Illumina Teams With Equity Firms to Create Consumer Genomics Data Company

Illumina is betting big on the consumerization of medicine and molecular data. But it isn't going it alone.

Along with private equity firms Warburg Pincus, Sutter Hill Ventures and both a clinical and financial hand from the Mayo Clinic, the San Diego-based Illumina has created Helix. Based in San Francisco, the new company will create and provide consumer-friendly sequencing and database services.

The move comes as more laboratories are positioning themselves to not only provide test results directly to consumers, but also crunching genomic data to help predict any health issues they might encounter as they age, or provide guidance for treating cancers or other serious medical issues that might arise during their lives.

Altogether, Illumina and its partners have committed more than $100 million to get the company off the ground, although no one at Helix would disclose the amount each party invested.

"Genomics is reaching an inflection point in cost, volumes, and knowledge, creating a significant opportunity to unlock information that is currently not widely accessible to individuals," said Illumina CEO Jay Flatley in a statement. "Helix and its founding investors are committed to creating a neutral platform at the highest quality standard that will work with partners to accelerate consumer adoption of genomics."

Mayo's Center for Individualized Medicine will work with Helix to develop applications initially focused on educating consumers and satisfying queries they make about their health. North Carolina-based LabCorp will also lend a hand in the new company, providing analytic and interpretation services focused on genetic conditions that can be medically treated or addressed. LabCorp is not investing in the new venture.

According to Justin Kao, a Helix senior vice president, the company will begin offering services to consumers by the second half of next year. Although he declined to provide specifics about the services that will be offered directly to consumers in an interview, he was certain they would be priced in a highly competitive manner.

"We want these to be consumer-friendly prices," he said, adding that partners would drive pricing, but that prices in the $99 to $199 range per service would be likely for initial products, and the potential for much lower cost applications also exist.

Flatley will serve as Helix's chairman. Helix will be run from San Francisco, but its laboratory team will be based in San Diego. It is currently trying to fill nearly 20 positions, including a director of business development and marketing. Kao believes there will be as many as 100 employees hired during Helix's first year of operations.

While the company will be semi-autonomous, its operations will be consolidated into Illumina's financial statements. It is initially expected that the Helix venture will lose money, as Illumina has forecast it will dilute its own earnings by about 10 cents per share in 2016, or roughly $15 million.

"We view (the) announcement as similar to a reasonably sized venture investment in a central/clinical lab ... with the hope of further catalyzing demand for consumer- based genomics (while also retaining distinct control over the ecosystem)," Analysts Ross Muken and Michael Cherny wrote in a report for Evercore ISI detailing the new venture. "Long-term we see partnering with leading clinical organizations such as LabCorp and Mayo as well as well recognized financial backers such as Warburg Pincus and Sutter Hill as a clear positive as the market developments (first mover advantage in potentially sizeable market), although we also see a complicated regulatory landscape ... as the key limiting factor near-term.

Kao would not say whether Helix planned to offer any prognostic services, which would likely require approvals from the U.S. Food and Drug Administration.

Takeaway: Illumina, which has had huge success with laboratory testing and product distribution, has made an ambitious leap into the direct-to-consumer testing market.