What: Shareholders in Pacific Biosciences of California (NASDAQ:PACB), a provider of gene sequencing technology, had a very prosperous October as the company released some good news during the month that caused its shares to skyrocket more than 30% higher.
So what: Pacific is launching its new nucleic acid sequencing platform called "The Sequel System," which it believes will bring several advantages over its previous system, including a reduced footprint, more scalability, and lower sequencing project costs.
The company and its investors expect that this new system will be a big hit with customers. When news broke about its launch, investors got so excited that they bid up shares as much as 35%.
Later in the month, the company reported mixed results for the third quarter. Revenue declined year over year, but since that was owed completely to the timing of payments from its partnership with Roche, investors were right to shrug it off. Revenue from products and services managed to grow by 15.7% during the quarter.
On the bottom line, the company produced a $1.8 million profit, but that was primarily driven by the one-time gain on lease amendments. Subtract out that event and it would have shown a loss of more than $21 million.
With the new system waiting in the wings, quarterly results didn't appear to sway investors' opinion much, one way or the other.
Now what: As the new system becomes available, the real question that investors need to focus on is how much market share this new system will allow Pacific to wrestle away from current market leader Illumina (NASDAQ:ILMN). Pacific's previous system, the RS II, didn't have much of an impact on Illumina as it was so much more expensive. However, now that Pacific has priced its new system to be much more competitive, it may have a chance at growing beyond a simple niche player in the industry, so it will be interesting to watch this story unfold.
Brian Feroldi has no position in any stocks mentioned. The Motley Fool recommends Illumina and Pacific Biosciences of California. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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