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Pacific Biosciences Posts Higher Loss on Increased Costs, Reports $20M Backlog

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Pacific Biosciences reported after the close of the market on Tuesday that it brought in revenues of $220,000 for the third quarter of 2010, compared to no revenues the previous year, as it prepares for a commercial launch of its single-molecule, real-time sequencing system.

The revenues were derived entirely from government grants. It has yet to recognize any revenues from sales of the PacBio RS, though the firm noted that it has an order backlog of approximately $20 million for limited production release instruments and full commercial release instruments. The firm anticipates a commercial launch of the PacBio RS in the first half of 2011.

During a conference call following the release of the financial results, company officials said that the backlog includes orders for 32 systems from 31 customers as of the end of the third quarter. Though company officials would not name specific customers who have ordered the systems — other than those who were previously named as early-access users by the firm — they said customers include genome centers, academic centers, agricultural companies, and sequencing service providers.

PacBio Chairman, President, and CEO Hugh Martin said that applications driving initial sales of the systems are infectious diseases and cancer research and SNP validation.

"We continue to lay the groundwork for sales in the latter half of 2011 and 2012 by building out the commercial organization in both North America and Europe," said Martin. He added that the firm is "investing significantly in service and support."

As of Tuesday, PacBio said that it has shipped all 11 systems included in its beta testing, or Limited Production Release program. Of those 11 systems, 10 have been installed and eight have been accepted, the firm said.

Susan Barnes, CFO of PacBio, said during the call that the firm will recognize revenue on the full selling price of the instruments once the beta customers are upgraded to the full commercial-release specifications in the first half of 2011.

The Menlo Park, Calif.-based firm posted a net loss of $40.7 million, or $39.70 per share, for the three-month period ended Sept. 30, compared to a net loss of $24.5 million, or $46.74 per share, for Q3 2009. The loss per share for Q3 2010 was calculated based on approximately 1 million shares outstanding, as the quarter closed before the firm completed its initial public offering in October. Company officials noted on the call that, as of today, the firm has around 53 million shares outstanding.

PacBio said that the increased loss was primarily due to an increase in purchases of material for the manufacture of prototype instruments and consumable products, as well as the expansion of sales, service, and manufacturing operations as it prepares for the launch of the PacBio RS.

PacBio's R&D expenses jumped 56 percent to $32.9 million, compared to $21.1 million for the third quarter of 2009, due partially to an increase in compensation expenses related to the additional 85 people that have been hired since the third quarter of 2009.

Its SG&A spending increased 135 percent to $8 million from $3.4 million, with headcount for these functions increasing by 61 people since Q3 2009.

As of Sept. 30, PacBio held cash and investments of $112.9 million.

In early Wednesday trade on the Nasdaq, shares of PacBio were up 2 percent at $12.85.

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