How did Illumina's revenue and losses change in 2002?

Total revenue increased to $10.0 million in 2002 from $2.5 million in 2001, driven mainly by higher oligonucleotide sales and the 18 SNP genotyping service contracts signed during 2002. Net loss widened to $40.3 million from $24.8 million, reflecting higher research and development spending, a $8.1 million litigation judgment and increased selling, general and administrative costs.

Does Illumina have enough cash to fund its operations?

Management states that cash, cash equivalents and investments, together with funding from existing strategic alliances and grants, should be sufficient for at least 18 to 24 months. The filing also says the company may need additional funding within that period, which may not be available on acceptable terms, and any equity financing could dilute existing stockholders.

What is the main legal risk facing Illumina?

Applied Biosystems filed a patent infringement suit in December 2002 and sent a notice alleging breach of their 1999 joint development agreement, seeking compensatory damages of $30 million and a prohibition on sales of the genotyping system. Illumina obtained a preliminary injunction on February 18, 2003 preventing arbitration, and the company believes the claims are without merit, though it cannot be sure of the outcome and states an adverse result could materially affect its business.

How is Illumina treating the $10 million from Applied Biosystems?

Illumina has recorded the $10 million of research funding from Applied Biosystems as deferred revenue and will continue to do so until the status of the collaboration agreement is resolved. Revenue would be recognized at 25% of the profit share from collaborative product sales, should such sales occur.

When does Illumina expect to achieve profitability?

The filing does not provide a timeline for profitability. Management states that it expects to continue incurring net losses and substantial research, development and sales costs, and that it will need to significantly increase revenue to achieve profitability.

ILMN 10-K FY2002 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 27, 2003. Cited figures are marked; the original filing is the authoritative source.

Illumina, Inc. reported a net loss of $40.3 million^a for the fiscal year ended December 29, 2002, compared with $24.8 million in fiscal 2001, as total revenue rose to $10.0 million from $2.5 million.

Product revenue was $4.1 million^b, service revenue $3.3 million and research revenue $2.6 million. Total costs and expenses were $51.9 million, including research and development of $26.8 million, selling, general and administrative expenses of $9.1 million, and an $8.1 million litigation judgment charge tied to a termination-of-employment lawsuit that the company is appealing. The accumulated deficit reached $90.4 million and stockholders' equity was $71.7 million at year-end.

Cash, cash equivalents, restricted cash and investments totaled $66.3 million^c, and the company states these resources should fund operations for at least 18 to 24 months, though it may need additional funding. The company's strategy centers on its BeadArray and Oligator technologies, with its production-scale SNP genotyping system launched in July 2002 and first system sales agreements announced in early 2003. Management expects net losses to continue and states that revenue must increase significantly to reach profitability.

It also expects selling, general and administrative and selling and marketing expenses to rise as it builds its sales infrastructure. The most significant risk disclosed is the dispute with Applied Biosystems, which filed a patent infringement suit in December 2002 and sought arbitration seeking $30 million^d in compensatory damages and a prohibition on sales of the genotyping system.

A San Diego Superior Court granted Illumina a preliminary injunction preventing arbitration on February 18, 2003, and the company treats the $10 million of Applied Biosystems funding as deferred revenue until that dispute is resolved. The filing states that an adverse outcome could have a material adverse effect on the business.

02—Key points

Key Highlights

Total revenue of $10.0 million in 2002, up from $2.5 million in 2001, with product revenue of $4.1 million and service revenue of $3.3 million
Net loss of $40.3 million (or $1.31 per share) in 2002, compared with a net loss of $24.8 million (or $0.83 per share) in 2001
Research and development expenses of $26.8 million in 2002, up from $20.7 million in 2001
Accumulated deficit of $90.4 million and total stockholders' equity of $71.7 million as of December 29, 2002
Cash, cash equivalents, restricted cash and investments of $66.3 million, with management stating resources should last at least 18 to 24 months
Applied Biosystems patent infringement suit and arbitration demand seeking $30 million in damages; a preliminary injunction blocking arbitration was granted February 18, 2003
An $8.1 million litigation judgment charge related to a termination-of-employment lawsuit, under appeal, with a surety bond requiring roughly $12.5 million of marketable securities as collateral

03—Questions

Frequently Asked Questions

How did Illumina's revenue and losses change in 2002?
Total revenue increased to $10.0 million in 2002 from $2.5 million in 2001, driven mainly by higher oligonucleotide sales and the 18 SNP genotyping service contracts signed during 2002. Net loss widened to $40.3 million from $24.8 million, reflecting higher research and development spending, a $8.1 million litigation judgment and increased selling, general and administrative costs.
Does Illumina have enough cash to fund its operations?
Management states that cash, cash equivalents and investments, together with funding from existing strategic alliances and grants, should be sufficient for at least 18 to 24 months. The filing also says the company may need additional funding within that period, which may not be available on acceptable terms, and any equity financing could dilute existing stockholders.
What is the main legal risk facing Illumina?
Applied Biosystems filed a patent infringement suit in December 2002 and sent a notice alleging breach of their 1999 joint development agreement, seeking compensatory damages of $30 million and a prohibition on sales of the genotyping system. Illumina obtained a preliminary injunction on February 18, 2003 preventing arbitration, and the company believes the claims are without merit, though it cannot be sure of the outcome and states an adverse result could materially affect its business.
How is Illumina treating the $10 million from Applied Biosystems?
Illumina has recorded the $10 million of research funding from Applied Biosystems as deferred revenue and will continue to do so until the status of the collaboration agreement is resolved. Revenue would be recognized at 25% of the profit share from collaborative product sales, should such sales occur.
When does Illumina expect to achieve profitability?
The filing does not provide a timeline for profitability. Management states that it expects to continue incurring net losses and substantial research, development and sales costs, and that it will need to significantly increase revenue to achieve profitability.

04—Continue

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