I think we're going to get going. All right, Ankur, sit here. All right. All right. Good morning, everyone. Welcome to RBC Capital Markets 2024 Global Healthcare Conference. I'm Conor McNamara, the Life Science Tools and Diagnostics Analyst at RBC. It's my pleasure to welcome Illumina to our conference. With me on stage are Ankur Dhingra, new CFO of Illumina, and Salli Schwartz with Investor Relations. Yeah, thank you, Connor. Thank you for joining us. Ankur, just, you know, you just joined Illumina. Maybe just can you give us some background on you? What attracted you to Illumina? And, you know, yeah, let's start there. Yeah, so I've been well, there's a lot to like in Illumina, and I view this as an excellent opportunity overall based on where Illumina is today. But as a background, I spent 18 years at Agilent Technologies, so I've been very much from the industry. I was CFO of the Life Sciences business within Agilent, so did watch Illumina over the last decade, decade and a half, doing all the cool stuff that they've done with the genomics. And thereafter, I was CFO within the molecular diagnostics industry, so did use Illumina products within our laboratory and actually launched a test using that technology. And from there, I was a CFO in a biopharma company where we were using some of the sequencing at a little bit lower scale, but still using sequencing for the purpose of profiling the tumors of the patients that were in our clinical trials. I did see the size of change that Illumina has brought, the overall genomics revolution. So watching from outside, it was great to see what happened. And then when the opportunity came by and I evaluated it, there were multiple factors there, right? Just as I thought about it and thinking about how much more that can be done, not just in genomics, but broadly in the multiomic space, it still seemed like a sizable opportunity and that Illumina was very well positioned to capitalize on it, provided they do the right things. And then second, of course, the CEO is a big factor, right? So Jacob and I worked together back in Agilent. I was his CFO when he was the president at the Life Sciences industry. So when I talked to him at length about the opportunity and what he was trying to do, that seemed exciting. The strategy, the way he was laying out for me, seemed like the right thing to do. He's wicked smart. I have a lot of respect for him. Those two factors combined kind of made this pretty much a no-brainer. Great. Well, thank you for that background. And, you know, just your first 30 days at Illumina, you started after the end of the quarter. Can you just walk through how involved you were with how you thought about guidance and where guidance stood? You know, granted, you started after the quarter. Yeah, is there a better way to compress the learning curve? Exactly. Joined at the end of the quarter and take it through the earnings. But jes aside, I walked in, I joined in the middle of April. The quarter was already done. So I was very much deeply involved, both in terms of going through the earnings process, in terms of development of the guidance, in terms of taking it through the board, the audit committees, and whatnot. So pretty intense, tight 3-4-week process to come in front of all of the investors and lay out the earnings as well as the guidance for the year. And I was, I can say, lucky because in some of my previous jobs, you didn't have the previous CFO available even as an advisor. So in some ways, having Joydeep Goswami as an advisor was positive that he was there, but very, very deeply involved. Okay. Thank you for that. Just based on your experiences, both at Agilent and where you were following Agilent, just as you look at Illumina today, are there any low-hanging fruits that you can come in and implement very quickly? You know, things like process or audit, you know, anything on the ERP side, just anything that you see that it was like, "Hey, this is something that I can bring to the table on day one. Yeah, so great question. And I see lots of fruit, some low-hanging, some a little bit higher-hanging that'll take a little bit of developing the muscle to get to. But lots of opportunity. Listen, the way Jacob has outlined the three priorities of the company, and he's spoken openly about it in terms of driving the top-line growth, driving operational excellence, as well as resolving GRAIL. I think the team's making good progress around it. We're getting close towards the timeline that we've communicated towards GRAIL. But in terms of operational excellence, which is going to be a strong part of my wheelhouse, as well as thinking about where the next ranges of growth would come from, I see opportunities in the ops excellence size across all of the lines of P&L, right? At the gross margin within R&D as well as in the SG&A space, there's lots of opportunity. As you look at our Q1 earnings, you're beginning to see some of the proof point in our numbers, the margin expansion of 190 basis points. You saw the OPEX now reducing year-over-year, which means that the actual executive leadership team is very well aligned and energized towards those three priorities. They're working on it. And when I've come in and started questioning or throwing ideas, they've been lapped up very quickly where the team says, "I haven't thought about that. Let's go after it." So that focus on execution to move the results quickly is high in the team. They're very well energized around it. So yeah, lots of opportunity. And a team that's just going after those. Okay, great. And you touched on GRAIL and the Q1 results, which we'll come back to. If I just think about one other high-level question, is there anything that you're going to that you've thought about changing from a reporting perspective as far as either segments or the amount of information that's given? Because, you know, there's areas like clinical versus research. There's high throughput versus low throughput. And you get those questions on every quarterly call. So have you thought about just changing what types of revenue segmentation you give or any metrics that you'll give on an ongoing basis? Yeah, let me make some high-level comments. I haven't gone in that level of depth yet or formed my opinions very specifically about changes there. But I'll tell you how I think about it and what my philosophy is on that. And it'll welcome Salli to add a few more comments into that as well. But generally, my intent would be to lay out a level of detail that is commensurate or required to understand the main drivers of our business, as well be able to explain to you, if we are putting certain strategies in place, then how are we measuring them? And to the extent we can shine the light on any metrics that'll help the investors understand them better, we will continue to do so. I've looked at the disclosures from the past at Illumina, and I've looked at what some of the other companies do. Illumina has been fairly open about the extent and the depth of metrics that they have been providing. So philosophically, I see a good alignment in terms of the intent to disclose and help people understand where the performance is coming from. So that's the approach. I think I'll let Salli add more. Sure. So a few things on the details, as you mentioned, Connor. So on clinical versus research, one thing we've been asked a number of times is just how that was in the quarter. And the clinical sequencing consumables revenue in the quarter was up high single digits. So I know that's something that a lot of people are tracking. Just wanted to share that and help you understand that piece. Also, with regard to the NovaSeq X sales, so we've historically given, in some cases, a clinical versus research split in terms of where the shipments are going out. And so last year, we had about 35% of the shipments go to clinical customers. The first quarter was roughly in line with that as well. One more I'll pull through because you asked about that. We gave ranges in February for all the different instruments that we typically give, and we were very well in line across all of our instruments with those ranges that we previously gave. So just for your modeling purposes and to help with some of those details. Great. Thanks for that. Now, you mentioned the strength at Q1. So, you know, you beat your guidance for Q1. You beat both on the top line and on the margin. And you kept guidance in line at the same spot for the year. So, you know, can you just walk through that outperformance and what are some things that will continue throughout the year and why didn't you use it as an opportunity to raise guidance for Q1? Yeah, sure. Yeah, lots to unpack there. So thank you. And always good to come into your first quarter with a beat story, right? And then quickly become, "So how are you going to raise? Yeah, why not? Why not? So very pleased overall and encouraged with how the year has started, right? Jacob did lay out for the entire year. We expect 2024 to be similar to 2023 overall with the operating margin closer to 20%. So when I came in and looked at the performance for Q1, so very encouraging. Good overall revenue beat. It was a pretty sizable revenue beat overall. And for the most part, it was driven by consumables and a good X placement story as well. We saw our backlog build as well as it seasonally does, but it was a good backlog build over the quarter as well, which was adding to that encouragement. And then the P&L side, broad beat on gross margins as well as OPEX, leading to a pretty healthy operating margin start. So when I started evaluating and looking at all the metrics and started thinking about the guidance there, a couple of thoughts around that. One was just in general, being early in the year. You just completed 1 quarter, 3 to go. And then you juxtapose that against to say, "Has anything materially changed in my end markets?" Right? Has the capital investment environment changed? Answers, "Not really." Has China changed materially? Answers, "No." So when you look at the pieces to say, "Yeah, we executed very well in the market. We have good confidence about our execution capabilities, but the underlying market conditions on the capital investment side, really didn't see any change on the positive side." So it's, well, it's early. We're not seeing any material changes. I'll bank this card for myself, kind of de-risk my full-year guidance for now. Would probably be a prudent approach to take at this point and see how the second quarter goes out. By the time we get to the second quarter guidance, probably everyone can mathematically build every quarter in the full year by then, right? So that's the thinking behind not raising the full year. I feel good about the operating margin pathway that we are on and the actions that the team is taking overall. Great. A couple of pricing questions. Now, there was a pricing initiative that Jacob called out to cover operating expenses. And then there has been some pricing pressure from a competitive perspective. So can you just walk through within the quarter and as we think about 2024, what you know the headwinds and the tailwinds, what's the net impact of that? Okay. Yep. Those two pricing dynamics. Yeah, again, I'll make a few comments, and Salli will probably add. So two dynamics. I'll take the simpler one first. We do our annual price increases every year. We saw very good realization relative to what our plan was, both across instruments as well as consumables on those. We did pocket that. It's good and kind of points to just the underlying position that Illumina has irrespective of how much of a competitive pressure there is or not, right? So from a pricing perspective, being able to realize that increase more than we anticipated was a net positive. Now, the overall step back and think about the transition into the X or into the X leap in both our mid-throughput and the high-throughput portfolios, that's going as expected, right? We expect people to buy these high-throughput or higher volume instruments, be able to drive higher sequencing throughput out of it, which we're seeing with over 35% sequencing growth, which naturally results into a lower cost of sequencing and impacts what you would call as a net price that we end up realizing for GB. We modeled that. That was part of our thinking when we guided that the 2024 would look similar to 2023. We're anticipating volume consumption goes up, but we get a lower part of it. And that has progressed in line with our expectations as well overall. So, Salli, anything on this? I mean, I'll just reiterate that we impacted the pull-through ranges and the guidance that we gave at the beginning of the year. So we took those moving parts into account and a view on them and pull-through in the quarter across instruments. Mid-throughput, high-throughput, low-throughput was in line with the ranges that we gave. One other piece on the P4 flow cell. I know we just launched that in March. So we only had a few weeks before we gave earnings with that out in the market. But it was very well received. And we had about roughly 25% of our customers that are using the 1K, 2K have actually adopted the software that allows them to take advantage of that flow cell. So that's pretty early, good indication of uptake there. Great. Thank you for that. And just on the, you talked about on the mid-throughput with the new X leap chemistry, what was the dynamic in the quarter? You know, was there a pause from customers buying new equipment until that was launched? And just what's the initial feedback? And how should we think about that impacting the consumable stream on the mid-throughput customers? Yeah, a little bit. We launched it towards what, middle of March, right? So towards the end of the quarter. So overall impact, I wouldn't say it was very material relative to the pause. But we did see some customers. I don't know if you can add more color on that. Basically, the comments I mentioned, I think, are what we're seeing early is just really good uptake of this new chemistry that we're offering and the work that can get done with it, things like single-cell work, spatial work, all the pieces that people are talking about quite a bit right now. What's the lag between technology launch and when customers start adopting some of those new uses? Is that, you know, a 3-month, a 6-month lag, or does it really vary by customer? Yeah, I don't know if there is a specific time window to that. What you said between a quarter and maybe 2 quarters, depending on what the work is, that's really more on the research side. Clinical can take longer because they, especially if they're moving work over to do revalidation, redocumentation. But if they're building something new, they have more work to do as well, but they can get started sooner. No, I think we do try to work closely with our customers to let them know what's coming and help them think through how they might be able to take advantage of it. So we'll continue to do that and maybe even do more of that going forward so that it's not a surprise that they then have to think about after the fact. Yeah, as you would expect, the excitement becomes visible on the research side of things. There is a lot of research specifically on the multiomic side where there are customers who would get a sense of the new launches that might be coming in. There are customers we're talking about who begin to get a view into some of the new launches that are coming. So many of them are preparing. Many of them are waiting. But the research side gets really excited about either the new research programs they can run or more samples that they can run within the constrained grant environment that they have. So many of them are looking in different ways. Great. All right. Thank you for that. You know, one of the things you talked about at the beginning was things on the R&D side. Illumina has historically spent around 20% of sales in R&D, which has allowed the company to launch innovative products like the X, the XLEAP chemistry. Do you think that, you know, is 20% the right number? And do you think that's required to stay ahead of the market and maintain your leadership position? Or is that not necessarily the case going forward? Yeah. So I'll make some comments which are not based on Illumina, just the understanding of the industry, right? One, if I have to invest 20% of revenue into R&D, then there better be a good return on it, right? And I can tell you, as a CFO, I would if I can't justify a return on it, then it doesn't make sense. So that's the base philosophy. Now, having come in and looked now, having spent some time with our R&D teams and looking at the pipeline that is there, I'm really excited about the stuff that's in that pipeline, not that I expected anything different. But I can tell you, part of it is I'm blown away by looking at the kind of stuff that the team's working on. It makes my job a little bit harder, right, to say, "OK, if I'm not going to grow the R&D, how the heck do I keep all of this, not just some of this, alive and kicking?" But that's a good problem to have in the grand scheme of things, the kind of stuff that Illumina has coming out. The focus is broad, right, not just in the core instrumentation and some of the front-end stuff that the team's doing, but also thinking about multiomics, thinking about software, and how the team can continue to be the leading innovator within this space and keep redefining it. In the end, though, there has to be a return at the end of it or during it. We are talking about a lot of things internally. My personal goal is to keep that innovation engine alive and kicking, but at the same time, be able to find cost opportunities here and there. We're talking about a lot of things. How do you run an R&D program more efficiently? How many times do you have to change the entire box? Are there reuse capabilities within that without really changing the innovation dimension of that? So doing all of those kind of conversations in the company so that you keep the innovation alive but can still keep driving the margin side of things. I still have more levers to achieve the margin, whether it's in the gross margin or the G&A stuff. Do you care to share any of those programs that you're excited about? Oh, we will at some point. We will at some point. Yes. Not today, though? Fair enough. You know, historically, Illumina has been one of the innovative companies in health care. And you guys have. It still is. Okay Thank you. Well, you're still an innovator. But historically, you've grown revenue well above life science tools peers. And you've had margins at the high end of the space. Through the macro headwinds, that's been pressured. And so if you just think about the longer term, do you think that Illumina can return to a growth number that's higher than the market? And can the company return to kind of the 35%-ish EBITDA margins you've had in the past? Yeah, great question. And that's the top-of-the-mind question for me as well, not in terms of an open question, but kind of where I'm forming my opinion as I think about the resource allocation for the company. But the pieces that give me a lot of encouragement and confidence are things like that the sequencing activity in Q1 still grew more than 35%, right? And this is huge. If I come back from an Agilent end, we were very happy if we could get the company to go from a mid-single digit to a high-single digit rate. That required a substantial change to be able to do that. If I look at just the fundamental demand for sequencing and the capacity utilization there, it gives us a lot of encouragement to say, "We've launched a new product. There is a change in the GB output that is coming out of each of the products." So we have to go through that cycle. But the underlying activity that we're enabling, the underlying research that we're enabling, and the way our customers are using our instrumentation gives me a lot of confidence that this business can come back towards a much better growth profile. And we haven't even layered on any of the multiomic stuff that we're thinking and talking about either through partnership or otherwise on top of what's going on today, right? So we will. And we've talked about we'll lay out a strategy that we've said during the fall. And Bojack, Emma, and I would love to have multiple shots at the goal in terms of our ability to drive that growth. And we laid out. But the way when now, Guardant, and I know several of Illumina customers. I was one of them, more on the clinical side, less on the research. But as I think about them, as I've talked to Guardant and talked to several of them, most of them still look at significant capacity that they are anticipating that they would need. Most of them are still talking about tests that take much more higher compute power and speed, which with the newer instruments enables them to now run the research and think about, "Oh, maybe I can bring a new test to the market because now I economically can." So those discussions give me confidence that we can get there. But we'll lay it out in probably a little bit more detail during the rest of the year. Okay. And you mentioned the fall. Is there a specific event that'll be in the next day? We haven't given an exact date, but it will be very soon. And we've planned a virtual event, so you won't necessarily have to travel. And we'll make sure that our executives are available both to give the strategy, do the financial algorithm so we can help you understand if we execute against that strategy, what it delivers, and then plenty of time for Q&A as you all like. Okay. Great. Look forward to that. Just in the last couple of minutes, did want to talk about GRAIL. You know, I think there's been some confusion from the investor community about, you know, all of the appeals and the next steps and the options and the Form 10 that you filed. So if I just look at, you know, and you talked about this in the quarter, but if you end up having, you know, you can't find a strategic buyer and it's going to be a spin, you know, what is the maximum capital outlay that Illumina would have to make? Because you have the fine that you've accrued for on the balance sheet. And then you talked about this $1 billion that you'd have to fund their operations. Is that kind of the max that we should think about? Is the max pressure to Illumina balance sheet in a worst-case scenario? Or is there anything else that's out there that we should be worried about? Okay. Let me lay it out. And, Salli, add as needed. So we've talked about two potential pathways here, both of them being worked in parallel. There's a possibility of a sale if we get an offer that makes sense and a potential spinoff. You're asking about the spinoff option. And your question is, what is the possible maximum outlay, right? So as per our agreement with EC, European Commission, the maximum capital that we have to put on GRAIL's balance sheet is roughly $1 billion, right? That's at the time of the divestiture. So that's one in the near term that'll happen. The second part, which is on the EC fine that you're talking about, when that EC fine accrued, it is on appeal right now. So depending on the outcome of the appeal, we'll end up determining exactly how much, if anything, has to be paid. The timeline of that is still in 2025, potentially 2026. There's the European Court of Justice appeal that we have underway that we're expecting a decision on maybe later this year. If we win, then the fine just goes away because the European Commission didn't have the right to assess it. If we lose that, then, as Ankur said, we do also have an appeal of the fine itself that goes out into 2025. The fine is stayed pending the outcome of that second appeal if it's not extinguished beforehand. Right now, we have a guarantee on the fine. We're waiting all these things out. That will play out in the background. To your point, if it all happens and we lose everything and we have to pay that out, that'll be not this year. Okay. All right. Well, thank you for that. Looks like we're out of time, Ankur. Salli, thank you for joining us. Really appreciate your time. No, I appreciate the opportunity. All right. Thank you. Thank you. All right. Let's get started. Welcome, everyone. I'm Brian Abrahams, Senior Biotech Analyst here at RBC Capital Markets. Really pleased to have Regeneron on here, represented by their CFO, Chris Fenimore, and their SVP of IR, Ryan Crowe. Chris and Ryan, thank you guys so much for joining us. Thanks, Brian. Great to be here at the RBC conference. Just going to read a quick forward-looking statement disclaimer. I'd like to remind you that our remarks made today may include forward-looking statements about Regeneron. Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in such statements. A description of material risks and uncertainties can be found in Regeneron's SEC filings. Regeneron does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. Brian, happy to jump right into your questions. Great. Thanks. Thanks, Ryan. So there's a lot going on, so a lot to cover. But maybe let's start with the ophthalmology franchise and Eylea. Maybe you talk a little bit about what you're seeing on the ground. It's been a few weeks now since the permanent J-code for Eylea HD. Can you talk about some of your early observations on the drug's uptake since the J-code and what you're seeing with respect to positioning versus other long-term agents? Sure. Thanks, Brian. As Ryan said, thanks for having us. Eylea is the leader in the anti-VEGF category. If you look at combined market share between Eylea and Eylea HD, it was 45% in the first quarter.