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PacBio Plans to Expand; Provides Update on Position in Increasingly Competitive Market


NEW YORK (GenomeWeb) – Pacific Biosciences has increased its headcount by 10 percent over the last year and plans to move into a larger office space with increased manufacturing capacity, the company said this week.

During a conference call discussing its second quarter performance, CEO Mike Hunkapiller gave an overview of the single-molecule sequencing company's position, saying that the increasingly competitive human genome sequencing space will eventually be the firm's largest market.

In addition, Hunkapiller said the company is on track to deliver a clinical sequencing system to Roche by next year, per the agreement the firms struck in 2013 to develop a system based on PacBio's single-molecule sequencing technology for the clinical market.

During the quarter, PacBio reached another $10 million development milestone, and Hunkapiller said the firm would reach another milestone in the fourth quarter. It has now secured $20 million of the $40 million tied to development milestones.

Due to the projected milestone, the firm raised its full-year revenue forecast, predicting revenue would grow more than 40 percent compared to 2014.

Hunkapiller discussed progress the company has made in its three main markets: de novo microbial sequencing, plant and animal sequencing, and human sequencing — both de novo and targeted sequencing to focus on difficult regions.

Hunkapiller asserted that PacBio is now the "gold standard" in microbial sequencing. As an example, the UK's Public Health England and Wellcome Trust Sanger Center are in the process of sequencing 3,000 bacterial reference strains using PacBio technology, he said. So far, the group has completed the sequencing of 650 strains and will finish the project in the next year or two, Hunkapiller said.

The plant and animal sequencing market accounted for about half of the company's consumable revenue over the last year, Hunkapiller said. The RNA sequencing application, Iso-Seq, has proven to be especially popular among this market for researchers studying transcript diversity.

Human sequencing is the "newest, fastest growing, and eventually, likely, our largest" application, Hunkapiller said, and will include de novo sequencing, transcript isoform analysis, epigenetic analysis, and targeted gene sequencing. The system is especially suited to sequence "difficult" regions of the genome, such as repetitive regions, areas of high GC content, and homopolymers.

In addition, the firm expects to make a significant dent in the clinical sequencing market. The company is "developing a version of our technology that will go through regulatory approval … for [Roche] to sell into the clinical diagnostic arena," he said. "We and Roche are making a substantial investment in the clinical diagnostic sequencing arena, so one might expect that we both anticipate a substantial return from that."

Nonetheless, the human sequencing market is extremely competitive and will only become more so with the entry of companies like Oxford Nanopore and 10X Genomics, which could potentially also provide long reads but at a much lower price point and footprint.

While PacBio said last quarter that it would no longer report on the number of instruments sold or in its backlog, its instrument revenue was $4.3 million, down from $4.7 million in the previous year's second quarter and flat sequentially.

Investment firm Piper Jaffray estimated that PacBio installed eight systems, below its estimated 10, and took orders for eight systems, leaving 15 in its backlog.

However, customers with installed systems appear to be using them. Consumable usage was up nearly 50 percent at $4.5 million in the quarter from $3 million in Q2 2014. Annual per-system consumable revenue is over $130,000, Hunkapiller said.

"While PacBio is clearly making solid progress on their Roche collaboration, the lumpy system placements lead us to lower our 2016 revenue estimate" to $83.4 million from $88.3 million, William Quirk, a senior research analyst at Piper Jaffray, wrote in a note to investors.