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Complete Genomics Misses 2011 Genome Shipment Target, Downgraded by Investment Firm

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Complete Genomics shipped fewer genomes than forecast in the fourth quarter of 2011, and as a result was downgraded by investment firm Oppenheimer from an 'Outperform' to a 'Perform' rating.

The company's full-year shipments will tally 3,000 instead of the 3,200 that the company predicted in mid-December (IS 12/20/2011).

Oppenheimer analyst David Ferreiro wrote in a research note that it downgraded Complete Genomics because of "disappointing" preliminary fourth-quarter results, highlighted by "further price erosion, slower than expected backlog growth, and another operational misstep."

Complete Genomics said this week that it delivered around 600 genomes in the fourth quarter. Though it said in December that it would deliver around 900 genomes during that time, "nearly 300 genomes took longer to move through the pipeline than anticipated and will ship in the first quarter of 2012," the company said.

The December forecast of 900 Q4 genomes was already at the low end of a guidance range of between 900 and 1,200 that the company provided in November (IS 11/8/2011). At that time, Complete Genomics acknowledged that quality control issues with its new instruments caused delays that led it to shift around 700 genome shipments from the fourth quarter of 2011 to the first quarter of 2012.

Despite falling sequencing costs, Complete Genomics booked nearly 2,000 fewer genomes than Oppenheimer's original forecast. "We are incrementally more concerned about management's visibility into the business," Ferreiro added.

As a result, Oppenheimer revised its 2012 revenue estimates from $42 million to $29 million, and its 2012 order estimates from 20,000 genomes to 11,000 genomes.

Nevertheless, Ferreiro added that the investment bank believes that Complete Genomics has "the industry-leading NGS technology."

Investment firms Baird and William Blair maintained their 'Outperform' ratings.

William Blair, which previously predicted Complete Genomics would ship 7,700 genomes in 2012, has lowered that estimate to 6,000 genomes and is forecasting 2012 revenues of $25.6 million.

Complete Genomics said this week that as of the beginning of 2012, it had contracts for around 5,800 genomes valued at around $28 million. Baird analyst Quintin Lai wrote that this number is "in line with our expectation."

As of the end of the third quarter of 2011, Complete had a backlog of 4,800 genomes, worth around $24 million.

"We believe that our recent lab expansion will give us the capacity to handle both our current orders and anticipated new sales," Cliff Reid, chairman, president, and CEO of Complete Genomics, said in a statement.

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