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PacBio Sales Start to Pick Up as Company Delivers on Product Enhancements

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This article was originally published February 6.

Following a slow start to 2012, sales of the Pacific Biosciences RS system began to pick up in the second half of the year, with five systems booked in the fourth quarter and four in the previous quarter — a marked improvement over three booked in the first half of the year.

The company also installed five systems in the fourth quarter of 2012, bringing its total installed base to 71. It ended the year with a backlog of five instruments.

While the company's fourth-quarter revenues fell 52 percent to $5.9 million from $12.4 million in the fourth quarter of 2011, on a sequential basis, Q4 revenues were more than double the $2.8 million logged in the third quarter of 2012.

"We started to see a turn in our business at the middle of last year, which was evidenced by an uptick in our new systems bookings," said CEO Mike Hunkapiller during a conference call discussing the company's 2012 fourth-quarter earnings. The company booked nine new systems in the second half of 2012, compared to three in the first half, he said. "We still have a ways to go to get to cash flow break even, but we are trending in the right direction."

Hunkapiller attributed the improvement to more than two dozen scientific publications and presentations at scientific meetings that "demonstrated the utility of the PacBio in a variety of applications."

Additionally, he said the company delivered on promised improvements to the reliability of the system and enhancements to its sample prep and bioinformatics components.

System "up time" increased from 50 percent at the beginning of 2012 to 93 percent by the end of the year across the installed base, he added.

Looking ahead, Hunkapiller acknowledged that the company is considering producing a desktop version of its instrument, although he did not provide further details or a timeline.

For the time being, PacBio is focused on making continued step-wise improvements to the read lengths and throughput of the existing system as well as continuing development of bioinformatics to drive further adoption and expand the number of applications.

For instance, the company recently released new software that enables users to de novo assemble genomes using only long-read PacBio data. The recently launched tools — dubbed HGap and Quiver — can generate genomes with Q50 scores, Hunkapiller said, or "at least as good as what's considered the gold standard," Sanger sequencing.

The new assembly tools, as well as the recently launched XL chemistry that increases average read lengths to 5,000 bases, will be used by researchers at the University of California, Davis, to sequence and de novo assemble around 1,000 pathogen genomes as part of the 100K Genomes Project (IS 1/15/2013).

While bacterial and other small genome sequencing is still the primary application of the system, Hunkapiller said that as the company continues to extend read lengths and bump up throughput, researchers are increasingly looking at using the PacBio RS on larger, more complex genomes.

There has been "substantial pickup" in several agriculturally important plant and animal organisms "that have been impossible to sequence using any of the short read or Sanger sequencing methods," he said.

Genomes with long repetitive regions, for instance, are particularly hard to sequence with short read technology because of the difficulty in mapping the reads back to the genome or assembling them into longer contigs and scaffolds.

Financials

While the company's revenues declined year-over-year, they rose sequentially, and Ben Gong, vice president of finance and treasurer, said he expects the company's 2013 revenues to be higher than 2012 revenues, due to booking more instruments.

"We expect the number of bookings to be significantly higher than the 12 we booked in all of 2012," he said. Nevertheless, he said the company expects that first-quarter 2013 revenues will be lower than fourth-quarter 2012 revenues due to the company only having five systems in its backlog.

Revenue for instruments ordered is typically recognized one or two quarters following the booking, he said.

However, "as we make progress on instrument sales and drive consumable revenue growth, we will make up the difference in the second half of the year."

The company recorded a net loss of $21.7 million for the quarter, compared to $22.8 million in the year-ago quarter.

Spending on R&D in the quarter declined 6 percent to $11.7 million from $12.4 million and SG&A expenses fell 9 percent to $10.7 million from $11.8 million.

The company's full year revenues declined to $26 million from $33.9 million in 2011, and net loss for the year narrowed to $94.5 million from $109.4 million in 2011. Total R&D spending for 2012 was $47.6 million, from $76.1 million in 2011, while SG&A expenses increased to $47.7 million from $46.7 million.

PacBio finished the year with $100.6 million in cash and investments. Additionally, the company also announced this week that it entered into an agreement with Deerfield Management Company to prove it with $20.5 million in debt financing.

"This cash provides us with greater flexibility and time to further develop our products and grow our business," Hunkapiller said.

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