UPDATE 1-Illumina shares sparkle on strong demand for new gene tech

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Aug 2 (Reuters) - Shares of Illumina Inc surged nearly 14 percent on Wednesday, a day after the company raised its 2017 revenue forecast on strong demand for its new gene-sequencing technology.

The company in January unveiled its NovaSeq sequencing platform, which is designed to deliver faster and cheaper gene sequencing over existing models.

Gene-sequencing is a method to analyze the genome, and can among other uses, help identify inherited disorders and markers of disease progression.

The human genome is the full complement of DNA, or genetic material, a copy of which is found in nearly every cell of the body.

It took government-funded scientists $3 billion and 13 years to sequence the first human genome in 2003.

While Illumina's older HiSeq technology brought down the cost of sequencing to $1,000 per human genome, NovaSeq is expected to eventually reduce it to $100.

The company said it shipped and installed 80 NovaSeq instruments in the second quarter, ahead of consensus estimates of 50, said Cowen & Co's Puneet Souda, who raised his PT by $6 to $207.

Illumina also has a backlog of more than 100 NovaSeqs.

"We're seeing the beginning of the HiSeq replacement cycle, with 2/3 of NovaSeq orders coming from HiSeq and HiSeq X labs accessing NovaSeq's improved sequencing costs and capabilities," CEO Francis deSouza said on a post-earnings call on Tuesday.

But less than 10 percent of HiSeq customers have ordered the NovaSeq so far, he said. "So the bulk of this wave is still in front of us."

Illumina said it was surprised that one-third of the orders came from new customers and those that don't use bulky "benchtop" sequencing systems such as HiSeq. Analysts, however, had doubted whether there was adequate sequencing demand for Illumina's customers to buy the NovaSeq system, which has a list price of close to $1 million.

But since the product reduces the cost of sequencing per genome, Illumina's customers were also expected to adopt the technology to remain competitive.

"It's a bit of a chicken and egg situation," Souda said.

Shares of the company, which reported better-than-expected quarterly profit and revenue, were at $196.42 in heavy volume trading on Wednesday afternoon.

(Reporting by Natalie Grover in Bengaluru; Editing by Arun Koyyur)