This article was originally published July 27.
Despite booking only one new PacBio RS system during the second quarter of 2012, Pacific Biosciences officials remain confident of the instrument's capabilities and said that increasing customer satisfaction, as well as focusing on base modification and hybrid assembly applications, will ultimately help drive adoption of the single-molecule sequencer.
"PacBio is emerging as the gold standard for finishing genomes," CEO Michael Hunkapiller said, with microbial genome assembly, in particular, a "sweet spot" for the technology.
Additionally, as the company has previously stated, it is planning to launch two new products in the second half of this year — software for automated base modification calling and a device that uses magnetic beads to more efficiently load longer DNA fragments.
During the second quarter of 2012, PacBio recorded $7.3 million in total revenues and installed its remaining backlog of seven systems, bringing its total installed base to 66.
It took an order for one new system in the quarter, down from two new orders in the previous quarter. In a conference call to discuss the company's financial results, Hunkapiller said that in the near term the company is "not expecting to book many new systems," but that "will improve in the quarters to come."
Instead, as Hunkapiller has said previously, the company is focused on its existing customers in order to drive adoption through word of mouth (IS 5/8/2012). "We strongly believe that satisfied customers become our best sales people," he said.
Looking into the third quarter, Ben Gong, the company's treasurer and vice president of finance, said that revenue will likely decrease from the $7.3 million recognized in the second quarter and will be "comprised primarily of recurring services and consumable revenues," both of which he expected to remain flat.
The company did not provide financial guidance for the full year. Amanda Murphy, an analyst with William Blair, said in a research note following the call that she has lowered her full-year revenue estimate to $23 million from a prior target of $25 million. She forecast that PacBio will place 22 instruments in 2012.
For 2013, Murphy estimates revenue of $15 million, compared to a previous estimate of $18 million, and 11 instrument placements.
The company is planning two new products for this year, Hunkapiller said. One, a magnetic bead system that is slated for a third-quarter launch and will be used to load samples into the sequencer's SMRT cells, will help increase the overall read length, reduce impurities, and require less starting material.
For example, Hunkapiller said, customers will be able to "generate 10-kilobase sized libraries using as little as one microgram of sample," a "five- to 10-fold improvement from where our customers were just a few months ago."
The system will increase read length and decrease impurities, because the magnetic beads enable longer DNA fragments to be preferentially loaded into the SMRT cells, Hunkapiller said. DNA binds to the magnetic beads and, as the beads roll over the zero-mode waveguides, the shorter pieces are not long enough to reach the ZMWs but the bigger pieces are. Additionally, because the shorter fragments tend to be a primary cause of contamination, the beads are used "both as purification and as a clever way of loading the bigger pieces," Hunkapiller explained.
Hunkapiller said that in talking with customers, sample prep is a continuing obstacle, and automation is important both for reducing the time and labor as well as for increasing the quality of the sequence data.
This new sample prep technology will not require new equipment, but will be a "fairly modest upgrade to the existing system" that the company will provide as part of its warranty service, he said.
The second product that the company is planning for the year is software for base modification analysis. The RS system has a unique feature that allows for epigenetic analysis without performing a separate experiment, such as methyl-seq or bisulfite sequencing. Instead, base modifications can be detected by analyzing the kinetics of the system. As the polymerase incorporates nucleotides, there is a detectable pause if a base is modified, such as with a methyl or a hydroxymethyl group, signaling the presence of a modification.
Earlier this year, the company released software that flags base-modification events in the sequence data, but the current version does not distinguish between the different types of modifications (IS 7/3/2012).
The new software will enable customers to target specific base modifications in bacterial genomes, such as 6-methyl adenosine, 5-methyl cytosine, and 4-methyl cytosine. Hunkapiller said that the availability of the software, which will be released as a free download, will help drive increases in consumables.
"Base modification analysis is an exciting application for us," he said. Future versions of the software will enable analysis of base modifications in larger genomes, including human genomes.
The company is also working on improvements to the chemistry and a new chip, but did not release timelines for these products.
Hunkapiller said that a new version of the sequencing chemistry is already operating in-house and will be beta tested "shortly." Internally, the company is generating results "that are roughly double the read length we are getting with C2 [chemistry]."
This week, the company also announced a collaboration with Imec to develop microchips that will boost the system's throughput (IS 7/24/2012).
PacBio recognized second-quarter revenues of $7.3 million, a decline of 27 percent from first-quarter 2012 revenues of $10 million, and a 31 percent falloff from year-ago revenues of $10.6 million.
The drop in revenues was due primarily to a decrease in instrument sales. In the second quarter of 2012, the company recognized $4.7 million in instrument revenue from seven installations, compared to $7.9 million in the first quarter from the installation of 11 systems, said Susan Barnes, the company's chief financial officer.
Meantime, consumable revenues increased sequentially to $1.2 million in the second quarter from $900,000 in the first quarter, "representative of the higher installed base quarter-over-quarter, and our customers' increase in the utilization of their instruments."
Service revenue also increased sequentially, to $1.3 million in the second quarter from $1.1 million in the first quarter. The company reported service revenue of $192,000 in the year-ago quarter.
PacBio reduced SG&A costs to $11.6 million from $15.3 million in the first quarter. SG&A for the prior-year period was $11 million.
Research and development expenses were cut to $11.3 million from $12.1 million in the first quarter and $19.5 million in the second quarter of 2011.
Net loss for the quarter was $22.5 million, or $0.40 per share. In the year-ago quarter, net loss was $22.5 million, or $0.42 per share.
The company finished the quarter with $137 million in cash and investments.