On August 11, 2022 (CST), Illumina released its unaudited Q2 2022 financial report, recording the first loss in a second-quarter report in five years (only reviewed financial reports up to 2018... apologies). The quarter showed a loss of $535 million, compared to a net income of $185 million in the same period last year, marking a significant gap.

On Friday, the 12th, the market plummeted before the opening, with a decline of over 15% at one point. However, it rebounded a bit after the opening. It remains to be seen whether it will level off by the closing.

The life science industry has had a tough time recently~ The last one to crash was Quanterix (the company with the Simoa technology) three days ago, which was even more dramatic, with a single-day drop of nearly 55%... In comparison, A-share investors got off relatively lightly.

    I believe everyone has seen the news through various channels, but we are different; when eating melons, we must eat the authentic ones.BelowLet's break down Illumina's earnings report for this quarter.

Let's follow Illumina's Earning Presentation to review Illumina's extraordinary Q2 earnings report, and take the opportunity to dissect the untold secrets behind each slide.

Let's welcome CEO Frank with a warm round of applause.

   Illumina's sequencing market in Q2 2022 remained strong, with a total revenue of $1.16 billion. In comparison, Pacbio's $35 million in revenue seems hardly worth mentioning.

Although 3% may seem insignificant, it appears acceptable when compared to the performance of previous years.

The table above summarizes Illumina's Q2 revenue over the past five years. It shows that 2020 saw significant fluctuations due to the pandemic. However, if we average out the Q2 revenues over the five years, it seems to be acceptable.

The CEO stated that the shipment volume of NovaSeq reached a record high this quarter, recording a 23% year-on-year increase, while the relatively lower-throughput products saw almost no change.

    This PowerPoint presentation focuses on showcasing Illumina's achievements in the field of oncology/clinical domain. As I mentioned in a previous article (perhaps), Illumina is becoming more like BGI, directly stepping into the clinical testing field, shedding its disguise and fiercely competing with its own clients for market share.At least BGI Group spun off MGI Tech, while Illumina didn’t even bother.

This slide is about GRAIL, nothing much to see. In all likelihood, the merger of the two will be rejected. Even if it isn't rejected, let's take a look at GRAIL's current performance:

How about losing $187 million in a quarter?

   In the pathogenic microorganism and scientific research market, Illumina is very powerful. Okay, got it. Companies working on pathogenic microorganisms, take note—maybe... hehehe (Illumina already bought IDbyDNA, didn’t they?). Next, it’s time for the CFO to step in.

    Damn, is the CEO going offline already? Shit... P.S. This guy wasn’t the CFO in Q1, seems like it's not easy being the CFO of Illumina, Inc. either.。

The first two pictures don't have much to say, I don't understand the financial rules... just put them up for everyone to take a casual look.

Let's mainly take a look at this one.

    It can be found that the United States is still its main source of income, while Greater China has pulled 10%. Illumina’s team is surely feeling the pressure. With MGI sequencers being approved for use in Europe and the Americas, hehehe...

There's nothing much to say, spending more money, reduced profits. 70% gross profit, my friends, investing in science is great.

Grail, which doesn't make much sense,Earned $12 million, spent $156 million, mainly on personnel and clinical trials. Bosses in China who want to pursue early screening, think twice.

From the Earing Release, it appears that Grail has accomplished quite a bit, including large-scale clinical trials involving 140,000 participants.

This picture actually says one thing: Money is no object.

    A rather fatal chart... Compare the 2022 guidance as of 2022Q1.

    Revenue target directly reduced to one-third of the original, with a 4-point drop in profit margin guidance and EPS nearly halved. It can hardly be considered good news.

    After looking at so many slides, have you noticed that neither of them mentioned a loss this quarter? Sneaky~

So, why is Illumina losing money? Because of BGI... and the fines in Europe.

  The amount included in Q2 2022 is $609 million, comprising a provision of $453 million for potential European fines and $156 million for the settlement with BGI.

   To be honest, if I were the CEO (let me dream for a moment), I would definitely not reconcile with BGI, let the lawsuit continue indefinitely~

Illumina, Inc. personally believes that there are currently a few challenges:

1. Whether GRAIL can merge smoothly and consistently generate positive profits;

2. How to face the competitive pressure from local brands like Ultima, Element, and Singular in the next-generation sequencing field, as well as pressure from Chinese brands such as MGI Tech, MGI Innovations, and GenoCare? Especially given that MGI Tech has pursued internationalization from the start, clearing obstacles for its North American expansion, which will pose a significant challenge to Illumina;

3. TSO and other tumor kits have directly entered the market, impacting their original downstream users and pushing them towards other brands. In the clinical field, apart from the heavy spending, each market has its own unique situation, which not only increases Illumina's investment needs in the clinical sector but also makes it prone to "failures."

4. The pressure from third-generation sequencing, especially nanopore sequencing. ONT, the high-tech company from the British Empire, aside from being adept at filing complaints, is also in a constant sprint phase with its nanopore sequencing—might as well just buy a company.

5. Overemphasis on the accumulation of "soft power" has led to the decline of originally leading hardware. MGI Tech is making impressive progress with its combination of laboratory automation equipment, single-cell sequencing platforms, sequencers, and BioIT, which is likely to gradually form a barrier. It's time to wise up.

However, a lean camel is bigger than a horse, and not everyone can achieve a quarterly revenue of $1.16 billion.