PacBio’s third quarter was met with a significant negative market reaction, reflecting disappointment over revenue that fell short of Wall Street expectations. Management attributed the underperformance primarily to a slowdown in instrument shipments, especially Vega systems in Europe, and lower average selling prices for Revio systems. CEO Christian Henry highlighted that while instrument placements were weaker, consumable sales reached an all-time high, driven by growing adoption among clinical and commercial customers. Henry described the funding environment in the Americas as “challenging,” particularly for academic and government research customers, which lengthened procurement cycles and weighed on demand.

Is now the time to buy PACB? Find out in our full research report (it’s free for active Edge members).

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions From PacBio’s Q3 Earnings Call

• Kyle Mikson (Canaccord): asked about the decline in Revio average selling prices and the impact of Vega shipment delays in Europe. CEO Christian Henry explained the lower Revio ASPs resulted from strategic placements at key accounts that are expected to drive higher consumable usage, and confirmed delayed Vega units will be recognized in the next quarter.

• Madeline Mollman (Wolfe Research): requested a breakdown of gross margin drivers. Henry attributed the strong result to record consumables sales, improved manufacturing yields, and cost reductions, emphasizing that higher-margin consumables made up a greater share of revenue.

• Thomas VonDerVellen (Guggenheim): inquired about funding assumptions and demand outlook for next year’s instrument environment. Henry reiterated that academic funding remains challenged and that PacBio is shifting focus toward clinical segments where demand and funding are more robust.

• Luke Sergott (Barclays): sought clarity on consumables pull-through trends for Vega and Revio systems and the potential impact of SPRQ-Nx chemistry. Henry indicated Revio pull-through was at the high end of guidance, with Vega targets to be set after a full year, and highlighted consistent data quality with multi-use SMRT Cells.

• Nathan Bolanos (UBS): asked about the impact of the U.S. government shutdown on order volumes. Henry noted no immediate material impact, but acknowledged that a prolonged shutdown could affect revenue in future quarters, while also stating PacBio’s revenue mix is now less dependent on government funding.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will be watching (1) the commercial launch and adoption rate of SPRQ-Nx chemistry and multi-use SMRT Cells, (2) continued expansion into clinical and population-scale genomics applications, particularly in China and Europe, and (3) any signs of stabilization or improvement in academic and government funding environments in the U.S. Developments in these areas will be critical indicators of PacBio’s ability to diversify growth and improve profitability.

PacBio currently trades at $1.83, down from $1.92 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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