NEW YORK – Pacific Biosciences reported after the close of the market on Wednesday that its fourth quarter 2020 revenues fell 3 percent year over year as a result of the COVID-19 pandemic.
"We exceeded our internal Q4 target for revenue and did not see a significant negative impact from the COVID-19 pandemic during the quarter," said Christian Henry, PacBio's president and CEO, during a conference call to discuss the fourth quarter and full-year 2020 results.
Revenues for the quarter totaled $27.1 million, down from $27.9 million in Q4 of 2019 but beating the average Wall Street estimate of $25.4 million. The result was in line with a preliminary estimate provided by Henry last month at the virtual JP Morgan Healthcare Conference.
Product revenues came in at $23.6 million, down 4 percent from $24.6 million in the year-ago quarter, while service and other revenues were $3.5 million, up a fraction of a percent from $3.4 million a year ago. Instrument revenues totaled $13.6 million, down 11 percent from $15.3 million last year, and consumables revenues were $10 million, up 8 percent from $9.3 million in Q4 of 2019.
During the quarter, PacBio placed 35 Sequel II/IIe systems, bringing its total installed base up to 203 as of Dec. 31, 2020. Henry said travel restrictions during the quarter delayed a number of installations.
The new Sequel IIe instrument was "well received by customers," he said, and drove an increase in orders, including an order of seven instruments by the Wellcome Sanger Institute and a multi-system order by Berry Genomics.
Annualized consumables pull-through exceeded $180,000 per Sequel II instrument in the quarter, he said, which was higher than in the previous quarter and benefited from some typical year-end consumables stocking.
The firm's net income in Q4 was $74.9 million, or $0.37 per share, compared to a net loss of $91,000, or $0.0 per share, in Q4 of 2019, and beating analysts' average estimate for a profit of $0.32 per share. The year-over-year increase in net income was primarily due to the recognition of a $98.0 million reverse termination fee received from Illumina in January 2020 and reflected as "other income" after associated contingency clauses lapsed on Oct. 1, 2020.
The firm's R&D costs climbed 22 percent to $17.4 million from $14.3 million in the prior-year quarter, while SG&A expenses rose 8 percent to $18.0 million from $16.6 million a year ago.
PacBio's full-year 2020 revenues declined 13 percent to $78.9 million from $90.9 million in 2019, beating analysts' average estimate of $76.5 million.
Product revenues declined 16 percent to $65.4 million from $77.7 million a year ago, and service and other revenues increased 3 percent to $13.5 million from $13.1 million in 2019.
The company's net income in 2020 totaled $29.4 million, or $0.17 per share, compared to a net loss of $84.1 million, or $0.55 per share, in 2019 and beating analysts' consensus estimate for net income of $0.05 per share.
PacBio's full-year 2020 R&D expenses were up 8 percent to $64.2 million from $59.6 million in 2019. SG&A expenses, meantime, declined 4 percent to $72.8 million from $75.5 million in 2019.
As of Dec. 31, 2020, PacBio had $318.8 million in cash and investments.
Earlier on Wednesday, the company announced a $900 million investment from a subsidiary of SoftBank, a transaction that CFO Susan Kim said is expected to close next week.
The new funding "will help enable us to accelerate the expansion of our product portfolio, expand our commercial footprint, and ultimately, to realize our vision that whole-genome sequencing using our technology will become a fundamental tool for the use in a broad range of both research and clinical applications," Henry said.
Kim said that related to the investment, PacBio will recognize $52 million of expenses in Q1 to account for the "expected repayment of the continuation advances due to Illumina as a result of the merger termination."
In the first quarter of 2021, PacBio expects revenues to be slightly lower than in Q4, according to Kim, in part because of soft consumables sales in the Asia-Pacific region due to the Lunar New Year holiday, but revenues are anticipated to "grow significantly" in the second half of the year.
Also, R&D expenses are expected to increase dramatically as a result of the firm's partnership with Invitae to develop a high-throughput sequencing platform, according to Henry, though Invitae will ultimately reimburse PacBio for these costs. Kim added that the company plans to spend $20 million to $25 million in R&D on this partnership this year.
PacBio plans to double its commercial organization in 2021 from a current 22 sales representatives, Kim said, and to hire more than 50 people in R&D, adding to its current R&D headcount of 158.
With the SoftBank investment, "now we will have well over $1 billoin in capital, giving us a strong foundation to drive growth over the long term," she said.
Following the announcement of the SoftBank transaction and business update on the call, a handful of investment banks raised their price targets on PacBio's stock. Piper Sandler analyst Steven Mah upgraded the firm's shares to Overweight from a previous rating of Neutral, calling the SoftBank deal "transformational" and noting that PacBio's management suggested on the call that the high-throughput sequencer being developed with Invitae, which might enable a sub-$1,000 medically relevant whole genome, could be two to three years away from completion rather than the five years previously expected.
In Thursday mroning trade on the Nasdaq, shares of PacBio were up 14 percent at $52.35.