Illumina Inc (ILMN) 2005 Q1 法說會逐字稿

Good day everyone and welcome to the Illumina Incorporated first quarter fiscal year 2005 earnings conference call. This call is being recorded. At this time I’d like to turn the call over to Mr. William Craumer. Please go ahead sir.

Thanks Keith. Good afternoon my name is William Craumer, Director of Corporate and Marketing Communications here at Illumina. Welcome to our Q1 conference call. After the close of market today we released our financial results of the first quarter 2005. During this call we’ll review our results and provide financial guidance for 2005 following which we’ll host a question and answer session. Presenting for Illumina today will be Timothy Kish, Vice President and Chief Financial Officer and Jay Flatley, our President and Chief Executive Officer. The call is being recorded and the audio will be archived on our Web site at illumina.com.

During the call we’ll be providing guidance and discussing plans for future commercial activity. Our intent is for these forward-looking statements to be protected under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risk and uncertainty. Actual events or results may differ materially from those projected or discussed. All forward-looking statements are based upon current information available and Illumina assumes no obligation to update these statements. To better understand risk factors we refer you to the documents that Illumina files with the Securities and Exchange Commission, including forms 10K and 10Q. I’ll now turn the call over to Timothy.

Thanks, William. Good afternoon everyone and thank you for joining us today. I hope that you’ve all had a chance to review our financial results that we released after the close of market about an hour ago. I’d first like to walk you through all the results for the quarter, follow that with an update on our financial guidance for the second quarter and full year and then turn the call over to Jay for some closing comments.

For the first quarter we are pleased to report record revenues of 15.1 million, which is ahead of our guidance of 13 to 15 million and nearly 40% higher than the 10.8 million amount we reported in the first quarter of 2004. We’re particularly proud that this represents our 15th consecutive quarter of sequential revenue growth, which as many of you are aware is somewhat more difficult to accomplish in the first quarter of the year. If you follow the results that other companies have reported in our market space, for example, you’ll generally see that revenues in the first quarter of the year tend to decline from those in the prior year fourth quarter, sometimes by as much as 15 to 20%, so we’re pleased to be able to show real growth over both last years comparable quarter and the fourth quarter of last year.

Our total product and services revenue was 14.9 million, up almost 50% from last year's amount of 10.1 million. We had consistent strength across all of our product lines, especially for instruments and oligos, where we had record a quarter. During the quarter we installed our 10th BeadLab system, which went to the Mayo Clinic and we shipped 13 more bead stations bringing our total installed base to 64. We continue to see strong interest in our instruments, which we expect to accelerate given the launch of our whole genome and gene expression BeadChips in March and the expected shipments of our whole genome genotyping bead chips by the end of the second quarter.

We also saw a number of customers upgrade their systems to handle both more volume and additional applications. Our oligo business began to see the benefit or our Invitrogen partnership even before the formal commencement of collaboration sales, which occurs later this year. A number of large orders were placed with Illumina that we would not have received had it not been for our relationship with Invitrogen.

Our services business continues to bring in a large number of new customers and contracts and sales this quarter of 2.6 million were more than double the 1.1 million amount in the first quarter of last year and as expected the growth in our extolled base of BeadStations is now driving increased consumables revenue. Consumables use on BeadStations now represents almost 40% of total consumable sales with very good utilization rates per instrument given the short time we’ve been selling BeadStation. We expect consumables utilization rates to continue to increase as more customers begin to use the new whole-genome BeadChips that are just now coming to market.

Our cost and product revenue, which includes cost of both product and service revenue was 4.6 million for the quarter, resulting in a product gross margin of 69%. This compares to a product gross margin of 72% in the first quarter of 2004. The reduction in margin percent is driven primarily by the large increase in instrument sales relative to the first quarter of last year, which have lower gross margins than our consumables products and services. In addition, we had some large premium priced oligo sales in the first quarter of 2004, which caused our average selling price for that quarter to be much higher than the more normal prices we had in the first quarter of this year. None of the margin change, however, was related to any unfavorable change in the manufacturing cost structure or our standard pricing schedule for any of our products. We expect that changes in our product sales mix will continue to cause our gross margins to fluctuate generally between the high 60s and the low 70s, but to average above 70% for the full year of 2005.

Turning to expenses, research and development expense for the first quarter was 5.9 million. This compares to 5.2 million in the first quarter of 2004 with 1 notable difference. Following the sale and leaseback of our San Diego facility in August of last year we now have rent expense instead of interest expense on a mortgage and we allocate a portion of that rent to all of our departments, most in which is absorbed by the R&D groups. Note that since the CyVera acquisition did not close until April we will not start incurring expenses for them until the second quarter. Selling, general and administrative expenses were 6.0 million in the first quarter as compared to 5.7 million in the comparable quarter of 2004. We have increased our sales, marketing and customer support staff over 50% since March 2004 and continue to grow our worldwide distribution infrastructure. The increased cost of these items is partially offset by approximately 1.2 million of lower legal costs in the current quarter.

Finally for the first quarter we reported a net loss of $1.2 million or $0.03 cents per share on a basic and fully diluted basis compared to a net loss of 3.9 million or $0.12 cents per share in the first quarter of 2004.

Moving to the balance sheet we ended the quarter with $62 million in cash, about $5 million lower than the ending 2004 balance, so excluding a $5.9 million January cash payment related to the judgment in a wrongful termination case we were cash positive for the quarter by about $1.1 million. We believe we are well positioned from a cash standpoint and we remain debt free.

I’d like to shift now to a discussion of financial expectations for 2005. As you know, we completed our acquisition of CyVera Corporation in early April. CyVera will be operated as a wholly owned subsidiary of Illumina and here’s how the acquisition will affect our financials. The price of the transaction was 17.5 million. As consideration for that we paid 2.3 million in cash and approximately 1.6 million shares of Illumina common stock. We have not yet completed our analysis of the accounting for the acquisition but we expect that a substantial portion of the purchase price will be treated as a one-time in process R&D research and development charge in the second quarter of this year. Consequently the financial guidance for the second quarter and the full year does not yet reflect the impact of this charge or any other one-time cost associated with the acquisition. It does however reflect our estimate of the ongoing operating expenses for CyVera, almost all of which are R&D costs.

So with that caveat in mind we are reaffirming the financial guidance for the full year 2005 that we provided last quarter. We expect total revenue for 2005 to fall in the range of 75 to 82 million. We anticipate that our system sales will nearly double, which should in turn drive a substantial increase in consumable sales. We continue to expect that our revenue growth will be fairly backend loaded, as a significant portion of our revenue target is related to shipments of our whole-genome BeadChips for both gene expression and genotyping. We expect no material revenue from CyVera in 2005.

Full year EPS guidance is the same as we provided last quarter, a range of minus $0.14 cents to minus $0.01 cent. For the full year we continue to expect to expect R&D expenses in the range of 28 million to 30 million and SG&A expenses between 31 million and 33 million. For the second quarter we anticipate that total revenue will range from 15.5 million to 17.5 million, driven principally from growth in consumables revenue as compared to the first quarter of this year, partially offset by lower anticipated service revenues due to completion of the HapMap project.

Second quarter EPS should range from minus $0.08 cents to minus $0.04 cents, as the R&D will now include the impact of the CyVera operation. Full year and second quarter guidance amounts are both based on approximately 40 million shares, which includes the shares issued for the CyVera transaction. Cash burn for the full year is expected to be in range of 15 million to 18 million, including 5.9 million for the legal judgment and approximately 8 million related to the CyVera acquisition. I’ll now turn the call over to Jay for additional comments before we begin Q&A.

Thanks Timothy. Good afternoon everyone we appreciate you joining us today. I would like to summarize a few of Illumina's key accomplishments so far this year and provide detail behind some of our more important ongoing initiatives. As Timothy indicated, Q1 was another very strong quarter for Illumina. In addition to the instillation of our BeadLab at the Mayo Clinic, we are very pleased to have sustained our high level of BeadStation shipments. Customers are typically buying the higher priced, fully featured configurations that allow them to run both genotyping and expression applications, as well as the newer protocols, such as the DASL assay that we launched in January. Most of you know that we began commercial shipments of our Sentrix whole-genome expression BeadChips just before the end of the quarter. These new products-- we call them the Human 6 and the Human rough [ph] 8 enable parallel analysis of multiple whole genomes on the same micro array device. Researchers have never before been able to do this. Performance and price points for these products are generating significant interest in the marketplace. Recent head-to-head comparisons with those of competitors are validating the exceptional performance of these arrays.

A key contributor to our revenue in the second half of the year will be our new Infinium [ph] assay and the related BeadChips which we plan to launch before the end of the second quarter. The Infinium assay enables whole-genome genotyping with virtually unconstrained selection of snip markers and multiplex levels that are limited only by the number of beads on the BeadChip. Our first Infinium product will contain over 100,000 markers, nearly 30,000 of which are located in genes. By the end of the year we expect to launch a second Infinium product with 250,000 markers largely derived from the so called tag snips identified during the HapMap project and in March we announced the goal of introducing a pair of BeadChips containing 1 million snips by the middle of 2006.

I’d like to comment briefly on the evolution of our customer mix. To date our system sales have been biased heavily toward academic institutions and research institutes. This has been due at least in part to the fact that the pharmaceutical industry has chosen to conduct much of their genotyping as a service. The launch of the whole-genome expression arrays last quarter, as well as other new applications will begin to open up the commercial markets more broadly to the internal use of Illumina technology. As an example, in the first quarter we took an important step with the sale of 3 Bead stations to 3 different sites of Roche Pharmaceuticals. We expect those sites to use the systems for DASL, focused expression and genotyping applications. We are excited by this development as it demonstrates the advantage that our multiple application strategy brings to penetrating the market and building the installed base.

In April we completed the CyVera acquisition and we’re working quickly to integrate the team, technology and systems into Illumina. We’re already working closely with CyVera to identify and negotiate collaborations and partnerships with firms who can work together with us to enter the emerging molecular diagnostic market.

We’ve invested significant resources developing our key competencies and fine-tuning our manufacturing infrastructure to support our broadening portfolio of products. We expect to accelerate cycle times for new product development by leveraging that infrastructure. For example, we plan to develop and ship 2 additional whole-genome expression products in 2005, one for mouse and one for rats. We’re very proud of our manufacturing capabilities and we’re continuing to build disruptive capabilities there, such as our fourth generation oligo synthesizers. When commissioned in the next few months, these two units will be capable of supplying the oligo requirements of the entire industry. We’re building these units as part of our global oligo collaboration with Invitrogen. We’re on track to kick off the commercial phase of this agreement at the start of Q3. In this phase we’ll turn over all oligo sales and marketing responsibility to Invitrogen, while we assume all manufacturing responsibility for both plates and tubes. We continue to believe that we’ll jointly deliver increased value and service to this market and in doing so we expect to generate significantly more revenue and profit than either Company could have done independently.

Finally, I would like to update you on the status of our CFO search. Timothy Kish has informed us that his last day as an employee of Illumina will be this Friday, April 29th. Timothy has agreed to provide limited consulting services to the Company as required. We’re certainly disappointed that Timothy will be leaving us. We thank him for the significant contributions that he’s made to Illumina over the last 5 years and we wish him the best in whatever endeavor he pursues.

We’re delighted today to announce that we have appointed Christian Henry as the Company’s new CFO. Christian has most recently been CFO of Tickets.com and previously spent 4 years in the number two financial role at Accumetrics [ph] holding the title of VP of Finance and Corporate Controller. We expect Christian to become a full-time employee of Illumina around June 6th. I think we’re now ready to take questions. Operator, will you please explain to the listeners the procedure for Q&A?

[Operator Instructions] We’ll go first to Quinton Lye [ph] with Robert W. Baird [ph].

Thank you for taking my call. Congratulations on a nice quarter and hey good luck, Timothy, in the future. First question, as I look at your Q2 guidance and the revenues of 15.5 to 17.5 million, how can I compare that with last years guidance, last year's numbers of 11.5 considering that a lot that was HapMap and in this next quarter won’t be HapMap? Could you help me get to kind of apples to apples comparison of what you’re expecting to see for Q2 growth?

Let me try to see if I can answer your question, Quinton. I think what we’ve said is that our last year's revenue component due to HapMap was about 30%, so that yields about $15 million of total revenue. So one way you could sort of get at that number is to assume it was linear and so subtract one fourth of the 15 million from our Q2 number last year and that would give you a ballpark assessment of what you’re trying to get at.

All right so, Jay, what you’re looking for is pretty dramatic increase in year-over-year in Q2. Is that based off of just the consumable pull through with BeadStation and how much expectations are you putting in with respect to just the new launch of your new genome expression chips?

Well, it’s an across the board effect, so we will continue to have increased system sales and we feel pretty good about how BeadStation sales are going. Certainly our services business, if you take the HapMap portion out of that and you talk about our genotyping services we have continued to do very well in the services part of our business and are continuing to build an increased backlog there and we see strength in our oligo business. So all of sort of the base components we think are continuing to improve and then we layer on top of that sales from our gene expression chips and the beginnings of the launch of the whole-genome chips and so I think all of those factors will combine to provide the growth that we’ve guided to.

As you’ve seen pickup with respect to commercial purchases of BeadStations are we in a situation yet where we can start talking about backlogs for BeadStation and how much capacity do you have for BeadStation manufacturing?

I don’t think we’ll get to the point where we start talking about backlogs. It’s not our intent to provide information about our backlog, but I think that our manufacturing capacity has enough head room to deal with you know a pretty broad range of our internal forecast, so we’ve built our capabilities sufficient that we can ramp up in a 3 to 6 month time frame to any sort of reasonable expectation.

All right thank you. I’ll jump back in the queue.

Adam Chazan with Pacific Growth Equities.

Hey guys thanks for taking the call. I was hoping you would be able to answer some questions. You know we are one year into the BeadStation launch and you’ve recently rolled out the fixed content arrays and we’re starting to see the rev in consumables. I mean how is this kind of played out versus plan? What are the expectations? I know we’re thinking of a back end acceleration due to consumables as the installed base grows. You know just curious to get your take on the developments to date and how much of that is really driven by fixed content overall?

I think the numbers of BeadStations have actually exceeded our plan. If you look at our internal budgets for last year we did better in BeadStations than what we had expected. This year a little to early to give any sort of information on that. In terms of consumables I think we’re doing very on the consumable side. There’s probably a broader distribution that maybe we'd have expected, some using lower levels of consumables and some using much higher levels of consumables on BeadStations so then deviation is pretty high, which is why it’s tough to use the average as a predictor, but overall we’re pretty pleased with that and we think as Timothy indicated in his comments that the advent of the whole-genome chips will begin to increase the average consumable rate and also will accelerate how fast that ramps up after the placement of the BeadStation and that’s because in the custom genotyping world once a BeadStation is installed then there’s a project design cycle and a design of an oligo pool and it takes a while for the BeadStation to ramp-up to do a genotyping project. Not so with the whole-genome chips. They can run on the first day the system is installed.

Right, right. You know the service funnel, so you added 21 deals currently. I mean what does that look like in terms of just backlog if you can comment on that at all? I know there was a sizeable bump at the end of the year.

Yes. Again we’re not going to comment specifically on backlog, but I can sat that our guys in the services group are having to work really hard to keep-up.

Okay and then lastly, actually two quick questions. Thoughts on just the changing landscape in the oligo business and how your partnership with Invitrogen might help you kind of address what’s going on out there you know with a ProLigo [ph] being acquired by Sigma [ph] in the quarter and then just before I get off I’ll drop one more question, thoughts on recent FDA guidelines and what that might mean for your business over the course of this year and going forward?

You know in terms of change in the oligo landscape it’s a little early to tell what the precise impact of our partnership with Invitrogen is going to be since we haven’t really entered the commercial phase of that yet, so in a couple of quarters I think we’ll know a little bit more about how the market has reacted. I think from our own perspective we’ve seen in the plate side of the business prices are relatively stable there now. We believe we continue to grow market share in the plate part of the business and we continue to be optimistic about our ability together with Invitrogen to make significant penetration into the tube market beyond what Invitrogen could have done alone.

Any thoughts you know FDA guidelines as they’ve kind of been cemented to date? You know does that change how customers might be thinking about incorporating the technologies going forward? Is there any change to sentiment out there that you can detect?

We certainly think so. You know everybody has know about this for over a year and I think the final guidance was about what most people expected, so there were no real surprises in the guidance. I think if you talk to pharmaceutical company executive’s today they’re all thinking about how it is they are going incorporate genomic technologies increasingly in the clinical setting and the guidance certainly gives them a much broader ability to do that in a safe harbor if you will to do it and so I think it opens up a much broader market opportunity for us and for others.

Good. I’ll get back in the queue.

[Operator Instructions] Constance Shia [ph] with SG Cowen.

Thank you for taking my question. I just had a couple questions. The first one is regarding the uptake of your DASL assay. Have you had any customer feedback and are you starting to book orders for that?

Yes we have had customer feedback. We’ve done a number of installations and the feedback so far has been just terrific. We’re really pleased with that and so we’re optimistic about how that’s going to go. It is a marketplace that doesn’t really exist in a way today and so in that sense we don’t expect an explosive uptake of DASL because customers need to get used to the fact that this assay does exist and can provide the type of data that we’ve shown, but having said that we think that the performance of the assay is terrific and it’s going to open up a very large market opportunity in the future.

Okay thanks and then the second question I had was that with the launch of your whole-genome expression arrays you are facing a lot of entrenched competition from competitors such as Affemetrix. What type of sales and marketing efforts have you put in place to kind of enter into that business, penetrate?

Our entire sales force is focused on selling expression technologies now as well as genotyping and we have a number of strategies that are in place in terms of how we’re going to penetrate this market and certainly there are quite a number of customers who have continued to use home brew arrays and we think that at the price points that we are now able to offer commercial grade whole-genome chips that that market becomes widely available to us. We also have adopted a number of marketing strategies that I won’t go into the details of, but these are strategies that allow us to enable customers to use these chips and acquire the capital equipment in various ways to sort of get them over the hurdle of buying the system. The other factor, of course, here is that with the price difference between our chips and those of our competitors the system payback is very rapid, so they don’t need to use many chips before they’ve actually offset fully the cost of buying the capital equipment.

Great. Okay, so you’re talking about discount incentives for the new users?

We won’t be offering large discounts but we certainly are doing things like providing the ability to rent systems. We are running an in house, we call a CSE program that lets customers send samples into Illumina so we can run them and provide the data to demonstrate how well the chips work, so there are strategies such as those that provide customers a way to get data on their particular samples very quickly without having to buy the capital equipment.

Okay great and lastly can you offer us anything more about the CyVera acquisition? You discussed that you were looking into potential partnerships for molecular diagnostics applications.

CyVera was in discussion with multiple potential partners before the acquisition and we have picked-up on all of those discussions and certainly added a few more. As you might expect these types of negotiations take many months and so we don’t expect to announce any of those in the next quarter or so, but beyond that I think that we have the potential to couple up with an number of companies that would help us bring this technology very aggressively into the molecular diagnostics market. In terms of integration with CyVera that’s gone very smoothly. We’ve become fully engaged in the product development with them and they’re beginning to use other resources and technology that’s available here at Illumina to accelerate that product development.

Great. Thank you so much.

Quinton Lye with Robert W. Baird.

Hi. A follow up question with respect to what you’re seeing with respect to demand on the US and International?

We continue to see pretty consistent growth and sales over I would say the last 4 or 5 quarters now, Quinton. It’s pretty close to 50/50 and we’ve not seen any change in the dynamics of that and we’re seeing very constant interest in BeadStation, both internationally as well and the US, so I would say it’s you know the strategy of putting our sales offices both in Europe and in Asia and going direct in those markets early on is paying off very nicely.

Okay and my last follow-up question, in the updates with respect to the litigation with Abby [ph]?

There’s been virtually no developments on that front whatsoever, so we don’t have a fixed trial date, nor do we have any hearings scheduled with the judge at this point, so there’s really nothing has been scheduled to date.

Thank you.

[Operator Instructions] Steven Rosten with Glenn Capital Management.

Yes. Please a couple of questions. You had very good progress on your consumables. Can you talk-- I couldn’t quite hear what proportion of your consumables was coming from BeadStations and could you also elaborate as you go forward your proportion of consumables you think might come from which source and then I have a couple of other questions?

Yes. About 40% of our total consumables came from BeadStations. We won’t necessarily break out that information in the future unless it’s notable enough for measuring progress along the particular vectors or that we want to make sure that information is out there, but it was 40% in the last quarter. It’s grown continually and pretty quickly we think over the last 3 quarters. Again, we’ve only been out in the market for-- this is now the fourth real quarter of real sales with BeadStation, so we’re pleased with that and I might add that you know since we’ve said all along that we think the worldwide market Bead labs is roughly in the range of 20 systems and we have 10 of those already installed that the growth and the install base of Bead stations will for obvious reasons be much, much faster and that we’ll probably crossover in the consumable tracking in terms of absolute dollars relatively soon, in terms of BeadStations becoming more a higher number than the BeadLab.

Okay that’s helpful. In terms to your sales teams, can you talk about how many sales teams you have and where you intend to go in terms of number of sales teams by the end of the year?

We have about 25 direct sales and coming up on about 30 direct technical support people who either field application specialists and technical specialists, so in combination about 55. For the entire year we expect to grow our field force about 50%, so you have to take out what we’ve already done this year from the numbers I just quoted you, but that would mean that our ending numbers in sales and direct support would be somewhere in the 70 to 75 area and we also are continuing to add some distributors to the distribution channel as well.

And would that be about 35 direct sales people and about 35 to 40 technical specialists by the end of year? That’s the general idea?

Yes. That’s about right.

And then on the services side of the business can you just talk a little bit about the trends that you see? You commented upon that in the past and some of the trend that you see, both in terms of academic and pharmaceutical and other uses of your services?

Trends in what respect Steven?

Just in terms of what you’re seeing what you’re seeing in terms of what kind of projects you’re being asked to do, if those are larger projects, if those are sort of testing projects before customer decide to bring in and have kind of a trail period? Just what you’re seeing the services used for and what’s growing powerfully and what’s not?

Early on in our services business we allowed small projects to come in because we were at that point validating the quality of our service work and also providing in many cases direct demonstrations to the customer that validated our capabilities against their samples. Over time what we’ve done is raise the dollar limit because we don’t want to take on a lot of very small contracts so that dollar limit has continued to increase and we probably will continue to do that, so I’d say the average size of our contracts is probably going up some. Having said that the distribution is still pretty large from contracts of 100,000 or somewhat less, up over $1 million, so it’s a pretty broad distribution in terms of actual dollars. In terms of the scientific component of the contracts we’re often blinded to exactly what the science is, so we don’t even know what’s in the samples that get sent to us and that’s typically how the customers like to operate.

And I guess the other question is what is really driving them coming to you for what purpose now and what purpose do you expect as you ramp up?

I see. Well they come to us because genotyping in particular tends to be very project focused, so if you look at any given group that was studying A to Zs they might have a collection of 400 samples that they want to analyze over some part of the genome and once that project’s finished they might spend a year doing other related tasks once they got that data back in addition to doing data analysis, so they may not be genotyping for a year. And so given that project profile it probably doesn’t make sense for them to buy a system and so that’s typically why customers come to use for use of genotyping services and we think that’ll continue. We’re also certainly seeing increased consortia forming and I think we’ve now identified about 40 of these worldwide where groups around the world have taken their sample collections and have agreed to put them into one bigger collection to improve the statistical power of the study and then to run that larger group of samples either with us or with others and we think that’s a very powerful trend in favor of the service business.

And then one final question. You had a nice sale of 3 systems to Roche for 3 different uses. Can you talk a little bit on where you see Pharma [ph] first really trying to use the systems that you provide? What do you provide the most value to Pharma over the next 6 to 9 months.

I guess it would be hard answer that with a pinpoint answer because it would depend on both on the Pharma company and the group within the Pharma company, so if you look at DASL as an example for those research groups that have paraffin embedded samples and want to get information out of those and correlate them to clinical outcomes they have no other good way to do it and so we bring enormous value to a group that has that objective. For groups that are looking to do whole genome expression studies with the pricing of our chips they now have the ability to more than double the amount of science they do for a fixed budget and so if you were in a Pharma company, even an academic setting, and you have a grant we can more than double the amount of data that you can get in the expression in the whole-genome expression area. So I think the answer is that we provide value across very broad fronts and our multiple application strategy allows us to enter the pharmaceutical and biotech firms through many, many angles and many departments.

Thank you.

We’ll go next to Brad Stevens [ph] with Steven Investment Management.

Jay Bart and Brad Stevens here. Just a follow-up on the last question, is this the deal with Roche or the 3 shipments to Roche. Is this within a diagnostics arm of Roche or Roche proper and do you see this as them kind of trying out the technology or potentially could expand to a larger relationship?

It’s in Roche pharmaceuticals and we certainly hope it could expand to a larger relationship. They, as I mentioned in my remarks purchased 3 systems and they’ll be doing at least 3 different applications on those systems. We believe they’re going to be delighted with the data that they generate and over time we’ll see increased consumables and hopefully a proliferation of BeadStations in other parts of Roche for those applications and others.

Great. Thanks guys.

We’ll go next to Adam Chazan with Pacific Growth Equities.

My question has already been answered. Thanks very much.

[operator instructions] Ladies and gentlemen, this does conclude today’s question and answer session. At this time I’d like to turn the conference back to Mr. Craumer for any additional or closing remarks.

Go ahead, Jay.

We just wanted to thank everybody for joining us on this first quarter conference call and we look forward to continuing to work with you in the future. Thank you very much.

Ladies and gentlemen this does conclude today’s teleconference. We appreciate your participation and you may disconnect your phone lines at this time.

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