Pacific Biosciences of California Inc. PACB reported loss of 2 cents per share in the fourth quarter of 2015, in line with the Zacks Consensus Estimate. The figure was much narrower than the loss of 26 cents reported in the year-ago quarter, primarily owing to higher contractual revenues from Roche.
Following the results, shares lost almost 7% in after-hours trading on Feb 3, most likely because of the unimpressive full-year 2016 guidance.
Revenues of $36.2 million lagged the Zacks Consensus Estimate of $38 million but surged a massive 114.6% on a year-over-year basis. The upside was driven by strong growth in contractual revenues that increased from almost $1.7 million in the year-ago quarter to $23.6 million in the reported quarter.
Notably, the company has a distribution agreement with Roche, under which Pacific Biosciences received $20 million as the final milestone payment in the quarter under review.
Pacific Biosciences reported strong full-year 2015 results, with revenues jumping 53% year over year to $93 million. Excluding contractual revenues from Roche, total revenues increased 10% from 2014.
Back to fourth-quarter results, product revenues decreased 24.2% to $9.8 million. Service revenues grew 26.3% from the year-ago quarter to $2.9 million.
Instrument revenues decreased 39.5% year over year to $5.2 million in the quarter. Consumable revenues totaled $4.6 million, up 7% on a year-over-year basis. Consumable comprises proprietary single molecule, real-time (SMRT) Cells and reagent kits, which consumers are required to use in combination with the PacBio RS II instrument to get the desired results.
Pacific Biosciences received 49 orders for the new Sequel system and shipped 10 during the reported quarter. The company noted that more than 40% of the Sequel systems ordered in the quarter were from new customers. Moreover, the legacy PacBio RS II won three orders in the quarter. RS II system install base grew by 28% in full-year 2015.
Gross profit came in at $26.5 million as compared with $4.4 million in the year-ago quarter due to higher margin contractual revenues from Roche.
Research & development (R&D) expenses increased 19.6% year over year to $14.8 million, while selling, general & administrative (SG&A) expenses were up 27.7% to $12.8 million. The increase in expenses can be primarily attributed to higher compensation and product development costs related to the launch of the Sequel system.
Operating loss narrowed to $1.1 million from $17.9 million in the year-ago quarter, primarily due to higher revenues and gross margin expansion.
Pacific Biosciences forecasts revenues of approximately $93 million for full-year 2016. Product and service revenues are expected to increase almost 70% year over year, which will fully offset the $33 million decline in contractual revenues.
Pacific Biosciences expects shipments of the Sequel shipment to be lower in the first half of 2016 due to the limited availability of Single Molecule, Real-Time (SMRT) cells. Hence, first-quarter 2016 revenues are expected to remain flat on a year-over-year basis.
However, management expect revenues to grow sequentially each quarter for the rest of full-year 2016 based on eventual increase in shipments of the Sequel system. Pacific Biosciences expects consumable revenues to grow sequentially each quarter as well. However, the growth rate is forecasted to be volatile due to fluctuations in customer order patterns.
Pacific Biosciences expects gross margin to be in the low 40% range in most quarters of this year. Gross margin is expected to expand in the first quarter driven by favorable product mix. Sequel systems are higher margin products than RS II and the growing adoption of the new system will drive gross margin expansion.
Management expects total operating expense to grow by approximately 5% in full-year 2016 driven by continuing investments on product development, higher volume Sequel chip manufacturing and chemistry and software improvements.
Zacks Rank & Key Picks
Currently, Pacific Biosciences has a Zacks Rank #4 (Hold).
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