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In an effort to commercialize its verifi prenatal test in Israel, Verinata Health, a division of Illumina Inc. (ILMN - Analyst Report), entered into an exclusive agreement with Teva Pharmaceutical Industries Ltd. This move is part of Illumina’s strategy to expand its footprint in the growing market of prenatal testing.

As per the five-year deal, Teva, in collaboration with MOR Institute for Medical Data Ltd., a subsidiary of Clalit Health Services, will provide the verifi prenatal test to Clalit customers. The test will be provided to patients with a high possibility of chromosomal abnormality in the fetus. Moreover, the MOR Institute will maintain a 9,000-patient clinical outcomes registry and will share the data with Verinata.

All the tests will be conducted in Verinata Health’s CLIA-certified laboratory in California and Teva will be the exclusive distributor of the verifi prenatal test in Israel.  Further, Clalit will provide reimbursement for this prenatal test through supplemental insurance.  

In a major strategic move, in February, Illumina acquired Verinata Health for $350 million along with an additional $100 million in milestone payments through 2015. This granted Illumina the access to Verinata’s verifi prenatal test, the largest non-invasive prenatal test (NIPT) available at present for high-risk pregnancies.

Compared to other testing options, the verifi prenatal test works more efficiently with advanced technology to provide accurate aneuploidy detection and the ability to look across the entire genome. This acquisition will help Illumina to tap the huge NIPT market, which is estimated to be over $600 million in 2013, with projected domestic market growth of 1.5 million to 2 million tests per annum in the next five years.

Given the occurrence of 500,000 high-risk pregnancies annually in the U.S. and an estimated 4 million pregnancies in total, the company is optimistic about its future growth potential in this niche. In addition, the American College of Obstetrics and Gynecology (ACOG) and Society of Maternal and Fetal Medicine (SMFM) have both recommended cell-free DNA prenatal testing as a first or second trimester option for women with increased risk of aneuploidy. Illumina expects the favorable recommendations to drive higher adoption of NIPT going forward.

In spite of the difficult research funding environment, in an uncertain economy, Illumina has continued to work on several growth avenues to improve its performance going forward.

 The company continues to demonstrate its strength in the genotyping market with its high margin next generation sequencing (NGS) platform. Over the past few quarters, it has made several acquisitions and entered into partnerships to tap this growing market. However, llumina experiences tough competition from players like Life Technologies among others.

The stock currently carries a Zacks Rank #3 (Hold). However, Natus Medical (BABY - Snapshot Report) and Haemonetics Corporation (HAE - Analyst Report), which carry a Zacks Rank #1 (Strong Buy), look more attractive.

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