PACIFIC BIOSCIENCES OF CALIFORNIA, INC. Q3 FY2024 earnings call

Christian Henry introduced new product launches, including an upgrade to the Revio platform with SPRQ chemistry (increasing data output per smart cell by 33%, lowering DNA input requirements), and the launch of Vega, a benchtop sequencer priced at $169,000. Also announced plans to launch SMRT Link Cloud solution in early 2025. Discussed third quarter results showing total revenue growth, sequential growth in various revenue streams. Highlighted commercial activity such as adoption from diagnostic and LDT labs, clinical research, and government sponsored projects. Susan Kim will leave PacBio in December. Also provided details on non-GAAP financial results and balance sheet items.

Total revenue in the third quarter of 2024 was $40 million, which was an 11% increase from the second quarter of 2024, with sequential growth in instrument, consumable, and service revenue. Long-read sequencing systems saw quarter-over-quarter growth, with Q3 revenue including 22 Revio systems and 5 Sequel IIe systems. Consumable revenue was $18.5 million, a 10% year-over-year increase and an 8% sequential increase. Approximately 77% of consumable revenue came from Revio systems. Service and other revenue in the third quarter of 2024 was $4.7 million, compared to $4.1 million in the third quarter of 2023. Regionally, America's revenue was $20.1 million, a 31% decrease from the third quarter of 2023; Asia Pacific's revenue was $10.8 million, a 32% decrease from the third quarter of 2023 but with sequential quarterly growth; EMEA's revenue was $9.1 million, a 17% decrease from the third quarter of 2023, with year-over-year growth in consumables partially offsetting the year-over-year decline in instrument revenue.

Fourth quarter revenue is expected to be flat to slightly up compared to the third quarter of 2024, with full year revenue lower than the previous estimate of approximately $170 million. Full year non-GAAP gross margin is expected to be between 34% and 35%. Full year non-GAAP operating expenses are expected to be $285 million to $290 million. Expect ending cash equivalents and investments to be approximately $385 million reflecting the Note exchange with SoftBank. Also expect to end the year with Revio instrument standard COGS over 10% lower than when the platform was launched and consumable unit costs over 20% lower.

Difficult macro environment where customer capital expenditure budgets have been challenged and sales cycles prolonged. Potential cannibalization concerns as Vega may prolong some sales cycles.

Q: Tejas Savant asked about feedback on SpaRC cost trade off versus additional resolution and the opportunity unlocked by lowering DNA input.

A: Christian Henry said feedback on SpaRC has been remarkable, the $500 per genome price point is a big deal, and lowering DNA input at 500 nanograms unlocks new demand.

Q: Kyle Nixon asked about overlap between Vega and Revio and the debt.

A: Christian Henry said little cannibalization expected, and the debt exchange strengthens the company's financial position.

Q: Mason Carrico asked about Vega manufacturing ramp.

A: Christian Henry said Vega is in late stages of development and expected to start shipping in early Q1.

Q: Dan Brennan asked about path to cash flow.

A: Christian Henry talked about gross margin improvement from Revio and OpEx reduction.

Q: Jack Meehan asked about Revio list price reduction.

A: Christian Henry said it's a milestone, sharing productivity improvements.

Q: Unidentified Analyst asked about Revio in China and Vega.

A: Christian Henry said seeing sample demand growth in China and Vega driving adoption.

Q: Subbu Nambi asked about balancing commercial investment with new market segments.

A: Christian Henry talked about Vega's simplicity and Susan Kim mentioned existing customer base upgrade.

Q: Madeline Mollman asked about Revio placements.

A: Christian Henry said some orders were pushed due to tenders in Europe