Back to top

Analyst Blog

Headquartered in Menlo Park, CA, Pacific Biosciences of California Inc. (PACB - Free Report) , a pioneer in the field of single molecule long resequencing, reported a loss of 19 cents per share in the third quarter of 2016, a penny narrower than the Zacks Consensus Estimate.

Notably, the figure was also narrower than the loss of 27 cents reported in the year-ago quarter.

Revenues of $25.1 million surpassed the Zacks Consensus Estimate of $24 million and crushed the year-ago figure by 78.6%. Product revenues were up 138.4% to almost $18 million. Service revenues grew 26.2% from the year-ago quarter to $3.4 million.

Quarter Highlights

Pacific Biosciences witnessed lower-than-expected orders in the third quarter and announced unrestricted ‘Single Molecule, Real-Time (SMRT) Sequencing’ Cell shipments.

In August, the company inked a multi-year partnership with HistoGenetics, an international leader in HLA typing. Notably, per the contract, HistoGenetics will perform HLA typing using PacBio sequencing which is likely to boost demand in the days ahead.

Meanwhile, Pacific Biosciences got featured in over 1800 publications in the third quarter, courtesy of its smart sequencing platform. Of all the publications, two papers based their research on describing ‘de novo assembly of the genomes of individuals from Korea and China’. In this regard, de novo assembly methods are used in the process of sequencing genomes (set of genes in living bodies).

Also, Pacific Biosciences received orders for 20 PacBio instruments during the third quarter. At the end of the quarter, the company’s backlog was over 40 systems.

Pacific Biosciences and Roche plans for a Sequel-based product launch which is expected to take place by early to mid 2017.

Revenue Details

Instrument revenues surged more than 400% year over year to $11.5 million driven by growing Sequel instrument shipments. Notably, the company shipped and installed more than 30 Sequel instruments in the quarter. Currently, the company has a solid base of 75 installed sequel systems.

Consumable revenues totaled $6.5 million, up 22% on a year-over-year basis. Consumable comprises proprietary single molecule, real-time (SMRT) Cells and reagent kits, which are required to be used in combination with the PacBio RS II instrument to attain the desired results.

Margin Details

Gross profit came in at $12.6 million (gross margin was 50.3%) as compared with $6.5 million in the year-ago quarter. The rise in gross profit and margin was supported by higher margin sales of the SequelTM System, which was introduced in the fourth quarter of 2015.

Research & development (R&D) expenses increased 8.1% year over year to $17.4 million, while selling, general & administrative (SG&A) expenses were up 9.9% to $11.8 million. The increased can be attributed to compensation, non-cash stock compensation, and chip development expenses.

Balance Sheet

Cash and investments at the end of third quarter was $87.3 million, compared with $82.3 million as of Dec 31, 2015.

Guidance

Pacific Biosciences registered lower instrument bookings in the third quarter, resulting in a decline in backlog at the end of the quarter. For the above-mentioned reasons, management is apprehensive that it might fail to achieve its revenue target of $93 million in full-year 2016. Currently, total revenue for the year is projected in the band of $86 million to $90 million.

PACIFIC BIOSCI Price, Consensus and EPS Surprise

 

PACIFIC BIOSCI Price, Consensus and EPS Surprise | PACIFIC BIOSCI Quote

The company forecasts product and service revenue growth between 55% and 65% for the year, compared to the previous forecast of a 70% increase. However, for the fourth quarter, the company expects its contractual revenues to decrease by $23.5 million on a year-over-year basis.

For the full year, management expects average gross margin percentage to be less than 50%. In fact, operating expense is forecasted to grow in the band of 10% to 12% in the full year.

Zacks Rank & Key Picks

Currently, Pacific Biosciences has a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader medical space include Cardiovascular Systems Inc. (CSII - Free Report) , Exelixis, Inc. (EXEL - Free Report) and IDEXX Laboratories, Inc. (IDXX - Free Report) . Notably, Cardiovascular Systems and Exelixis carry a Zacks Rank #2 (Buy) while IDEXX Laboratories sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cardiovascular Systems represents a stellar one-year return of 52.8%. Notably, the company has an expected long-term growth rate of 22.5%.

Exelixis has a stupendous one-year return of almost 94%. In the last reported quarter, the company registered an impressive earnings surprise of 40.74%.

IDEXX Laboratories represents a promising one-year return of 50.23%. The company has a long-term expected growth rate of almost 14.8%.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>


In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

PACIFIC BIOSCI (PACB) - free report >>

IDEXX LABS INC (IDXX) - free report >>

CARDIOVASCLR SY (CSII) - free report >>

EXELIXIS INC (EXEL) - free report >>