Seeking Alpha: Pacific Biosciences Still Trying To Claw Out Its Own Niche

When it comes to sequencing, it's still pretty much Illumina (NASDAQ:ILMN) and then everybody else. Illumina has earned this place of prominence through consistent R&D productivity and opportunistic M&A, and it makes life difficult for would-be challengers to the throne like Pacific Biosciences (NASDAQ:PACB). That said, PacBio has continued to make solid progress, with the shares up more than 100% from when I first wrote on them as a Top Idea and up about 20% from my last update.

The challenge for PacBio remains what it has been for some time - build upon what is currently the best available technology for long DNA sequences and make it faster, cheaper, and easier to use. Wrapped within that, the company needs to continue to develop new systems and new technologies, as well as develop opportunities in areas like plant genomics, clinical diagnostics, and epigenetics where its technology can really stand out.

As a stock, PacBio remains highly speculative. It's partner Roche (OTCQX:RHHBY) has continued to pursue its own alternatives in sequencing (while remaining at least outwardly committed to its PacBio partnership) and major rivals like Illumina, Thermo Fisher (NYSE:TMO), Oxford Nanopore, and 10X Genomics continue to work on technologies and systems that could ultimately capture some or all of PacBio's targeted markets. Still, 10% of the sequencing market and success with its Roche partnership could still support close to $1 billion in revenue well down the road and an $8 fair value today.

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Pacific Biosciences Still Trying To Claw Out Its Own Niche

Seeking Alpha: Volatile Pacific Biosciences Continues To Make Progress

Early-stage next-gen sequencing company Pacific Biosciences (NASDAQ:PACB) continues to make progress both with its system specs and its end-market development, but the path is not smooth or easy. The shares are still up about 80% from my initial Top Idea write-up, but down about a quarter from my last piece as investors fret over the progress and competitive risks of Illumina (NASDAQ:ILMN), Thermo Fisher (NYSE:TMO), and Oxford Nanopore, as well as questions as to whether the company's development partnership with Roche (OTCQX:RHHBY) will deliver the hoped-for revenue and profits.

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Volatile Pacific Biosciences Continues To Make Progress

The Motley Fool: Illumina Inc's Seemingly Endless Victory Lap

It gets harder and harder to criticize a company's valuation when that company continues to surpass expectations and build its lead on its rivals. That is the basic story for Illumina (NASDAQ: ILMN  ) , as this company continues to distance itself from Thermo Fisher (NYSE: TMO  ) and other would-be sequencing competitors and build up its bona fides in the diagnostics market. With a diagnostics opportunity at least twice as large as the $2 billion sequencing market (and growing at a double-digit rate), there seems to be enough growth potential to keep investors keenly interested in this name.

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Illumina Inc's Seemingly Endless Victory Lap

Seeking Alpha: Pacific Biosciences Looking To Carve Out Its Niche

High-end sequencing company Pacific Biosciences (PACB) still has much left to prove. The company has done a good job of improving system performance and reliability, but the 800lb gorilla in the sequencing space, Illumina (ILMN), books more orders for both its HiSeq and MiSeq platforms in a quarter than PacBio has installed in the field. PacBio's alliance with Roche (OTCQX:RHHBY) provided a significant boost to the stock, but it has yet to be established that the company can develop systems and tests that will work in the clinical diagnostics setting.

I continue to believe that PacBio has a worthwhile future, as I believe the company can address a multibillion-dollar opportunity by targeting applications where Illumina's technology does not work as well. Microbial and plant genetics, so-called "platinum genomes", and epigenetics are all areas where PacBio's technology can play a long-term role. This is by no means a stock for the nervous or impatient investor, but I believe opportunity remains even after the large move in 2013.

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Pacific Biosciences Looking To Carve Out Its Niche

The Motley Fool: Can Anything Stop Illumina?

There aren't many companies that have done what Illumina, (NASDAQ: ILMN  ) has done. Illumina does not have monopoly share, but it also doesn't have much to worry about today in terms of competition. I have my doubts as to whether Thermo Fisher Scientific (NYSE: TMO  ) is truly prepared to invest the sort of sums into R&D that it will take to make Life Technologies Corp.  (NASDAQ: LIFE  ) a true neck-and-neck long-term rival, and Oxford Nanopore has struggled to deliver its systems to market on time.

The biggest problem with Illumina is the price. I realize growth investors are famously ambivalent about valuation, but it looks to me as though the market is pricing in over 20% long-term free cash flow growth for Illumina. At that pace, the company would have well over $5 billion in revenue in 2022 and the sort of free cash flow margins that even the best med-tech, pharmaceutical, diagnostics, and life sciences companies struggle to match.

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Can Anything Stop Illumina?

Investopedia: Pricing Still A Long-Term Risk, But Illumina Continues To Build A Sequencing Fortress

Between the disruptions created by Thermo Fisher's (NYSE:TMO) acquisition of Life Technologies, Roche (Nasdaq:RHHBY) all but raising the white flag in sequencing, and Oxford Nanopore's ongoing commercialization challenges, Illumina (Nasdaq:ILMN) continues to build on its already considerable lead in the sequencing space. I do maintain my concerns about the company's ability to maintain pricing on a long-term basis, as well as reimbursement pressures in diagnostics, but it's hard to find much fault with a business that can be driven by ongoing sales of high-margin reagents and consumables.

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http://www.investopedia.com/stock-analysis/081513/pricing-still-longterm-risk-illumina-continues-build-sequencing-fortress-ilmn-tmo-brkr-rhhby.aspx

Seeking Alpha: Pacific Biosciences Will Go Checkers Or Wreckers

I live in NASCAR country and it's not that rare to hear the expression "going checkers or wreckers" - meaning throwing caution to the wind and going all-out, with the idea that you either win or end up in a smoking heap.

That notion would seem to apply to Pacific Biosciences (PACB) today, as this once-promising innovator in single-molecule sequencing has been battered by concerns about the accuracy and value of its systems. With intriguing accuracy-improvement technology and techniques now available, though, PacBio may have its last best chance to achieve the success that many once thought was near-certain. If PacBio can recover its reputation and drive system and consumables sales, this stock could be undervalued by 50% or more. On the other hand, failure to markedly accelerate customer adoption over the next three years could have this company in bankruptcy and the share price in tatters.

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Pacific Biosciences Will Go Checkers Or Wreckers

Investopedia: Has Roche Said "Nein" To Illumina's Asking Price Once More?

The "will they or won't they" between Roche (OTC:RHHBY) and Illumina (Nasdaq:ILMN) has continued to spur rumors and debate ever since Roche walked away from its bid for the leading gene sequencing company earlier this year. Rumors in the fall said that Roche was working on yet another bid, while subsequent rumors claimed that agreements had been reached at $60 per share or even $66 per share. Given reports of Roche chairman Franz Humer's statement to a Swiss newspaper on Sunday, however, it looks like this deal is off once again.

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Investopedia: Is There Enough Growth To Really Push Life Technologies?

Investors are often surprised at the relatively low growth rates that are available in the life sciences industry. While there are indeed segments that offer exceptional top-line growth prospects (like genetic sequencing), the sheer size of the sector and the fact that many new offerings simply supplant older technologies and products means that the overall growth rates are more moderate.

It's important to understand that backdrop when looking at Life Technologies (Nasdaq:LIFE). Life Tech is indeed a very good life sciences company, but serious competition in sequencing from Illumina (Nasdaq:ILMN) and Oxford Nanopore does challenge the company's ability to outgrow the broader market, as does the less-desirable state of government-sponsored research funding in the U.S.

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Seeking Alpha: Illumina Tries To Get The Kool-Aid Flowing Again

I'll give Illumina (ILMN) management credit for at least one thing - in the wake of turning down Roche's (RHHBY.PK) buyout bid, they know they have to keep analysts and investors excited about the company's prospects, or the stock will suffer. Unfortunately, while Illumina's technology is largely first-rate, the expectations for this business still seem pretty aggressive.

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Illumina Tries To Get The Kool-Aid Flowing Again

Sequencing Wars - The Third Generation

Forget the white lab coats and the quiet demeanors. In biology labs across the country, and in corporate R&D labs, there is an all-out war going on. Researchers are pushing themselves and their gear in an effort to understand human disease and find new pathways for treatment, while companies are pushing each other on a relentless drive to build better, faster, and cheaper research equipment. (Learn more about the importance of Research and Development, see: Buying Into Corporate Research & Development (R&D).)

We are now on the cusp of a new battle - the sequencing wars to be fought with third-generation sequencing equipment. Third-gen systems promise more accuracy, faster results, better economics, and a new round of sales for major corporations. The combatants will include some of the better-known names in life sciences research, while the victors will almost certainly include all of us, as these technology innovations should ultimately lead directly to better healthcare treatments.   



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I also would like add that IBM is working on a next-gen platform as well. IBM's idea is to use microtubules that read the charge of the base-pairs in the DNA. IBM thinks they may be able to produce entire genomes in under an hour with this technology. It's very interesting technology, but it's a long way from "interesting in the lab" to break-out commercial success.