accelerating genetics. Life ScienceS · conSumer GeneticS · moLecuLar DiaGnoSticS 2009 LETTER TO ShaREhOLdERS dear fellow shareholders: In 2009, we completed another strong year Consistent with the core values of the for Illumina. Once again we achieved record company, product innovation remains the revenue, profits, and cash flow. We successfully central driver of revenue growth at Illumina. maintained or extended our market share in our In 2009, we launched over 60 new products two core markets: next-generation sequencing or product upgrades across our microarray and DNA microarrays. Importantly, we continued and sequencing business, generating nearly to expand our portfolio of innovative products in $200 million in revenue from products launched our quest to help customers unravel the genetic in the last 12 months. underpinnings of disease. In our microarray business, we introduced Since the founding of the company, Illumina’s eight new Illumina BeadChips in 2009. The first goal has been to develop products that was the HumanOmni1-Quad, a four-sample radically improve our understanding of genetics BeadChip that includes over a million markers per and human disease. Through rapid innovation, sample and is powered by the third-generation of we have been able to change the economics our Infinium® microarray technology. It is our of genetic research, enabling projects once first array product to contain rare variant considered unapproachable to now be within content derived from the 1,000 Genomes reach of every investigator. In 2009 alone, Project (1KGP), an endeavor in which Illumina technology was used to help generate researchers are cataloging the vast expanse more than 1,220 peer-reviewed publications. of genomic diversity by sequencing over 1,000 Illumina’s objective for the future is to ultimately revolutionize the management of human health. By enabling genetic analysis to be performed quickly and accurately, our products are making genetic information more accessible and allowing researchers to gain a deeper understanding of the molecular biology of disease. We believe that the elucidation of an individual’s unique genetic makeup will become human genomes from people with various ethnic backgrounds. Following the Omni’s launch, we announced our Infinium microarray roadmap, which includes new BeadChips that will contain significantly more 1KGP rare variants. This content will provide researchers with a next-generation catalog of human genetic variation and will catalyze a new wave of genome wide association studies (GWAS). an integral component in the future prevention Shortly after the close of fiscal 2009, we launched and treatment of disease. Through our the Omni-Express and the Omni-Express Plus. innovative portfolio of technologies, Illumina The Omni-Express contains 8.4 million markers is working to accelerate this future vision of across 12 different samples on one BeadChip personalized healthcare. and is upgradable within our Infinium roadmap. 2009 Achievements Despite some challenges in our markets in The increased capacity of these third-generation arrays is a testament to the flexibility of our Infinium technology platform and our ability to design BeadChips that improve per-sample 2009, we generated solid full-year results. economics, while incorporating the content that We grew revenue by 16 percent to $666 million our customers demand. This new generation of and produced nearly $175 million in operating microarray BeadChips will support the launch cash flow. Excluding capital investments of of the 2.5 and 5 million marker BeadChips that $52 million, we generated $122 million in free will be introduced as part of our 2010 roadmap. cash flow, a record for Illumina. During the year, we returned $175 million to our shareholders through the purchase of over six million shares of our common stock. In 2009, we made phenomenal progress within our sequencing business. Early in the year, we launched the Genome AnalyzerIIx (GAIIx), a hardware and software upgrade to our next-generation sequencing technology. We R&D investment is our engine of innovation and continued to improve the system over the next is responsible for such revolutionary products 10 months, ultimately enabling researchers to as the HiSeq 2000, the Omni-Express, and generate over 50 gigabases (Gb) of sequence our third-generation of Infinium BeadChips. data per run, lowering the cost per whole human genome to approximately $20,000. Early in 2010, we began shipment of early-access kits that have enabled customers to generate 95 Gb of data per run on the GAIIx. This will lower the cost per genome to $10,000, an important threshold in enabling the routine sequencing of whole human genome samples in complex disease research, particularly cancer. In 2008, we announced our diagnostics business strategy which included 1) the expansion of our BeadXpress® System installed base, 2) the creation of a CLIA-certified diagnostics services lab, and 3) the whole genome sequencing of cancer tumor and matching normal tissue samples to discover diagnostic oncology biomarkers. In 2009, we made investments and progress in all three areas. Specifically, we In January 2010, we launched the most submitted the BeadXpress for 510k approval significant product in Illumina’s history, the to the Food and Drug Administration (FDA) in HiSeq™ 2000. The HiSeq 2000 represents the September, and we expect to hear a response vision that inspired our acquisition of Solexa® from the FDA in the first half of 2010. During the in 2007 – the integration of sequencing by first half of 2009, we completed our diagnostics synthesis (SBS) chemistry with state-of-the-art services lab and received CLIA certification. As system design and optics. It is a two flow cell, of the end of the year, we had nearly completed dual-surface imaging system designed and sequencing 25 ovarian cancer samples in our engineered from the ground up. The HiSeq 2000 oncology discovery program. We made these has generated over 250 Gb of data per run in initial steps into diagnostics with the belief that this the hands of our customers and over 350 Gb market may ultimately hold the largest long-term in our own internal runs. This substantial growth potential for Illumina. We plan to continue increase in throughput will reduce the cost of investing in the development of products for this whole human genome sequencing well below emerging market and to seek additional the $10,000 threshold, enabling Illumina to once opportunities to grow our diagnostics presence. again redefine the trajectory of sequencing and our customers’ approach to disease research. Investing in Our Future Growth In order to support the significant growth opportunities we see in our markets, we believe it is imperative that we reinvest in our business. Recruiting top talent is critical to support our rapid growth and we are pleased to have added over 230 outstanding members to the Illumina team in 2009. We also made a number of infrastructure investments this year, the most notable of which is a new 49,000 square foot state-of-the-art research and development facility in Little Chesterford, UK. We grew our investment in research and Whole genome sequencing is a key component of the longer-term opportunity we see in diagnostics and personalized medicine. After receiving CLIA certification of our diagnostics services lab, we introduced Illumina’s personal genome sequencing service in June 2009. This service enables an individual, in consultation with an Illumina approved physician, to have their entire genome sequenced. We delivered the first whole genome sequence through this service in August and subsequently have sequenced numerous additional samples, including a tumor and normal tissue sample of a cancer patient, as well as samples from a four-person family and a centenarian. While this service is in its early days with respect to adoption and affordability, we believe that personal genome sequencing will become development (R&D) this year by over 30 percent affordable thanks to the strides we are making to support the innovative product development in reducing the cost of sequencing, and that it that has enabled us to become market leaders. will eventually become the standard of care for the delivery of personalized medicine. Opportunities on the Horizon Over the past three years, Illumina has lowered the cost of whole human genome sequencing by 100 times. In the past eight years, we have reduced the cost-per-microarray data point by over 3,000 times. This unprecedented pace, which dramatically outstrips Moore’s Law, has resulted in a corresponding explosion of demand by researchers to interrogate genetic samples. This relationship supports our view that the demand for genetic information is essentially limitless if we can continue to lower the cost of analysis. pursue opportunities in the plant and animal market. The same sequencing and microarray solutions that are helping personalize medicine are allowing researchers to improve breeding practices of food crops and animals. We generated over $90 million in agricultural-related orders in 2009. In early 2010, we introduced our next generation BeadChip for livestock research, the BovineHD, which contains over 700,000 markers from 20 different international bovine breeds. As we lower the cost of genetic analysis, we expect to see a corresponding increase in the applications and opportunities of our products by researchers in the plant and In the near term, this cost reduction has enabled animal market. large-scale scientific collaborations like the 1,000 Genomes Project. We believe that this new content, which will populate our third generation of microarrays, will allow researchers to interrogate thousands of disease samples and discover new and more powerful genetic markers to understand the predisposition, diagnosis, and treatment of disease. In conclusion, none of Illumina’s achievements are the result of single, individual efforts but rather the passion, motivation and collaboration of a highly effective team. I would like to thank all of our incredibly talented employees who make Illumina the unique company it is. Already, 2010 is shaping up to be one of the most exciting product years in the company’s history. In the longer term, it is becoming clear to After a year of some uncertainty in 2009, our us that the use of whole human genome markets and the collective scientific funding sequencing will play a key role in the future of environment look to be better than ever. healthcare and enable the development of The company is well capitalized with nearly personalized medicine, particularly in cancer. $700 million of cash on our balance sheet and Early discoveries emerging from the global poised to take advantage of the significant research community suggest that whole opportunities that lie ahead of us. genome sequencing is perhaps the most powerful tool available to determine the mechanistic pathways of cancer. By understanding the genetics of these affected pathways, we believe that one day physicians Best regards, will be able to routinely monitor cancers via Jay T. Flatley whole genome sequencing and prescribe President and Chief Executive Officer drugs that target mutations specific to an individual’s cancer: the ultimate embodiment of personalized medicine. Today, the research community is at the nexus of foundational genetic discoveries and their direct application to managing healthcare. The translation of these discoveries into actionable medical practice represents a significant challenge but also the greatest opportunity present in today’s healthcare industry. In addition to the opportunities in human health and genetics, Illumina will continue to actively Compare 5 - Year Cumulative Total Return Among Illumina Inc, NASDAQ Composite Index and NASDAQ Biotechnology Index S R A L L O D 1,000 900 800 700 600 500 400 300 200 100 0 12.31.04 12.30.05 12.29.06 12.28.07 12.26.08 12.31.09 The graph depicted above shows a comparison of cumulative total stockholder returns for our common stock, the NASDAQ Composite Index and the NASDAQ Biotechnology Index, from December 31, 2004 through December 31, 2009. The graph assumes that $100 was invested on December 31, 2004 in our common stock and in each index. No cash dividends have been declared on our common stock. Stockholder returns over the indicated period should not be considered indicative of future stockholder returns. corporate information EXECUTIVE OFFICERS Jay T. Flatley President and Chief Executive Officer Christian O. Henry Senior Vice President, Chief Financial Officer and General Manager, Life Sciences Business Unit Christian G. Cabou Senior Vice President and General Counsel Gregory F. Heath, Ph.D. Senior Vice President and General Manager, Diagnostics Business Tristan B. Orpin Senior Vice President, Commercial Operations Mostafa Ronaghi Senior Vice President and Chief Technology Officer TRANSFER AGENT Computershare 250 Royall Street Canton, Ma 02121 www.computershare.com +1.781.575.3400 FORM 10-K The Company’s Form 10-K can be found on the Investor Relations website in the “financial reports” section at: http://investor.illumina.com/ INDEPENDENT ACCOUNTANTS Ernst & Young LLP San diego, Ca 92122 LEGAL COUNSEL dewey & LeBoeuf LLP New York, NY 10019 BOARD OF DIRECTORS Jay T. Flatley President and Chief Executive Officer William H. Rastetter, Ph.D. Chairman Blaine Bowman Director Daniel M. Bradbury Director Karin Eastham Director Jack Goldstein, Ph.D. Director Paul Grint, M.D. Director David R. Walt, Ph.D. Director Roy Whitfield Director ANNUAL MEETING The Company’s 2010 annual Meeting will be hosted live via the Internet only at 9:00 a.m. PdT on May 12, 2010. any stockholder can listen to the meeting and participate live via the Internet at www.virtualshareholdermeeting.com/ILMN. SELECTED COMMON STOCK DATA The Company’s common stock, par value $0.01, has been traded under the symbol ILMN since July 28, 2000 on The NaSdaQ Global Select Market. USE OF FORWARD LOOKING STATEMENTS This letter contains projections and expectations about our business and other forward-looking statements that involve risks and uncertainties. These forward-looking statements are made based on our expectations as of the date of this letter and may differ materially from actual future events or results. among the important factors that could cause actual results to differ materially from those in any forward-looking statements are (i) our ability to develop and commercialize further our Beadarray™, VeraCode®, and Solexa® technologies and to deploy new sequencing, gene expression, and genotyping products and applications for our technology platforms, (ii) our ability to manufacture robust instrumentation and reagents, and (iii) reductions in the funding levels to our primary customers, including as a result of the timing and amount of funding provided by the american Recovery and Reinvestment act of 2009, together with other factors detailed in our filings with the Securities and Exchange Commission, including our most recent filings on Forms 10-K and 10-Q, or in information disclosed in public conference calls, the date and time of which are released beforehand. We undertake no obligation, and do not intend, to update these forward-looking statements after the date of this letter.” WORLDWIDE HEADQUARTERS Illumina, Inc. 9885 Towne Centre Drive San Diego, CA 92121 USA 1.800.809.4566 toll-free 1.858.202.4566 tel 1.858.202.4766 fax www.illumina.com For local offices and international distributors, visit www.illumina.com/locations © 2010 Illumina, Inc. All rights reserved. TRADEMARK INFORMATION Illumina, illuminaDx, Solexa, Making Sense Out of Life, Oligator, Sentrix, GoldenGate, GoldenGate Indexing, DASL, BeadArray, Array of Arrays, Infinium, BeadXpress, VeraCode, IntelliHyb, iSelect, CSPro, GenomeStudio, Genetic Energy, HiSeq, and HiScan are registered trademarks or trademarks of Illumina, Inc. All other brands and names contained herein are the property of their respective owners.