Pacific Biosciences Has 'Long Road' Ahead, But Cantor Still Bullish

• Cantor Fitzgerald reiterated a Buy rating and $9.00 price target on shares of Pacific Biosciences of California PACB on Thursday.
• The reiteration follows Wednesday night’s announcement of the introduction of the Sequel System.
• Shares of Pacific Biosciences were up more than 42 percent on Thursday.

On Wednesday evening, the company launched a new nucleic acid sequencing platform called the Sequel (TM) System, which “provides higher throughput, more scalability, a reduced footprint and lower sequencing project costs” compared to the company’s previous system.

This new system should strengthen the small-cap company’s competitiveness versus Illumina, Inc. ILMN’s portfolio of systems, analyst Bryan Brokmeier said.

Although Pacific Biosciences still has a long way to go (data collection wise) to reach Illumina’s level of support from physicians and researchers, the company “has seen increasing interest in the human sequencing market since it first announced its collaboration with Roche two years ago, particularly over the last year,” the report adds. Moreover, launch timing seems just right, ahead of the annual American Society of Human Genetics (ASHG) conference, to be held between October 6 and October 10.

The research note goes on to assure that the introduction of Sequel System should provide a boost for revenue growth and profitability. In addition, the launch moves the Roche development timeline forward, Brokmeier said. “The Sequel System is the basis for the IVD instrument that PACB has been developing in collaboration with Roche, which is expected to be launched in 2H16.” Pacific Biosciences now anticipates it will receive the remaining $20 million (up from a previously expected $10 million) in milestone payments during the fourth quarter of the year.

“Some of the initial deliveries in 4Q15 are planned to be delivered to Roche as it expands its IVD assay development,” the report continued. The analysts still expect Roche “to take delivery of more than 10 instruments in 2016.”

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.