Good day, ladies and gentlemen, and welcome to the fourth quarter 2021 Illumina earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would like to now pass the conference over to Sally Schwartz, Vice President

of Investor Relations. Good afternoon, everyone, and welcome to our earnings call for the fourth quarter and full year 2021 during the call today we will review the financial results released after the close of the market and offer commentary on our commercial activity after which we will host a question and answer session if you have not had a chance to review the earnings release it can be found in the investor relations section of our website at illumina.com Participating for Illumina today will be Francis D'Souza, President and Chief Executive Officer, and Sam Samad, Chief Financial Officer. Francis will provide an update on the state of Illumina's business, and Sam will review our financial results, which include GRAIL. As a reminder, pending the outcome of the European Commission's investigation into Illumina's acquisition of GRAIL, the Commission has adopted an order requiring Illumina and GRAIL be held and operated as distinct and separate entities for an interim period. Compliance with the order is monitored by a monitoring trustee. During this period, Illumina and GRAIL are not permitted to share confidential business information unless legally required, and GRAIL must be run independently, exclusively in the best interest of GRAIL. Commercial interactions between the two companies must be undertaken at arm's length. This call is being recorded, and the audio portion will be archived in the Investor section of our website. It is our intent that all forward-looking statements regarding our financial results and commercial activity made during today's call will be protected under the Private Securities Litigation Reform Act of 1995 Forward-looking statements are subject to risks and uncertainties. Actual events or results may differ materially from those projected or discussed. All forward-looking statements are based upon current available information, and Illumina assumes no obligation to update these statements. To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that Illumina files with the Securities and Exchange Commission. including Illumina's most recent forms, 10Q and 10K. With that, I will now turn the call over to Francis.

Thank you, Sally. Good afternoon, everyone. I'm excited to share with you how our commitment to innovation is driving growth and unlocking the power of the genome. My comments will cover a few key areas, starting with our strong finish and exceptional results for 2021, followed by how our platforms and markets drove those results. I'll then conclude by highlighting a few of the many trends that will support our momentum and continued growth in 2022 and beyond. Let's start with our financial results for both the fourth quarter and full year 2021. Fourth quarter revenue of approximately $1.2 billion increased 26% year over year, with strong growth across both instruments and consumables, and across all regions. Full-year 2021 revenue of more than $4.5 billion increased 40% year-over-year, reflecting 76% growth in sequencing instruments and 43% growth in sequencing consumables. We're seeing record demand for our instruments across the throughput spectrum and across geographies. In 2021, we shipped more than 3,200 sequencing instruments and added more than 930 new instrument customers, over 50% more than in 2020 or 2019. Delving now into each of our platforms, starting with high throughput, we shipped 384 NovaSeq units in 2021, with more than one-third of those instruments for oncology testing. Approximately 50% of NovaSeq orders in 2021 were to new to high throughput or new to Illumina customers. 2021 NovaSeq consumable pull-through of more than $1.3 million per instrument was the highest ever average, even with over double the placements compared to last year. Moving to mid-throughput, in 2021, we shipped more than 1,100 NexSeq systems, surpassing 1,000 for the first time, and nearly doubling 2020 shipments. This volume was driven by growing NexSeq 550 demand in clinical applications like oncology testing and reproductive health, as well as NexSeq 1000 and 2000 demand as customers expand into multi-omic applications. More than 20% of NexSeq 1000 and 2000 units this year were placed with new to Illumina customers as we continue to see new customers using higher throughput applications. For low throughput, in 2021, we shipped more than 1,600 units, another record, driven in part by the addition of more than 700 new customers. Looking at our continued strong growth through the lens of our market, our clinical markets currently include testing for oncology, reproductive health, and genetic disease. In 2021, our consumable shipments to clinical markets grew 42 percent, driven in particular by oncology testing, where many customers are building out Comprehensive Genomic Profiling, or CGP, and expanding into liquid biopsy and monitoring. We continue to see expanding opportunities for our oncology products globally, including new studies launching in Europe and Asia, with our research use only TruSight Oncology 500 assay. For example, our recent joint research project with the National Cancer Center Japan will We'll develop personalized cancer treatments for patients with nasopharyngeal carcinoma, a cancer that occurs more frequently in Asia. And our partnership with the Jean Perrin Center at the Clermont-Ferrand University Hospital in France will assess the clinical value of CGP in patients with late-stage disease compared to the current standard of care. Also in oncology, GRAIL continues to see strong momentum. GRAIL launched the GALLERY test last year as the first clinically validated multi-cancer early detection test to be available to patients and providers. GALLERY can detect more than 50 types of cancer, most of which have no current screening. It's great to see the initial market reception, with multiple large employers and payers adopting gallery, and more than 1,500 prescribing partners, including participation from leading health systems like the NHS, the Mayo Clinic, and the Cleveland Clinic. The team continues to collaborate with pharmaceutical partners like AstraZeneca, Amgen, and Bristol Myers Squibb on potential new innovations in the post-diagnostic space. Finally, the recent initiatives launched in the U.S. and EU to beat cancer are very encouraging. The U.S.'s Cancer Moonshot National Initiative and Europe's Beating Cancer Plan highlight the increasing recognition of early detection as a critical component in the fight against cancer. Illumina is deeply committed to supporting all early detection, oncology testing, and treatment initiatives to improve care and save lives. Beyond oncology, reproductive health also had a strong year in 2021. This was driven in part by Revised American College of Obstetricians and Gynecologists, or ACOG, guidelines enabling genetic testing coverage for all U.S. pregnancies, as well as increasing adoption of our VeriSeq NIPT V2 product globally. Our third clinical market, genetic disease testing, saw tremendous growth and additional evidence generation in 2021, with significant publications in both the New England Journal of Medicine and JAMA Pediatrics affirming the clinical utility of whole genome sequencing, or WGS, for critically ill children. In 2022, we're already seeing an increase in coverage with California, Oregon, and Maryland Medicaid initiating coverage for WGS in the NICU setting. Expansion of programs for WGS in NICU settings are also occurring globally, including our recent project with Germany's Hanover Medical School to implement the use of WGS in NICU patients. This program contributes to a growing body of evidence from other countries, including the United Kingdom and Australia, as well as in states across the U.S., showing that WGS offers significant benefits for diagnosis of genetic disease in critically ill infants, along with cost deficiencies for health systems. Turning to our research and applied markets, consumables grew 43 percent in 2021, driven by projects like all of us, along with ongoing COVID surveillance efforts that contributed approximately $220 million in total revenue. I'd now like to spend a few minutes on three key trends that will drive long-term growth. First, is the continued deepening and expansion of Illumina's addressable markets. We're seeing further penetration of our existing markets through increased access and adoption. The use of sequencing is proliferating globally across applications, and new initiatives continue to integrate genomics into national healthcare systems. Our technology and genomics expertise are enabling programs like Our Future Health, the UK's largest-ever health research program that will deliver genetic analysis of DNA samples from up to 5 million volunteers. This data will be used for a variety of potential discoveries, including new signals to detect diseases earlier, new ways to better predict high-risk population for diseases, and new personalized therapies or tools to delay diseases or change the course of their progression. We're excited to play a role in this project as the genotyping partner for the program. We also continue to support a growing global COVID surveillance network that will extend to broader pan-pathogen and genomic epidemiology work. This infrastructure is already being used to study other infectious diseases. For example, in South Africa, Dr. Tulio de Oliveira's team at SERI, the Center for Epidemic Response and Innovation, is using their fleet of sequencers to study other communicable diseases like HIV and malaria. We expect additional opportunities for epidemiology applications in the future, as global funding for pathogen surveillance and research expands. And new sequencing applications and opportunities are growing and evolving rapidly, including in multiple nascent spaces like multiomics and drug development. We're supporting the spectrum of multiomic applications across our instruments, including proteomics, where our co-development partnership with SomaLogic is off to a strong start. We're also catalyzing growth and drug discovery, where genomic-based methods can dramatically speed to market, success rates, and costs. In addition to our partnership with Nashville Biosciences, we're collaborating with the Montreal Neurological Institute Hospital, Takeda, and Roche to enable large-scale analysis of patient data and identify promising targets for drug development in neurological diseases. Programs like Our Future Health, growing applications, and increasing global access will support long-term adoption of NGS. The new markets we're opening, like drug discovery, will further enable adoption while also improving data equity and the integration of genomics into healthcare. We're experiencing this increasing demand for genomics as we enter 2022, with our instrument backlog almost twice the size it was entering 2021. A second trend is the multifaceted growth in our customer base. Our existing customers are growing their instrument fleet. We're also seeing increasing numbers of customers new to Illumina. As a result, our install base has grown to more than 20,000 instruments at the end of 2021. A third trend is the demand for even greater data generation. In 2021, an average Illumina High-Throughput customer generated approximately four times more data than in 2017. This will continue as customers need more complete genomic information and as NGF becomes standard in clinical settings. These shifts will increase the number of projects, number of samples per project, and the depth of sequencing per sample. as multiple tests are run per patient and as samples are used for reads across high-intensity applications like multi-omics. This demand for higher throughput sequencing will in turn continue to drive further growth in our sequencing consumables revenue. For 2021, between our consumables and services, more than 80% of our revenue is recurring in nature. This more predictable and profitable revenue stream provides a tremendous base to invest into the business and drive future growth. Lumina's 2021 performance and significant momentum entering 2022 demonstrate our strong position to support our customers and partners as these trends accelerate genomics in healthcare. air. I'll now turn the call over to Sam to highlight additional details on our results and operations, as well as discuss our guidance for 2022. Sam?

Thanks, Francis. As a reminder, our fourth quarter financial results include the consolidated financial results for GRAIL. I'll start by reviewing our consolidated financial results followed by segment results for Core Illumina and GRAIL, then conclude with our outlook for 2022. I will be highlighting non-GAAP results, which include stock-based compensation. I encourage you to review the GAAP reconciliation of these non-GAAP measures, which can be found in today's release and in the supplementary data available on our website. Our record fourth quarter revenue again exceeded our expectations due to continued strength in our core business. with consolidated revenue growing 26% year-over-year to $1.198 billion. For the fourth quarter, gap net income was $112 million, or $0.71 per diluted share, and non-gap net income was $117 million, or $0.75 per diluted share, which included $0.66 of dilution from Grail operating losses and $0.09 of incremental dilution from the 9.8 million shares issued to fund the GRAIL acquisition. Our non-GAAP tax rate was 15.6%, which decreased 280 basis points year over year, primarily due to a more favorable mix of earnings and jurisdictions with lower statutory tax rates. Our weighted average diluted share count for the quarter was approximately $157 million. Moving to segment results, I will start by highlighting the financial results of Core Illumina. Core Illumina revenue grew 25% year-over-year to $1.193 billion, driven by another quarter of record shipments for both clinical and research, with notable strengths in oncology testing, genetic disease testing, and population genomics. Core Illumina sequencing consumables revenue grew 32% year-over-year to $792 million, driven by record NovaSeq consumables shipments resulting from the significant growth in installed bays and strong pull-through that again exceeded our guidance range. Sequencing instruments revenue for Core Illumina grew 35% year-over-year to $191 million, driven by record NovaSeq shipments due to continued new to high-throughput customer adoption and accelerating demand in oncology testing. NextSeq 1000-2000 shipments also reached a new high in the quarter, and there was strong growth across all mid and low-throughput systems year over year. We are entering 2022 with a strong sequencing instrument backlog that is almost double the backlog entering 2021. Revenue from COVID-19 surveillance again exceeded our expectations, driven by the sustained focus on variant tracking due to the emergence of the Omicron variant. During the fourth quarter, COVID-19 surveillance contributed approximately $42 million in sequencing consumables revenue and $8 million in incremental instrument revenue. Coralumina sequencing service and other revenue of $106 million was flat year-over-year, as revenue growth from instrument service contracts and lab services was offset by lower IVD partnership revenue. Moving to regional results for Coralumina, revenue for the Americas region was $619 million, growing 25% compared to the prior year period, driven by clinical demand and oncology testing, strength in genetic disease research for pharma, and population genomics initiatives like all of us, and COVID surveillance testing. EMEA delivered revenue of $350 million, representing 23% growth year-over-year, driven by strength in emerging markets, population genomics initiatives, and COVID surveillance testing. Greater China revenue was $121 million, representing growth of 26% year-over-year, due to continued clinical strength in the region driven by the growing installed base and hospitals. Finally, APJ revenue of $103 million grew 34% year-over-year, driven by record NovaSeq placements and continued momentum in clinical markets, including genetic disease testing and oncology testing. Moving to the rest of the Core Illumina P&L, Core Illumina non-GAAP gross margin of 71.6% increased 470 basis points year over year due primarily to increased fixed cost leverage on higher volumes. Core Illumina non-GAAP operating expenses of $580 million were up $141 million year over year due primarily to headcount growth, increased performance-based compensation expenses, higher one-time partnership-related expenses, and increased project spend driven by investments we are making in R&D and operations to support the growth and scale of our business. Non-GAAP operating expenses for the quarter were higher than expected due to higher variable compensation expense and higher partnership expense compared to previous expectations. Core Illumina non-GAAP other expense of $8 million was $28 million lower than other income in Q4, 2020, due to lower interest income on short-term investments liquidated to fund the GRAIL acquisition, as well as interest expense on the term notes issued in Q1, 2021. Transitioning to the financial results of FURGRAIL, GRAIL revenue of $10 million for the quarter consisted of gallery test fees and MRD partnership revenues. GRAIL non-GAAP operating expenses totaled $131 million for the quarter. which consisted primarily of expenses related to headcount and clinical trials. Moving to consolidated cash flow and balance sheet items. Cash flow from operations was $282 million. DSO was 49 days compared to 50 days last quarter driven by revenue linearity. Fourth quarter 2021 capital expenditures were $70 million and free cash flow was $212 million. We did not repurchase any common stock in the fourth quarter. We ended the quarter with approximately $1.3 billion in cash, cash equivalents, and short-term investments. Moving now to 2022 guidance, we expect full-year 2022 consolidated revenue to grow 14% to 16% to approximately $5.16 to $5.25 billion. dollars we expect full year 2022 core alumina revenue to grow 13 to 15 percent to approximately 5.11 to 5.2 billion dollars grail expects its revenue to be in the range of 70 to 90 million dollars for 2022 consisting primarily of gallery test fees for fiscal 2022 at the midpoint of our revenue guidance range. We expect core Illumina sequencing revenue to grow approximately 15% year-over-year, driven by accelerating demand in our base business. This includes inter-company sales to grail of approximately 25 million dollars which are eliminated in consolidation. We expect core Illumina sequencing instrument growth of approximately 10% year-over-year, driven by continued strength in NovaSeq and NextSeq placements. We expect core Illumina sequencing consumables growth of approximately 18 percent year over year, driven by our growing instruments installed base and strong utilization by our customers. We expect the strength to span our platforms and we are raising our pull-through guidance for NovaSeq to a range of 1.2 million to 1.3 million dollars per system for 2022. We expect pull-through for NextSeq 1000-2000 in the range of $130,000 to $180,000 per system in 2022. And pull through for NextSeq 550 in the range of $100,000 to $150,000 per system. For MySeq, we expect pull through in the range of $35,000 to $45,000 per system. And for MiniSeq, we expect pull through in the range of $20,000 to $25,000 per system. We also expect revenue from COVID surveillance in the range of $130 million to $150 million in 2022. We expect consolidated non-GAAP operating margin in the range of 15.5% to 16% and Coralumina non-GAAP operating margin of approximately 28% for 2022. We also expect a consolidated non-GAAP tax rate of approximately 19%. We expect consolidated non-GAAP earnings per diluted share in the range of $4 to $4.20, which includes dilution from GRAIL of $3.75, including GRAIL operating loss dilution of approximately $3.25, and incremental dilution of approximately $0.50 from the 9.8 million shares issued to fund the GRAIL acquisition, in line with previous expectations. And finally, we expect diluted shares outstanding for fiscal 2022 to be approximately 159 million shares. For the first quarter of 2022 for Consolidated Illumina, we expect revenue to increase 10% to 12% year-over-year from the first quarter of 2021. This represents a sequential increase from the fourth quarter of 2021, reflecting a strong start to the year. We expect non-GAAP operating margin to increase approximately 300 basis points sequentially, primarily due to a decrease in operating expenses. We expect non-GAAP tax rate to be in line with our full-year 2022 guidance of approximately 19%. We expect diluted shares outstanding to be in line with our full-year 2022 guidance of approximately 159 million shares. For Core Illumina, we expect non-GAAP operating margin in Q1 to be in line with our full year 2022 guidance of approximately 28%. I'll now hand the call back over to Francis for his final remarks.

Thanks, Sam. To close, I'd like to thank our teams, our network of partners, and the extraordinary scientists and clinicians we serve. I am incredibly excited for the many opportunities ahead. Today, more than one billion people are covered for genomic testing globally, and we expect this number to double within five years as genomics accelerates the adoption and potential of personalized medicine. Illumina will continue to support the growing number of patients around the world accessing the lifesaving benefits of genomics, from oncology therapy selection to reproductive health, genetic disease testing, and pathogen surveillance. We will also continue to push genomics to new frontiers, like drug development and proteomics. Additionally, we will enable discovery across these existing and new markets with a pipeline of innovative products and solutions developed in collaboration with our customers. It has been fantastic to see the strong interest and excitement across our customer base for our latest developments, including our Breakthrough Chemistry X and our Infinity Long Read technology. We expect to not only directly address unmet market needs, but also revolutionize what scientists and clinicians can expect from sequencing. Together, we're enabling genomic-based discoveries that can transform healthcare and ultimately provide a brighter future for human health i'll now invite the operator to open for q a operator absolutely if you would like to ask

a question please press star followed by one on your telephone keypad if for any reason you would like to remove that question please press star followed by two again to ask a question please press star one if you're streaming this conference please dial in and press star one and if you are on a speakerphone please remember to disconnect and use your handset as a reminder please limit yourself to one question so that we can accommodate as many analysts as possible you are welcome to re-enter the queue if you have additional questions our first question goes to dan brennan with cowan dan your line is open you can go ahead great thanks uh thanks for the

questions congrats obviously on the quarter um so i wanted to ask a question on the new products Obviously, we're going to hear a lot more about this this fall, but as you would expect, there's material interest in Chemistry X and Infinity, particularly in light of some of the expected competitive launches that will be coming between now and around HBP. So I'm just wondering, you know, you've laid out some basic metrics on read length, accuracy, and speed, and you talked about revolutionizing things and unmet needs. So I was hoping, Francis, that you could provide a little bit more color about maybe how we can think about these products. Obviously, you're not going to give us new factors at this point, but particularly around some of the unmet needs that might be addressed and or this idea of revolutionizing things because, you know, arguably Illumina has done a terrific job evolving their product portfolio, driving higher throughput, lower prices. But revolutionary sounds like a pretty big word for this product. So just wondering and hoping to try to get some more color.

Yeah, thanks, Dan. And it has been fantastic, as I said, to see the reaction of our customers to both chemistry x and the data we've provided so far on on infinity so we go through uh each of them a little bit with chemistry actually we've been keeping uh all of you in the loop over the years as we moved uh from the research phase then into product development and shared some of the early data maybe just over a year ago and then as i said a couple of weeks ago we're now moving chemistry x from product development into manufacturing with a whole new manufacturing facility and sort of scaling up production. So it's been terrific to see the progress and the innovations that are in chemistry. As I said, this is a from the ground up rethink of our chemistry, probably the single biggest advance in our chemistry since Celexa was created all those years ago. What this means for our customers and in terms of the industry is we can expect a step change change in terms of the speed of the chemistry, and that will translate into much faster turnaround times for the tests that our customers are running, and that's especially relevant for not just very large-scale research projects, but especially relevant in clinical settings where you do want to get some of those results to patients more quickly. It means higher accuracy, and all of that combines to also enable a really exciting roadmap in terms of price per G. We've talked about the fact that we continue to be committed to really driving down the cost of sequencing to make it more accessible, and Chemistry X is a fundamental part of that. We're now entering manufacturing, and we're closer to bringing that out into products than we've ever been. I've talked about the fact that this is going to be foundational to all new products coming out. There's no reason, as we look at our existing portfolio, why it may not make sense in some parts of our portfolio to have it in there as well. In terms of Infinity, the excitement there is because we've sort of rethought how people think about long reads and short reads. And again, went back to first principles to say what customers don't want is they don't want two different platforms, one for short read and one for long read. And what they're telling us is they want to take some of the best elements of what we've got in SBS, high accuracy, low cost, low input requirements, and apply that to all reads. And so when we looked at how we would rethink long reads, we brought some of the best of those elements in to say low input requirements, lower cost, maintain high accuracy. And they also want it to be a single molecule approach. They didn't want it to be a composite of multiple molecules, and so the team has done a fantastic job innovating to deliver that in terms of our infinity technology you've seen some data from some of our customers we've talked about the fact that we're bringing it to market later this year and you continue to see more data and

more information from us our next question goes to Tyco Peterson with JP

Morgan Tyco your line is open you can go ahead hey thanks on guidance 10% sequencing instrument growth I'm just wondering if you could put a little bit more color around that. You know, obviously you've got the NovaSeq DX launch. How material do you think that could be? And then, Francis, your comments a minute ago, you know, how do you avoid freezing the market ahead of, you know, chemistry X being rolled out? And then a follow-up on GRAIL guidance as well. 70 to 90 million is, you know, a big step up from 10 million in the fourth quarter. So can you just talk a little bit about scale-up plans and how you plan to get there?

Yeah, so maybe I can start, Tycho. This is Sam, and thanks for the questions about the guidance on instruments. And I'll just provide a couple of brief comments. I mean, first of all, let me say instruments in 2021 represented incredible performance. We're entering the year now in 2022 with a record backlog of instruments. So it gives us a lot of confidence about the guide, the 10%. As we think about, you know, some of the drivers behind this, you know, continued very strong placements of NovaSeq, continued very strong placements on the mid-throughput side with NexSeq 2000-1000. And we've talked about in 21 the record performance across those two platforms Now there is a headwind which is COVID surveillance, you know, we've placed quite a few instruments for COVID surveillance in 2021 and we don't expect frankly to place Instruments for COVID surveillance in 2022. So that's a year-over-year headwind that's factors into the 10% growth in terms of the guide For NovaSeek DX, that's a product that we're very excited to launch. It will be launched later this year it does not represent the material impact in terms of growth for instruments in 2022.

So, Francis, maybe... Yeah, so let's talk about, you know, chemistry X and what that means in terms of our customers and how do we avoid, as you said, freezing the market potentially. You know, one of the exciting things we hear from our customers about being with Illumina is that you are, you know, you're part of this exciting roadmap and that you're not only, you know, getting access to what we provide today, but you know that we're going to continue to innovate and bring new products out and so for our customers it's been exciting to watch this journey of chemistry X develop and we've been I think good about sharing the data through this whole process so they know what's coming they can get a sense for you know what it can can mean for them we don't have a new product announced so there's nothing to freeze the market for and our customers also know that you know they've done this with us several times that whenever we introduce a new product we do have programs in place that involve trade-ins or if you've already placed an order and it's you know it's in our backlog you can switch that if you want to the new instrument and so over the years we've developed a number of pretty robust programs around enabling a seamless upgrade for our customers now also the other thing we've learned is especially in the clinical markets that when a new instrument comes out typically some of our customers will buy you know one of a new instrument, for example, and use that to develop their new workflows, to get familiar with the new instrument, and then plan an upgrade over a multi-year period. And so that could still play out, that as we introduce a new instrument in the future, they may buy one to sort of get comfortable with it, and then use that to plan an upgrade over a multi-year period. Great. And then in terms of GRAIL, the momentum we're seeing with GRAIL has been terrific to watch. They are seeing traction, as we said, with employers. And what's been interesting there is we expected traction with financial services companies, with tech companies, some of the companies that traditionally are more forward-leaning in terms of using benefits as a way to attract talent. What we are really excited about is that we're seeing customers across industries. You know, we've seen, as we said, large logistics players and transport players that are signed up to offer this benefit to their employees. And so that's been exciting to see. We're also really pleased with the number of prescribing providers that have now got experience with the gallery test. So we said there are over 1,500 prescribing providers that ordered the test in 2021. last year going into this year, and so that's a great base of healthcare professionals that have some experience now with gallery and should be more comfortable order it going forward. In terms of the guidance, most of the guide for GRAIL this year is gallery. There is a component of it associated with MRD, but it is a smaller percentage. Now, as we look at that number, You know, that could be a potential area for upside, and we'll keep watching the traction they're making in that space.

Our next question goes to Dan Arias with Stifle. Dan, your line is open. You can go ahead.

Good afternoon, guys. Francis, just back on ChemistryX, is there anything you can add there on the per gigabase economics that might be at play? How much cheaper do you think genome price it could be for the Novac crowd? And then for the mid and lower throughput users, should those folks also see a cost of sequencing decrease if they're running an XSEC or a MySeq? And then if I could just sneak in a second one, on the Nashville Biosciences collaboration, what's the timeline for the 250,000 samples that I think you're sequencing there? And is that a whole genome? Thanks.

Yeah, so let me start with ChemistryX. It gives us a big step forward in terms of delivering price reductions in terms of sequencing for our customers. But ultimately, the specific number will depend on the type of instrument we build it into, as well as the other components of the technology ecosystem that we build into that instrument, the data paths, the optics, and so on. And so, you know, stay tuned as we get more specific.

We'll share that with you. Our next question goes to Vijay Kumar with Evercore. Vijay, your line is open. You can go ahead.

Hey, guys. congrats on the print. And I had a question on the guidance here. Sam, your Q1 revenue guidance up sequentially, I guess we haven't seen that historically. And your guidance implies sequential ramp up throughout the year. I guess maybe just talk about the visibility you have. You know, I know you made some comments around backlog being twice as high. So talk about the visibility into the guide, and now, Francis, I think, on the 70 to 90 for Grail, is that the gross contribution? Is there some inter-company elimination in that number, or is that a net number? Is that a proxy for gallery volumes? Thank you. Yeah, thanks, Vijay. So, let me actually

take both questions. So, I'll take the first one on the guide. You know, the visibility on the guide is good. I think we have a balanced guide, and we're very confident about achieving the guide that we have. With regards to Q1, you know, you are correct. We are entering the year with very strong momentum in Q1. I mean, the business is really, is very strong. We're seeing very strong momentum on clinical with oncology testing and genetic disease testing and NIPT. And our research markets are also robust. We have a very strong backlog, as we said, a record backlog, in fact, in terms of instruments. So that's what's driving the Q1 momentum. As we look forward towards the year you know this is a year that reflects a more I would say linearity that's more similar to prior to the pandemic where we see a ramp or an increase in terms of sequential revenues throughout the year there are a few things that we've considered in the guide that have been reflected in that 14 to 16 percent VJ that we have factored in that we believe also de-risks the guide so let me mention a couple of those for instance you know one is with regards to COVID surveillance as I mentioned in the prepared remarks we're assuming 130 to 150 million dollars in terms of COVID surveillance revenues that's a step down from last year it's you know at the midpoint approximately 80 million dollars of a step down we've we've also reflected a step down in terms of population genomics driven by the the termination of the UK biobank the finishing and the wrap-up of the UK biobank so that's a step down in terms of population genomics revenues year over year, you know, and NOVA-Seq is showing very, very strong pull-through. As we said, in 2021, we exceeded $1.3 million per instrument, and we're reflecting a pull-through guidance range of $1.2 to $1.3 million, you know, to make sure that we factor in these significant instruments that are coming into the installed base that will take some time to ramp up to those levels of pull-through that we're seeing across, that we saw across the average in 2021 so in general very confident about the guide good visibility um and uh you know but the backdrop to all of this is still a pandemic year here in year three and uh you know the uncertainty that goes with that with regards to grail the 70 to 90 million dollars that's end grail sales to their customers you know so we do have inter-company elimination of revenues that impact our total consolidated alumina revenues but the 70 to 90 million is the total end grail sales to their customers. That's not impacted by intercompany. The sales from us to Grail show up on the core business, and then they're eliminated in the total consolidated view.

Our next question goes to Derek DeBrun with Bank of America. Derek, your line is open. You can go

ahead. Hi, good afternoon. Thank you for taking my question. So two related questions. One, on the new platform you're alluding to, um, are you going to take a high seek X approach and basically segment this and make it for like whole human genome or single cell applications? Where are you going to make it broadly accessible? And then a follow on that is, you know, I can certainly see, um, elasticity of demand in the research markets. I mean, that clearly has been proven out, but what are your assumptions for the clinical market as you lower price? What are your sort of like volume assumptions? I mean, don't you have to keep clinical pricing sort of at a premium for a while longer before you can really sort of see the volumes in there to make it up. Thanks. Great. Thanks, Derek. So let's take both.

You know, this new chemistry can be applied across, you know, the throughput spectrum. So all options at this point are on the table. There are options, like you said, where we could create an instrument that targets and catalyzes a segment of the market. So as you're alluding to, you know, HiSeqX was extraordinarily successful at opening up the whole genome sequencing market. That before HiSeqX enabled the $1,000 price point, you know, a very small part of the market was whole genomes. And after HiSeqX, you know, you've seen just an explosion in terms of the number of customers that could do whole genome sequencing and that did, in fact, do whole genome sequencing. And so one of the options on the table that ChemistryX would allow us to do is, again, look for opportunities like that to catalyze certain segments of the market. I mean, you could imagine lots of parts of the markets that could be catalyzed. So, for example, hypothetically, you could look at the single cell market. And we hear from lots and lots of customers that they would love, love to be able to do much, much, much larger experiments using single cells. And so something like ChemistryX could enable that part of the market. We also hear from our customers that they would love to run much, much larger experiments targeting understanding the genomic drivers of neurological conditions like autism and Alzheimer's and Parkinson's. And so you can imagine that this could enable, you know, some of those kinds of experiments. And so, again, it depends on where we decide to use this chemistry, but the benefits it provides, you know, in terms of lower costs, but also faster turnaround time. Because one of the other things you could get with this chemistry is you could see scenarios where you can have certain tests being returned to customers within a single shift. And that would be fundamentally enabling to some clinical applications. So even if the price was the same, just the ability to turn results around in a single eight-hour shift would open up potentially some segments of the market. From our customer, in terms of the price perspective, there are some parts of the clinical market where, because we provide end-to-end solutions, we're already at the stage where the customers buy the product and it's priced in terms of a per report or a per sample fee. And those markets, like NIPT, for example, or genetic disease diagnosis, are already enabled at the price point they are. And so it's not necessary that the per sample price needs to change because reimbursement's already in place, allowing our lab customers to have a profitable business in those areas. But there are other clinical markets where the lower price point will be fundamentally enabling. And so that's sort of how we're thinking about the options in front

of us with ChemistryX. Our next question goes to Kyle Mikeson of Canaccord. Kyle, your line is

connected. You may proceed. Great. Thanks for taking the question. The two-part question, The first of which was most of these kind of competing new short rate platforms that are launching the near term are low to mid throughput, which is suitable for the clinical market. That's going to be an early focus for these emerging companies. I'm just wondering if you think that's going to eat into any of your clinical market share or growth in the near to medium term, given the area is still pretty underpenetrated. And then the second question I had was about Grail, the cancer moonshot initiative that the Biden administration kind of announced recently mentions multi-cancer detection tests. I just want to understand if, you know, you think the initiative is going to move the needle for the MSED industry overall, and could it improve the domestic or the global perception of the merger specifically and potentially have any downstream impact on the ongoing trials or reviews?

All right, so we'll take both. The first question is around, you know, entrance in the low to mid-throughput market and how we expect that to play out. Let me jump there first. They'll say, you know, obviously we have terrific products in that part of the market, and we just, you know, in the last couple of years, launched the NextSeq 1000, 2000 that are squarely targeted at that space. And we think they're especially well-suited for the clinical markets because, you know, you have the, from a clear perspective, you know, the MySeq DX, the NextSeq DX that are workhorses already in the clinical market. And then you have the terrific price performance that you get out of the NextSeq 1000-2000s. Those instruments, NextSeq 1000-2000s, represent the most powerful mid-throughput products on the market, even including some of the entrants that are coming in. And I think that will continue to provide very compelling value to our customers going forward. The other interesting dynamic, though, that we're seeing playing out in the market is more and more of the new customers coming in are coming in at higher ends of the portfolio than we've seen historically. And so what's playing out in the market is that the applications that are emerging for sequencing are more data-intensive and sequencing-intensive. They are high-intensity applications that are just demanding more sequencing and more performance power. And so what that means is I think, And we saw this play out in the computer, the PC market. We saw this play out with iPhones that, you know, the devices just need to be more and more powerful. In fact, somebody was telling me that, you know, is NovaSeek the new MySeek? And I think that's sort of the ethos we're seeing in the market, that there is this insatiable demand for more power. And what we consider today, if you're targeting what's the low and mid throughput today, you better show up with a lot of power because today, you know, The future low and mid will look a lot more like today's high-throughput market. In terms of GRAIL and the cancer moonshot, it's obviously great to have an increased national focus on cancer and bending the mortality curve for cancer. So that's terrific to see. It's especially exciting to see a recognition that early detection of cancer, and specifically early detection of multiple cancers simultaneously, a simple test, are an important thrust in terms of this fight against cancer. And so just the attention being put on this space, I think, is great to see. We're going to watch to see how that plays out in terms of additional funding or accelerated regulatory review or reimbursement. But we feel it's all very helpful in terms of accelerating that market. It's obviously especially helpful for GRAIL because GRAIL is the only product in the market today that can detect 50 cancers and identify tissue of origin. So that's obviously really exciting from a GRAIL perspective.