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Pacific Biosciences (PACB) Posts Wider-than-Expected Q2 Loss

Zacks Equity Research

Headquartered in Menlo Park, CA, Pacific Biosciences of California Inc. PACB, a pioneer in the field of single molecule long resequencing technology (SMRT), reported a loss of 26 cents per share in the second quarter of 2017. The figure is 2 cents wider than the Zacks Consensus Estimate. In fact, the figure is also wider than the loss of 21 cents reported in the year-ago quarter.

Revenues of $20.07 million missed the Zacks Consensus Estimate of $23 million and declined 3.2% on a year-over-year basis.

Q2 Highlights

Product and Services revenues rose 17% to $20.07 million on a year-over-year basis.

Gross margin in the second quarter was 39.9% of net revenue versus 41.1% in the year-ago quarter. Research & development (R&D) expenses totaled $16.9 million, lower than $17.5 million reported in the year-ago quarter.

Pacific Biosciences of California, Inc. Price, Consensus and EPS Surprise

Pacific Biosciences of California, Inc. Price, Consensus and EPS Surprise | Pacific Biosciences of California, Inc. Quote

Selling, general & administrative (SG&A) expenses totaled $15.5 million, significantly higher than $11.2 million a year ago.

Balance Sheet

Cash and investments at the end of the second quarter was $102.6 million, compared with $56.1 million at the end of the first quarter of 2017.


Pacific Biosciences reaffirmed its guidance in product and service revenues for full-year 2017 at the range of 35-45%.

The company also expects gross margin growth assuming that revenues will increase as anticipated. Overall, the company expects gross margin percentage to reach the mid 40% by the end of the year.

Our Take

Pacific Biosciences exited the second quarter of 2017 on a disappointing note with loss wider than estimated and revenues missing the Zacks Consensus Estimate. Also, the gap in the loss widened than the year-ago quarter with revenue decreasing from the same. Poor margin also adds to the woes.

However, we are encouraged by the new agreement inked in August between Pacific Biosciences of California and Novogene Corp. Novogene will purchase 10 Sequel Systems, giving the DNA sequencing service provider the capacity to run up to 20 Sequel Systems at a time.

Zacks Rank & Key Picks

Pacific Biosciences has a Zacks Rank #3 (Hold).

A few better-ranked medical stocks are Edwards Lifesciences Corp. EW, INSYS Therapeutics, Inc. INSY and Align Technology, Inc. ALGN. Notably, Edwards Lifesciences, INSYS Therapeutics and Align Technology all sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

INSYS Therapeutics has a long-term expected earnings growth rate of 20%. The stock posted a stellar four-quarter average earnings surprise of 37.8%.

Align Technology has an expected long-term adjusted earnings growth of almost 26.6%. The stock has added roughly 23.5% over the last three months.

Edwards Lifesciences has a long-term expected earnings growth rate of 15.2%. The stock has gained around 5.3% over the last three months.

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