Pacific Biosciences’ stock price dropped more than 40% this morning after disclosing that revenues from its new DNA sequencing machines are expected to fall below expectations, and that the company plans to cut annual costs by the tens of millions to help close the gap.
The preliminary first-quarter earnings report is a dour departure from the high notes heard earlier this year, after the company posted 56% annual growth following two new platform launches.
Today, PacBio said it had underperformed in all international regions, and attributed the shortfalls in part to customer procurement delays and uncertainty around funding for capital equipment purchases in the U.S. and China.
At the same time—among those who did end up putting down money for the company’s latest long-read sequencer, the Revio system, after it made its debut early last year—PacBio said those small- to mid-sized users, many of them first-time buyers, have yet to fully ramp up their usage of the machine and its supplies to the maximum capacity.
“Following the successful launch of the Revio system and a record 2023, we entered the year with optimism regarding our growth prospects,” President and CEO Christian Henry said in a statement. “As we reached the last couple of weeks of the first quarter, however, we saw an increasing number of customers delay instrument purchases and we experienced some unexpected softness in consumable shipments.”
Preliminary total sales for the quarter are slated to come in at $38.8 million, nearly level with the $38.9 million seen during the same period last year.
That includes a drop in instrument revenue, down to $19.0 million from $20.7 million, but an increase from consumables—$16.0 million versus $14.0 million, with about $11.0 million from Revio. Services and other revenues, meanwhile, fell to $3.8 million from $4.2 million.
The company said it shipped 28 Revio systems during the quarter, including 16 to new PacBio customers, bringing its total installed base to 201. It also saw “sequentially” increased sales of its short-read Onso system, introduced last summer to compete more directly with Illumina’s DNA decoders.
“Looking ahead, we are focused on four strategic priorities,” said Henry. “First, improving commercial execution to drive adoption of both the Revio and Onso platforms; second, continuing the development of our benchtop long-read and high throughput short-read platforms; third, implementing projects to improve our gross margin and drive manufacturing efficiencies; and finally, reducing annualized run-rate operating expenses on a non-GAAP basis by $50 million to $75 million by the end of 2024 in relation to our prior guidance of 5% operating expense growth.”
More details on the company’s plans are expected during the full earnings presentation scheduled for May 9.
Earlier this year, the company said it envisioned Revio’s long reads quickly taking over a much larger piece of the market—with the system’s sales outpacing the growth of the DNA sequencing market as a whole.
Back in February, PacBio forecasted 2024’s full-year revenues to land between $230 million to $250 million, for 15% to 25% beyond 2023’s haul of just over $200 million. It also set a goal of becoming cash-flow positive in 2026, with a target of at least $500 million in sales.
Now it is re-evaluating that timeline. PacBio said it expects 2024’s total to weigh in between $170 million and $200 million.
That would be driven by improvements in consumable sales in the latter half of the year, the company said, with a total of about 120 Revio shipments if it hits the midpoint of the range at $185 million.
“Despite these near-term headwinds, we remain highly encouraged by PacBio's long-term growth potential,” said Henry.
“We are continuing to see new customers adopt Revio as evidenced by the fact that nearly 60% of our Revio placements in the quarter were to new customers. We are also starting to see significant traction with large-scale projects, such as the Estonia National Biobank project announced last month, the first Revio in Latin America to be used for a 1,000-sample whole genome project, and pediatric genome initiatives at hospitals in Canada and Korea,” he added.
“It should be noted that March Revio utilization was at an all-time high—including some of our top customers exceeding our expectations.”