PacBio Market Cap <$1B
Today I was idly scrolling through the Stocks app on my phone to see if there was anything I should write an insightful thought piece1 about. When I noticed that PacBio’s market cap has dropped below $1B.
I don’t have a particularly nuanced view on market caps. But in general view them as “a lower bound on any potential acquisition price”. Given that Illumina previously tried to acquire the company for $1.2B a $1B market cap seems low.
The Good
The complaint I hear from investors about PacBio is “the consumables mix is too low”. The idea being that the majority of your revenue should come from consumables. This doesn’t seem like a particularly nuanced take. PacBio released a new instrument in 2023. A big, expensive instrument. And shipped quite a lot of them (173). That’s about 50% of Illumina’s 2023 NovaSeq X shipments. And it’s significantly more than ONTs S3 active customer numbers (83)2. With the Revios being new installs, we might expect consumables revenue to ramp up this year. Or perhaps they’ll keep selling large numbers of instruments… would that be such a bad thing?
Then there’s the instrument specs. PacBio is offering a $1000 30x Q30+ genome with 20Kb reads. This seems pretty compelling to me as a new standard in “clinical grade genomics”. Not just because it offers a good mix of high quality and long reads, but also because there are clear performance characteristics.
In contrast to this someone posted this paper using the PromethION on the Discord. It’s pretty good! But required 15 flowcells to reach 70x coverage. Suggesting ~7 flowcells for 30x, using an unreleased chemistry. So it’s not just that ONTs per-base quality is worse3. The platform is also somewhat of a moving target, doesn’t come with strong vendor claims on throughput, and is possibly4 more expensive on a per-base basis (than PacBio).
So that’s all great right!? PacBio is a clear win? Well…
The Bad
While Macklemore and me are sold on the idea of long read sequencing, particularly for clinical genomics many are not. In fact my experience is that it’s an uphill struggle getting even short read sequencing performed in a clinical context. This means long read players like PacBio likely find it difficult to gain traction here.
Now that clinical is the bulk of the sequencing market, perhaps this will change. But it doesn’t seem like an easy fight.
Next there’s IP. Looking through PacBio patents the vast majority of IP expires in 2029. This is likely most of the IP required to create a Q30 20Kb sequencing platform, and includes things like CCS. So in five years it might be possible for competitors to enter the market using the same basic approach.
Many of these issues also apply to ONT. Someone recently posted details of Qitan’s platform on the Discord which didn’t seem far off the last data I looked at from ONT. Perhaps similarly we’ll also see ZMW startups appear a go after PacBio’s market.
Will five years be enough time to build enough of a market and new IP to retain users? Only time will tell!
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Caution: Thought pieces may contain neither insight nor thought.
S3 users are those spending >$250K, I’d guess mostly PromethION users.
In my opinion, and I’ll be happy to dig into this further when Duplex is released.
certainly? probably? again difficult to calculate without strong vendor claims. But whenever I check it seems significantly more expensive…