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Pacific Biosciences Touts R&D Pipeline for Reviving Growth


NEW YORK – Pacific Biosciences officials touted the firm's R&D activities and recently launched products this week as part of the firm's plan to boost sales after a disappointing first quarter.

New Kinnex kits for long-read, full-length RNA sequencing, among other sample prep products, are already contributing to consumables revenues, and new hardware is close to being ready to contribute to the firm's top line, CEO Christian Henry said on a conference call with investors following the release of the firm's Q1 financial results, which saw flat year-over-year revenues.

During the Q&A portion of the call, Henry defended his choice to slash costs without pruning the R&D portfolio, including development of short-read sequencing products.

"We have done a lot of that work already to develop next-generation products that are in parallel with Revio," he said. "What this really says is that our benchtop system is pretty far along, and we're leveraging other technologies, coming from Revio for example, to make that system fly."

He also said that PacBio is hitting its stride in manufacturing its Onso benchtop short-read sequencer and that the data quality of a high-throughput short-read sequencer in development is promising.

Yet another new SMRT cell design — the core technology for the firm's long-read systems — is also close at hand. Meanwhile, improvements on the computational side could also help the company save costs on certain integrated chips.

"PacBio remains focused on developing its benchtop long-read sequencer, followed by a high-throughput short-read sequencer," Canaccord Genuity analyst Kyle Mikson wrote in a note to investors, noting that the firm's ultra-high-throughput long-read sequencer plans have been delayed "although there is likely modest demand for such a product currently."

JP Morgan analyst Rachel Vatnsdal noted that recent layoffs "should not impact the company's new product pipeline as a lot of the work has already been completed."

PacBio's flat year-over-year Q1 revenues were attributed to slowing sales of its sequencing instruments due to macroeconomic conditions in the US and China. Moreover, company officials said that some purchases were delayed and that sales are taking longer for several reasons, including the fact that many customers are new to PacBio.

These are dynamics other companies are seeing in the genomics market, Henry suggested. The short-read sequencing market is "more competitive than it has ever been," he said. "We did have to ask ourselves, 'Do we keep going?'"

For context, one competitor, Singular Genomics, has already chosen to focus more on the spatial biology market with its sequencing instrument.

"I think we're really just getting our feet under us there, so to speak," Henry said. PacBio recently consolidated Onso production in the Bay Area, CFO Susan Kim said, which will lead to lower production costs for consumables kits.

"We've been manufacturing-constrained, and we had some late developments that we had to finish to make the chemistry even better," Henry said, adding that shipments for Onso have increased sequentially, though he did not provide any numbers.

Henry added that he was "very encouraged" by progress on the high-throughput short-read system, which is being built with technology acquired from Apton Biosystems. "We're already sequencing billions of reads at high accuracy," he said, adding that the addressable market for this platform could be over $1 billion per year.

The first quarter was one of PacBio's most successful quarters for sample prep, Henry said, highlighting sales of DNA extraction and other sample preparation kits for long-read sequencing. The Nanobind PanDNA kit launched in January is helping the firm gain traction with users he hopes may purchase a benchtop long-read sequencer.

HiFi prep and plex library prep kits, also launched in Q1, help Revio customers prepare up to 96 libraries at a time at lower cost per library. "Some of our largest customers are adopting these kits to help them further scale their projects," Henry said. "We expect the kits to be particularly beneficial for microbial genome and low-pass large genome sequencing, where library prep costs are a large percentage of the overall workflow cost."

Meanwhile, the PureTarget kit, which began shipping in late March, helps users characterize repeat expansions.

Kinnex full-length RNA sequencing kits, launched in the fourth quarter of 2023, have led to orders from 160 customers as of March 31, totaling over $1.5 million, Henry said.

The long-read benchtop system remains a priority for PacBio, which believes it will address a market of over 1,000 potential customers. This product would likely compete with offerings from Oxford Nanopore Technologies.

PacBio is also close to finishing development of its next-generation SMRT cell. "This cell is expected to power a new, extremely high-throughput long-read platform, enabling throughput dramatically higher than that of the Revio system," Henry said.

PacBio brought manufacturing of a key component for the Revio system in-house, Kim said, "which, since being implemented in March, has helped reduce the contract manufacturing overhead expenses on each Revio instrument built by tens of thousands of dollars.The firm has also reduced the cost of the 25M SMRT cell and can continue to lower costs for both the Revio instrument and consumables, Henry said, which could help improve margins and get the firm toward breaking even. The company is also "on a path" to being able to use cheaper graphics processing units in the Revio by reducing the amount of computing power required.

Henry noted that with version 13 of the firm's SMRT Link software, "mean yield per SMRT cell for whole-genome sequencing runs in 2024 is approximately 5 Gb higher than in 2023."