(Reuters) - Shares of Illumina Inc (O:ILMN) rose 14 percent in premarket trading on Tuesday, after the maker of products used for genetic analysis launched its newest gene-sequencing platform, prompting a slew of analyst price target increases.
The company on Monday unveiled its NovaSeq sequencing platform, which is expected to deliver three-times faster and 20 percent cheaper sequencing than its existing models.
Gene-sequencing is used to analyze the human genome and can be used to identify inherited disorders, characterize markers of disease progression and for tracking disease outbreaks.
A complete replacement of sequencing instruments used by Illumina's current customers represents a $2 billion opportunity alone, and the company believes the lower price could drive further market expansion, Barclays (LON:BARC) analysts said.
It took government-funded scientists $3 billion and 13 years to sequence the first human genome by 2003. In 2014, the cost was closer to $1,500 per genome.
In the same way that Illumina's HiSeq X enabled the $1,000 genome, future systems derived from NovaSeq architecture could enable the $100 genome, Chief Executive Francis deSouza said.
Adding further capacity - even with a major upgrade - is unlikely to lift demand, especially from customers that are still struggling to meet margin targets and find it hard to fork out $985,000 for NovaSeq, Leerink analysts said.
Whether Illumina, which also disclosed a partnership with IBM's (N:IBM) Watson unit on Monday, could return to robust instrument growth has weighed on the stock through 2016.
In October, the company's stock plunged 25 percent on a weak third-quarter forecast. Overall, its shares lost a third of their value over the course of the year.
Last January, the company announced it was forming a new company called Grail to develop a universal blood test to identify early-stage cancers in people with no symptoms of the disease. http://reut.rs/2iAl0eJ
Coupled with Grail, as well as the ramp up of several new precision medicine initiatives, we believe Illumina has the pieces in place to return to mid-teens organic revenue growth by 2018, Bank of America Merrill Lynch (NYSE:BAC) analysts said.
They upgraded the stock to "buy" from "neutral" and raised the price target to $175 from $145.
As part of the J.P. Morgan healthcare conference, the company forecast fourth-quarter sales of $619 million, about $6.5 million above Thomson Reuters I/B/E/S estimates.