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Pacific Biosciences Lowers Full-Year Revenue Guidance After Slowdowns in Europe, China

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NEW YORK – Pacific Biosciences is lowering its full-year 2022 revenue forecast by about 13 percent due to weakness in sales in Europe and China in the second quarter, the company said on Wednesday.

In a conference call with investors following the release of the firm's second quarter financial results, in which the firm reported revenues of $35.5. million, up 16 percent from a year ago, CEO Christian Henry said the firm now expects full-year revenues between $138 million and $145 million, representing year-over-year growth of 8 percent at the midpoint. Previously, the firm had expected revenues in the range of $160 million to $170 million.

"We're operating in an uncertain macroeconomic environment," Henry said. "These macro issues do not change our nor our customers' enthusiasm for PacBio sequencing. However, we are finding that these factors broadly play a role in customer purchasing patterns, and their ability to operate at scale, especially as our business is currently dependent on large capital purchases."

In particular, PacBio expects revenues from Europe, the Middle East, and Africa to be lower than predicted. "We see the region to be most affected by longer purchasing cycles," Henry said. "In addition, foreign exchange headwinds and increased competition are expected to have a greater impact there than in other parts of the world. We're also seeing that some of our larger customers in the region are ramping their utilization to pre-Omicron levels at a slower-than-anticipated pace, due to staffing shortages, among other things."

In Q2, PacBio saw revenues from Europe, the Middle East, and Africa fall 12 percent to $5.8 million.

Asia Pacific revenues fell 18 percent from a year ago, to $8 million, due to weakness in China where revenues were down 30 percent year over year, partially offset by growth in other countries. "The second quarter was impacted more than we expected from COVID lockdowns, and we expect it to take longer for customers to ramp back to pre-lockdown levels, in addition to ongoing risk of localized lockdowns that could be reintroduced," Henry said.

He noted that fears of a recession in the US, volatile capital markets, and competition in the sequencing instrument market are slowing purchasing patterns, but PacBio's sales in the Americas grew 51 percent year over year in Q2, to a record $21.7 million. "The strength and diversity of our customers in the US market gives me confidence that other regional headwinds are only temporary and we'll re-accelerate going into next year and beyond," he said.

"PacBio's prior '22 guide reflected an achievable bar for Q2 with a steep second half ramp that carried risk," Cowen Analyst Dan Brennan wrote in a note to investors. "Thus, [Wednesday's] '22 guidance cut … isn't too surprising, though the magnitude — from 30 to 40 percent second half year over year growth to 3 percent — creates greater uncertainty over trends and 2023."

For the three months ended June 30, the Menlo Park, California-based company recognized revenues of $35.5 million, compared to $30.6 million in Q2 2021, beating the consensus Wall Street estimate of $35.2 million.

Revenues included $15.6 million in instrument revenue, compared with $14.3 million a year ago; $14.6 million in consumables revenue, compared with $12.2 million a year ago; and $5.3 million in service and other revenue, compared to $4.1 million a year ago. The company placed 36 Sequel II or IIe instruments in the quarter, bringing the total installed base to 460 instruments, compared to 282 a year ago.

PacBio's net loss in the quarter was $71.4 million, or $.32 per share, compared to a net loss of $41 million, or $.21 per share, in the prior-year period. On an adjusted basis, loss per share was $.34, slightly missing the Wall Street estimate of a loss of $.32 per share.

The firm's R&D expenses in Q2 2022 more than doubled to $50.3 million from $22.3 million a year ago. Its SG&A expenditures grew to $39.3 million from $29.1 million.

As of June 30, the company had $899.2 million in cash and investments and 782 employees, compared to 728 at the end of 2021.

In Thursday morning trading on the Nasdaq, shares of PacBio were up 5 percent at $5.49.

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