Pacific Biosciences of California Inc. PACB reported a loss of 19 cents per share in the third quarter of 2017, a penny narrower than the Zacks Consensus Estimate. The loss is in line with the year-ago quarter. Strength in China and Asia boosted the company’s bottom line in the quarter. The company has a Zacks Rank #3 (Hold).
Revenues of $24 million missed the Zacks Consensus Estimate of $28 million and declined 4.2% on a year-over-year basis. Notably, the DNA sequencing market is highly competitive owing to the presence of several established players. Cutthroat competition in the niche space is the primary reason for the year-over-year decline in revenues.
Segment Details
Product revenues rose 12.7% to almost $20.3 million. Service revenues declined 7.8% from the year-ago quarter to almost $3.2 million. Year to date, Pacific Biosciences generated $68.5 million in product and service revenues, up 26% from $54.2 million generated in the first three quarters of 2016.
Consumable revenues in the reported quarter were $10.6 million, up 62% on a year-over-year basis. Consumable revenue growth was driven by higher installed base of instruments and growth in sequel instrument utilization.
Instrument revenues in the third quarter were $9.7 million, down from $11.5 million on a year-over-year basis. At the end of the quarter under review, Pacific Biosciences installed base of sequel instruments totaled around 200 instruments.
The company didn’t record any contractual revenues in the quarter.
Pacific Biosciences of California, Inc. Price and Consensus
Pacific Biosciences of California, Inc. Price and Consensus | Pacific Biosciences of California, Inc. Quote
Margin Details
In the third quarter, Pacific Biosciences generated gross profit of $8.2 million. As a percentage of revenues, gross margin in the quarter was 35%, down substantially from a year ago.
Operating expenses in the third quarter of 2017 totaled $29.8 million, compared with $29.4 million on a year-over-year basis. Year to date, operating expenses in 2017 were $94.4 million. R&D expenses in the quarter totaled $$15.8 million, down from $17.5 million a year ago. Sales, general and administrative expenses in the third quarter were $40 million, compared with $11.9 million in the third quarter of 2016.
Financial Update
Cash and investments at the end of the third quarter was $84 million, compared with $102.6 million at the end of the second quarter.
Outlook
Management expects full-year revenues of around $90 million and an improvement in gross-margin performance. For the fourth quarter, Pacific Biosciences expects gross margin in the range of 37% to 40% of net revenues.
Our Viewpoint
Solid contribution from the Instrument and Consumable revenue platforms acted as a significant positive for Pacific Biosciences in the third quarter. The improvement in margin sales of the Sequel System is another encouraging factor. The company also witnessed significant strength in China. Notably, it placed numerous system orders in the region with both new and existing customers. Of the major concerns, the DNA sequencing market is highly competitive owing to the presence of several established players. Cutthroat competition in the niche space is a headwind. However, problems related to the limited availability of SMRT cells (Single Molecule, Real-Time) for the Sequel system and higher non-cash operating expenses are expected to mar prospects.
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