What happened

Shares of Pacific Biosciences of California (NASDAQ:PACB), an as-yet-unprofitable purveyor of genome sequencing systems, jumped 14.8% as of 12:17 p.m. EDT during Wednesday's session. It seems investor confidence is returning despite the loss of a major contract with Roche late last year.

So what 

Last December, Pacific Biosciences stock took a 44% beating in a single day after revealing the termination of an agreement to supply Roche, a pharma and diagnostics giant, products based on its proprietary genome sequencing technology. The tie-up was perceived as a way for PacBio to increase its presence in the fast-growing space for clinical diagnostics, and its abrupt end stoked fear that the company's products might remain confined to research labs.

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Image source: Getty Images.

After today's gain, the stock has recovered most of the loss sustained in December, as investors have had time to digest a relatively positive fourth-quarter earnings report. Management claimed that demand for its products was on the rise, and fourth-quarter product and service revenue popped 92% higher than the prior-year period while operating expenses were just 6.5% higher.

Now what

The reported gain in non-Roche-related revenue was encouraging, but PacBio needs to continue to report stellar growth to reach profitability. Product and service revenue of $11.7 million in the fourth quarter is a long way from the $29.3 million the company recorded in operating expenses during the same period.

Luckily, PacBio isn't the only company predicting strong uptake of next-generation genome sequencing equipment. A recent survey of laboratories conducted by Cowen and Company suggest the strong uptake of next-generation sequencing systems, such as PacBio's Sequel recently, will probably keep growing throughout 2017.

Cory Renauer has no position in any stocks mentioned. The Motley Fool recommends Pacific Biosciences of California. The Motley Fool has a disclosure policy.