Pacific Biosciences: Uncertain Federal Research Funding Latest Blow For Already-Battered Stock

2025-02-25 22:26:06 ET

Summary

• Pacific Biosciences' Q4'24 results were another disappointment, with revenue and margin misses, and 2025 guidance was notably below expectations.
• Underlying utilization growth (genetic data generated by PacBio systems) was strong in 2024, showing that PacBio's systems are being used in the real world and that long-read sequencing is growing.
• Major uncertainties in life sciences capex and research funding, particularly in the U.S., pose threats to PacBio's near-term outlook, including cuts to indirect costs in NIH grants.
• Growth in clinical and diagnostic markets will help, but not right away, and PACB is likely to remain below $100M in annualized consumables revenue through most of 2025.
• PacBio shares appear undervalued, but the company faces significant ongoing challenges, including weaker near-term research funding, and the stock is basically a high-risk, binary investment.

Over the last four years, almost every light at the end of the tunnel for Pacific Biosciences ( PACB ) has turned out to be another oncoming train, as the company has been buffeted by multiple external challenges, included failed partnerships, competition, uncertain funding environments for major customers, and a sharp boom/bust cycle in life sciences stocks that has also hammered companies like 10X Genomics ( TXG ), Illumina ( ILMN ), Oxford Nanopore ( OTCPK:ONTTF ), and Seer ( SEER )....

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