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Illumina Inc. (ILMN - Analyst Report), a major developer of life science tools for large-scale genetic analysis, recently entered into a 3-year supply agreement with genetic testing company Natera. As per the terms, Natera’s noninvasive prenatal test (NIPT) Panorama will be performed using Illumina's HiSeq 2500 and associated consumables. Financial terms of the deal, however, are yet to be disclosed.

According to Illumina, this initiative remains a part of the company’s strategy to expand its footprint in the fast-growing NIPT and the broader reproductive health market. Earlier this year, as per the strategy, the company acquired Verinata Health, Inc., a privately held company dedicated to non-invasive tests for the early identification of fetal chromosomal abnormalities.

This acquisition gave the company access to Verinata’s verifi prenatal test, the largest among the non-invasive prenatal tests (NIPT) available at present for high-risk pregnancies.

The NIPT market 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. With the occurrence of 500,000 high-risk pregnancies annually in the U.S., and an estimated 4 million pregnancies in total, Illumina is hopeful about its prospective growth in this niche market.

Difficulties in obtaining research funding amid continuing economic uncertainty, have not been able to deter Illumina from working on future growth avenues.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 the potential of this growing market.

We are also upbeat about the launch of the new reagent kits as it is likely to bolster revenues from MiSeq systems for Illumina. This should expand the installed base for the system and thereby boost the sequencing consumables business for the company.

Illumina currently carries a Zacks Rank #3 (Hold). Other stocks that warrant a look are Alere Inc. (ALR - Snapshot Report), Affymetrix Inc. (AFFX - Analyst Report) and Gilead Sciences Inc. (GILD - Analyst Report). All these stocks carry a Zacks Rank #1 (Strong Buy).

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