Roche takes aim at Illumina's dominance with new gene sequencing machine

By Bhanvi Satija and Marleen Kaesebier

LONDON/ZURICH, June 29 (Reuters) - Roche launched its next-generation gene sequencing machine on Monday, marking a bid by the Swiss drugmaker and diagnostics group to loosen U.S.-based Illumina's grip on genetic-testing and research technology.

Roche said it was rolling out the Axelios gene sequencing machine to targeted research-focused facilities first because it wanted researchers to adopt and build applications for the new technology before moving to clinical versions.

The company tried and failed to take over Illumina, in a $6.8 billion hostile bid more than a decade ago.

Roche has since been expanding its footprint in the $7.3 billion gene-sequencing market through partnerships and investments in next-generation equipment that decodes DNA and ribonucleic acid (RNA) for applications including medical research, disease detection and drug development.

Unlike traditional short-read sequencing systems, Roche sid its Axelios equipment converts DNA or RNA, into longer molecules that are easier to read, then passes them through tiny pores on a reusable chip to generate genetic data that can be analysed in near real time.

The technology could help Roche gain share in an expanding market rather than making this "a knife fight" for a limited pool of customers, Evercore analyst Vijay Kumar said ahead of the launch.

QUESTIONS ABOUT WIDER ADOPTION

Roche expects to sell around 100 Axelios machines in the first year and hopes it will lay the foundation for a blockbuster franchise generating more than 1 billion Swiss francs ($1.1 billion) in annual sales over the long term, which analysts said was largely achievable.

Illumina's NovaSeq X machines list at roughly $985,000 to $1.25 million, while Roche's Axelios is priced at $750,000 in the United States.

Analysts said Roche faced a long battle to challenge Illumina, which they estimate dominates 70% of the market. They questioned whether the new technology would be widely adopted after testing in research settings.

"You know exactly what you're dealing with Illumina for 20 years, the software, the kind of error profiles," said Kumar, who does not cover Roche.

"The bar has to be very, very high."

The Functional Genomics Center Zurich, which works with the University Hospital Zurich, has six Illumina sequencers and one from Element Biosciences.

Catharine Aquino, head of its genomics units, said larger labs like theirs would likely run Roche's equipment alongside existing devices before deciding whether to move projects to it.

Much of the market will wait for early adopters' feedback before switching, she said.

"It's like a phone - like Android or Mac. If you're used to Mac, you cannot just switch to Android... you have to install your apps and all these things."

(Reporting by Bhanvi Satija in London and Marleen Kaesebier in Zurich; Editing by Louise Heavens and Emelia Sithole-Matarise)