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Citing Sample Prep Glitch, Complete Genomics Lowers Guidance for 2011 Genome Shipments

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By Monica Heger

This story was originally published on Dec. 15.

Due to problems upgrading its sample-prep capacity, Complete Genomics will ship fewer genomes this year than it previously anticipated, the company said at the Oppenheimer Healthcare conference in New York last week.

Chief financial officer Ajay Bansal told investors in his presentation, which was webcast, that the company experienced a "minor glitch in our sample-prep operation" late in the third quarter, so between 700 and 800 genomes that it expected to ship this year "got shifted from Q4 to Q1 of next year."

The company expects to ship around 900 genomes in the fourth quarter and 3,200 genomes for the year. This is on the lower end of an estimate the company gave in its third-quarter earnings call, when it first announced its sample-prep problem (IS 11/8/2011). It said then that it expected to ship between 900 and 1,200 genomes in the fourth quarter, for a yearly total of between 3,200 and 3,600 genomes, but said at the time that the sample prep issues had been resolved.

Bansal said this week that the company "would have delivered close to 4,000 genomes to our customers" this year if it had not had the sample-prep issue.

Aside from problems upgrading its sample-prep capacity, Bansal gave no other indications for the lower-than-expected shipments. He said that the company has not been affected by funding pressures in the US.

"Although the [National Institutes of Health] is experiencing budget cuts and has to figure out where to focus their resources, there is a strong bias toward keeping funding for cutting-edge technology, such as sequencing, pretty much in place," Bansal said.

Bansal also said that the company's plans for upgrading its instruments to handle more volume were still on track. As it previously stated, it is developing higher density arrays to increase its throughput to 1.5 genomes per day per machine. When these upgrades are complete, by the end of the first quarter of 2012, the company will have a total capacity of more than 1,000 genomes per month.

Additionally, the company is making progress on its second-generation sequencers, which are currently "in the prototype stage," said Bansal, and "will be available at the end of Q2 next year." The company has already placed orders for six of these new machines, he added.

As previously reported, Complete Genomics is also developing a third-generation instrument with entirely new optics technology that will enable a throughput of 80 genomes per day (IS 9/20/2011). Bansal said the company is still on its planned trajectory for these instruments.

Following Bansal's presentation, several analysts lowered their fourth-quarter revenue estimates.

Analyst Quintin Lai of R.W. Baird lowered his fourth-quarter revenue estimate for Complete Genomics to $3.8 million from $4.7 million, and his 2012 revenue estimate to $35 million from $46 million.

Additionally, Lai said that that Complete Genomics will likely have to raise more funding in the second half of 2012, and expressed concern that the company has "yet to show traction towards profitability."

William Blair also lowered its fourth-quarter, 2012, and 2013 revenue expectations. Previously, it had predicted $5.6 million in fourth-quarter revenues, which it has now lowered to $4.5 million, wrote analyst Amanda Murphy in a research note.

Additionally, she now anticipates that Complete Genomics will ship 7,000 genomes in 2012, down from a previous estimate of 9,500; and 15,000 genomes in 2013, down from 18,600.

As a result, William Blair is lowering its revenue estimates for those years to $33 million and $45 million, from $40 million and $56 million, respectively.

Murphy also questioned the lower guidance on genome shipments since the company had previously indicated that the sample-prep issues were resolved in the third quarter.

"[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," she said.

Murphy also predicted that the company would need additional cash in 2012. "Complete Genomics needs to generate some large sample orders to meaningfully drive toward profitability," she wrote.

Despite these lowered revenue estimates, both firms maintained their Outperform ratings.


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