#338: Illumina’s Product Playbook Is Alive And Well, & More

A few weeks ago, Illumina (ILMN), in our view the dominant provider of gene sequencing equipment, hosted its inaugural genomics forum. The company assembled a dynamic set of speakers who proposed answers to obstacles slowing the adoption of genetic medicine around the world. Illumina’s management spoke extensively about the firm’s technology roadmap, which we have detailed in this technical summary. In our view, Illumina is addressing several pain points plaguing the life sciences industry with its next wave of products. That said, in several areas, product marketing could be getting ahead of reality.

Illumina unveiled the NovaSeq 6000 Dx, a high-throughput sequencer built specifically for medical testing, and the NovaSeq X Series, its new flagship sequencer. Already cleared by the FDA, the NovaSeq 6000 Dx helps labs streamline clinical genetic testing, while the NovaSeq X Series will be able to sequence a whole human genome for roughly $200 by the end of next year and is likely to catalyze another upgrade cycle with several ultra-high-throughput applications, including large population studies.

The company also showcased two non-hardware products: a new core chemistry (XLEAP) and a synthetic long-read workflow (CLR). While XLEAP’s accuracy and read-length specifications did not live up to expectations, we believe the chemistry’s stability and speed are impressive. Illumina can ship XLEAP consumables without dry-ice, increasing the access of sequencing to nations without robust cold-chains. CLR’s workflow, however, seems to be more expensive, less performant, and more cumbersome than native long-read technologies. We expect to see more sequencing users adopt longer-range sequencing to address unknown questions and answers in the life sciences industry. Get the full scoop from our new piece in Medium.

During its annual Connect conference last week, Meta Platforms showcased its new, full color, mixed reality (MR) Quest Pro VR headset. Having added many new capabilities, Meta hopes the Quest Pro will attract both enterprise and consumer markets.

We question the viability of the Quest Pro. Most importantly, the Quest Pro costs $1,500, nearly four times the starting price of its predecessor, the Oculus Quest 2. In the last few years, as shown below, the average selling price (ASP) for an AR/VR headset seems to have found equilibrium in the $400-500 range, suggesting that Meta may see limited success in attracting consumers with such an expensive model.

In addition, Meta seems to be betting on enterprise adoption, which we believe is a long shot. Based on the announcements we gleaned from Connect, the Quest Pro is unlikely to sufficiently boost the productivity of knowledge workers to stimulate broad-based enterprise adoption. In fact, many of its new partnerships involve the integration of extant communications and collaboration services such as Zoom and Microsoft Teams, which are not likely to require VR’s immersive 3D experience to be effective.

Further, with a battery life in the 1–2-hour range and a refresh rate that could cause motion sickness, the Quest Pro does not seem ready for enterprise prime time. Although its maximum refresh rate of 90Hz technically meets the minimum baseline to prevent motion sickness, the refresh rates of its predecessor, Oculus Quest 2, range from 90Hz to 120Hz and still cause significant motion sickness, especially during its first days of use.

In short, Meta’s vision for the Quest Pro could be ahead of its time. Having catered primarily to the consumer, Meta expects to catalyze the next wave of VR adoption in the enterprise, which we believe will be a difficult leap to make.

Last week, VW announced a 2.4-billion-euro investment in a joint venture with Horizon Robotics, a Chinese auto chip startup, that aims to build full-stack autonomous driving software and hardware systems. Despite the investment risks associated with China’s weakening economy, Volkswagen could be feeling pressure to accelerate the development of fully autonomous cars in its largest market.

In our view, robotaxis will become winner-takes-most markets by geography. Companies in the US and China appear to be moving faster than European competitors. Its new venture is likely to add another layer of complexity to VW’s already-complicated corporate structure as the company regroups after ousting its CEO.

Apple continues to double down on fintech, announcing recently that it will launch a savings account for its Apple Wallet. Earlier this year, the company announced Pay Later, a feature enabling Apple Pay users to pay for purchases in four installments over six weeks, like the buy-now-pay-later (BNPL) offerings from Klarna, Afterpay, and Affirm. Reportedly, technical and engineering issues have delayed Pay Later until 2023.

According to Apple, users of the new savings account will be able to deposit daily cash-back rewards automatically into high-yield savings accounts with Goldman Sachs. Also powering Apple’s credit card, Goldman has been struggling with Marcus, its own consumer business, so supporting a savings account for the roughly 50 million Apple Pay users in the US could be an attractive distribution opportunity. For Apple, we believe a savings account could increase the stickiness of its ecosystem, making users even more dependent on its primary revenue driver, the iPhone.