The Google Of Genetic Testing Looks Like A Buy Right Now

One of the biggest future trends in healthcare is "personalized medicine".

Personalized medicine refers to medical care based around the genetic makeup of an individual.

The list of advantages to personalized medicine over today's treatment models are stark and exciting:

  1. Extremely early screening for potential mutations that lead to certain diseases - as early as before birth. Preventative measures can then be devised.
  2. Focused treatments. Different individuals respond to certain treatments differently. Personalized medicine will allow doctors to choose the best and most effective treatment for each individual patient, rather than the "trial and error" that occurs today.
  3. Drugs can be formulated slightly differently to achieve maximum efficacy and safety based on an individual's genetic profile.
  4. Having genetic information to reference against will be a huge advantage in the battle against Alzheimer's and other cancers thought to be linked to DNA mutations.

Why bring up personalized medicine?

Because one of the stocks in our Quality Growth Spell - the undisputed leader in genomic sequencing - just fell over 20% this week and is trading at one of its lowest prices in the past 2 years.

Seems like a good time to check it out! Let's take a look at Illumina (ILMN).

The Google Of Genetic Testing?

Wired magazine recently ran a great article on the company, which it referred to as the "Google of Genetic Testing".

Pretty high praise. Is it true?

Illumina's primary business is selling DNA sequencing machines. New hardware accounts for about 30% of revenue, while consumable supply sales are over 55% and an emerging services business is about 15%. Illumina dominates this market. Its machines generate nearly 90% of all DNA data produced today!

Already, we are seeing a lot of things we like in a business. Competitive advantages are strong, as in most cases Illumina's customers have invested a substantial amount of time and money in its platform, so switching is difficult. By scale and reputation alone, Illumina is a default vendor for many new customers as well. 70% of revenue is reliably recurring.

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Disclosure: Steve owns no stocks referenced here.

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