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PacBio Books Five Systems in Q2; Cites HLA Typing as Fast-Growing Application

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NEW YORK (GenomeWeb) – Pacific Biosciences took orders for five of its RS II systems in the second quarter of 2014 and delivered eight systems, bringing its total installed base to over 100 systems and its backlog to 10, company officials said last week.

In addition, the firm plans to complete its first milestone project related to its agreement with Roche Diagnostics later this year.

During a conference call discussing the firm's second quarter results, CEO Mike Hunkapiller said that "the business has never been in better shape," adding that the company is projecting 70 percent growth in full-year revenues over 2013. For complete details on PacBio's second quarter financial results, see this article from GenomeWeb Daily News.

Nonetheless, several analysts expressed concern over the company's lower-than-expected bookings for the quarter. For instance, Piper Jaffray analyst William Quirk said in a note following the call that the firm had lowered its full-year projections to 30 instruments booked from 36.

The lower orders could be attributed to "customer logistical and tender delays," Hunkapiller said. "It wasn't a lack of order prospects in our pipeline." In addition, Hunkapiller said that the lower bookings were not because potential customers were choosing other instruments. "We're not a head-to-head competitor with any of the short-read technologies for most things. We focus on the areas where those technologies don't perform so well," he said.

Quirk added that although expected performance enhancements to the RS II are favorable, "anticipated competitive launches create a potential hurdle for broader adoption of PacBio's systems."

Investment bank William Blair also lowered its full-year bookings estimates for PacBio to 32 systems booked from 34. However, analyst Amanda Murphy wrote in a note that consumable usage is up. "Importantly, management increased its consumable-per-machine guidance to above $120,000 for the remainder of the year, highlighting current customer demand," she said.

PacBio's consumable revenue grew 62 percent in the quarter to $3 million from $1.9 million in Q2 2013 and the average pull-through per instrument per year was $125,000, Hunkapiller said. "We're seeing an increase in per-customer usage," Hunkapiller said. According to Ben Gong, the company's vice president of finance and treasurer, the most productive customers are using around $300,000 in consumables per year, indicating that average consumable pull-through can still improve.

Tapping the HLA market

The HLA typing market is quickly becoming a niche for PacBio. Earlier this year, HLA typing firm HistoGenetics and the UK blood cancer charity Anthony Nolan, both purchased two RS II systems.

HistoGenetics plans to incorporate the technology into its clinical HLA typing workflow, initially to resolve ambiguous types and for urgent cases that require a quick turnaround time.

In addition, GenDx, a spinout from the University Medical Center in Utrecht, the Netherlands, struck a co-marketing agreement for HLA sequencing with PacBio and also launched a CE-marked HLA amplification kit that is compatible with the PacBio RS, Illumina's MiSeq, and Thermo Fisher Scientific's Ion Torrent PGM.

Hunkapiller said that at the European Federation of Immunogenetics conference in Stockholm this year, both HistoGenetics and Anthony Nolan presented on their use of the PacBio system for HLA typing, which has led to a lot of interest in the field. For example, Hunkapiller said that HistoGenetics CEO Nezih Cereb demonstrated how PacBio technology could resolve tandem repeat structures that were misaligned when sequenced on the MiSeq.

The conference has since spurred "a lot of interest from a lot of different kinds of laboratories interested in the whole HLA space," Hunkapiller said, including not only typing centers, but also "laboratories working with pharmaceutical companies that are interested in high-resolution HLA typing in conjunction with clinical trials."

Hunkapiller estimated that the market for HLA typing for registries is around $200 million to $300 million, but said that there is an even larger potential market in doing HLA typing at high-resolution for pharmaceutical trials. Tapping this market will require increases to the system's throughput, Hunkapiller said, adding that the company has already seen a "fair amount of interest from pharma."

Ag and cash crops

Another growing market for PacBio is the agricultural market and sequencing reference genomes of cash crops, Hunkapiller said. He cited KeyGene, a genomics and agricultural company based in the Netherlands, as one of the firm's "highest capacity users," and said that the US Department of Agriculture also has a PacBio RS II system that it has been using for plant sequencing projects.

At a PacBio user group meeting in Asia, a Singapore-based lab described how it used the RS II to sequence the seabass genome, Hunkapiller said. Compared to assembly with the Illumina HiSeq, Hunkapiller said that with PacBio long reads, the lab reduced the number of contigs to 5,000 from 122,000 and the contig N50 increased to 1.1 million base pairs from 32,000 base pairs.

Looking ahead, Hunkapiller said that the company plans to release a series of improvements in the second half of the year to increase average read length and throughput. The improvements will not require a hardware upgrade, but will instead be software and chemistry enhancements.

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