2020 started pretty rough for PacBio with the Illumina acquisition being called off (albeit with a nice $98 cushion). Then the pandemic hit, forcing them to shut down for a while. Finally, mid-summer the CEO and CFO announced their retirements. My guess is they were all in on the merger and didn’t want to be a part of the new path forward. I didn’t make any strong predictions for PacBio, but I noted a couple of things to look out for.
2020 Predictions
System Placements
Here's what I said:
"They have a great system and great people, but they keep burning cash. It’s possible the Sequel II can turn that around, but they better do it quickly. Watch the platform sales over the next two quarters carefully to get an idea of where this is going."
On the surface, their performance here has been pretty anemic. In the first three quarters they placed 11, 23, and 20 Sequel II instruments (a substantially slower pace than in 2019 when there was downward pressure on them due to the pending acquisition). They picked up steam in Q4 (along with most in the genomics space) with 35 placements. It’s really hard to judge how well they did in the year of Covid, but at least they ended on a positive trend.
System Upgrade/New System
Here's what I said:
“Regardless, they’re going to have to start talking about their future again. While I don’t think we’ll see a 48M chip or a Sequel III in 2020, I think they’ll start talking about their roadmap. The need to in order to raise money or attract an acquirer.”
I think I got this pretty spot on. They did launch the IIe (just typing that out gives me flashbacks to playing Ultima as a teenager), but it’s really just a bundling of the Sequel II with the compute necessary for HiFi reads. I was pretty underwhelmed with this new machine until I learned how difficult and expensive HiFi reads are on the Sequel II - this more or less brings it up to the capability that I had assumed it had all along.
As expected, they started laying out their roadmap, with improvements in chemistry, loading, read length, and density. I don’t think any of those improvements have been rolled out yet, but, as I said before, everyone gets a bit of a pass because of Covid.
What else happened in 2020
What became clear in 2020 is that PacBio is going all in on high quality reads (aka HiFi). This makes sense as they’ll struggle to match Oxford Nanopore’s read length (I think the record is ~2M bases, so well over an order of magnitude beyond PacBio). This puts them in an interesting place between Illumina (which has cheaper, higher throughput, short reads) and Oxford Nanopore (which has longer, cheaper, but lower quality reads). I can’t say for sure how big this market will be (assuming they can’t compete with the $/Gb of ILMN or ONT) but people seem quite besotted with the quality and generally bullish on their longevity.
Looking forward to 2021
With the departure of Hunkapiller over the summer, it started looking like PacBio might be down for the count, or at least paving the way for someone else to acquire them. However, with Christian Henry stepping into the CEO role, the mood really seemed to change. He appears eager to carve a new path forward for PacBio. The recent announcement of my former colleagues Mark Van Oene and Peter Fromen jumping from Illumina to PacBio can only help to implement the new path. Acquisition no longer seems the most likely outcome. Instead, look for them to start delivering some of their roadmap promises, including a higher throughput chip (48M or maybe 64M? I’ve heard both) and cashing in on their momentum with a capital raise (in addition to the one they completed in November, although there are some timing issues in the Illumina termination agreement). Again, I don’t think we’ll see a new instrument (e.g., Sequel III) in 2021. But while I don’t really expect them to launch any new instruments, they may start talking about new instruments. Christian has already hinted at wanting to build out PacBio’s platform portfolio, ending up with a range of small to large throughput instruments. I’m not sure when they’ll actually put these plans on their roadmap
After I started writing this post, PacBio and Invitae announced a partnership to “develop a production-scale, high-throughput whole-genome sequencing (WGS) platform for clinical use.” The wording seems to imply a new instrument jointly developed with Invitae, which on the face of it doesn’t make a lot of sense seeing as Invitae is an expert user of sequencing instruments, but has no direct instrument design or manufacturing experience. I suspect this is more like the Roche deal that spawned the Sequel platform. Invitae would be providing the clinical experience along with some cash to help keep PacBio humming along. And who knows, Invitae has a habit of gobbling up companies (at least seven over the past two years). But at respective market caps of ~$9B and ~$6B, this would be more of a merger of equals.
