Pacific Biosciences Targets Clinical Growth, $40M Savings With HiFi Sequencing Push

Key Points

• Pacific Biosciences expects approximately $40 million in savings next year from headcount reductions and lower non-recurring expenses, while maintaining its focus on clinical genomics, particularly carrier, newborn and rare-disease screening.
• The SPRQ-Nx reagent rollout lowers list prices by 30% and allows sequencing chips to be reused up to three times, but has temporarily reduced consumable revenue per instrument; PacBio expects pull-through and margins to recover by year-end as adoption improves.
• PacBio is prioritizing a high-throughput platform planned for launch later next year, viewing it as central to future revenue and margin growth, while shifting toward clinical, biopharma and other customers amid uncertain academic and government funding.

Pacific Biosciences of California NASDAQ: PACB is maintaining its existing strategy while sharpening execution around clinical genomics, cost controls and the rollout of products designed to improve sequencing economics, Chief Executive Officer Mark Van Oene said during a Morgan Stanley discussion.

Van Oene, who recently took the CEO role after more than five years at the company, said the company’s principal strategic opportunity is expanding in differentiated clinical applications, particularly germline genomics. He identified carrier screening, newborn screening and rare-disease testing as priority areas.

“This is not me making a wholesale change on the strategy,” Van Oene said. “It really is … the execution.”

Restructuring Savings and Product Priorities

The company recently completed a restructuring intended to reduce cash burn. Van Oene said investors should expect Pacific Biosciences to deliver approximately $40 million in savings next year through headcount reductions and lower non-recurring expenses. He also said a near-term priority is stabilizing commercial and research-and-development teams affected by the restructuring.

Product execution will center on the company’s SPRQ-Nx reagents, which began shipping at the end of May. The reagents enable customers to reuse a sequencing chip up to three times, a capability Van Oene described as significant for both customer pricing and the company’s gross margins.

Pacific Biosciences lowered its list price by 30% with the rollout, according to Van Oene. He said early customer feedback has been encouraging, with strong results on first and second sequencing runs, though yields have been somewhat lower on third runs. The company is working with customers on workflow and timing considerations.

Van Oene said the lower pricing is generating new projects, larger-scale discussions and, in some cases, expansions of customers’ Revio instrument fleets. However, he said the transition has reduced consumable pull-through per instrument to closer to $200,000 during the second quarter and expects that pressure to continue through the current quarter.

He characterized the rollout as a two-quarter transition and said the company expects consumable revenue and annual pull-through to begin recovering by year-end. Successful adoption could also support gross-margin improvement, with Van Oene citing SPRQ-Nx as the company’s first product intended to more meaningfully increase margins.

Clinical Growth and High-Throughput Development

Van Oene said European hospitals and academic medical centers are already using whole-genome sequencing for rare disease at volumes reaching thousands of samples. In Europe, he sees a growing transition toward using HiFi sequencing as a frontline test rather than as a reflex test or a limited subset of cases.

In the U.S., he expects earlier clinical adoption to be led by targeted carrier-screening panels. He cited Quest’s launch of ataxia panels and said additional targeted tests may precede broader whole-genome sequencing for rare and undiagnosed diseases.

The company is also continuing to invest in a high-throughput sequencing platform targeted for launch later next year. Van Oene said the platform remains Pacific Biosciences’ largest R&D expense and a central capital-allocation priority. He said the company does not plan to add major new development programs, instead focusing on launching its portfolio of three HiFi sequencing technologies.

“The real growth starts to happen from the high-throughput platform,” Van Oene said, adding that high-throughput sequencing is expected to be important for both revenue and margin expansion.

• Successful SPRQ-Nx adoption and gross-margin improvement;
• Growth in recurring clinical consumables revenue, which Van Oene said should grow more than 50% over the next several years; and
• Development, commercialization and utilization of the high-throughput platform.

Funding Environment and New Customer Segments

Van Oene described the U.S. academic and government funding environment as uncertain, noting that NIH grant funding had been challenging even before the current administration. He said the company had not seen a traditional September budget “flush” and is not assuming a major improvement in its forecasts.

As a result, Pacific Biosciences is focusing more heavily on clinical customers, biopharma, philanthropy and other funding sources. Van Oene said the company is also seeing renewed interest from biopharmaceutical customers seeking larger and more comprehensive genomic data sets for target discovery.

The company is investing in software and data infrastructure alongside its sequencing systems. Van Oene highlighted HiFi Solves, a federated network through which hospital systems can run, share and analyze HiFi data. He said Pacific Biosciences has developed secondary-analysis pipelines covering areas including phasing, structural variation, copy-number analysis and methylation, and is working to make those tools more accessible through software and partnerships.

AI Opportunity Remains Outside Base Case

Van Oene also identified AI-driven therapeutics and healthcare as a potential longer-term customer category. He pointed to a deal with Basecamp Research Group in England, which is building a biology foundation model using a large atlas of genes found in soil samples. Basecamp is sending samples to Pacific Biosciences for HiFi sequencing, he said.

He said early indicators from that relationship suggest demand for higher-quality, more comprehensive sequencing data, including in metagenomics and transcriptomics. Still, Van Oene said potential AI-related revenue is not included in the company’s base-case model for margin improvement or reaching cash-flow breakeven.

In the longer term, Van Oene said multi-use SMRT Cell technology could be a key factor in making Pacific Biosciences’ business more sustainable. By amortizing the cost of what had been a single-use sequencing chip across multiple runs, the company expects to improve customer economics, expand pricing flexibility and increase gross margins.

About Pacific Biosciences of California (NASDAQ:PACB)

Pacific Biosciences of California, Inc NASDAQ: PACB develops and commercializes life-science technologies for DNA sequencing. The company is best known for its Single Molecule, Real-Time (SMRT) sequencing platform, which produces highly accurate, long-read sequencing data used to study genomes, transcriptomes and other biological systems.

PacBio's product portfolio includes the Revio and Sequel IIe long-read sequencing systems, associated consumables and sample-preparation solutions, and software for data analysis and interpretation.

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