Pacific Biosciences’ Earnings Call: Mixed Results and Strategic Outlook

Pacific Biosciences ((PACB)) has held its Q3 earnings call. Read on for the main highlights of the call.

The recent earnings call for Pacific Biosciences presented a mixed sentiment, highlighting both achievements and challenges. On the positive side, the company celebrated significant milestones in consumable revenue, gross margin improvements, and clinical advancements. However, these successes were overshadowed by a decline in total revenue and difficulties in the funding environment, which affected instrument sales.

Record Consumable Revenue

Consumable revenue reached an all-time high of $21.3 million, marking a 15% year-over-year increase and a 12% sequential growth. This impressive performance was driven by the strong adoption of long-read sequencing technology, showcasing the company’s strength in this segment.

Improved Gross Margins

The company reported non-GAAP gross margins of 42%, the highest since 2022. This improvement was attributed to increased consumable revenue and a better product mix, indicating efficient operational management.

Strong EMEA Growth

Revenue from the EMEA region saw an 18% year-over-year increase, bolstered by a 50% rise in consumable revenue. This growth highlights the region’s robust demand and the company’s expanding footprint in the market.

Cash Burn Reduction

Pacific Biosciences successfully reduced its cash burn to $16 million in Q3, with a forecasted total cash burn of approximately $115 million for 2025. This represents an improvement of over $70 million compared to 2024, reflecting the company’s focus on financial efficiency.

Clinical Advancements and Partnerships

The company secured China regulatory approval for its Sequel II CNDx system, a significant step for clinical-grade long-read sequencing. Additionally, new partnerships were announced to expand the use of clinical assays, further strengthening its market position.

New Chemistry SPRQ-Nx Launched

Pacific Biosciences introduced the SPRQ-Nx chemistry, which is expected to lower sequencing costs to less than $300 per genome. This innovation is anticipated to improve gross margins through the use of multi-use SMRT Cells, enhancing the company’s competitive edge.

Overall Revenue Decline

Despite these achievements, total revenue fell to $38.4 million, below expectations and down from $40 million in the third quarter of 2024. This decline was primarily due to fewer Vega shipments and lower average selling prices (ASPs).

Decreased Instrument Revenue

Instrument revenue experienced a significant drop, decreasing by 33% year-over-year and 20% sequentially. This was largely impacted by reduced Revio shipments and procurement delays in Europe, highlighting challenges in the instrument segment.

Challenging Funding Environment

The company continues to face a challenging funding environment, particularly in the Americas and Asia Pacific. This has affected academic and government research customers, who rely heavily on funding from institutions like the NIH.

Forward-Looking Guidance

Looking ahead, Pacific Biosciences provided guidance that includes slightly below-expectation revenue of $38.4 million, mainly due to fewer Vega shipments in Europe and lower ASPs. However, the company anticipates a 10% sequential growth in the fourth quarter, driven by increased shipments of Revio and Vega instruments. Furthermore, the company aims to reduce cash burn to approximately $115 million for 2025 and achieve cash flow breakeven by 2027.

In summary, Pacific Biosciences’ earnings call reflected a blend of optimism and caution. While the company achieved record consumable revenue and improved gross margins, it faced challenges with overall revenue decline and a difficult funding environment. The forward-looking guidance suggests a strategic focus on growth and financial sustainability, aiming for a stronger performance in the coming quarters.