As noted earlier, Roche is willing to pay more than $5 billion to acquire gene sequencing firm Illumina. But other firms looking to enter the space may end up targeting another industry player for just a fraction of that price. Pacific Biosciences (PACB) currently is worth less than zero, after you remove the company’s $161 million cash balance from the equation. PACB is valued at $143 million on the open market.
The stock is so cheap simply because this gene sequencer is roughly a half decade behind Illumina on the development curve. While Illumina is expected to boost sales roughly 8% in 2013 to around $1.2 billion, Pacific Biosciences’ sales won’t likely top $40 million by then.
Yet investors may be overlooking how much money has already gone into the company’s technology base. Pacific Biosciences has spent a cumulative $250 million in R&D over the last three years, giving the company a considerable headstart for any firm that wants to enter into this biotechnology niche.
Right now, this stock is getting little investor affection simply because it is unprofitable -- and will likely remain that way for at least a few more years. Yet for potential acquirers, that loss can be easily absorbed if it means getting control of the company’s technology platform. "