Q2 2021 Pacific Biosciences of California Inc Earnings and to Discuss Acquisition of Circulomics Inc Call
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Okay.
Good afternoon, ladies and gentlemen, and welcome to the Pacific Biosciences of California incorporated second quarter 201, 2 on earnings conference call. At this time all participants are in a listen only mode. Later, a little will conduct a question and answer session and instructions will follow at that time.
And the ones you did grant of assistance during the conference. Please press Star then zero on your cash don't tell the forward.
As a reminder of this conference call is being recorded.
I'd like to turn the conference over to your host today, Mr. Todd Friedman director of Investor Relations, Sir you may begin.
Good afternoon, and welcome to the Pacific Biosciences second quarter 2021 earnings Conference call.
Earlier today, we issued a press release outlining the financial results, we will be discussing on today's call of <unk>.
Copy of which is available on the investors section of our website at www Dot Tacb dot com or alternatively as furnished on form 8-K available on the Securities and Exchange Commission website at Www Dot SEC Dot Gov.
With me today are Christian Henry President and Chief Executive Officer, Suzanne Kim Chief Financial Officer, and Mark <unk>, Chief operating officer.
Similar to last quarter, we are hosting our conference call from the number of different locations. So bear with us if there are any technical issues or pauses.
Before we begin I'd like to remind you that are on today's call, we will be making forward looking statements, including providing predictions estimates plans and expectations and further information.
You should not place undue reliance on forward looking statements because they are subject to assumptions risks and uncertainties and may differ materially from actual results of.
These risks and uncertainties are more fully described in our press release issued earlier today or in our filings with the Securities and Exchange Commission, we disclaim any obligation to update or revise these forward looking statements and.
In addition, please note that today's call is being recorded and will be available for audio replay on the investors section of our web site shortly after the call.
Investors electing to use the audio replay are cautioned that forward looking statements made on today's call may differ or change materially after the completion of the live call.
I will now turn the call over to Christian.
Thank you Todd and good afternoon, everybody. Thanks for joining us today, the start I'd like to welcome the circular on X team for the back bio family.
As you May have seen this morning, we announced the Pac bio has acquired circular on mix of long read sample prep company specializing in manipulating high molecular weight DNA, especially in extraction.
<unk> sells its products to approximately 700 customers worldwide. These customers use circular <unk> the sample prep solutions across almost every sample type from sales bacteria in blood to animal tissue insects fungi and plants.
Several large sequencing initiatives of youth circular <unk> nano bind extraction kit, including customers like the NIH center for Alzheimer's and related Dementias, who used it to extract DNA from blood and brain samples nano volume was also used by biologists to sequence the 27 gigabytes.
This hexaploid giant Redwood genome.
As I've indicated in the past and important part of our strength our acquisition strategy is to obtain capabilities will improve our overall sequencing workflows for our smart sequencing.
Of the circular all mix as part of <unk>.
We will be able the deeply leverage both their proprietary nano.
<unk> and significant technical expertise into our complete sequencing workflow, which will simplify our sample of library preparation processes and ultimately enable our customers to consistently generate even higher quality Hi Fi data.
The searching on X team is based in Baltimore, Maryland, and the team will report the Doctor Kathy ball, our senior Vice President of research.
Finally, I wanted to share all of circular on mix as current customers that we will continue to support all of the current products on the market even for those customers that use other platforms that require the extraction of high quality high molecular weight DNA.
As we shared a few weeks ago. We also entered into an agreement to acquire the Omnia San Diego based company developing a proprietary short read DNA sequencing platform capable of producing a highly accurate sequencing data.
<unk> technology has the potential to re imagine the possibilities of short read sequencing in areas like liquid biopsy minimal residual disease and other clinical applications.
These 2 acquisitions. These 2 acquisitions underscore both our commitment to strengthening long read hifi sequencing as we begin to position it for clinical Germline applications.
And our strategy to build scale by adding a differentiated technology that is intended to allow us to serve more customers more broadly.
With respect to the proposed acquisition of Omnium I'm pleased to report that we have filled file all required regulatory documents and we continue to believe that we are on track to complete the acquisition later this quarter.
Now, let's turn to the second quarter highlights and talk about the business.
We continue to see strength in our business as Pac bio achieved its second consecutive quarter of record revenue.
Product and services revenue of $30.6 million was in line with our expectations and represented an increase of 6% sequentially and grew 79% compared to the second quarter of last year.
The record quarter was driven in part by strong consumable sales.
Suitable revenue of $12.2 million was up 18% sequentially from the first quarter of 2021 and grew over 150% compared to the second quarter of 2020.
<unk> bio is growing consumable revenue is the result of the sequel, II and TUI installed base expansion in the second quarter, we installed 38 equal to in 2 weeks systems, bringing the total installed base. The 282 compared to 148 at the same point last.
Here.
Our second quarter placements included 10 sequel, Twos, and 28 sequel 2 weeks.
1 quarter of our sequel, II, and 2 replacements or to new instrument customers.
Nearly half of our installed base is now using the sequel to eat platform, meaning more customers are benefiting from significant compute savings and can spend less time on data processing.
Some of our new quarters in the quarter included Dante Labs, an Italian company planning to use hifi sequencing to transport health information into diagnostic and therapeutic solutions.
Additional new customers also included an academic reference laboratory that purchased and installed the sequel to Li to expand the rare an inherited disease research, we're short read exome and shortening the whole genome sequencing.
Enable to explain the newborns condition.
From a regional perspective Asia for Asia Pacific, Australia, the instrument placements.
The region continued on.
Sequencing.
In China, no the expanded its Pac bio of fleet with an order of 8 sequel, II E systems, some of which were installed and recognized as revenue in Q2.
This was the competitive win and Nova gene is adding capacity for human genomic and de Novo agricultural studies.
No the gene has already completed over.
The 600 projects on pack biotechnology, including animal and plant de Novo genome sequencing.
<unk> sequencing full length transcript on sequencing and human genome sequencing.
The systems will help them further scale, there hi Fi sequencing services to customers all across China.
In Japan, our new pack bio customer bioengineering lab adopted the sequel to either run its meta genomics and de Novo plant and animal projects.
This customer previously used another long read technology, but adopted pack by the sequencing because of high fives accuracy and completeness.
Moving to EMEA strong consumable sales in the region were driven by growth in plant and animal sequencing has our customers leverage our highly accurate long reads to understand the genetic variation that can ultimately help organism adapt to changing climates conserve endangered species.
Produce higher yielding and disease resistant crops.
Also in Europe, the genomics core louvain installed their sequel TUI. The first in Belgium, and we will use the new instrument to research structural variation and other human applications.
Finally.
The Americas region had record revenue in the second quarter sequencing for the NIH as all of US Research program is underway and is expected to add thousands of high quality long read genomes to the program's database over the coming quarters.
Covid surveillance using Pacbio sequencing continued in the second quarter contributing to modest consumable revenue with volume slowing in June of corresponding to the overall COVID-19 cases declining in the United States and in the second quarter, we booked another sequel II system at a University lab.
The ramp up their COVID-19 surveillance efforts and to detect other emerging viruses.
We remain committed to serving the broader surveillance need, especially in light of the growing Delta variant and we expect to offer a fully kitted COVID-19 solution before the end of the year.
Taking a step back from business updates.
Past quarter was a landmark in the ongoing genomics for evolution.
Nearly 2 decades after the completion of the human genome project.
Researchers finally assembled the human genome in its entirety.
We believe this Pete could not have been done without our highly accurate long hifi reads. This new sequence Dakota, the last 8% of the genome that has been missed.
Years.
The new reference now include the assemblies for all 22 auto zone, plus chromosome X, including 200 million base pairs of new sequence containing over 2200 gene copies of 115 of which are predicted to be protein coding.
I'd like to congratulate everybody involved in the Taylor merits of deal American sourcing and we are incredibly proud of the contribution Pac bio sequencing made to this important effort.
The study shows there is still so much to learn about the genome and highly accurate long reads are 1 of the best technologies to teach us.
Yeah.
The goal of research initiatives like the <unk> American Sorption is the gain deeper understandings of biology, so that we can ultimately better human health.
We share this mission with our research customers, which is why we continue to collaborate with leading institutions like Rady children's hospital to demonstrate pacbio sequencing in the clinical research setting.
As part of our collaboration Pac bio and <unk> will work together on the study focused on long read whole genome sequencing of rare disease cases for which previous short read whole genome and exome sequencing yielded no answers.
The study, which is currently underway already detected variance on identified by other sequencing methods.
Staying on rare and inherited disease, we are pleased to see that ACM G.
David its guidelines and now provides a strong recommendation to support the use of exome or genome sequencing as either a first or second line test in patients presenting with congenital anomalies or intellectual disabilities.
These updated guidelines can provide clinicians with justification for ordering sequencing based tests and may ultimately reduce the diagnostic odyssey for patients and their families.
We strongly believe hi Fi whole genome sequencing technology could be used to develop first line test as of elucidates parts of the genome undetected by other technologies.
Short tandem repeats for example have proven association with dozens of disorders and are challenging areas for other sequencing technologies to sequence.
And.
As the recent study by researchers from the Garvan Institute on Australia explains the established short read Mgs platforms are unable to genotype large and complex repeat expansions potentially leaving cases unsolved.
We also believe that our hifi sequencing can address other key clinical applications. For example, our collaboration with Berry genomics continues to show the benefit of Pacbio sequencing and its Dallas EMEA of carrier screening test, which is in development.
Research results from their latest study in July reveal that hifi sequencing was able to identify all panel variance present with no false negative results and was able to improve carrier assignment through the identification of rare variance missed by current panel tests.
Additional studies continue to show high Fives utility and farmer Mac of genomics last month scientists at Leiden University Medical center use pacbio sequencing to develop of computational method that significantly improved the prediction of drug metabolism based on the ship to the 6 sequence.
<unk> 6 is responsible for the metabolism and elimination of approximately 25% of the clinically used drugs and is difficult to sequenced due to its suite of gene and several structural variance.
This is just 1 more example, where having complete long read gene information can be clinically beneficial.
Turning to our organizational update we made significant progress in expanding our team. We added 11 quota quota carrying sales reps in the second quarter, bringing the total to 39 at the end of Q2, and we're well on our way to achieving our goal to double our ending 2020 sales Rep head count.
By the end of the year.
We also successfully broke out our Americas and EMEA regions with the hire of Neil Award as the EMEA of General manager.
<unk> brings extensive experience developing sequencing markets in the region and deep customer relationships with his time working with the UK Biobank and genomics, England.
Underneath the leadership the EMEA region will have an increased focus on the end customer.
We added other key leadership positions to our team during the quarter, including hiring Dr. Kathy ball to lead our newly created research function. This function will focus on directing investments into early research and technology development activities to broaden our toolkit and feed our product development pipeline.
I'll now turn the call over to Susan to discuss our financial results Susan.
Thank you Christian.
Scott we achieved another record in the second quarter with $30.6 million in revenue, which represented an increase of 6% from $29 million in the first quarter of 2021, and an increase of 79% from $17.1 million in the second quarter of 2020.
In total revenue in the second quarter was $14.3 million a decrease of 4% sequentially from $14.9 million in the first quarter end of 60% increase from $8.9 million recorded in the prior year quarter.
We delivered 38 equal to in 2 weeks systems during the second quarter growing the installed base of 282 systems as of June 30.
Consistent with last quarter about 3 quarters of the shipments were equal to the system.
Customers continued to upgrade to sequel Toohey from sequel, 2 in the second quarter, representing approximately 400000 in revenue.
Turning to consumables revenue of $12.2 million in the second quarter grew 18% sequentially from $10.4 million in the prior quarter and was up over 150% from $4.8 million in the second quarter of last year.
The growth in consumable revenue reflects increased smart style usage as the results of our growing installed base is equal to <unk> systems.
Equal to and TUI consumables represented approximately 85% of our total consumable shipments in the second quarter with the rest of from older systems.
We continue to expect the proportion of consumable sales from sequel, II systems to grow as the installed base for the system to expand and customers migrate to our newest platforms.
Annualized pull through revenue per system on the sequel to until we installed base on the second quarter approximated 170000.
Finally service and other revenue grew to $4.1 million in the second quarter compared to $3.7 million in the prior quarter and $3.3 million on the second quarter of 2020.
Our service revenue growth reflects the growing installed base of sequel II <unk>.
Moving to gross profit and growth margin second quarter gross profit of $13.8 million was in line with our expectations and represented on gross margin of 44, 9%.
<unk> to gross profit of $13.1 million or 44, 8% in the first quarter of 2021.
Year over year gross profit more than doubled to $13.8 million driven by the growth in revenue with gross margin of approximately 6.2 points higher primarily due to higher volume and higher and higher utilization in our factory.
Moving on operating expenses were in line with our expectations.
Operating expenses in the second quarter of 2021 total of 51.3 of my arm up 10% sequentially compared with $46.7 million in the first quarter and 70% higher than $30.1 million in the second quarter of the prior year.
The increase in operating expense compared to the previous quarter last year was primarily a result of higher head count related spend as we continue to build our commercial and R&D organizations.
In terms of head count we ended the quarter with 492 employees.
The 7 more than where we ended the first quarter.
We grew our quota carrying sales force by 11 people. The majority of whom are added to our Americas and EMEA regions, bringing the total to 39 and we're well ahead of other targets of double ending 2020 sales Rep head count.
We also added new hires in our research and development organization to support a growing number of initiatives.
Non cash stock based compensation included in operating expenses was $13.9 million in the second quarter compared to $9.2 million in the prior quarter and $2.8 million in the second quarter of 2020.
Other income and expense in the second quarter of $3.4 million reflects a full quarter of interest expense associated with our convertible notes.
Second quarter net loss was therefore of 41 million and the net loss per share was 21, <unk> compared to net loss of $87.4 million and net loss per share of <unk> 45.
In the first quarter of 2021, and a net loss of $23.1 million or <unk> 15 per share in the second quarter of 2020.
As a reminder, net loss in the first quarter of 2021 included a 52 million expense related to the repayment of continuation advances to alumina due to a 900 million convertible note financing earlier in the first quarter.
Now turning to the balance sheet.
We ended the second quarter with 114 billion in unrestricted cash and investments compared to $1.1.6 billion at the end of last quarter and $319 million at the end of 2020.
Inventory balances increased in the second quarter to $18.1 million, representing 3.9 inventory turns compared with $16.3 million at the end of the first quarter of 2021, which represented 4 point to inventory turns.
Accounts receivable increased in the second quarter to $19.9 million, reflecting of DSO of 49 days compared with $12.9 million at the end of the first quarter of 2021, reflecting of DSO of 46 days the aim.
Increase in accounts receivable and DSO compared to the first quarter, we were primarily a function of revenue linearity in the second quarter.
Long term deferred revenue grew approximately $4.5 million in the second the second quarter 2 of balance of $10.2 million the.
The increase reflecting largely the cash received from the <unk>.
As part of our collaboration agreement to develop ultra high throughput sequencing.
Now moving to guidance.
I'd like to take this opportunity to provide our estimates for fiscal year 2021.
We continue to see growing customer demand for a sequel to <unk> platform and our hifi chemistry.
As a result on a quarterly basis, we expect revenue to continue growing sequentially.
However, the quarterly revenue mix can shift the based on the volume of instrument placements in any given quarter.
Additionally, multi instrument orders from customers with larger projects can add additional variability to timing of orders in any particular quarter.
For the full year 2021, we expect revenue to grow in the range of 62% to 67% compared to 2020.
Which represents revenue of approximately 128 million 2 of 132 million with sequential growth in each Q3 and Q4.
In the first half of 2021, we placed 79 equal to an <unk> system, which exceeded our internal expectations and we continue to project the number of asos to grow in the second half relative to the first half, reflecting our increased commercial presence and customer demand.
Moving down the P&L, we expect full year 2021 gross margin to be between 45% and 46 per cent.
For operating expenses, we expect the full year to be between $218 million and 222 million, which included in VK R&D expenses, which we estimate between 20 million.
And $25 million for the full year.
As a reminder, as part of the terms of our convertible notes, we expect to incur approximately $3.5 million on interest expense every quarter going for it until maturity of <unk>.
1 of the notes, which represents 1.5% interest per annum and amortization of debt issuance cost.
We expect the weighted average share count for purposes of EPS for the full year to be approximately 200 million shares.
Please note that these estimates exclude the impact from the proposed omnium acquisition and the related pipe financing announced last month.
We do expect that the first full quarter of post closing of the Omnium acquisition will increase our quarterly operating expense run rate by approximately an incremental 12 to 19 million.
We expect the impact from the acquisition of circular on nice to have an immaterial contribution to our P&L in 2021.
We are also mindful that there is a growing uncertainty around the COVID-19 delta of variance and its effect on commercial activity and therefore of our estimates reflect our best estimates.
Given the current state of the pandemic.
With that I will turn the call back to Christian Christian.
Thank you Susan.
When I joined Pac Bio last September I laid out of clear plan to drive revenue growth expand our product offering and to show how Pac bio Hi Fi gene ounce can have a real impact in clinical whole genome applications.
We've now had 5 consecutive quarters of revenue growth achieving quarterly revenue over $30 million for the first time.
Our results indicate that our commitment to commercial expansion is beginning to drive it forward.
We've also been able to expand our research and development teams and are progressing well against developing our multi product long read sequencing portfolio that we expect will enable our customers to dramatically expand the size of their projects as we pushed the cost of hifi sequencing well below the 1000.
Dollar genome barrier.
Finally, we have entered into several transformative collaborations that are demonstrating the power of hi Fi in understanding the genetic basis for rare and undiagnosed disease.
Additionally, with the acquisition of circular mix, we are delivering on our strategy to dramatically improve the front end of our smart sequencing workflow. So the customers can operate at greater scale with even better sequencing results.
And then finally, our announced the acquisition of Omnium represents the beginning of the new era in sequencing.
<unk> highly accurate short read sequencing platform is expected to enable us to enter into large markets, where our long read sequencing technology has not historically been able to access we.
We will soon have the ability to offer our customers the right sequencing technology for all of their applications, we will reach more customers than ever before which will not only lead to the sales of omnium platform, but our sequel platforms as well.
The addition of the <unk> team will also allow us to further scale our organization to meet the challenges of the future.
To close high on both pleased with our continued execution and hungry to drive further expansion into our end markets. It's rewarding to see firsthand, how our technology is an enabling better science.
Looking at the sequencing landscape today I'm confident that there are thousands of more customers that can realize the benefit from highly accurate and complete sequencing and it's our mission to bring that to them.
And with that I'd like to open up the call for questions operator.
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The first question comes from the line of Tycho Peterson from Jpmorgan. Your line is open.
Hey, good afternoon, Christian I want to start with 1 on on Neil 1 of the questions. We've gotten is just they are using the Molson Pcr.
Upfront and that's been the cumbersome.
Issue for some of your competitors in the past so I guess in your view, how easy is it kind of be to kind of move away from that and can you maybe talk to some of the steps that are required we've heard anecdotally that maybe you have to redesign the flow channel you may need to.
Innovate around the chemistry, so I am just curious as you think about kind of a roadmap of that path to first commercial launch in the first half of 'twenty 3.
What are some of the key steps you think that needs to be taken here and then the circular on explained at any of that here on the sample prep side or is that mainly for sequel.
Okay. So with circular on mix will just start there circular on mix.
The is principally driven for the sequel platform. The long reads the team there is.
World class at understanding out of handle non fragments of DNA, and we're going to leverage their capabilities into our long way of work.
They're experts kind of I think the downturn in general and so I suspect over time, they may find their way onto the omnium side of the equation as well, but the principle for the principal driver.
Really developing our long read more.
Workflows with respect the omnium you know we were very thoughtful about that about <unk>.
<unk> and thinking through how do we get broad market adoption and we think the PCR could be useful in some applications, but the reality is is that we would much prefer to have a different color.
Clustering capability and so as we were doing the diligence we definitely approach we definitely came up with some different approaches and 1 of the reasons why we decided to slow the development down it because I think as I've said.
A couple of weeks ago. The day, we're ready to go to beta right now effectively.
In order to really nail down that.
The nail down that clustering method, so that we can.
Operated the much bigger scale much higher density and we believe that we are confident that we can get that done.
Interestingly, we'll be leveraging some of the internal Pac bio expertise to help in that mission, which is pretty exciting and we will show how.
How the combination of both companies will give us expertise on the short side and then I suspect some of the omni on folks will help us on the long read side as well with respect to readout redesigning the chemistry the flow cell.
It's unlikely that we're going to have to do significant changes there. So I don't think that's a big barrier for us.
Okay. That's helpful and then a follow up unrelated question around guidance.
I guess 2 parts just any color you can give us on <unk> versus <unk>, just trying to think about kind of year end budget flush and how youre thinking about the sequential step up in the <unk> and then given that you are guiding a bit below the street street's at $134 million I'm. Just wondering if there are things that would drive the to the upside for example, like Covid surveillance.
They can simply for that.
Yeah Tycho.
That's great I think Susan in her remarks tried to point out that we expect to continue growing sequentially. So we would expect Q3 to be better than Q2, and Q4 to be better than Q3.
And so I would I would be thinking along those lines.
<unk>, you know pretty pretty tight range and where the street is.
We're in the same ballpark and so I'm.
Not really we are just looking at we're trying to think through the.
The environment with respect to Covid and Delta variance in and where the state of the market is the good news is the we had record we had record.
Record demand generation coming into our funnels in Q2.
The Q1 Q2, we're continuing to expand the sales force and so I'm actually very optimistic about our opportunity that's in front of us, but we thought that as we put guidance out for the first time kind of on a on.
On an extended basis that we would be thoughtful about.
The defense in the sense type.
Yes, that's very helpful. Thank you.
Okay.
The next question comes from the line of day has savant from Morgan Stanley. Your line is open.
Hey, guys. Good evening I just wanted to follow up on on the guidance question that Tycho just asked you.
Specifically in terms of the instrument the install cadence question I mean, you had about sort of 41 units in the first quarter on 38.
Was there any pull forward from multi unit.
Is there some such that we need to be thinking about.
Because it looks like I mean in terms of installs, we are sort of flattish in the third quarter with the slight pick up in the fourth quarter. So just trying to do some quick mental math here in terms of what are the in place for instrument placements this year.
Yes.
Do you believe the instruments are going to grow.
In each quarter for.
From here I do think the reality is of that when we get larger.
Larger bolt instrument orders the timing of when they actually come in do they come in in the third quarter or did they come in in the fourth quarter.
How does it how does it matter.
For the variable and that will and unfortunately, when we're still a little bit small.
A few instruments have an impact on on the rest of the business. When you look at the the consumables.
Bill not being larger than instruments now you saw in Q2, we had a great consumable quarter and I think that the installed base growth is starting to pay dividends for us on that front and Youll continue to see that through the rest of the year, but I'm actually very encouraged at what we're seeing in the sales funnel with.
With respect to the instrument placements and as you know the more we can place the instruments over time that will drive consumable growth, which will help drive gross margin expansion and also create more.
More sustainable long term growth and so on balance with the guidance. We gave we do see instrument placements increasing over the back half of the year.
And the timing of any particular quarter can can change of <unk>.
Of course, but the.
The other piece to think through is that we had very good success competitively in the market in Q2, I think we highlighted that on 1 particular significant deal with Nova Jim that was a very competitive deal that we won and so I think on balance we are capturing the minds of customers with re.
A spec the hi Fi and its power and I think thats, the only going to bode well for us as we get into the back half of the year end of 'twenty 2.
Got it very helpful.
And then 1 quick 1 on 13 nomex.
Can you I know the press release that the.
On the contribution for 'twenty, 1 is pretty small debt as we think about the longer term trajectory.
Can help us dimension the size of that opportunity and perhaps share what fraction of the sales are from customers who are using other long lead technologies in the market.
Well I think we will give some generalities I mean, the reality is the revenue is very small and that's why that's why we why we said what we said in the press release.
You do have a significant of their revenue.
A significant proportion going to other technologies.
And that May or May not continue on it's our intent to fully support all of those customers in the market and I was on the phone with with competitors. This morning, reassuring them to that effect.
That we will support everyone in the market, but what you really need to think about is how this impacts our sequencing workflow and allows us to make the upfront extraction and library sample preparation library of craft easier so that customers can scale faster using the smart sequencing.
Technology and so the real benefit here is to our base business and to our ability to.
On to growth to accelerate our consumable pull because customers will have in the easier.
This is going to be especially important as we think about launching new platforms. As we've talked about that can sequence. Many many more samples per year than our current platforms can and so what we're really doing is we are setting the stage to have.
So you're ready to operate at very high scale, if that makes sense.
Got it and 1 final 1 for me Christian.
Can you just.
Confirmed.
Plans on on the core of sort of sequel platform in terms of new chemistry of software releases should we expect 1.
On that Esa day timeframe like Pac bio has done in the us Boston.
And sort of on a related note I mean.
Youre integrating a couple of deals here and managing these external collaborations as well what are you doing internally to make sure that the focus on the sequel of commercial scale up and Onboarding all of these new employees remains intact.
Yeah at the really really important question and the truth. This.
On this would be possible.
It started with the vision.
And your management team, that's capable of handling scale and so if you look at the leadership team that I've been fortunate enough to recruit.
All of these managers have significant experience operating at multibillion dollar scale with very large teams and lots of complexity and so that was the first that was the reason why.
I went so hard to hire such of senior team and so we put that team in place and now we can use leverage those capabilities to keep us laser focused on developing the long read technology and taking taking really the foundational assets of the company to the <unk>.
Where they need to go because we think there's significant opportunity in front of us in long read sequencing and we're definitely going to make sure. We don't take our eye off the ball there.
With respect of the sequel platform, we will continue to develop and improve on that platform and so on.
Although I'm not going to comment with respect of the timing of.
<unk> to the platform on this call you can be assured we will continue to improve that platform make it more robust more usable.
More valuable to our customers. So that we can keep expanding our installed base and then at the right time when the when the next generations of products are ready, we'll we'll move those into the market and.
And give customers much greater choice and flexibility and what scale they want to operate yet and I think that will help us.
No really maximize our opportunity in the market.
Very helpful. Thank you.
Thank you.
Your next question comes from the line of Steven <unk> from Piper Sandler Your line is open.
Great. Thanks, and thanks for the questions.
So 1 on sequel too.
P trends.
Looking out on my model and it looks like Asps for sequel, 2 in the quarter ticked up incrementally.
I'm just wondering if you can confirm that and then maybe some of the rationale and some of the trends that caused that was due to less multi unit orders or was it something else.
Yes, Susan do you want to comment on the actual the.
Actual asps in the quarter.
I'm happy to so that is confirmed that the ASP. The incrementally was higher in Q2 than Q1, but it's not materially different and Youre right that there is the mix shift in terms of the instruments that come in in the different capacity with respect of multi unit orders, but we have multi.
Unit orders in Q1, we had multi unit orders in Q2, so it's not a big driver, but also of the ASP difference isn't that big between the 2 quarters.
Yeah. Some of it is some of it's also regional differences where in any given quarter of the asps might be a little different from.
From region to region I don't there was enough of the difference to really sort of a fundamental change in the way we are selling in fact I've instructed the sales force debt debt instrument placements are a top priority and that we're going to keep building out that installed base.
So we were we were happy with the ASP in Q2, but the real.
Okay, and then maybe just a follow up talking about sequel too.
Can you give us a sense for for 22 or 2022 sequels.
<unk> placements given all of the investments in the in the sales of marketing and commercial organization and sales force.
Well I think that if you look at the demand generation in our funnels. If that's any indication I do think theres an opportunity to continue growing of course.
We're not on a position to start guiding to 'twenty 2 yet, but the reality is as debt. We are reach we are really starting to reach more customers than than the company ever have before and that very fact is starting to spread the word so to speak of Hi, Fi, which which we believe will generate demand.
On.
And that's that if you remember when I first joined the company 1 of my foundational.
Strategies was to increase our commercial footprint because the when I did my channel checks and even today not enough people understand what Pac bio does and why we do it and why long reads are important.
And so we're we're really growing our commercial footprint and then backing that up with the.
With more with enhancements to the sequel platform that make it more useful.
And I think you're starting to see that youre seeing the consumables grow youre seeing the the total revenue of the company grow we've had 5 quarters in a row of sequential growth now and where we're really starting to.
Get some momentum going and so I'm excited about the rest of this year and 2022 as well, but probably too early to really comment on anything specific there.
Okay. Yeah I appreciate the color you were able to provide.
Maybe just moving then onto the consumable consumables I know you did about 170000 per instrument. This year is that a good run rate going forward.
And also could you give us the fence given that you guys are placing so many more instruments now could you comment on the consumables ramp on of new sequel to instrument.
Yeah, I think the general it still fits for the customers a few quarters to.
The ramp to.
The level of run rate and that will be dependent on the brand new customer or it's an addition to their installed base.
Imagine of core lab that has a 3 or 4 months backlog, we put a new system in there they're going to ramp very quickly, whereas the brand new customer will take a little bit on longer to get the workflows.
Nailed down and how theyre going to analyze the data and so it's gonna be variable income I think 1 where we are in the 1.7 is not unreasonable place to be you would see it bounce around from quarter to quarter.
The little bit dependent on how customers take their shipments and also.
How many systems, we're placing debt.
Given quarter, but put on balance. This is these are pretty reasonable losses.
For us to be if you looked at the actual utilization I think we see overall utilization starting to click up some in on <unk>.
Per system basis.
Which will ultimately help us a little bit as well.
Okay, great and if I can sneak in a final 1.
Regarding.
Search on.
The you mentioned on the press release.
The potential for an automated workflow.
You envision.
It's staying of the Standalone instrument or would you integrate it with the sequel II.
If you are integrating it are you going to integrate it also into the low cost long read clinical.
Clinical sequencer youre developing with the inventory thank you.
Hey, Mark do you want to take this 1.
Yes happy to.
So I do I do believe that at least initially this would be of standalone instruments for automation.
Of the great things for these nano buying disk is that they are a little bit easier for us to automate.
Kelvin and team of showing that even just things like kingfisher extraction robots can be used quite readily. So so think of this as a standalone not something that I would initially tried to integrate into the sequel play platform and the.
The focus of Christian mentioned this earlier in the.
The questions.
The focus right now is for this with the long reads there are synergies of the team and the opportunities for us to explore how we could use this for extraction and purification for sure of your technologies, but the focus initially is to make sure of that we're optimizing the long reads and focus on the sequel platform with the stream.
Yes.
Our last question comes from the line of kind of makes sense from Canaccord Genuity. Your line is open.
Hello.
Excuse me Mr. Carl Mixon from Canaccord Genuity. Your line is open you may ask the question.
It looks like we lost Kyle.
Yes.
Yeah, perhaps can you can you hear me Hello, Yes. There you go Okay, sorry, guys hi, guys. Thanks for taking the question sorry about the audio congrats on this acquisition did I know, it's small, but it's nice to see everything kind of coming together and on the answer of Columbus of.
We are investing now in optimizing the front end of the work flow and you've already got a great long read on I guess short read platform as well I'm. Just curious if you are not interested in deploying capital to maybe inorganically enhance the back end technology and analytics similar to what <unk>.
Illumina has done with that of co and Blue B in the non CEO recently and I think it's interesting because the <unk>.
In 2011 on women of acquired at the Center and then from there went on to have some clinical deals right and so it's an interesting.
Kind of Tom I guess on kind of the parallels our interest and so I'm curious to hear your thoughts around.
The bigger picture here on your thoughts on the analytical kind of data side too.
Yeah, I think kind of thank you for the question Kyle in the.
Truth is we're looking across the entire workflow.
Starting with with sample prep and.
Kind of the front end, because we really need to make sure that debt, we get very high quality DNA going into the sequencer. So that we get high quality data coming out of it.
But it is the back end and the and the informatics and data science side Theres going to be very very important to us, particularly as we get to scale with the next generations of systems and with our collaboration with the V. Pay for example, so yes, we're thinking through.
Strategically how do we address that side of the equation and what are our opportunities and so.
That definitely is on our radar, but I think for at this moment, what's most important is making sure that we get.
Very strong workflow up to the data analysis of part and then and then as we get the new systems to market.
And really start to think about how do we integrate the data infrastructure between both omnium and the <unk>.
Io infrastructure, what what are the data science solutions that are going to be.
Help our customers solve their problems and so it's clearly on our radar.
On.
But it's 1 step at a time here.
Okay.
Helpful. Thank you for that and I guess, the sticking with strictly on the.
For the kids it.
It appears the kids can kind of increase the yield on kind of the highest the sequencing of what.
Does that impact the cost of all I, just wanted to kind of understand that and obviously it seems like there's more of an emphasis lately on the accuracy and read length.
It didn't really the.
The weren't because of already talked about those bottlenecks.
Months ago. So I guess, if you for the update you of a list of priorities where does the.
Reducing of the costs that we've talked about in the past kind of falling on the list now.
It's still right at the top and I do think making making sample prep easier gives you more yield through the sequencer more yield means lower cost per base.
So therefore lower cost overall so.
Driving the cost down still has a very very top priority. The second priority is making sure that each system has the throughput.
You know that debt operates at a scale of the customers looking for so we're really interested in getting into the very high.
High volume sample human Germline sequencing.
Areas and as a result, we need to make sure we build out our platform such that it can be it can do large large numbers of samples at very low cost and so the.
Everything of course is interrelated starting with with the actual cost per base, and then going to the throughput, which lowers the lowers the cost of the capital so to speak as you amortize it in the lab.
And then none of this data.
Data quality.
Read lengths accuracy, none of that can be sacrificed because really that's our leader we are the leaders in the market in accuracy, we need to continue that and.
Forward and we're going to be pushing really hard on that lever, while we drive cost down and drive scale up for everyone.
Okay awesome.
And Susan just had a question for you on the.
The agreement.
<unk> I guess like in January we've just discussed the economics, but I know that a certain portion of.
Revenue is going to hit the P&L at some point is that is that included in this outlook for the end of 'twenty 1 or are.
Sure.
How should we think about about that the top line impact from from the <unk> agreement.
So Kyle of the way to think about that is the revenue won't hit until we actually launch the product. So the investment I think making of sitting in our long term deferred revenue balance on the balance sheet and none of that hits the revenue in 2021.
Okay.
Got it the threat that's right Alright, just 1 last question for me I think on the last 1 in the queue. So.
Christian it's been about of your since you kind of.
It took the role of the CEO of member and August 7 I think of last year was for the spin. The press release went out if you look back on kind of reflect on the past year of some of those objectives that you the U.
<unk> put out there how would you kind of say that the company has done in executing on those and what are you.
What are you kind of what's your goal is now looking forward on metering.
Thanks.
I am I am really proud of what we've been able to accomplish in just the.
I'm thinking.
Think about it we have completely transformed the company in basically every respect.
Taken.
We've taken the leading long read sequencing capability and we deployed our new commercial organization to accelerate revenue and get more customers using the technology than ever before.
Created a new leadership team.
And on a Boe.
<unk> vision of where this company could go thinking about being a multi omics platform.
Where customers can where we can solve customer's problems as opposed to just offer 1 technology will have a whole suite of technologies that we can offer and then the leadership team. We've built quite frankly is in my opinion is second to none at every at every step of the way from.
Mark and Susan who are on this call too.
The new marketing and commercial team that we built Peter for them in as our Chief commercial officer on.
All the way down the line, we've been able to really upgrade the talent and can create a vision for where the what he is going to go so I actually think that we've exceeded.
My expectations for the first year. However, we're at the very beginning of this journey. If you look at the genomics landscape.
The opportunities are still.
Just right in front of US if you think about it the omnium acquisition itself basically doubles potential path.
The dollars.
And we have the management team and the ability to the balance sheet.
For Q to really take advantage of that and so.
I think when people think of Pac bio they think of US a lot differently than they did 12 months ago.
And so I'm excited about what we've done but I'm, even more excited about what's in front of us in the next couple of years as they unfold and as we continue to transform the landscape can be a lot of fun.
That's great.
Really excited to see that going forward. Thanks, a lot guys for taking the time.
Thank you.
I am showing no further questions at this time of the like to turn the conference back to Todd Friedman for closing remarks.
Thank you as a reminder, a replay of this call will be available on our website in the investors section as well as the through the dial in instructions contained in today's earnings release.
Thank you for joining US today. This concludes our call and we look forward to updating you on our progress in the third quarter.
Ladies and gentlemen. This concludes today's conference call. Thank you for your participation and have a wonderful day give me all day.
Disconnect.
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