This story has been updated to include management comments made during a conference call.
NEW YORK (GenomeWeb) – Pacific Biosciences reported after the close of the market on Thursday that its third quarter revenues dropped 33 percent compared to the prior-year period, due to a $10 million milestone payment from Roche in Q3 2014 that wasn’t repeated in the most recent quarter.
The Menlo Park, California-based single-molecule sequencing company reported total revenues of $13.9 million compared to $20.6 million in Q3 2014. It missed the average Wall Street estimate of $15.8 million.
Product revenue, which includes both instrument and consumable revenue, was up 12 percent to $7.6 million from $6.8 million in Q3 2014, while service and other revenue was up 27 percent to $2.8 million from $2.2 million.
Instrument revenue fell year over year to $2.2 million from $3.5 million, despite the firm reaching a record number of RS II placements in the quarter.
Earlier this month, the company launched a new single-molecule sequencing system, Sequel. It plans to ship 10 systems to customers in the fourth quarter of this year with a broader launch next year. PacBio CEO Mike Hunkapiller said during a conference call discussing the firm's third quarter results that due to the timing of the Sequel launch, the firm allowed some customers to lease RS II systems, hence the drop in instrument revenue. Revenue from the leased placements will be recorded as services, rather than instrument revenues, he said.
Consumable revenue was up 64 percent to $5.4 million from $3.3 million, and the average per-system annual consumable revenue now exceeds $135,000, Hunkapiller said.
Contractual revenue fell 69 percent to $3.6 million from $11.7 million. Contractual revenue in Q3 2015 included $3.6 million of quarterly amortization of the upfront Roche payment while Q3 2014 revenue included a $10 million milestone payment and $1.7 million of quarterly amortization.
PacBio expects to receive its final $20 million Roche milestone payment in the fourth quarter of this year, Ben Gong, VP of finance and treasurer, said during the call. As such, the firm now expects 2015 revenues to be between 50 percent and 55 percent greater than its 2014 revenues of $60.6 million. Earlier this year, PacBio anticipated 40 percent revenue growth.
PacBio's net income for the quarter was $1.8 million, driven by a one-time gain on lease amendments of $23.0 million, compared to a net loss of $9.2 million in the third quarter of 2014. Net income per share was $.02 compared to a net loss of $.13 per share in Q3 2014. On an adjusted basis, PacBio's loss per share was $.28, just missing analysts' average estimate of $.27 per share.
PacBio had R&D expenses in the quarter of $16.2 million, up from $11.7 million in the prior-year period. Its SG&A expenses were also up to $10.8 million from $9.9 million.
The company ended the quarter with $58.9 million in cash and investments.