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Thursday, January 28, 2021

Pacific Biosciences of California (NASDAQ:PACB) Springs Higher on Combo of Catalysts

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Pacific Biosciences of California (NASDAQ:PACB) is a gene sequencing play that blasted off to close last week on two key catalysts. Naturally, one big catalyst was PACB’s posting of its Q2 financial results, where it saw a general improvement in operational efficiency after accounting for one-time items. However, it’s possible that the bigger catalyst in play right now is its announcement of a new agreement by Novogene to purchase 10 Sequel Systems, giving the DNA sequencing service provider the capacity to run up to 20 Sequel Systems at a time.

According to the release, Novogene, a leading provider of genomic services and solutions with cutting edge next-generation sequencing and bioinformatics expertise, is the largest user of PACB’s Sequel Systems in the world. The service provider has ramped its use of the system dramatically since earlier in the year when it acquired access to the first 10 Sequel Systems through the Nanjing Yangzi State-Owned Investment Group in China.

Pacific Biosciences of California (NASDAQ:PACB) promulgates itself as a company that designs, develops, and manufactures sequencing systems to resolve genetically complex problems. The company’s single molecule real-time (SMRT) sequencing technology enables single molecule real-time detection of biological processes.

It offers PacBio RS II and Sequel Systems that conducts, monitors, and analyzes biochemical sequencing reactions. PACB also provides consumable products, including SMRT cells, as well as various reagent kits, such as template preparation, binding, and sequencing kits. Its customers include research institutions; commercial laboratories; genome centers; clinical, government, and academic institutions; genomics service providers; pharmaceutical companies; and agricultural companies. The company markets its products through a direct sales force in North America and Europe, as well as primarily through distributors in Asia, the Middle East, and Latin America.

According to company materials, “Pacific Biosciences of California, Inc. (PACB) offers sequencing systems to help scientists resolve genetically complex problems. Based on its novel Single Molecule, Real-Time (SMRT®) technology, Pacific Biosciences’ products enable: de novo genome assembly to finish genomes in order to more fully identify, annotate and decipher genomic structures; full-length transcript analysis to improve annotations in reference genomes, characterize alternatively spliced isoforms in important gene families, and find novel genes; targeted sequencing to more comprehensively characterize genetic variations; and real-time kinetic information for epigenome characterization.

PACB’s technology provides high accuracy, ultra-long reads, uniform coverage, and the ability to simultaneously detect epigenetic changes. PacBio sequencing systems, including consumables and software, provide a simple, fast, end-to-end workflow for SMRT Sequencing.”

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While we see some promise in the company’s financial results, given the faster rise in sales than costs on a factor basis, it still seems likely that the bigger driver of the recent pop higher in share prices was the company’s new large purchase order.

“The overwhelming demand for SMRT Sequencing in the few months since we began running the Sequel Systems has required us to double our capacity in a short amount of time,” said Ruiqiang Li, Ph.D., Founder and CEO of Novogene. “Some of the large projects we have planned include building a database of structural variants in 1,000 Chinese individuals as part of the Chinese precision medicine initiative.  In addition, we have partnered with the Global Ant Genomics Alliance to sequence 300 different species of ants to provide a comprehensive look at genomic diversity in ant genera.”

Michael Hunkapiller, Ph.D., Chairman and CEO of PACB added: “Novogene has very quickly become the largest user of our Sequel platform, and is now operating the largest SMRT Sequencing service center in the world. We are delighted that they have successfully ramped up their utilization of the systems so quickly, and that high demand for SMRT Sequencing services in China has led them to already increase their capacity.”

Traders will note 24% tacked on to share pricing for the company in the past week, a bounce that has taken root amid largely bearish action over the larger time frame. However, PACB is a stock whose past is littered with sudden rips. In addition, the company has seen interest climb, with an increase in recent trading volume of 33% over what the stock has registered over the longer term.

Now commanding a market cap of $463.52M, PACB has a significant war chest ($29M) of cash on the books, which compares with about $3.1M in total current liabilities. One should also note that debt has been growing over recent quarters. PACB is pulling in trailing 12-month revenues of $96.5M. In addition, the company is seeing major top line growth, with y/y quarterly revenues growing at 30.3%. This is an exciting story, and we look forward to a follow-up chapter as events transpire. For continuing coverage on shares of $PACB stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $PACB, either long or short, and we have not been compensated for this article.

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