of them are running. We, as of now, feel confident that we will get to a resolution here within Q2, and as soon as we do, we will communicate it.
Great.
Get into the Q&A then.
Okay, sounds good. Thank you. So you mentioned that you're going to be unveiling a strategy in the fall, and clearly you're in the midst of examining that strategy and deciding what it's going to be. So we'll try to stay away from questions that we know... So I'm gonna ask about strategy, then let's start there. So maybe let's start out with can you help us understand what the bones are gonna look like or sort of what sorts of components we can anticipate in a strategy? So, for example, I don't imagine you're going to come out and say, "We are going to give on price to keep market share," or, "We're gonna try to take on 10x," right? So what is it, when you say that you're going to be articulating a strategy that you really plan to articulate?
Yeah, sure. So, yeah, great question. And, yeah, I'm not going to lay out exactly what the strategy is going to be here. The way we are thinking about it right now is to step back and think about—still thinking about the genomics ecosystem overall, as Illumina has created over the last 2.5 decades. We have made access to genomics much more important as well as efficient, and several steps over the last 2 decades have been taken. We're not talking about realistically in a production environment, a $200 genome, which is being run now in the lab. That's a great feat of both technology as well as the science that this company has done. Our strategy is built on that foundation. That is what we built further.
It's going the way we are also thinking about it is thinking about the sequencer being used potentially as a detector. I come from the life sciences tool side, so thinking of a detector, but there is much more that the sequencer is being used for in the ecosystem today... as a player, what is it that Illumina can continue to do for developing that ecosystem? How do we make other parts of that sequencing run scientifically more progressive as well as cost-wise more efficient? And they can take in many forms. You can talk about it in terms of sample to answer, you can talk about it in terms of multiomics, you can talk about it in terms of what everyone calls elasticity, but in terms of how much higher resolutions on these new applications actually consume.
But they've now been enabled because you can run that sequencing at a cost level, which is much more efficient than has ever been in the past. So there is an ecosystem that's been enabled, and our strategy, like, you will talk and touch on all of those to say, what role can Illumina play in these areas going forward? Whether you think about sample to answer, whether you think about multiomics and whatnot, and how do we believe that can both drive the ecosystem as well as Illumina's growth going forward. So that's the largest play. Second part is the CFO, I talk about the returns, and that's how I think about it, right? The company has been investing heavily in various aspects of this ecosystem at this point. We do want to talk about what our expectations for return from some of these investments are.
How do we measure them, and what kind of pathway do we see over the next several years of what core Illumina, excluding Grail, could potentially look like? What kind of pathway are we setting ourselves upon? So that's how we're kind of thinking about this strategy at this point.
So, so your comment about returns, expect to offer long-term guidance on revenue growth or, or EPS?
In some form. I can't tell you exactly whether it will be in EPS growth number or whatnot, but I do intend at some point, set the expectations of where are we going, where do we see leverage, within our P&L, and I can tell you it is likely going to be across all of lines of the P&L. And then with the 20-ish% core operating margin today, what kind of path is from a profitable growth can we expect, or what I'm driving for over the next several years? We'll give you some sort of algorithm. I don't know the answer exactly what it would look like, but yes, we do intend to get there.
Okay, great.
Could there be new product announcements?
Any new product announcements? Lower probability.
Okay.
We still intend to stay focused more, more at the strategy level. We're still thinking about it more like an investor day, less an R&D day type of discussion at this point. Now, don't hold me, I may change that later on, not because we have to make a product announcement, but this is still more a strategy conversation. This is more to say, here's where we think we want to take Illumina, and what could that look like, rather than a very specific product decision.
Fair enough. Great, thank you.
So, you talked a lot about how the discussion is gonna touch on some of the different ways that you can grow beyond just sequencing as a platform, right? Sample to Answer, multiomics applications. But if we think just about your core business, just the consumables, you know, just the platform. One of my favorite quotes about strategy, Michael Porter, is, you know, it's saying what you're not gonna do as well as what you are gonna do. And it seems to me that for your core business there, there's really a distinction between investing at kind of industry or historical high levels in order to drive back to the top line growth that you've had historically. You know, high singles or doubles versus acknowledging that maybe that's not possible in world and cutting costs.
I guess my question to you is: Do you agree that those two things are at odds? Are you ready to talk a bit or not to?
Yeah, great question. Are they at odds? The answer to that varies where you are in the S curve of the technology development, right? It may not be at odds early on, where you have to make outsized investments, when you're making the market, with the adoption of the technologies in the earlier cycles. At a stage where Illumina is now, I don't see it as much at odds. The way I'm thinking about it is it comes back down to if you're running 20, 25 different programs, the technology has now reached an ecosystem. People really know the value of what the sequencing is.
Most of the changes that you will make now are more going to be, are you pushing the envelope of the science, where people still know how the technology is being used, and as soon as you push the next envelope, they can very clearly articulate how it is going to affect them. Does it enable running new tests? Does it enable a running test much more efficiently, right? So you're lesser in the market-making mode, which means the returns expectations on your R&D, on your marketing, investments, is now different than it would be what Illumina was years ago. Is the team internally thinking about it the same way? They're getting there.
I've been here six weeks, and I think I've spoken about this, to say some of the observations I've had coming into the company and the most positive ones as I talk to the leadership team, is that understanding, yes, we have leading science position, but the size of investments that we need to make going forward to continue to make the changes that are required may not be as outsized as they were in the past.... So coming back to your main question, are they at odds? Mm, yeah, if you still set the right return expectations, if you still set the right prioritization of areas that we will work on, which by connotation means the areas that we will not work on, I think we can drive a good revenue through this market.
We're still in early stages of adoption, but not in early stages of technology development, but still early stages of adoption in this market. Yeah.
Fair enough. You talked in Q4 quite a bit about strategic partnerships because you've had a lot of revenue from them, but they were also lower margin. And you just said we're still more of in early stages of adoption. It kind of strikes me that for the last decade or more, you have been really investing to build this market.
And that's great, because it builds the market, but that's also expensive for you. So I guess, you know, is there a point where that burden goes away, and you don't have to continuously overinvest in order to build that market?
And also, now that you have, I would argue, credible competitors, they seem to also benefit from the investments that you make. How do you think about that free rider problem?
Yeah. I think every new industry, every market ever goes through that cycle, right? The size of the investment made by the first entrant to create a market is always much larger than the second or the third follower behind that, who ends up benefiting from the work that has been done by the other company. But at the same time, the second and the third player also helps expand the market a little bit in terms of making the technology more, I don't know, available, more acceptable. Or many kind of plays out in many different ways. Now, is there a point in time where the size of market-making investments could go down? Yes, I see that. And I see that actually happening within about 2024.
So I'd say within this decade, where I say different life. But certainly within the time horizon that we're talking about thinking about it from a strategy perspective, where the size of the market-making investment potentially could go down. As we think about our evolution of Illumina's P&L as well, those are part of the things that we think about, because it require that much of a push to the customers for adopt the technology. Most of our customers really know now what they're getting into.
This is more a conversation because you can now do sequencing at a much, much lower cost, and or you can do a whole genome-based sequence or the whole exome-based sequence, and now you can run an MRD or a new kind of test, which is much more intensive from a sequencing perspective, but also gives you the level of resolution to enable that science. The conversation is more about that end consumer developing that test, right? It's not about the adoption of the technology itself. And that's the power of this ecosystem, where we make one step change, and what does it enable in the entire ecosystem. So definitely market making goes down. Do the second and the third player end up getting a free ride from that perspective? Yes, they do.
What they don't have is a 25,000 instrument base in the world. What they also don't have is the stable, high quality, highly reliable instrument, which is also going through significant technology upgrade, not just on a hardware basis, but also by adding either in the NovaSeq or even available potentially as a cloud. We get the analytical capabilities at the back end. We enable new assays in the front end, and many of them are backward compatible to one or two generations behind. So the value that you're getting out of this system is just dramatically different. It's taken a couple decades to build up, and we don't intend to just back away from it.
There is so much more that we can add into that ecosystem, not just by buying the latest X technology, but if you've been with us for 10, 15 years, a lot of these, this enablement goes into the entire ecosystem. So the power of that is, I think, when I get into some of these discussions with some of the investors, I still feel that kind of underappreciated a little bit, right now. But part of it is we also have to lay out how does that fit within our strategic team?
Yeah. So maybe just to pick on that a little bit or put together some of the pieces that you mentioned. You know, you said for the core sequencing business, maybe you can start spending less over time because you don't get the same return. You aren't going to have to spend as much to develop the market, and the power is really in the ecosystem. Is it fair to say that at this point, pure platform sequencing is commoditizing, if not commoditized, and really the value of Illumina or of any sequencing player going forward is in the ecosystem that they create?
Yeah. Let me let me say that differently about how we think about it. I think it's commoditized if there are so many other companies who are able to replicate that same, quality, capability, and experience. That's when I would say it is commoditized. I don't think we're anywhere near commoditized. Where we are, though, if you think about end-to-end workflow, and you think about the total sequencing cost, both at the research level as well in, as well as in a clinical environment, the cost of sequencing is getting to a point where that isn't the largest-... part of the cost system anymore, right? And what Illumina has done is that it has made the technology available at a speed of execution as well as at a, at, at a price point where that's not the largest component.
There are companies, and I come from CareDx, so, it is more time, labor, money spent on collecting the sample, getting it to the lab, people who are running the test, how much does it take to prepare the libraries, and the preparation work, as well as subsequent analysis, as well as the delivery of the results. If you look at the entire end-to-end structure, there are many more components that are ripe, for taking a look at, right, and making them more potentially efficient or scientifically advanced. So we're not going to play in each and every one of those. That's not Illumina's play, but that there are areas where scientifically Illumina can make a difference, and make those pieces. I would take an example of whole genome sequencing.
There is a play Illumina could potentially make in that space to make that part of the assay much more easily available to the ecosystem, so that our customers can then build their diagnostics, their tests, on top of us showing them what's possible. But in something we've done, something can be done in a 15-hour run at a low cost price point on one genome, it does enable our ecosystem to think about tests in a different way, so.
That's a good lead-in into another topic that I want to touch on. So I'd like to spend time on the health of each of your end markets.
Maybe let's start with academic. I guess a framing question first, just about the money available there. If I wanted, I think I could argue that NIH funding is at an all-time high, if you look at it, on dollars, and there's a lot of political risk to funding in academia this year. It seems like there's a lot more downside risk than upside potential for that market overall. Do you agree with that statement, and what is it for Illumina?
Yeah, I think I've personally, even during the Agilent days, we used to get that question in terms of our ability to predict where NIH or something government funding would go, which is highly questionable. But at the same time, and Sally, help me out on this one, a little bit, but so far what we've seen is that the funding has been stable to slight growth this year as well. To the extent we hear from our academia partners, with whom we are working, as well as anything in the street, we see good bipartisan support for the science, at least so far. We haven't seen a large discussions anywhere about, especially in our academia partners, who rely a lot on some of this funding.
We haven't seen any discussions so far about saying, "Oh, our funding's being cut," or the questions being asked about what programs are we running, et cetera. Can at any point in time, the government take a different decision? That risk will always remain. Are we seeing signs in the market at this point? I would say so. I don't know it yet, so.
I'd only add two things. One, we track a lot of different grants through our customers and trying to understand where they're headed and what they'll need in order to take advantage of those, if they're awarded those grants, and those levels have persisted.
In terms of the number and dollar amounts represented by the various grants that we're hacking. We're kind of talking about all this funding in the bucket, but then there's the part that goes towards genomics or things that could be relevant to our world. Maybe we'll broaden it out a little bit.
That's typically been holding up better and growing a little faster than the overall NIH budget, for example. So there's a... That gives us some confidence as well, but back to Ankur's point, predicting-
Again, in the end, if you're in academia, you're running a program based on grant. And even if you run, say, a single cell-based analysis, in the end, it is still a sequence that we use in the back end, right? So there is a portion of that that Illumina does enable, and a lot of research that's going on now. Strategically, within that space, within, let's say, the academia research center space or otherwise, one thing that we will lay out in more detail during this strategy, but we've been working through is Illumina's relationships with the KOLs, the partnerships that we have with pharma. How have they been in the last few years? Specifically when GRAIL happened, and whatever was going on in the company, is there a play here in terms of how Illumina works with some of its largest customers?
How many of the customers really have some views into what is in the Illumina pipeline, right? And how could what's in our pipeline enable some of the work that these customers are doing can be prepared with us? So the discussions we're having about that to say: How do you evolve the ecosystem in a manner where some of your largest customers, who are equal partners with you in shaping the science, become more participative in way in Illumina's way, right? So we talked about the MRD partnership with BMS and J&J . We have internally been working with some of the largest KOLs in the industry and talking about, so what's the next program you're doing? We can show you some of the things that could be coming from Illumina here in the near term, enable that next level of science. I'm seeing excitement around that.
The second connection I'm trying to make there is also from a grant and the funding perspective is we see excitement in these KOLs to say, "Oh, I am thinking about this large program that will require a different level of measurement." And if you have something in your pipeline for that, we may have access to funding for those kind of programs. So it's kind of going both ways. One is how much funding is available, but at the same time, we are enabling science that eventually does full funding in that sense.
That makes sense. To that point, so this is, you know, not the case in every single workflow, but some of the workflows that are growing, like single-cell and spatial, for example-
They have their own cost for a researcher, right? They have their own instruments, they have their own consumables.
You even said earlier, that platform sequencing is really not the biggest portion of cost anymore.
So if academic funding is relatively stable, maybe growing at a touch above NIH funding in general, are you still losing at this point with the products that you have now, without the whole ecosystem, are you losing share within that academic sphere? Because, yes, single cell and, and spatial give volume to you.
They do.
But at the same time if an investigator has a $2 million grant-
Some of that money has to go to someone else.
Yeah, but in the end, the whole idea of making sequencing available at that point is exactly what you're talking about, which is a single cell or a spatial, if run, does take whatever percentage they would take, but does enable much more sequencing than a typical traditional sample would have done in the. And the consumption of the consumables in that space is much, much higher than what we have been in the past, which goes back to the core concept of elasticity, you can say. Are we enabling science that is much more sequencing, sequencing intensive? And that there is a transition period. We talked about a valley here, literally as we transition to some of these newer technologies.
But specifically in the example that you're talking about, we do go back and see and actually measure to say actually, CGP output is much, much higher. The actual consumable consumption in that space is much, much higher, which is the core tenet of liquid franchise.
Much higher than what? What are, what are you comparing it? You know-
What has been in the past. If a research core in large genomics workflow based on, say, a flow cell, and now they go into a single cell analysis, the actual output for that analysis could be significantly higher, 30, 40, 50% higher from core sequencing basis that is acquired in that cell. It's hard for me to kind of articulate if you had a $2 million grant or you're putting more money here or here, but if you are running a single cell analysis, you by design acquire more flow cell consumption
to be able to run that test effectively. So in other ways, if the cost of hadn't moved the way we moved it, to be able to run those tests at that volume probably would not have been possible or economically viable. So we still get a fair.
Okay, fair enough. You talked about elasticity. Let's go there. So elasticity in the clinical end market-
comes up all the time.
Yeah.
You know, you, you guys have talked about this in the past, and if I had to sort of say what I've taken away as, as your, your view, and you can correct me if I'm wrong, it's, it's two things. One, people are going to do more. They're gonna do bigger panels, they're gonna do more coverage. And then two, the clinical applications are still very underpenetrated-
And that's where growth comes from.
Is that fair? Anything you would add?
Certainly. I think the only other thing I would say from a clinical market perspective is traditionally, and it's always been, whether it was in the sequencing space or you look at the other modalities within the clinical diagnostic space, it has always been a longer cycle market, right? When you get a test approved and you actually get it into the clinic, changing that to a new technology takes much longer. The technology you will see within clinical lab generally tends to be older. It is used much older just because of the cost of regulation and validating a new test on a new technology. So irrespective whether it's sequencing based or not, there's a portion of that market that always is longer to transition to the new technologies.
Okay, great. So then I want to dig in on this a little bit across new time horizon. So, let's start longer term first, actually. So, longer term, the new FDA LDT rule, to some extent makes it harder for clinical players to evolve assays to do what you said, right? To add more bells and whistles like, you know, Guardant, for example, they have a CGP test, and they have a CDx version, and then they have an LDT version that is deeper and deeper and offers more. And with this new rule in place, is there a risk that companies are not going to be able to bring that innovation to patients as quickly, and so that elasticity of demand is going to take longer to play out than it would otherwise?
I riffed on somebody else, right? If the science is enabled and it is cost effective, somebody will, whether it is Guardant or I wouldn't take any of the examples. Now, the clinical evolution of technology within the clinical space, as I said, always takes longer for the exact reasons that... When we think about elasticity within the clinical space, it will come in two different ways. One is the actual development of the test themselves.
So the example of companies, if they're developing, say, a new MRD test, and start using the power of X to say, "I'm now going to now be able to build a test that can still make me money, and I can still run it within a certain time frame, and can still achieve the resolution that we need for this test to be really effective, we will go out and research, and develop that test." The first elasticity would be in their test development lab.
I think if I'm right, roughly about a third of our X's got sold to the clinical customers.
Right? So, my thesis is that largely still going into their research efforts to say, can I now develop a test that is much more reliable, both scientifically and economically? The second step then is to take it into the clinic, through the approval, whether whatever the final form of FDA are going to be. So you have a brand-new test potentially; now you have to go through a transition over a period of time. Is it going to take longer than what it would have before the LDT rules? Could be a year longer or whatever. We'll see where it eventually lands. But if you take a medium- to long-term view, in the end, if the science has been enabled and if the economics have been enabled, somebody will go develop that test.
It will be up to our entire ecosystem, with all the players, to go see which part do they think they can bring fastest to the market and then choose their investments accordingly. We're enabling an ecosystem, so that whether you are a specialty lab, a core lab Illumina is positioned to benefit either ways with respect to which player takes that position.
I would just add on this point, this is a, this is a place where Illumina can again, competitively differentiate itself. Given the infrastructure we've built over years in clinical affairs, medical affairs, quality, we've run the gauntlet globally through multiple different regulatory systems and pathways to understand what's needed, understand how things work, understand the steps you need to take in order to go down these various clinical validation paths. We can help our customers. So that's, that's something that we are well positioned to do, and we work with customers going forward, and they have to adapt these new requirements, opportunities. You mentioned, about a third of your access went to clinical customers, and I know you said about half of your revenue is clinical customers. My understanding is that that bucket includes clinical research.
Like you said, you know, probably the vast majority of those are in research setting. And it strikes me that in that setting, the elasticity of demand algorithm may not be any different than in academia. Like I, way back in the day, I used to work in a cancer hospital, and I consented people for clinical studies, right? So if you have the same budget and suddenly cost of sequencing drops, you can in fact go get more samples, kind of at the same rate that you can in academia. Is that - do you agree with that?
Yeah, that's one tenet of the research. Now, I don't know specifically, because I'm not conversant in how the dollar portion makes business yet. So, but strategically, the question about elasticity within the research space, the-- what you're touching on is one aspect of that. The second aspect, which is more important, when we are having conversations with our customers, is it's not just to be able to run more samples at a lower cost. Yes, that's part of the play. The more important play for them beyond just this, say, evidence generation that you're talking about, is also to say, are there tests that they did not believe were viable in the past-
But are now viable? That's a portion of elasticity in the research setting. That's the most enticing part of it. And we're having discussions in the academia with the KOLs or within some of our clinical customers who can start looking at X, and some of the work we're doing on the FDA side is that, "I could potentially use your technology. Because it really wasn't something that we would have thought or we shelved it in the past, but we think now it could be a viable test." That's the part of elasticity that we are after, but in the entire continuum, will there be people who will take advantage of the lower cost? Yes, we want that.
Then what about the portion of your clinical revenue that is truly clinical, like it is diagnostic or therapeutic, it's touching a patient per day? Where you said previously that group or that cohort is probably going to be slow to switch to the X because you have a lot of FDA-regulated tests, and it takes time to work through that.
But, is it fair to say when the customers do go through the hassle of validating these, these new assays, that there's not going to be any elasticity of demand because sequencing cost is just not what drives volumes there? And how big is that portion of revenue for you?
Yeah. Yeah. So, yeah, not the proper point. I don't think we've very precisely provided that cut. However, the point of elasticity is if you're in the lab, you have a test that is running, you go through the process of validating, you will end up getting some benefit out of moving to the NovaSeq X technology. But as I said, most customers' question is as much about expansion. That's where you see in their strategies and part of the discussion, how does Illumina get closer to our customers to show them really what's coming out of Illumina over the next two, three years, so that we can align some of our R&D thought process with that expansion, with exactly what science is now enabling, is the more interesting part that gives us a higher clarity.
Right. Thank you.
That was a question from the audience, and there's another question from the audience I'm going to take next. So reminder, if you guys have questions, please add them in the Pigeonhole here, and we'll take them in. So next question, changing a little bit. Multiomics has been a real buzzword for you guys recently. You said it a number of times on your last call, and we've been getting a lot of questions about it as well. And you know, as you know, several papers out about hacking Illumina machines to do that, we get a lot of questions on that.
Yeah.
We've talked about this a little bit already, but right now you are sort of beneficiary of other single cell and spatial companies to some extent.
Enabler. Enabler.
Enabler. Okay, sure. Yeah, fair.
Yeah.
Very fair. So you're an enabler, and as a result, it drives sequencing volume for you. If you were going to expand into more of that workflow, is it fair to say that you would be challenging or competing?
Yeah, great, great questions from a strategy perspective. So when we talk, when think about proteomics, there are aspects, whether I think you've said, as an example , that you would take in more single cell or, or whatnot. What we see as an opportunity within the front end of this sequencer, so this preparation work goes on, is in that entire end-to-end workflow, in lots of these cases, even though the sequencing is much more intense, the amount of either money being spent in that front end, or the way the science is being enabled, we think we can develop some parts of that ecosystem. Well, there is technology, Illumina, and integrate in front of the sequencer, that, that can enable much more science.
One of the things I've said as I've gone out and in the last six weeks, I've done a full pipeline review of what's going on within our R&D programs, and I almost walked away with the kind of things that are happening. One of the big questions I had was just, how much money do we still spend on the box versus assays, versus whatnot? And the focus on that front end and the work that the team's doing is just phenomenal. We just need to let it go through the process that it needs to go through before it shows up in front of the market. But we do think that, as an example, we did the partnership with SomaLogic, and proteomics teams, continues to do the work to say, now, how can you simplify that?
How can you make it much more tightly integrated at the front end, less involved in the process, can even improve the science? How do you integrate the back end software, either our products , so that the, the workflow becomes much more, both tighter, and your ability to generate and, and use data becomes easier? We see similar opportunities in other omics as well, not just proteomics. We do things strategically. The sequencer right now, as you were saying, is enabling a lot of the sciences, but, the ecosystem at some point creation of sequencer being the core around all of the omics going through this. Today, it's happening. It is happening in ecosystem. We really haven't built it in a, in a tightly managed way, where it can be both more efficient and certainly data scientific. But that's how we're thinking about it.
In the end, it will enable a lot more in the ecosystem, and some of the people who are players in the market. We have to then look at what science is becoming available and how they're involved, but at the same time, have to be able to provide as well as the opportunity to go into the market.
It sounds like what you're saying is, you know, I know there are plenty of things you can't say in this last timeline, but it sounds like what you're saying the vision is, is not to displace partners that are there today, but to displace, call it manual process, or inefficient processes that are often people or other technology. And so, you're not taking shares, you all, you know, take a share from a while back. Is that fair?
Yeah, we'll, we'll see where we have a share if it actually happens. But my view still is because we still think it's the full adoption is in different stages of the market. The market is expanding enough that if we're in a position and advice to people in this space, the market, if you like, more market opportunities than thinking about it as a fixed pie out of which Illumina has actually... That's how we think more about it. You talked about the economics of that process of kicking the manual steps, you integrate, yes, that's part of it, but in the end, it's still about the science, as much as it is.
If we're trying to do something, it has to be more.
... Thank you. I know you started out with a couple comments about sale and spin , and I listened till the end, but I do want to do a couple of
Okay. Okay.
First, so you as you acknowledge, the end of the quarter is about a month away. It sounds like you are still on track to finalize the terms by the end of that month. And then can you give us some sense how long this is to actually have, like, in case of a sale or a spin, what sort of timeline are we looking at?
Yeah. So, to the first question, yes, that's what we're working towards, to be able to get to a decision, clearly articulated, communicated in the next, literally, the month of June , and I said, both of the tracks are running. Both the tracks have different timelines from the point of view of making a decision, but either of them needs to go through an approval stage. In case of a spin, you have to go to Nasdaq and SEC and everyone, and also through different. There are steps we've already taken. With EC, there is a framework that they've already agreed to. If there is a sale transaction, we would have to go back and make sure that the transaction still fits within the framework.
There are players that you're talking to, you have advisory players on the other side. So in either scenario, I would think the sale may have a slightly longer, taking a bit longer to come to a decision. Eventually end up with a outside of getting the control, the process more than we control on the sales side. So that's roughly how I think about it, but intention still is, and we're prepared to do in either of those two scenarios, is to really move as expeditiously as we can within that.
Is that, do you measure those in months, or is it just to get some sense about how?
I can, as of today, we're still thinking months.
Right? I'm still thinking within 2024, I'm still thinking in that we have a strategy. The way I'm thinking still about it is in the back half of the year, starts giving a very clear view over the course of the moment, not just finance, but not just... We talked about the P&L up to the operating margin. I think we disclosed that pretty clearly.
But in terms of thinking through what's my earnings power, what's my cash generation power, and thinking through that baseline, my thinking is have a very clear view into what that is, in terms of then setting the, the forward-looking strategy, all in terms of where the earnings will come from, we need to be in a position where we're generating free cash flow, and it's a good amount of it, and then thinking about how we deploy it. That's roughly I'm thinking about it.
That, that's a great question. You will have a lot of cash. How will you deploy? So, is it all the investment? Okay. Is it, you know, it is...
Yeah, I can clarify the LRP will talk about it in September, but I am at this point, I think our approach will be more prudent. It is likely going to be probably on the conservative side, in a more balanced use of cash. We will be in either scenario, from a leverage perspective, I tend to be investment grade here in the near term, establish a good runway for the business. We have a lot to do at this point in time. I would rather keep the business focused towards accomplishing those priorities, and with that intent, we'll deploy capital. We've done a few tuck-in M&A , and we'll probably continue to look at a few tuck-in M&A as we look at adding any new technology within our space.
And then whatever it is that remains of cash might look.
On the M&A point, you just mentioned at the M&A, Joey said previously that tuck-in was on the table, but large scale M&A was probably not. Based on the way you're speaking, it sounds like you're of a similar mind, but large scale is probably not.
Yeah, I think our, our focus right now on the priorities, get this business to grow, get this online growth, drive a level of operating performance that's more commensurate with the quality of the business. That's it. That's the more near-term focus. We don't intend right now that then we have a really large, acquisition. At this point, that's not what we're asking our BD teams to go look for-
Or if there's anything on the horizon at this point. Our focus is then tuck-in . There is a lot within our strategy that we can do ourselves, and that's good.
Great. All right, we've got maybe one more minute, so, another question for you, I guess. Aside from being asked about how Q2 is progressing, what, what did you expect us to ask you that we didn't ask?
I think that was pretty comprehensive. From a strategy conversation, I really appreciate the way the question structured this conference is around focusing around where the business is going and where some of the longer-term conversations are. I do think, as all of you look at where we are and where the growth in the near term has been, there does tend to be around a little bit on how long will this last?
I would step back and say the system that has worked over the last two decades is really, really strong. And there are lots of pieces in terms of individual businesses that are, and will continue to be built on that ecosystem itself. Really don't have to go out to build those. That capability resides within us at this point in time. We just have to focus on the right things, which, as I look at the things, I'm excited about what this, what this business can look like within the digital, both in terms of top line performance opportunity, as well as where this could be from a perspective.
Great.
All right, we're out of time. Ankur, Salli, thank you both so much for your time. Real pleasure having you guys here.