Pacific Biosciences of California (NASDAQ: PACB) is on the cutting-edge of genome sequencing technology. It provides technology that will form the next step in researching autism, Alzheimer’s, and even cancer. Although it is a small company, it has a lot of potential and that is why Pacific Biosciences is the one biosciences stock that I am investing in right now.
Pacific Biosciences’ financials
Pacific Biosciences of California develops and sells sophisticated genomic sequencing systems that help scientists analyze complex genetic issues. For an innovative biotech company, it is currently in an ‘okay’ place financially. For its most recent quarterly report, its total revenue came in at just under $29 million, up 42% year-over-year (YoY). However, the company made a net loss for the quarter, coming in at $87 million. Despite this, its balance sheet is still quite healthy.
Pacific Biosciences had debt of $895.7 million as of the end of March this year. This is an increase from $0 of debt last year. However, according to the company’s recent earnings report, it has cash and equivalents of $936 million, meaning that its net cash is just over $40 million.
What I like about Pacific Biosciences
The genetic sequencing market has been primarily focused on short-read gene sequencing technology which allows geneticists to research single variants of an associated disease or searching for small genetic anomalies. Now that the human genome project has finally been completed, PacBio’s technology is ready for a deep dive into this huge area of research.
PacBio’s sequencing systems are very impressive as they could potentially encourage a new era of long-read genetic analysis. This in itself will hopefully give many scientists the opportunity to understand the human genome on a broader scale, including the way humans influence nature and vice versa. Although not yet a popular area of research, this is where the industry will eventually turn. Investors in this company will likely see huge returns later down the line.
Last year, the company released its new Sequel IIe system which included updated cloud capabilities at a reduced price with fewer data requirements for long-read sequencing than other products. It also has the additional benefit of being more accurate than any other long-read sequencer and since it was launched last October, Pacific Biosciences of California’s stock has increased by 145% so far.
With such cutting-edge technology, this company has made it into the holdings of the popular ARK Innovation ETF. The stock makes up 0.83% of the fund. For comparison, the more popular companies, CRISPR and Invitae, make up 2.82% and 1.93% respectively. This is not bad for a smaller company in the same field.
Risks to Pacific Biosciences share price
Pacific Biosciences’ appearance on the ARKK ETF only serves to strengthen the fact that this is a young, innovative company with tech that will be important for the future. But this has a downside. Its future-facing role does not guarantee results in the present, or over the short term. This will cause volatility for a good few years to come.
Indeed, PacBio faces a tough few years as its long-read gene sequencing systems need to, on the one hand, become more relevant to current and ongoing research; whilst, on the other hand, it needs to fight off strong competition in the highly DNA sequencing market. The presence of established players like Illumina and Thermo Fisher Scientific Inc. means that low-cost sequencing products from these companies will continue to grow in popularity. As Pacific Biosciences is a smaller, less established company, it will experience headwinds from this competition due to its smaller brand reach as well as possessing significantly less capital.
Pacific Biosciences growth potential
The long-term opportunity for PACB is strong. The company has a unique position in the life sciences market for DNA and long-read genome sequencing, but short-term volatility will be a problem for this company. Anyone who chooses to invest in this company should do so with a focus on holding the stock for a decade or more.
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Financial Writer at MyWallSt
Poppy’s favorite stock is Nvidia as she loves innovation and this stock has bags of it. Nvidia invented the GPU in 1999 and even today its immersive graphics give life to the gaming world. Poppy is also inspired by Nvidia’s ability to imagine and create positive change for the world, with its AI technology fuelling new developments in the automotive industry, the medical industry, as well as powering data centers around the world.