Why Pacific Biosciences of California Jumped 10.5% in January

A handful of positive announcements allowed shares to bounce back from December's drubbing.

Brian Feroldi
Brian Feroldi
Feb 6, 2017 at 11:23AM
Health Care
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Image Source: Getty Images.

What happened

Shares of Pacific Biosciences of California (NASDAQ:PACB), a manufacturer of systems used in genomic sequencing, rallied more than 10% in January, according to data from S&P Global Market Intelligence.

PACB Chart

PACB data by YCharts.

So what

Here's a review of the key developments during January that contributed to the gains:

  • PacBio announced that GrandOmics Biosciences of Beijing agreed to purchase five additional Sequel instruments in order to support China's precision medicine initiative.
  • The company announced enhanced versions of the company's chemistry and software for the Sequel System that promise to make the product more useful to researchers.
  • PacBio announced that its SMRT Sequencing technology would be featured in more than 115 presentations and posters at an International Plant & Animal Genome Conference taking place during the month.
  • Management said Novogene Corporation had agreed to buy 10 Sequel Systems.
  • Finally, management gave a presentation at the 2017 J.P. Morgan Healthcare conference that outlined the company's growth and financial plans for the year ahead.

This combination of positive developments allowed shares to partially recover from their drubbing in December.

Now what

Pacific Biosciences recently reported its fourth-quarter results, which were mixed. On the plus side, product and services revenue jumped by 92% year over year. However, the big increase was more than offset by the decline in contracting revenue from its recently terminated agreement with Roche (NASDAQOTH:RHHBY)

Thankfully, management continues to reaffirm its belief that the company's separation from Roche won't have much of an impact on sales growth. In fact, the company is projecting that product and services revenue will grow by 40%-60% in 2017. 

However, that growth will require the company to hire additional sales staff, as they will no longer have Roche helping to distribute their products. As a result, PacBio believes its net loss will grow in 2017.

Will the company succeed at selling its products without Roche? Only time will tell, but the recent sales to GrandOmics Biosciences of Beijing and Novogene are certainly a good sign.