Pacific Biosciences of California, Inc. Canaccord Genuity's 46th Annual Growth Conference
Review the key takeaways and the transcript of this earnings call.
- PacBio reported second quarter revenue of $39 million, up sequentially from the prior quarter, with $20 million from consumables, $13 million from instruments, and $6 million from services.
- Service revenue declined slightly due to completion of a large population genomics study in Asia year over year.
- Clinical consumables grew 67% year over year, driven by expansion in clinical markets and strong demand for the Sequel IIe system, including two major fleet expansion deals with existing customers and a large new population genomics initiative.
- The company completed the transition to Mark Van Oene as CEO, who has a background in R&D, operations, and commercial leadership, focusing on clinical market expansion and growth in EMEA, US, and Asia-Pacific.
- PacBio executed a targeted reduction in force, primarily in marketing and management layers, to reduce costs by $15 to $20 million and extend cash runway amid increased compute and memory costs and slower-than-expected uptake of Spark Next chemistry.
- The company secured inventory of compute components for the rest of the year and prioritized R&D efforts to optimize GPU and memory usage to mitigate supply chain headwinds.
- The Spark Next chemistry launched commercially in May, offering three uses per chip at approximately 35% lower ASP, causing a temporary lull in consumables revenue as customers depleted prior inventory and validated new workflows.
- PacBio expects increased sample volumes per run to offset lower ASPs, with volume growth anticipated in the second half of 2026 and meaningful revenue contributions from large population genomics projects in 2027.
- The company highlighted competitive wins based on data depth, coverage, and reproducibility, with customers preferring comprehensive long-read data sets over short-read sequencing to avoid future reanalysis.
- Clinical consumables represented mid-teens percentage of total consumables revenue, with strong growth in EMEA driven by favorable reimbursement and adoption in rare disease testing; US clinical growth is expected to accelerate with the launch of a higher throughput instrument.
- The Vega system continues to sell well in academic, government, and public health labs globally, with a new Spark Next chemistry launch for Vega planned in August to increase output and use cases.
- PacBio lowered full-year 2023 revenue guidance to approximately $160 million from $170 million due to slower Spark Next transition and lower-than-expected Vega demand in the second half of the year.
- Management expects strong demand for Spark Next and Vega placements to continue, with uncertainty on timing and magnitude of revenue ramp.
- The company aims to be cash flow positive in 2028, driven by successful launch of the next high-throughput instrument, overcoming compute and memory supply challenges, and broad adoption of Spark Next chemistry.
- Management targets gross margins near 50% as a realistic medium-term goal post supply chain normalization and product mix improvements.
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Transcript
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Hi, welcome to the Canaccord Genuity Growth Conference. I'm Kyle Mikson. I cover life science tools and diagnostics for Canaccord. Please welcome me to a fireside chat with PacBio. PacBio offers some of the leading products for long-read sequencing across a range of throughputs. With the company, we have Jim Gibson, CFO. Thanks, Jim, for joining us today.
Appreciate it. Great. Good morning, Kyle.
Thanks. Just to start, you reported your second quarter results last Wednesday, almost a week ago. Maybe just talk about some of the key factors at play with respect to the financial performance and, of course, the management transition that was announced as well.
Sure. All right, Kyle. Again, thanks for inviting us to Canaccord to speak this week. First, we finished the second quarter with $39 million in revenue, up sequentially from the prior quarter. Solid consumable revenue, $20 million, so we were happy with that. Instruments at about $13 million and services at six. Services down slightly. We finished a big population genetics study over in Asia year-over-year, so that slightly decreased our service revenue. We were happy with our growth in consumables, especially related to clinical. We had 67% growth in our clinical business, which is really an area we're leaning into. So we're excited to see that performance. Also really excited with some of the expansion in our fleets.
We had two big deals with two existing customers to expand our fleet with Revio, and then we did a really large deal with a new population genomics initiative that we will be talking about a little more in Q3 that shipped 5 Revio. We are really excited with that deal as well. So continued strong demand for Revio. We believe primarily driven by the SPRQ-Nx launch, which this was also the first quarter of the commercial launch of SPRQ-Nx. We released that in May, so great reception from our customers on that as well. Then I think as important as the company continues to lean in heavily to the SPRQ-Nx transition, as well as kind of leaning heavily into clinical, we completed the transition to Mark Van Oene as our new CEO. He stepped into that role. We announced that last week.
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