Pacific Biosciences of California, Inc. Morgan Stanley 24th Annual Global Healthcare Conference

All right. Thank you very much for joining us today. My name is Mike Pittol. I lead Morgan Stanley's U.S. Life Science Tools and Diagnostics coverage in the healthcare investment banking group. It's my pleasure to introduce Mark Van Oene, Chief Executive Officer of Pacific Biosciences.

Mark, welcome. Thanks, Mike. Thanks for having me today.

Absolutely. Congratulations again on stepping into the new CEO role. As you've gotten settled into the company, from your vantage point, where do you see the clearest opportunities to enhance the company's strategy or execution?

Well, fortunately, I've been here for a little over 5 years, and Christian and I worked hand-in-hand on really defining where we could build out the portfolio and the strategy for PacBio. This is not me making a wholesale change on the strategy. It really is what you asked about, is the execution. I think really making sure that we're really focused on driving into some of these clinical markets where our technology's differentiated, and that's really around germline genomics right now. Think about carrier screening, newborn screening, rare disease. How do we better execute there? A piece of this is just bringing the commercial organization together to properly drive and go after those markets and seize the momentum that we're starting to see both in Europe and now starting in the rest of the world.

To me, it's a very execution-focused change, more so than a big strategic shift for the organization.

What should your customers or investors expect to be different? Obviously, execution is a big part of this, but as you think about your two or three biggest priorities for the next 12 to 18 months, what are those, and what kind of evidence should investors look for that you're driving that execution the way that you hope to?

Yeah. First we did just go through some restructuring and reduced some cash burn. Look for me to land the restructuring for the organization and settle the rest of the commercial and R&D groups back down that have been impacted. That's top of mind for me, is making sure that we're fully focused on moving forward from the restructuring. You guys should look for the cash savings next year. We're talking about a $40 million savings between headcount and non-recurring expenses. You should be looking for me over the next year to make sure that we deliver those savings on the operating expenses. From an overall product perspective, we've just started shipping our SPRQ-Nx reagents. For those of you that don't follow us closely, these are reagents that let us reuse the chip up to three times.

This multi-use chip really gives us the economics to think about how we can drive gross margin and drive some price elasticity in the market by lowering the price. This SPRQ-Nx transition that started in May is really important for us to execute on this year so that we exit 2026, with consumable growth, margin growth, setting ourselves up on Revio for 2027. The other big product, obviously, to execute on over the next 18 months is the high throughput platform. SPRQ-Nx is giving us the economics to have conversations for large deals that we haven't been involved with in the past. Now people do want higher throughput platform.

Continuing to make sure that we're focused and this piece of the company was not impacted through the restructuring, but focused on driving that high throughput platform through development to execute on later on next year.

Maybe just looking ahead maybe 3 to 5 years, longer term type of time horizon, anything else that you'd like investors to understand about the broader vision for PacBio and how you see PacBio within the broader genomics ecosystem that, I think as we all know, is an ever-changing environment?

Yeah. It's been fun for life science tools companies the last 2 years, hasn't it? I'm joking. It's been tough. I think because of that, we're starting to see some new opportunities emerge that aren't the traditional funding sources for us. The first is PacBio has been built in the most part from plant, animal, non-human, and some more recently, growing human academic research. I think we're here to catch and support that as much as we can, and we will, because those are important customers and markets for us. But this drive into clinical is just critically important, and I think we have an opportunity in the longer term, 3 to 5 years, with higher throughput technologies, with even more affordable pricing per genome, to really cement ourselves in the rare disease clinical diagnostics.

I say that because in the rare disease odyssey, it's a bunch of different technologies that are used that we can consolidate onto our test. Being able to change the economics of the labs that can consolidate tests, to be able to change the economics of health systems that are deploying those tests and drive up the clinical evidence and clinical utility of combining those is a real opportunity, and publications are coming out regularly now to show the increased diagnostic yield and benefits of using HiFi as frontline. If I think about 3 to 5 years, it's making HiFi a frontline genetic test using whole genome sequencing, not just a reflex or not just a subset, but a frontline test for rare disease diagnostics. I also see a big opportunity emerging, and you're seeing it in the tools companies in our space as well.

There is this intersection of AI and healthcare. It is data hungry, the comprehensiveness of our data is meaningful for them. I do think, over the next 3-5 years, you will see us get funding from more of these AI therapeutic companies and non-traditional customers. I think of this as a new category of customers to start to drive the understanding of multimodal data into different models of biology and healthcare and therapeutics and diagnostics. I think that will likely replace academic and government in many ways, as a real opportunity for us, given the quality of the data that we have.

You mentioned SPRQ-Nx and the rollout there. What are you hearing from your early customers? How should investors understand what successful adoption might look like?