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Pacific Biosciences' Sequel Sees Solid Q2, Competition Rife

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On Aug 6, we issued an updated research report on Pacific Biosciences of California, Inc. (PACB - Free Report) . The company has gained consistently from its coveted Sequel platform, while a competitive industry remains a headwind.

The stock currently carries a Zacks Rank #3 (Hold).

Price Performance

In the past year, shares of Pacific Biosciences have rallied 3.2% against the industry’s decline of 3.4%.

Over the last 60 days, the Zacks Consensus Estimate for the company’s current-quarter loss per share widened by a penny to 16 cents.

What’s Favoring the Stock?

Pacific Biosciences’ flagship platform — the Sequel system — has been contributing to the company’s top line. The Sequel system is a nucleic acid sequencing platform based on SMRT (Single Molecule, Real-Time) technology.

In the recently reported second quarter Sequel instrument bookings were strong. Per management, Sequel SMRT Cell usage in the field was up more than 90%. The RS II SMRT cell usage declined more than 50%, which contributed significantly to Sequel growth. In fact, management states that an increasing number of RS II customers are switching to Sequel. Resultantly, Pacific Biosciences will discontinue support for the RS II system in 2021. In the second quarter, the company installed approximately 275 Sequel instruments worldwide.

Pacific Biosciences also continues to see solid demand for SMRT sequencing in Asia.

In the second quarter of 2018, 30% of worldwide Sequel installations were done in China. Sales momentum in China comes from large orders received from BGI in the second quarter. Also, Novogene has become Pacific Biosciences’ largest customer worldwide. The facility is located in Nanjing China and houses 20 sequel systems.

Pacific Biosciences is also strong on a plethora of product development activities. By the end of second-quarter 2018, Pacific Biosciences confirmed that its new sequencing enzyme and software update done earlier this year has received positive feedback from customers.

Additionally, the Sanger Center in the United Kingdom announced the completion of SMRT sequencing analysis of 3,000 strains of bacteria selected from infectious outbreaks over the last 100 years.

Deterrents

In the recently reported second quarter, Pacific Biosciences’ service and other revenues came in at $3.1 million, down 12.3% year over year.

Furthermore, Pacific Biosciences’ sales in Europe declined substantially on a year-over-year basis. A number of the company’s customers in Europe have been slow in initiating the usage of Sequel systems. As a result, Pacific Biosciences’ products have seen limited growth in European markets in the recent past.

The DNA sequencing market is highly competitive owing to the presence of established players like Illumina (ILMN - Free Report) and Thermo Fisher Scientific Inc. (TMO - Free Report) . Low-cost sequencing products from Illumina continue to gain traction, which is a potent threat for the company.

Key Pick

A better-ranked stock in the broader medical space is athenahealth (ATHN - Free Report) .

athenahealth has a long-term projected earnings growth rate of 17.6%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.

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