Coming home to roost

SAN DIEGO—In the wake of the acquisition of Solexa earlier this year, Illumina Inc. took the time for a little soul-searching of its operations, and has decided that closing a facility, expanding one and looking for another one abroad is the best bet to maximize efficiency and effectiveness.

The facility set to close down is in Wallingford, Conn., a site that Illumina possesses as a result of acquiring CyVera Corp. in April 2005. It was at that site that Illumina's latest technology platform—the BeadXPress system, which launched in March—was developed and is currently manufactured.

Over the course of this year, operations will wind down in Wallingford and BeadXPress work will ramp up at Illumina's base of operations in San Diego. Upon completion of the process, all manufacturing and development activities related to the BeadXPress system will be performed in San Diego. As a result of this transition, Illumina will incur incremental charges of approximately $2 million. But, combined with the expected efficiency gains, these charges are not expected to materially impact the company's financial performance for 2007, according to Christian Henry, Illumina's CFO.

"With the completion of our acquisition of Solexa, we took the opportunity to evaluate all of our operations. We determined that consolidating the Wallingford operations into San Diego will provide us with efficiencies from both the manufacturing and product development perspective," said Jay Flatley, president and CEO of Illumina "We now will concentrate research and development and manufacturing activities in our San Diego and Hayward, Calif., and Little Chesterford, United Kingdom facilities, all of which are expected to continue expanding as we see increasing demand for our products and services."

"As we consolidate the Wallingford operation into our San Diego site and continue to build infrastructure to support our rapid growth, we need to expand our facilities here in San Diego as result," Flatley adds, noting that in January, his company entered into a lease for an 83,000-square-foot facility on its San Diego campus. "Construction on the new building is expected to begin in May and the build-out is expected to be completed in the fourth quarter of 2008. This facility will enable us to continue growing our manufacturing, research and development, and commercial capabilities."

While Illumina remains dedicated to its two earlier platform products, the BeadArray and Gene Analyzer, the new kid on the block, the BeadXPress system—which will be aimed first at the research market—is certainly a key driver of current efforts both to consolidate and expand.

"Ultimately, we believe this system will be an important element of our molecular diagnostics strategy, as the system meets many of the critical needs for this market, including low cost, high throughput and high accuracy," Flatley says. "Initial demand for the platform has been strong, and we are already seeing evidence of the power of this platform strategy. We commercially launched BeadXPress on March 21, and we have already seen four different customers that have ordered all three Illumina platforms."

Expansion in San Diego isn't the end of the story, either. Flatley says that in addition to the build-out in San Diego, Illumina is in the process of identifying an additional manufacturing facility in an international location.

"This is part of an overall strategy to mitigate our total tax exposure," he says. "We expect to have this new facility up and running in 2008."