Summary of Pacific Biosciences of California (PACB) FY Conference Call - August 12, 2025 Company Overview - **Company**: Pacific Biosciences of California (PACB) - **Conference Date**: August 12, 2025 - **Key Focus**: Discussion of Q2 results and future outlook Key Points Financial Performance - Q2 revenue reached **$39.8 million**, slightly exceeding expectations and aligning with internal forecasts [3] - **60%** of placements were with new customers, indicating strong demand for long-read sequencing technology [3] - **45% growth** in revenue from the rest of the world, particularly in EMEA and Asia Pacific [3] - Continued improvement in gross margins quarter over quarter, attributed to better yields from smart cells [3] Cash Flow and Guidance - Reduced cash burn in Q2, with expectations for further reductions in the second half of the year [4] - Targeting cash flow positivity by the end of **2027** [4] - Guidance range refined due to increased confidence in the second half of the year, despite uncertainties related to NIH funding and tariffs in China [9][10] Market Dynamics - EMEA anticipated to be the strongest growth region, with significant progress in PopGen studies and hospital collaborations [5] - Modest pull-ahead in orders from China, primarily for consumables, impacting revenue stability [6][7] - U.S. academic customers showed continued spending on consumables, but larger budget allocations remain uncertain [11] Product Insights - The **Revio** instrument is seen as a key driver for future financial performance, although sales to academic customers have been lower than expected [14][12] - The company is diversifying its customer base beyond academia, focusing on biopharma and clinical markets [18] - Anticipated launch of **multi-use smart cells** expected to lower costs per genome and improve gross margins [34][35] Clinical Market Expansion - Clinical business now accounts for **15%** of consumables, with potential for significant growth as labs adopt PacBio technology [25][26] - Revio's introduction has reduced the cost per genome to approximately **$500**, making it more competitive in clinical settings [29][46] - Future growth expected from partnerships with labs like GeneDx and Varyontics, although significant revenue contributions are not anticipated until later years [31][32] Strategic Focus - Emphasis on improving gross margins through better supply chain management and product offerings [51] - The company is pivoting towards consumables and multi-use products in response to a challenging macroeconomic environment [56][58] - Long-term vision includes leveraging AI and advanced data analytics to enhance the value of PacBio's sequencing data [59] Risks and Considerations - Ongoing uncertainties regarding U.S. academic funding and potential impacts on sales forecasts [10][12] - The need for clarity in the funding environment to drive future sales of high-value instruments like Revio [13] Conclusion Pacific Biosciences is navigating a complex market landscape with a focus on expanding its customer base, improving product offerings, and achieving cash flow positivity by 2027. The company is optimistic about its growth potential in clinical markets and the impact of new technologies on its financial performance.

Financial Data and Key Metrics Changes - The company reported Q1 2025 revenue of $37.2 million, slightly above preliminary estimates and consistent with internal expectations, but down from $38.8 million in Q1 2024 [7][25] - Instrument revenue decreased by 42% year-over-year to $11 million, primarily due to lower REVIO system shipments [25] - Consumable revenue reached a record $20.1 million, reflecting a 26% year-over-year growth [11][26] - Non-GAAP gross profit was $15 million with a gross margin of 40%, up from 33% in the prior year [27] - Non-GAAP net loss was $44.4 million, or $0.15 per share, compared to a loss of $71.4 million, or $0.26 per share, in Q1 2024 [30] Business Line Data and Key Metrics Changes - Instrument shipments included 12 REVIO systems and 28 VEGA systems, with cumulative shipments of 282 REVIO and 35 VEGA systems [9][25] - Academic and research institutions represented the lowest percentage of instrument shipments since the REVIO launch due to funding pressures [10] - Consumable demand from academic and research customers remained stable, indicating resilience in usage-driven spending [11] Market Data and Key Metrics Changes - Americas revenue decreased by 8% to $16.3 million, impacted by government funding headwinds [26] - Asia Pacific revenue decreased by 9% to $11.6 million, although consumables showed strong growth [26] - EMEA revenue increased by 11% to approximately $9.3 million, driven by strong REVIO placements in hospitals and clinics [27] Company Strategy and Development Direction - The company is focused on expanding HiFi sequencing adoption and enhancing the REVIO platform through the rollout of Spark chemistry [39] - A restructuring plan was executed to narrow strategic focus and reduce operating costs, aiming for a non-GAAP operating expense reduction of $45 million to $50 million by year-end [13] - The company paused development of the high-throughput short-read sequencing platform to concentrate resources on long-read sequencing technologies [16][50] Management's Comments on Operating Environment and Future Outlook - The macroeconomic environment remains challenging, with uncertainties around academic funding and potential NIH budget cuts impacting revenue [12] - The company adjusted its full-year 2025 revenue guidance to a range of $150 million to $170 million, reflecting a $5 million decrease at the lower end due to tariff uncertainties [12][32] - Management expressed confidence in strategic direction, citing strong customer interest in long-read sequencing and ongoing innovation [12][39] Other Important Information - The company ended Q1 2025 with $343.1 million in unrestricted cash and investments, down from $389.9 million at the end of 2024 [30] - A licensing agreement was announced with the Chinese University of Hong Kong to enhance sequencing workflows [19] - The company achieved a Net Promoter Score of over 50, indicating strong customer satisfaction [21] Q&A Session Summary Question: Can you discuss the clinical opportunity and its potential to offset concerns around academic funding? - Management highlighted significant opportunities in clinical diagnostics, particularly with the PureTarget panel, which has seen adoption by major customers [42][44] Question: What are the expectations for REVIO and VEGA placements in 2025 guidance? - Management indicated that REVIO shipments are expected to decline year-over-year, while VEGA is anticipated to grow in unit placements [48] Question: What factors influenced the decision to pause the development of the high-throughput short-read sequencer? - The decision was based on macroeconomic conditions, competitive advantages in long-read sequencing, and significant R&D progress in that area [52][54] Question: How does the company view the demand trends in EMEA? - Management expressed confidence in the EMEA market, noting strong funnel visibility and growth potential [95]