Pacific Biosciences of California, Inc. Announces Third Quarter 2019 Financial Results

MENLO PARK, Calif., Nov. 07, 2019 (GLOBE NEWSWIRE) -- Pacific Biosciences of California, Inc. (NASDAQ: PACB) (the “Company’) today announced financial results for its third quarter ended September 30, 2019.

The Company has continued its commercial launch of the Sequel II System, which it began during the second quarter of 2019. As of September 30, 2019, the Company had installed a total of 75 Sequel II Systems, which includes a number of sites with multiple systems installed. Instrument revenue for the three months ended September 30, 2019 totaled $11.6 million, compared with $6.3 million in instrument revenue for the same period in 2018, driven by robust demand for Sequel II instruments. However, consumable revenue for the three months ended September 30, 2019 totaled $6.9 million, compared with $8.9 million for the same period in 2018. The decrease in consumable revenue was driven by lower utilization of Sequel instruments as a number of customers are transitioning from Sequel to Sequel II. Total revenue for the third quarter of 2019 was $21.9 million, compared with $18.2 million for the third quarter of 2018.

On November 1, 2018, the Company entered into an Agreement and Plan of Merger with Illumina, Inc. (“Illumina”) and FC Ops Corp. (“Merger Subsidiary”), a wholly-owned subsidiary of Illumina (the “Merger Agreement”) pursuant to which Illumina will acquire the Company for $8.00 per share of the Company’s common stock in an all-cash transaction and Merger Subsidiary will be merged with and into the Company (the “Merger”), with the Company surviving the Merger and becoming a wholly-owned subsidiary of Illumina. Completion of the transaction is subject to terms and conditions set forth in the Merger Agreement, including expiration or termination of any waiting periods applicable to the consummation of the Merger under the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and clearance under the antitrust laws of certain non-U.S. jurisdictions. The Merger has been notified to the United States Federal Trade Commission (“FTC”) and to the Competition and Markets Authority of the United Kingdom (“CMA”) and is under review by both the FTC and the CMA. The Company and Illumina continue to work cooperatively with the FTC and the CMA.

On September 25, 2019, the Company, Illumina and Merger Subsidiary entered into Amendment No. 1 (the “Amendment”) to the Merger Agreement. The Amendment, among other things, extends the End Time (as defined in the Merger Agreement) to December 31, 2019, subject to Illumina’s unilateral right to further extend the End Time to March 31, 2020. In addition, the Amendment provides that Illumina will make cash payments to the Company of $6 million on or before each of October 1, 2019, November 1, 2019 and December 2, 2019 and we have received the October 1, 2019 and November 1, 2019 cash payments. If Illumina elects to further extend the End Time to March 31, 2020, then Illumina will make cash payments to the Company of $6 million on or before each of January 2, 2020, and March 2, 2020, and a cash payment of $22 million on or before February 3, 2020. The Company will use these payments, which are collectively referred to as the “Continuation Advances,” to fund its continuing operations. Up to the full amount of the Continuation Advances actually paid to the Company are repayable without interest if (1) the Merger Agreement is terminated and (2) within two years of termination, the Company enters into certain change-of-control transactions with a third party (in which case the entire amount will be repayable) or raises at least $100 million in equity or debt financing in a single transaction (with the amount repayable dependent on the amount raised by the Company).

For the three and nine months ended September 30, 2019, the Company recognized approximately $3.6 million and $12.8 million, respectively, in operating expenses in connection with the Merger.

No Conference Call

Given the pending Merger with Illumina, management will not be hosting a conference call to discuss its financial results for the third quarter ended September 30, 2019 and does not expect to do so for future quarters.

About Pacific Biosciences

Pacific Biosciences of California, Inc. (NASDAQ: PACB) offers sequencing systems to help scientists resolve genetically complex problems. Based on its novel SMRT® Technology, Pacific Biosciences’ products enable: de novo genome assembly to finish genomes in order to more fully identify, annotate and decipher genomic structures; full-length transcript analysis to improve annotations in reference genomes, characterize alternatively spliced isoforms in important gene families, and find novel genes; targeted sequencing to more comprehensively characterize genetic variations; and real-time kinetic information for epigenome characterization. Pacific Biosciences’ technology provides high accuracy, ultra-long reads, uniform coverage, and the ability to simultaneously detect epigenetic changes. PacBio® sequencing systems, including consumables and software, provide a simple, fast, end-to-end workflow for SMRT Sequencing.

Forward-Looking Statements
All statements in this press release that are not historical are forward-looking statements, including, among other things, statements relating to the timeline for Pacific Biosciences’ potential development and commercialization of products, future uses, quality or performance of, or benefits of using, products or technologies, the commercial launch of the Sequel II System, the expected availability of SMRT® Cell 8M chips, the performance of the Sequel II System, the Merger Agreement and Merger including the expected timing of the completion of the Merger and whether the Merger will be consummated, and other future events. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, changes in circumstances and other factors that are, in some cases, beyond Pacific Biosciences’ control and could cause actual results to differ materially from the information expressed or implied by forward-looking statements made in this press release. Factors that could materially affect actual results can be found in Pacific Biosciences’ most recent filings with the Securities and Exchange Commission, including Pacific Biosciences’ most recent reports on Forms 8-K, 10-K and 10-Q, and include those listed under the caption “Risk Factors.” Pacific Biosciences undertakes no obligation to revise or update information in this press release to reflect events or circumstances in the future, even if new information becomes available.

The condensed consolidated financial statements that follow should be read in conjunction with the notes set forth in the Company’s Quarterly Report on Form 10-Q when filed with the Securities and Exchange Commission.

Trevin Rard

Pacific Biosciences of California, Inc.
Unaudited Condensed Consolidated Statement of Operations
(amounts in thousands, except per share amounts)

  Three Months Ended September 30,   Nine Months Ended September 30,
  2019     2018     2019     2018  
Product revenue $ 18,484     $ 15,150     $ 53,191     $ 49,917  
Service and other revenue   3,431       3,010       9,770       9,183  
Total revenue   21,915       18,160       62,961       59,100  
Cost of Revenue:                      
Cost of product revenue   12,188       12,250       32,786       31,127  
Cost of service and other revenue   2,813       2,718       8,531       8,623  
Total cost of revenue   15,001       14,968       41,317       39,750  
Gross profit   6,914       3,192       21,644       19,350  
Operating Expense:                      
Research and development   14,962       14,356       45,357       46,331  
Sales, general and administrative   20,066       13,506       58,915       43,383  
Total operating expense   35,028       27,862       104,272       89,714  
Operating loss   (28,114 )     (24,670 )     (82,628 )     (70,364 )
Interest expense   (664 )     (616 )     (1,933 )     (1,795 )
Other income (expense), net   (345 )     242       518       396  
Net loss $ (29,123 )   $ (25,044 )   $ (84,043 )   $ (71,763 )
Basic and diluted net loss per share $ (0.19 )   $ (0.19 )   $ (0.55 )   $ (0.55 )
Shares used in computing basic and diluted net loss per share   152,983       135,130       152,351       130,302  


Pacific Biosciences of California, Inc.
Unaudited Condensed Consolidated Balance Sheets
(amounts in thousands)

  September 30,   December 31,
  2019   2018
Cash and investments $ 49,204   $ 102,354
Accounts receivable   9,966     8,595
Inventory   15,067     17,878
Prepaid and other current assets   2,704     2,832
Property and equipment, net   31,618     34,073
Operating lease right-of-use assets, net   33,510    
Long-term restricted cash   4,000     4,500
Other long-term assets   41     43
Total Assets $ 146,110   $ 170,275
Liabilities and Stockholders' Equity          
Accounts payable $ 8,111   $ 6,736
Accrued expenses   15,823     12,823
Deferred service revenue   7,814     7,427
Operating lease liabilities   46,692    
Notes payable   15,546     14,659
Deferred rent       13,765
Other liabilities   1,110     788
Financing derivative       16
Stockholders' equity   51,014     114,061
Total Liabilities and Stockholders' Equity $ 146,110   $ 170,275

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