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Pacific Biosciences of California, Inc. PACB, popularly known as PacBio, has been gaining from its continued product development. The optimism, led by decent 2024 preliminary results and restructuring initiatives, is expected to contribute further. However, long purchasing cycles and business seasonality concerns persist.

In the past six months, this Zacks Rank #3 (Hold) company’s shares have lost 8.1% against 4.8% growth of the industry. The S&P 500 Composite has also gained 9.4% in the said time frame.

The renowned global provider of sequencing systems has a market capitalization of $449.1 million. The company projects 25.3% growth for 2025 and expects to maintain its strong performance going forward. PacBio’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and met on one occasion, delivering an average surprise of 11.1%.

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Factors Favouring PACB’s Growth

Product Development Driving Growth: In January, PACB announced a significant publication from Radboudumc that demonstrated the positive impacts of PacBio’s HiFi long-read sequencing technology in identifying genetic causes of rare diseases. This illustrated the feasibility of potentially replacing multiple diagnostic tests with a single, more comprehensive approach.

In the same month, PACB and Intus Bio, a leader in microbiome research and discovery, recently unveiled GutID, the first commercial human gut health test powered by Intus Bio’s groundbreaking Titan-1 platform and PacBio’s HiFi sequencing technology.

In third-quarter 2024, PACB upgraded its Revio platform with SpaRC chemistry, increasing data output by 33%, reducing DNA input needs fourfold, and enabling up to 2,500 HiFi genomes annually at lower costs. Enhancements include improved methylation analysis, new 6-methyl A capabilities, and expanded sample compatibility, including saliva and tumor samples. This upgrade should drive the adoption of the Revio platform.

PACB is also expanding its market reach through partnerships, including Singapore's National Precision Medicine Program and TGen, which is the first SBB short-read sequencing service provider. Joining the 10X Genomics Compatible Partner program integrates Onso into single-cell and spatial biology workflows, addressing growing market demands.

Restructuring Initiatives Buoy Optimism: In the second quarter of 2024, PacBio initiated restructuring initiatives to improve the commercial execution of its new products and gross margins, attain cash flow positivity and strengthen its balance sheet. The initiatives include workforce reduction, closing the company’s San Diego office and other actions to reduce annualized run-rate operating expenses. The restructuring activities entail certain restructuring charges in the form of employee separation and other costs.

PacBio recorded $3 million in accelerated amortization and depreciation for the right-of-use asset, leasehold improvements and furniture related to the planned abandonment of the San Diego office. Excess inventory charges of $3.8 million, driven by reduced internal demand from expense reduction initiatives, were recognized in the cost of product revenues.

The San Diego office lease liability was remeasured in the second quarter of 2024, reducing the operating lease liability by $4.4 million, offset against the right-of-use asset. PacBio fully exited its San Diego office in September 2024.

Full Year 2024 Preliminary Results: Per PACB’s 2024 preliminary results, consumable revenue growth reflects a robust 11% increase over 2023. This growth underscores the increasing adoption of PacBio’s sequencing platforms, particularly the Revio system, which has emerged as the fastest-growing platform in the company’s history. Revio’s ability to sequence up to 2,500 human genomes annually at less than $500 per genome has proven to be a pivotal factor in this success.

Per the report, the company’s financial position has also improved. A reduction in adjusted annualized operating expenses by more than $75 million and a successful convertible note exchange have collectively bolstered PacBio’s balance sheet. By 2024-end, the company reported approximately $390 million in cash and investments, ensuring sufficient liquidity to fund its ongoing strategic initiatives.

Factors That May Offset the Gains for PACB

Longer Purchasing Cycles: PACB is experiencing longer-than-expected sales cycles for Revio instruments due to funding uncertainties, procurement delays in Asia-Pacific and Europe, and slower sample volume growth among smaller customers. New customers also face extended purchasing timelines. These challenges are likely to impact the company’s top-line growth.

Business Seasonality: PACB’s business is highly seasonal, influenced by customer procurement and budgeting cycles, especially those of government-funded clients. For instance, the U.S. government fiscal year-end in the third quarter often drives increased sales as customers utilize unspent funds. This seasonality leads to significant fluctuations in quarterly results.

Estimate Trend

PacBio has been witnessing a stable estimate revision trend for 2025. Over the past 30 days, the Zacks Consensus Estimate for its adjusted loss per share has remained unchanged at 68 cents.

The Zacks Consensus Estimate for revenues for 2025 is pegged at $189.5 million, indicating a 22.2% increase from the year-ago reported numbers.

Key Picks

Some better-ranked stocks in the broader medical space are Masimo MASI, Accuray ARAY and Abbott Laboratories ABT.

Masimo, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated growth rate of 11.8% for 2025. You can see the complete list of today’s Zacks #1 Rank stocks here.

MASI’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 17.10%. Its shares have risen 55.9% compared with the industry’s 1.8% growth in the past six months.

Accuray, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 1200% for 2025. Its earnings missed estimates in three of the trailing four quarters and met in one, delivering an average negative surprise of 141.97%.

ARAY’s shares have gained 17.9% compared with the industry’s 1.8% growth in the past six months.

Abbott, carrying a Zacks Rank of 2 at present, has an estimated earnings growth rate of 10% for 2025. It delivered a trailing four-quarter average earnings surprise of 1.64%.

ABT’s shares have risen 8.8% in the past six months compared with the industry’s 6.7% growth.

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