Bay Area's Pacific Biosciences Stock Pops on Roche Acquisition Bid Rumors

Bay Area's Pacific Biosciences Stock Pops On Roche Acquisition Bid Rumors
February 3, 2016
By Mark Terry, Breaking News Staff

Rumors of a potential acquisition of Menlo Park, Calif.-based Pacific Biosciences by Swiss-based Roche had Pacific Biosciences stock jumping.

Apparently Roche Holding AG approached Pacific Biosciences on Tuesday over a potential bid, according to unidentified sources. Those same sources told Reuters that the talks haven’t advanced over differences in price.

Roche is likely interested in Pacific Bioscience’s advanced gene sequencing technology. In 2013, the two companies inked a development and distribution partnership.

Pacific Biosciences describes its technology as a “scalable platform for single molecule, real-time (SMRT) sequencing.” For the less technology inclined, the company’s platform is a way to quickly sequence entire genomes at an affordable price. This would put them directly in competition with the sequencing leader, Illumina .

In a 2014 article in Xconomy, Keith Robison, a computational biologist with Warp Drive Bio, based in Cambridge, Mass., said, “It’s going to be very, very hard for anybody to take on Illumina. But PacBio is a pioneer in finding applications that don’t work well on Illumina.”

The technology appears to be focused on so-called “long reads” of DNA. Most gene sequencing instrumentation reads short stretches of DNA and then piecing them together. PacBio’s reads an average of 8,000 to 9,000 bases at a time, which allows researchers to observe subtler variations.

On Jan. 11, Pacific Biosciences provided an update on customer demand for its new Sequel System, which was launched in October 2015. In the fourth quarter of 2015, the company received orders for 49 units, 10 of which were shipped. It also received three orders for its PacBio RS II System in the same time period.

“Demand for our new Sequel System has been strong,” said Michael Hunkapiller, Pacific Biosciences’ chairman and chief executive officer, in a statement. “We are delighted to see the community’s positive response to the continued innovation of SMRT technology. With each advance, customers benefit from performance improvements that help solve more complex biological challenges. To date, there have been more than 1,000 scientific publications describing results using SMRT technology, and we look forward to seeing what customers can achieve with the new Sequel System.”

If there’s more information coming regarding a Roche bid, it may come this afternoon. The company changed its fourth-quarter and Fiscal Year 2015 financial call to this afternoon at 4:30pm Eastern Time.

At the company’s third-quarter filing on Oct. 22, 2015, it reported $13.9 million in quarterly revenue, down from $20.6 million for the third quarter of 2014. Gross profit for the third quarter was $6.6 million.

Pacific Biosciences has popped on the rumors. Shares traded on Sept. 30 for $3.66, jumped on Nov. 24 to $10.13, then to $13.45 on Dec. 23. Shares slid to $10.26 on Jan. 28, 2016, but are currently trading for $11.80.

It’s worth noting that the Roche rumors are just that, rumors, although analysts will undoubtedly ask about it at this afternoon’s conference call. Travis Holum, writing for The Motley Fool today, says, “It’s a nice pop for investors today, but if a deal doesn’t come through, the stock could fall back to where it was earlier in trading today.”

He also points out that in the last quarter there was a surprise profit of $0.02 per share, so investors will be looking for momentum.

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