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Analysts Lower Complete Genomics' Estimates on Updated Guidance

NEW YORK (GenomeWeb News) – Wall Street analysts have revised their revenue estimates for Complete Genomics following a company executive's updated guidance on genome shipments on Wednesday.

Speaking at an investment conference, Complete Genomics CFO Ajay Bansal said that during the fourth quarter the firm expects to ship about 900 genomes, the low end of a guidance range of between 900 and 1,200 that the firm had given last month. For full-year 2011, Bansal said that the company expects to ship 3,200 genomes.

Reacting to the news, investment firms R.W. Baird and William Blair lowered revenues for Complete Genomics, though both maintained Outperform ratings.

In a research note, Quintin Lai at R.W. Baird lowered the target price on the genomic testing service firm's stock to $6 from an earlier estimate of $10. He also lowered his fourth-quarter revenue estimate to $3.8 million from $4.7 million and full-year 2012 revenue estimate to $35 million from $46 million.

Lai added that the company is expanding sequencing capacity to 1,000 genomes per month by the first quarter of 2012 from 750 genomes per month currently, and by the third quarter of 2012 Complete Genomics expects to bring six next-generation sequencers online, increasing overall capacity to 6,000 per month.

Though the company is progressing on new orders and backlog, it "has yet to show traction [toward] profitability," he said. During the third quarter, the company reported a backlog of around $24 million and 4,800 genomes.

Lai added that despite Complete Genomics' intrinsic value, it "faces few positive catalysts until it demonstrates stronger genome-delivery/revenues when it reports" first quarter 2012 earnings results.

William Blair analyst Amanda Murphy also lowered fourth quarter estimates on the updated guidance, saying in a note that she expects revenues to come in at $4.5 million, down from an earlier estimate of $5.6 million. She expects Complete Genomics to ship 900 genomes during the quarter at an average sales price of $4,500, compared to a previous estimate of 1,110 genomes at an ASP of $5,000.

For 2012, she estimates revenues of $33 million on about 7,000 shipped genomes, down from an earlier prediction of $40 million on 9,500 shipped genomes. For 2013, Murphy lowered revenue estimates to $45 million on 15,000 shipped genomes from $56 million on 18,600 shipped genomes.

It is not clear why guidance was lowered, she said, and Complete Genomics has indicated that sample prep issues that were noted during the firm's third-quarter earnings release has been resolved.

"[I]t is not clear whether this issue had a larger impact on the quarter than expected or whether the issue was related to timing of sample receipt from customers," Murphy said. "Regardless, the company also indicated funding is not having an impact on demand; thus the issue appears operational."

Both Murphy and Lai also noted that Complete Genomics will need to raise additional funds in the second half of 2012.

In early morning trading on Nasdaq, shares of Complete Genomics were up 3 percent at $2.90.

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