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Hi, I just replied Randy's question on AFFX board before realizing that there is a ILMN board. Here is that post again. I would like to hear your responses.

Thanks!

MaxW

Randy1019 wrote: "is ILMN a comptetitor to AFFX?"

In my mind, Illumina (ILMN) is certainly a major competitor of AFFX.

Recently, I heard a presentation by Mark Chee ( VP of research at Illumina:ILMN) on their BeadArray technology. Mark Chee is one of the core
investigators behind the technology used at Affymatrix. My impression is that Illumina's BeadArray technology is far superior to Affymatrix's (AFFX). If they can execute and deliver their business plan, they will pass Affymatrix in near future.

Introduction-BeadArray technology
Illumina, Inc. is a developer of next-generation tools for the large-scale analysis of genetic variation and function. It has a patented BeadArray technology. The technology has parallel processing, super high throughput capabilities. This makes it very attractive for large-scale genomic analysis, proteomics, high-throughput screening and chemical detection. The
technology have the potential to solve the complex problems of many different industries, such as Pharmaceutical Discovery and Development; Medicine; Agriculture and Food Production; Chemical and Petrochemical,etc.

The BeadArray technology uses fiber optics to achieve a level of array miniaturization that surpasses the capacity of other technology. This technology has many advantages: (it's somewhat complicated, visit their
website http://www.illumina.com, for details).

1. High capacity: in simplistic terms, Affymatrix make DNA chips by "sticking probes" onto two dimensional, FLAT surface. This restricts number of DIFFERENT probes they can put in a fixed area. In addition, Affymatrix cannot put two probes too close (less than 80-100 microns), since the signals will interfere with each other. On the other hand, Illumina combines fiber optic bundles and specially prepared beads that self-assemble into an array. Since a bead has a "ROUND BALL" shape, the surface area is much bigger than a flat area. Besides, each fiber optic bundles contains thousands of beads, thus, generating "array of arrays". Since their detection method is very specific, Illuminar can put two probes as close as 4-6 microns without interference. Thus, they can put MUCH MORE probes per fixed area, i.e., very high density of test sites per array.

2.Flexibility: the beads can be scaled into large or small format. This is done by putting them into different multiwell plates (them look like flat honey combs made by bees), used as standard format in biomedical research labs. For instance, one can use 96 fiber optic bundles arranged in the standard 96-well microtiter plate. Since each fiber optic bundle performs approximately 2,000 unique assays, one such array can perform approximately 192,000 individual assays simultaneously, By using a standard 384-well and 1,536-well microtiter plates, the Arrays will be able
to simultaneously perform approximately 768,000 and 3,072,000 unique assays, respectively. This is a big advantage, as one can scale it up for pharmaceutical research, or scale it down for clinic labs.

3. Low manufacturing cost: Due to different technology in processing, Illumina can make BeadArray at one-tenth (1/10) cost of Affymatrix array. For a single Affymatrix chip, they need higher redundancy (same probes repeated several times on the same chip) to maintain accuracy of the test. In addition, the rate of "bad chips" at Affymatrix during production is about
40-50%. These all contributes to the high prices of Affymatrix chips. They cannot afford to offer their chips at lower prices! Illumina can offer lower/or
similar prices for much high density and accuracy. This is a big marketing
advantage.

4. Adaptability: In BeadArray technology, one can vary the size, shape and format of the fiber optic bundles. Alternatively, one can generate beads for various applications. Thus, it can be used to address the needs of various industries, such as agriculture and chemical industry.

The management team
I think Illumina has attracted a superb team of management. This is most likely due to their next-generation array technology and prime location in
San Diego. The list of CEO, CFO, VP is very impressive. They all are from big players in the field: PE Biosystems, Molecular Dynamics & Devices, Biogen, Amersham, and Affymetrix, etc. These companies are big,
international biotech companies. The management team has success stories before and could do it again. The fact that PE biosystems has established partnership with Illumina is a very good endorsement. (PE Biosystems is the one that started Celera: CRA).

Finance:
The company reported a net loss of 14 million for the first 9 month of 2000. They have cash and investments totaled $124 million at the end of September. They aim to market several products starting 2001.

Summary
Illumina has a superior, next-generation, patented BeadArray technology. It features high density, flexibility, low cost, and adaptability. This technology is way ahead of other conventional technology by at least 2-3 years. It is adaptable for biomedical/pharmaceutical research, medicine, genomics,
agriculture, and chemical industry, etc. They have enough cash to sustain their operation for at least 3-6 years. They are expected to generate revenues starting 2001. I expect their products to compete well with Affymatrix due to its low cost, superior technology, flexibility, and high capacity.

Illumina has a very experienced management team. Most members have demonstrated track record in biotech field. They should be able to execute their vision.

The fact that PE Biosystems has backed Illumina up speaks highly of the confidences for the technology and their strategy.

The only thing puzzles me is why only 6 millions out of outstanding 31.3 millions shares are being traded (float shares 6.0 million). Maybe they want to keep the up trend much higher by limiting shares on market. This poses certain risk for individual investor, as it is a thinly traded stock. I have not seen big institutional holding of ILMN yet.

On the other hand, I see lots of potentials by owning Illumina stocks.

MaxW.

Disclaimer: After I heard Mak Chee's talk, I sold 1/2 of my AFFX stocks at a profit and bought shares of ILMN.
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