PACB - Earnings call transcript Q1 2020 | Pacific Biosciences of California, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Pacific Biosciences of California, Inc.

First Quarter 2020 Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your first speaker today, Ms. Trevin Rard. ahead. go please Ma’am,

Trevin Rard

welcome We Pacific keeping hope this and XXXX well first conference time. call. that to afternoon, Biosciences the quarter during Good you are

so number our any are or different from hosting challenges with a We’re locations if call technical today, please pauses. there bear us of

or, financial website the call, as X-K on at Vice our Officer; today, Officer; are of a our Form available alternatively, Earlier Exchange the Financial the Commission which issued Gong, Executive at www.sec.gov. Mike President Investors be Securities website of will is Chief press a Susan and Chief Ben we today we Barnes, on Finance section our With copy our of and discussing www.pacb.com outlining me and available the on release results on furnished today’s Hunkapiller, Treasurer.

we on that COVID-XX events, statements, to our remind partners, other products and I today’s making customers COVID-XX pandemic business would plans and use call, our and Before like forward-looking to the research. impact of be products relating as the in and our expectations projections, including may you of on begin, financial such employees we future

actions well which on assumptions, You In remain may the depend the and including by undue because to continued this as as factors severity, place businesses on business several reliance subject impact taken extent our of at to time. evolve pandemic and extent duration the statements uncertain will particular, to on should materially the of in the governments, and are from all risks pandemic, response consumers of not they and uncertainties results. and forward-looking differ actual COVID-XX’s continued

XX-Q. including filed described uncertainties Commission Pacific are statements. Biosciences Securities obligation most update no Form X-K, forward-looking more reports recently These our our to XX-K Exchange in and Forms risks undertakes and fully and on filings,

website shortly made forward-looking today’s use or replay on call electing Investors Investors after recorded call our to note is cautioned after today’s audio may replay the and call. the materially please statements our completion live the that available section on be In the differ for call. of of being change addition, audio that will may are

to now over to the Mike. like I’d call turn

Mike Hunkapiller

you On we Trevin. our quarter us as Good for for this joining call, thank the will results today. and afternoon usual. review Thanks, previous

pandemic will the We also been our and describe have how how impacted COVID-XX we business has responding.

with result line down XXXX million, our start $X.X QX the QX Consumable with financial in for from up from of some highlights expectations was XXXX XX% generally results. going our and revenue quarter the X% This XXXX. into sequentially I’ll QX was quarter.

consumable sequentially As shutdowns generally consumable the sales latter anticipated, part seasonality of strong to with most to China to customer starting in in and cut March. back down sales due of Europe of and COVID-XX. our Meanwhile, China into quarter for customers early the U.S. impacts only were our were the due in

$X Instrument down revenue quarter from XXXX. QX the first for XX% was million,

negatively of instrument ordered. taking many had impacted by postponed as was COVID-XX revenue instruments delivery customers Our they

weighted sales the end are and heavily each quarter. Our instrument towards usually installs of

again numerous Europe, Systems. II XXX operations we to and ended unable shutting were installations. U.S. in the across complete of Sequel down with customers quarter as However, base installed the their an We March,

QX to our QX XXXX. revenue last expected to X% we first of $XX.X the down early compared Total was for year. million, part quarter, quarter from the the revenue In increase

operations. Europe China. to drastically outside the our before of in picture spread However, many of mid-March and The in shutdown areas customers U.S. begun had this COVID-XX was in changed as

XX% XXXX the in XX%, in from we XXXX. a the the QX than up first was and Gross As of usual. quarter weaker XX% the weeks from result, generated QX were last for in revenue much margin quarter up

Illumina from we terms received termination we $XXX merger during the of recorded Per $XX out the Illumina, income. as with agreement million total quarter non-operating of first the million a which of

income result, a the quarter We the for cash million with ended we $XXX.X on quarter. net of and $X.X generated investments positive hand. As million in

regarding a of Now operations. current few our comments state I’ll provide

is place in Our and businesses first to that in facility the one March of many manufacturing on These shelter issued orders our forced countries shutdown. located headquarters orders area XXth. in

However, essential to been businesses permitted have continue operating.

carry a an company sciences businesses and necessary of activities. with that by them tools out essential We virtue considered fact are business supplies for life other essential the that we to consumables critical were

to safety supply the We the operations However, home. support field had provide Park were onsite employees onsite in of them, having continued our at still were and we for limited our to those Menlo number close maintained employees employees are who of of from facility A to the majority work to a our of providing needed. instruments as our customers consumables operating. also customers certain and our

to who certain employees essential the continuing addition, COVID-XX can efforts and conduct acknowledge wet COVID-XX. that largely on In to all related efforts to are their to are ensure our like of customers other research we and in areas. continue activities the work I’d supportive working important lab

would offer be the useful and on against in like perspectives to can fight I some COVID-XX pandemic. technology Now products how PacBio’s

First other based in infected for are to an PacBio’s polymerase Such chain virus individual. for inexpensive not transcriptase sequencing reverse sample reaction suited diagnostic the fast or of a taken relatively which or on an technologies. all, products test from see individuals from high been if can a demand generate by the tests they application RT-PCR, near-term testing the is have

CoV-X valuable time. can to different across community virus mutations PacBio’s samples order other over the have detect individual at collected are adapt high time Researchers this which sequencing because the regions. particularly products across may spread research virus to genome virus to within track be their identifying hand mutate multiple in general or virus for evolved very individual, how namely in can an different sequence PacBio times over and regions studying be of particles of different easily By to allows valuable tend type on to a with how order in how responsible environments. accuracy. virus the strains researchers could the it Viruses the present. SARS’ has technology COVID-XX within for for evolves or

scientists and As both of is with vaccines. also may is systems. it develop the studies our mutate positioned for expanding human biomedical it sequencing research. and researchers virus be an In future, understand are is an example, and they smart virus therapeutics products CoV-X honored we the already to how LabCorp antiviral and conduct LabCorp using applications to the PacBio the combat are and well that will COVID-XX on experienced in their to we have use partnered valuable drugs response for SARS’ user sequencing of to research COVID-XX pleased

the SARS valuable ongoing the study candidates. identify and Researchers how that hosts Another valuable of sequencing these are PacBio The of to exposure virus. infected protective in CoV-X Researchers the also the study people can for antibodies patients the genomes vaccine of be studying the genetic been fight interested antibodies in affected by in understand virus. virus. to host the can to response is who are the to have the immune of generated application with people patients different development sequence very analysis recovering background of who

hosts why experienced seen can a the The have response. within who very explanation deadly others negative is for in exposure that genomes. of some wide to genome different impact. a has across sequencing complex host there human how for valuable the positive the PacBio the virus reactions hidden proven little immune be control for maybe range underlying within the be sequencing tool have people, differences regions to such While have we tested

proud estimate In we to has studies this to demand resume customers these term, online our a state. likely systems difficult decreased That who significantly. At by long pandemic. when to aimed systems. time, confident the with and fighting run, majority vary are region to serving We shutdown it's business of of remain are said value in by engaged back most the increase. be that running And and high have PacBio multiple at customers and sites state Sequel our COVID-XX Sequel the near sequencing continue will II will their in for come will It PacBio region the operations. various

a provide today the and COVID-XX with we're that pandemic. out that make to response to science customers' privileged play to our and a seeing technology society are can truly We difference

concluding time and Before our the response remarks, my today energy of initial I worth noting, being think most while that is on COVID-XX the spent pandemic. it's to

and using PacBio accurate who customers and traditional products and are sciences fields. in and made Generating several biomedical respective their the tools Our comprehensive most months. on progress working past genomes animal tremendous areas, in including human the have diverse research plant

We advancement are our lot customers return they look of able we their continue to We with on temporarily will reengaging stay number and of to growing home are applications. at assure into that to of products adhering sequencing when a labs. back orders, the SMRT improvements you to forward our who to a to push

now results. will more over to our Susan it I financial details provide on to turn

Susan Barnes

the financial remarks Thank provide remarks balance first discussion you, QX our with to quarter for of with will a will of XXXX. will I comparison afternoon details the of XXXX. of and Mike, overview XX, I results with ended good our my begin today our quarter everyone. that sheet. my the conclude March brief I operating then

$XXX.X net $X.X $XX.X quarter million million. ended revenue financial of first XXXX quarter of highlights, and with during We quarter, in million cash investments. our with the the Starting we recognized recorded and income

recognized $XX.X down Turning X% in $X.X to in XXXX Consumable in the million in quarter XXXX. other and revenue of revenue, was $X.X million the of of XXXX. Service product, and million, Breaking other for $X down and revenue in XXXX million we product, the other $X.X was quarter QX QX in million up in compared instrument of the $X reported service was quarter revenue, XXXX. lower the of revenue, million of revenue XXXX $X.X than from from XXXX. recorded recognized to million of was QX first first QX million of the service revenue QX $XX.X

QX gross of profit in resolving is gross XXXX. gross up to of $X.X This QX of margin profit profit gross and and XX% margin approximately a of million generated $X.X in regards gross With XX%. we a million XXXX, from margins, in

incurred compared the was fee of totaled QX the in $XX.X Moving of to million to $XX.X operating quarter the advisory expenses, a in conjunction of termination million This with operating of merger expenses $X with result Illumina. in first million, primarily the XXXX. XXXX agreement increase

in down from Non-cash R&D of million the incurred QX of XXXX. expenses, expenses quarter was the down compensation XXXX, operating down expenses operating our included from Breaking $XX.X QX of in XXXX. million in slightly $X.X stock-based in were million $X.X QX $XX.X million in

QX In were line. we expenses of result $XX increase income in was million of of continuation from million the QX we of and loss in Illumina, XXXX. a in in general gain fee million of million a the $XX.X I the This mentioned $XX.X net QX up $XX.X of administration earlier. a $X below net recorded XXXX. XXXX, from operating of the the to gain, quarter result QX million compared we XXXX, million, Sales, This $X.X $X.X was larger recorded million $XX as a income result million received advisory advances

balance to Turning sheet. our

a the Illumina, a at $XX my As advances I was at the investments and merger increase at fee. primarily million quarter of of the of with fourth $XX.X received of result beginning end the cash from continuation $XXX.X our comments, $XX first This of termination combination $XXX the unrestricted end and mentioned quarter million that million of was compared the million balance million was which XXXX. of

increased million in retire QX million from the We of from the $XX.X XXXX. million XXXX. in $XX.X principal of to $XX.X in $XX had million decreased at facility the QX matured. million finally agreement outstanding QX FebruaryXXXX, repaid to QX end the at end to balance receivable the we debt of $X.X And balances Inventory it. Accounts under

remarks my financial I turn Ben. the quarter. on to for over results would the the like concludes This to call

Ben Gong

we uncertainty revenue the you, light by to Susan. In will caused are not a experience That forecast. the Thank providing said, the by the we caused headwind continuing of be pandemic. COVID-XX pandemic,

PacBio with the when At sites sites normal we're the to of predict are operations. this will resume currently their majority shutdown. have not able our shutdown systems earlier, mentioned Mike who As time,

are We those supplying sites running still that with consumables.

were pleased improvement we to gross our on during margin, gross the first the in margin see quarter. to Moving

of manufacturing rate that a were For output QX, similar running and we at to our facility of level production QX. most

However, we have manufacturing leading since reduced capacity. to our significantly March the of idle middle output

to margin the gross our expect we result, a As significantly near in decrease term.

we further Now QX, expect to significantly to our one-time expenses. such we Since what a of recognized moving merger lower scheduled occur, recorded expenses QX. In million we are this in agreement to than no of the in subsequent expense operating there related to with operating termination quarters Illumina. our $X be year expenses

that the line, fee recognize recognizing from in not $XX noted operating as million QX, later this did income we but earlier income We the anticipate Illumina in non-operating termination we income Below QX. the reverse this received in year. as

in In addition, we the incurring interest with debt our February, retired we it. will since longer expense no associated be

Finally, regarding and cash, on we $XXX.X ended with investments our million quarter cash in the hand.

While, we this have years COVID-XX not specific forecast than time. future cash balance of several a our ongoing due a at had as or what the this usage higher result to providing sales represents in a the are the a over uncertainty pandemic, we past cash

questions. and remarks now prepared our concludes That will up call the for we open

Operator

Schenkel is first Doug from question of Cowen. The

Your open. line is

Subbu Nambi

it's it outlook have that China in Asia April QX? of year its and quick did has how couple in does are sales is This of stabilizing, for bit, for a the is utilization? but over course this through the the know follow-up. China. Pacific of Subbu and and for How on your steady much progress of solved this over revenue of I the rest now XX% And Doug. from I Sequel what development the

Mike Hunkapiller

but gathered forward, revenue the do that only half how about caught see or going of is you that minus asking I said you're but what sorry, I’m there, correct? we plus is

Subbu Nambi

China, Yes, correct. in that’s yes,

Mike Hunkapiller

Well, it's been noted.

year, operating Sequel pretty of ended that is, and at that put It accurate in us down particularly first the chemistry they're this think of reads a a the closely related now they've on about we a the position. that. although cut have on a COVID-XX year, were was down of mostly for end II still, pretty things success or focused lot the I obviously and right position. number of time of of and lot way last butter has while base. thought we bread we off And like The customers demonstrated other system, that very what COVID-XX of everybody long the success production, issue that the approach on sites activities guard customer the the HiFi lot gives and strong kind our our strong caught the April, highly we that And for us time. a of gone in last

the particularly of get strongly. dependent from had And recover are academic Europe sites when as how our totally pretty A the given for how unless U.S. And up lot the is is back of impacted it for in the running. China, doing and dependent earlier started they is we us. the where the come example, been customers, it of upon fast that fast world, actually research in on able to were area, than rest as really and reopening happens, world this

better to get give forecast a so hard sense. we And it's us for a until meaningful

a But the think the better uptake really timeline that's U.S., can get going to the be. slowly We the right on Europe As I difficult handle now, to around starting some is and for everybody are countries of reopened. world. in what

Subbu Nambi

based something QX, tailwind, how So a your these, should we between updating we think turning maybe on our models? about comments toggle then China, for as into

Mike Hunkapiller

Well, I to be honest. have

that light and gets operating we're switch and on uptick getting certainly I the important Your – guess slow think kind businesses U.S. now to projections. seeing But give and really certainly because China customer Europe the enough And flipped, conference China that of really of I'm last U.S., good it the good ours that been the of places a But in and on we is of reagents doubtful obviously in an understands is an impact a mode. U.S. depends our U.S. we than us. is What the and is whether of which impacted. government all don't. we people back mentioned Europe. this lot it's the call. as And Asia other the point. certainly, in at saw the downturn our in as don't first into It for

Ben Gong

just within And obviously, add go was of to the add quarter, and I’ll get utilization we if fair hit and February. but saw, was, back, back down say within But coming – systems come the let's to China – maybe in a start I’m amount. where not sharpest it QX, China just the it's the China's the exactly quarter, might just might first pretty

think come that, things I alluded one bit. to it quite questions how China. So of particularly, Mike before was your And I a has seen back think we've it in

Subbu Nambi

That's Okay. I tough encouraging. have question. And last one

while with sense. just and As the makes you commercial cash with efforts presumably were broader hiring managing to progress pandemic, additional about

On be encouraging. support look things normal play instruments hand, and to want to get to some and starts back to the do everything other you also ready once

So and for it takes hires efficient. to become time new

these So dynamics? how within seemingly conflicting you do balance

Mike Hunkapiller

You take want that to one, Ben?

Ben Gong

Sure.

on mentioned QX folks those in And more did our over in fact, few the we some to last of with we call, some as pleased people the hire our So in set out ability past are we field. to months. hire

there. we some progress So making are

I think actually to people we takes also mentioned onboard. bring time that those it

supply something we probably product, going watching Generally work some of we're your things do to of and be the also it's expenses, the receiving that can So to product. shipping as right balance speaking going continue in point, we're to out less is, demand, just away to terms that on. we're sort as of less

reducing have Obviously, and things We've anything helps. like we headcount. head this not are instituted our at we travel utilities. that maintained on currently But saving like So draconian time, count.

Subbu Nambi

guys. helpful. Thank it. That's Got you,

Operator

Sandler. is of Vatnsdal Piper Rachel from next The question

Your line is open.

Rachel Vatnsdal

thanks guys, for the taking Hey questions.

question first the around install base. is my So

can the the to orders So that incremental those slowdown how follow-ups to well. give few talk about relative due weeks received your March? can the prior place I couldn't you in to few shutdowns? last tracking any And on then have a you And us as expectations you you were color placements

Mike Hunkapiller

to I can then you necessary, qualitative that. and a in can add give thing Ben

installs of pointed sort just it's that shutting started out, think U.S., to in put quarter. that there was March, early tend uncertainty lot in and I up. we of of of it that overnight. most And bit, what So the – with that sites that be do our particular do instrument that just The part And as into companies see normally changed point would. can their until in get to were maybe kind we tracking – to as space, do the at but China. the to in a able of kind kind up that been the closing instrument do little installs shot of to of to even lot But the do more us on expected we that growing ability minute than you the universities countries A up down. started the the fact a inventories late

in ways. you you One is get do hits And in installs. it two can't and

of new they're don't lot for slow. confused. about right month get saw issue. even their the a where wasn't employee for lab just ability if even from that But effectively got through an have feel is shutdown, of open somebody purchasing the operation somebody second to, get and And since The The a to site that, we lab in a we're of there that orders, we winds those pretty things. the now have these could little can you become wanted going there, there still arranging Aircraft Relative an a in who confident more up all the to places, you that last being to certainly onsite, lot. a bureaucracy pipeline.

everything lost but haven't process And we've blocked been been slow. struggle, just or seen a very the so opportunities. obviously very, is It's either we it's from – that that

Ben Gong

of did up don't Rachel. only during to base tools we actually with II much I quarter end of Yes, II’s XXX, end we that add able the to I that, the XX install of Sequel the to the means were of which quarter. complete Sequel have installs mean at

small the As at Mike to and being quarter of fair QX. number for pretty it tend amount a mentioned, why a we ended that's do end up the

Rachel Vatnsdal

all that makes you, Yes, sense. guys. Thank

you walk the us of happening Sequel kind II? comments what that seeing first same were you're customers transition from sure for the slower question, upgrading I to of was that than just but the you to expectations? my first faster in things that Obviously, through can quarter more few said Next, or Sequel disrupted your where weeks normalized I'm given was

Mike Hunkapiller

upgrades in the who to are forms. Sequel replacement Sequel can people, apart upgrade, an come There forth and Well, budgets have in II. with do instrument and a up so old to go two bring limited we I where

in times because You in much that's even a a take difficult that's week. might as process expect that a lab these more as can

the in stopped, the you long. while to there So that for most sites that of doing we're been have just has this well pretty that get don't opportunity

throughput And they've the they've so, the Sequel they I, happy the performance they're a people, Sequel had it, of there II’s. with Sequel increased alternative but want perspective on additional been And is buying strictly II.

a still of being we constraints see of limited happening that shutdown. the way people a And lot in given other

purchase either of – a sites way, but they were their been down bit the push or path research, they're customer I COVID-XX had we same slowed forward So new has little slowed involved maybe mean completely upgrade in have an really in individual said, that the system. down. if actively who, has been upgrade

Rachel Vatnsdal

Great. And then last question for me.

comments appreciate first I to the of China on So the questions. some all

for their us trends starting should onset of at you're an the consumable U.S. you looking And of usage May? they breakout. at to all, trends Thank seeing the you and to about the you from COVID So come had to you. Europe now any back, started in it consumables, example. tell April see the earlier March late and given Can of early rebound

Mike Hunkapiller

at have one. impact think it then I But and much felt would get U.S. to the been. month April. It's where the that those has this in that's beginning in been started handle month the general, last in slower I certainly mean, of right I'll or really let areas. Ben Europe

Ben Gong

terms the add stabilized kind U.S. the sites would the say, to Europe. utilization I in and that. it still would rapidly only of is, throughout of on we're dropped in really able it open But the April. fairly fairly – has The are monitor of been most It thing that stable Yes. I that

So forward have when more say sites of any like to able actually doesn't sort reopen. shutting But people we're look continuing are looking down. of, it to other we the trend

Mike Hunkapiller

on once added Yes. that were samples what And the to focused they've it people U.S. working system back and sequencing. is things who in it working not but systems, switching Because, up quickly. use they of continued other were and the were were I to their a you saw – pretty mean, lot large Europe that terms to on they around ones response who but even operate of completely, got they pandemic – in what was the them mostly. are on a people projects were degree, doing the

Rachel Vatnsdal

Great. That's for Thank it me. you.

Operator

next from [Operator Kyle is Instructions] Cantor The question Mikson Fitzgerald. of

Your line is open.

Kyle Mikson

Thanks my for questions. taking

the year. So upgrade throughout mentioned software chemistry to call, had release you and plans last

is to will uncertainty Just upgrades pandemic, near-term – given more will going maybe the muted. adoption to be the be those or delayed further

going of Thanks. kind how timeline understand trying forward. COVID the Just going affect to is to

Mike Hunkapiller

short-term. still of release ready the we which Well, software that going, want were since quarter, people in didn't and the we're have were of obviously projects for doing we other doing lot it ready critical so – are But delayed we to the the ones and shutdown a at go. interrupt beginning that to many this

look for will where time out up from a the a genome run good that for right but human getting has been what and us enough ready goal at in of structure our perspective get variation is, to cell look to is get single to the in development for that to there. the sense The the year quite a still level is and go, throughput genome the is individual. point a bigger get So, we an issue at

may a that. And bit sort year. to little back this they're working more the for get it the shutdown. Xst date. much And But structural goal one, have that, a little down two for that's while People I our a video conferences. to into able out cells been to It lot of planned later starting But to that. takes get lab for still in planning October of particularly with continue that we're think at on do variance. the QX down ready to to we're from this targeting looking get still be for point we're to then, And pretty bit now

up And labs begun make get sure more bit in going we people the to those week open to the so, we last little to meet just a timelines. that

Kyle Mikson

how Okay. Perfect. they inventory the what's of to and I'm affect you. and was are start is how going consumable the customers also holding your to to wondering, life long the much Thank customer how I products? before throughout reordering going shelf trying that's understand have to have consumables the year.

Mike Hunkapiller

Ben? Do to one, that take you want

Ben Gong

to of try shelf say a bit plus minus more or products worth target inventory. six usually for And lives around than on or our varies customers month's that. would months are typically we even our I it Sure. a little though shoot

– and have run of a to reorder. there back up whatever are and shouldn't So through people for kind delay they inventory of be let's to that when running need people much say,

Kyle Mikson

break sense. you That quarter for housekeeping And Okay. makes in out question. consumables one these and then the Can Sequel II? just revenue I

Ben Gong

So we similar. the actually of in fourth quarter was broke quarter it in and the that out kind first

XX%, a half, at more least around and Sequel XX%. I II little was represented than So Sequel

pretty So from was QX. it's in where stable it

Kyle Mikson

labs were using the But some to of on well do to system work diagnostic of that continue – the the COVID-XX to do expect lot that we Sequel A evolve. were Yes. I’s.

instrument to see there in And normal to perspective, for we're the starting so testing. going throughput Systems. and than to they're sales II as there – that go Sequel a take to they consumables. validate was probably But have the disproportionate for from any uptake because to the research over new just use there, lab They switch even longer higher a we're back people a start

Ben Gong

Yes.

I Sorry, RS less than the was component RS II remainder XX%. and the that is said it have II should

Kyle Mikson

think Sequel what'd you I I? for Then I say missed that.

Ben Gong

comprised I Sequel bit the more around the maybe first XX%, in XX% total than consumables. quarters of a little So

Kyle Mikson

perfect. Thank you. Okay,

Operator

no I There questions Mike Hunkapiller, back conference like further to this turn sir. now at time. Mr. would the are to

Mike Hunkapiller

patterns closing, sequencing most genomes length by brought our the accuracy, complicated and ability formity acknowledge the be of due pandemic bringing challenging the commitment host the important like smart the attributes advantages that genetic infection. These remain response. accurate to time. coverage, characterize universe response performance fashion picture to its scientific forward understanding In our and us for characteristics We customers can you. we to believe a PacBio Thank community. provides to the pandemic COVID-XX industry's environment sequencing technology and evolving as global steadfast modifications. as about of viral assist to of we Thank at team to viral of months our and the products particularly well despite I'd talking to who mutation to populations read you and look DNA in based three joining to the superior long smart in in and again the complete in fantastic responder and immune

Operator

today's conference call. you Ladies participating. and gentlemen, for Thank this concludes

You may now disconnect.

Pacific Biosciences of California (PACB) 7 May 202020 Q1 Earnings call transcript