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Pacific Biosciences to Build 'High-Throughput Onso' Following $110M Apton Biosystems Acquisition


NEW YORK – Pacific Biosciences' Onso era has officially begun and is set to get big — literally.

Not only has the firm shipped the first Onso short-read, sequencing-by-binding (SBB) instruments, but it has also made a deal that should allow it to develop a "high-throughput version of Onso," as CEO Christian Henry described the project to investors on a conference call following the release of the firm's second quarter financial results on Wednesday.

PacBio will acquire Apton Biosystems, a Bay Area-based sequencing technology firm, for approximately $85 million in stock now, with up to $25 million in stock and cash add-ons.

By combining Apton's super-resolution optics and image processing technologies with the sequencing-by-binding chemistry used by Onso, "PacBio expects to commercialize a high-throughput short-read platform faster than we had planned," Henry said. "This acquisition is consistent with our strategy to develop a multiproduct short-read sequencing portfolio alongside our long-read sequencing platforms, giving us an opportunity to reach an even greater portion of the multibillion-dollar sequencing market."

Apton's technology allows fast and detailed imaging that could provide tens of billions of reads from a densely-packed, unpatterned flow cell. PacBio suggested that a sequencer built on this could run multiple flow cells, have a 48-hour run time, and generate bases that are more than 90 percent above Q40, or have an error rate of one in 10,000.

That could give the company the technology to challenge Illumina's NovaSeq X, which offers between 1.5 and 26 billion reads per flow cell; Ultima Genomics' UG100, which generates about 10 billion single-end reads; and MGI Tech/Complete Genomics' DNBSeq-T7, which creates 5 billion reads per flow cell. Currently, Onso offers 500 million reads per run.

"Apton's imaging technology is impressive and, when combined with PacBio's SBB chemistry, could be a really powerful synergy," said Chris Mason, a sequencing expert at Weill Cornell Medicine who has tested the Onso platform in his lab. He added that the demand for high-throughput, high-accuracy short-read sequencing could be generated by minimal residual disease testing for cancer. 

As part of its due diligence before signing the Apton deal, PacBio tested the Onso binding-based chemistry on the Apton platform and demonstrated that it works "right out of the gate," Henry said.

"Acquiring Apton accelerates our development timeline and is not currently expected to increase our planned research and development expenses," PacBio Chief Operating Officer Mark Van Oene said in a statement. "We can quickly start integrating our chemistries onto Apton's high-throughput sequencing instrument, which we believe will significantly decrease the time required to develop the new platform. … Additionally, this comes at an opportune time with Onso entering the commercialization phase, and the Onso development team looks forward to leveraging its expertise in this new project."

Apton, based in Pleasanton, California, has raised $57 million, according to PacBio, including $24 million in Series A financing in 2021. The firm has approximately 30 employees and holds 36 patents, with another 49 pending. Its optical systems use so-called "super-resolution" imaging to interrogate molecules packed more closely than those that traditional optics can resolve. According to the firm, it can provide resolution of 40 nm and detect a single molecule.

The deal includes an upfront consideration of $85 million in stock, or approximately 6.3 million shares, plus an additional $25 million in stock, cash, or a combination of both, payable in connection with achieving a milestone of $50 million in revenue associated with the new sequencer.

The news comes as sales of PacBio's newest long-read sequencer, Revio, drove a 34 percent increase in total revenues in Q2. For the three months ended June 30, the Menlo Park, California-based sequencing technology firm reported record revenues of $47.6 million, up from $35.5 million in the prior-year period and beating the consensus Wall Street estimate of $40.3 million.

Revenues included $29.9 million in instrument revenue, up from $15.6 million a year ago, driven by Revio. The company placed 45 Revio instruments and two other sequencers in the quarter, up from 36 instruments in the year-ago quarter.

Consumables revenues were $13.7 million, down from $14.6 million a year ago. Service and other revenues were $3.9 million, down from $5.3 million a year ago.

PacBio's net loss in the quarter was $69.8 million, or $.28 per share, compared to a net loss of $71.4 million, or $.32 per share, in the prior-year period. On an adjusted basis, loss per share was $.26, compared to $.34 during Q2 2022, beating the Wall Street estimate of a loss of $.32 per share.

The firm's R&D expenses in Q2 2023 fell 8 percent to $46.2 million from $50.3 million a year ago. Its SG&A expenses grew 3 percent to $40.6 million from $39.3 million.

On the investor call, PacBio officials said they expect the Apton deal to decrease total operating expenses involved with a new high-throughput, short-read sequencer.

As of June 30, the company had $829.9 million in cash and investments, as well as $2.8 million in restricted cash, and 818 employees.

Due to a "healthy backlog" of Revio orders and the "momentum and ability to meet demand," Henry said PacBio has raised its full-year 2023 revenue expectations to between $185 million and $190 million, or growth of 44 percent to 48 percent, from a previous range of $170 million to $185 million.

In Thursday morning trading on the Nasdaq, shares of PacBio were down 6 percent at $11.75.