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Pacific Bio Pushes Back at Illumina With New No-Compromise Gene ReadersPacific Bio Pushes Back at Illumina With New No-Compromise Gene ReadersBarron's (Online); New York Gene-sequencing giant Illumina tried acquiring Pacific BioSciences of California a few years ago, because PacBio's technology can decode parts of our DNA that elude Illumina. The deal didn't survive antitrust scrutiny , so PacBio continued alone in its high-end niche of the sequencing market. Tuesday night, Pacific BioSciences (ticker: PACB) unveiled new products that will slash the price, while raising the throughput, of its sequencing. The products could expand PacBio's market and perhaps nip into sales of Illumina (ILMN). As investors looked ahead to the news, PacBio stock rose 9% Tuesday, and surged another 8% Wednesday to $8.90. Illumina shares didn't suffer: They were up 4% Wednesday, to $240, in a roughly flat market. "This is a transformative moment," PacBio Chief Executive Christian Henry told Barron's. The new Revio sequencing platform has 15 times the throughput of the company's previous system, which will enable customers to read any human genome for under $1,000. That is half the cost of PacBio's previous technology, but it remains higher than the cost of Illumina sequencing, which is dropping toward $200 a genome . People use PacBio's pricier technology because it can accurately reads parts of the genome that stump Illumina's technique, which is particularly valuable because those genome stretches play roles in neurological and rare diseases. The difference boils down to Illumina's "short read" sequencing versus PacBio's "long read" sequencing. Illumina has been able to cut the cost of reading a genome from $10,000 in 2010 to $200 today because its short-read technology chops the millions of links of a DNA molecule into short segments that the Illumina sequencer reads in parallel. But then the system must reconstruct how those segments fit together in the original gene, through multiple scans and data analysis. And some stretches of DNA contain long repetitive patterns that are hard to reconstruct without error. PacBio's long-read sequencing can make sense of these challenging parts of the genome, because it leaves longer stretches of the genetic chain intact. Christian Henry says the accuracy of the new Revio long-read technology can yield answers with fewer scans, meaning that some users could see costs as low as $500 a genome. That could be close enough to Illumina's cost to lure some short-read customers to the better accuracy and coverage of long reads, says the PacBio CEO. "It's our time to show that short-read sequencing is insufficient," said Henry. "Our new Revio platform allows you to resolve more of the biology." Illumina's fast and thrifty short-read technology suffices for more than 90% of today's sequencing. That is why its $4 billion a year in sequencing sales dwarf PacBio's $140 million. Last month, Illumina challenged PacBio with a new technology called Infinity that is a kind of synthetic long read of unproven accuracy. It would cost about $800 per genome. Infinity shouldn't prove a problem for PacBio, says J.P. Morgan's Julia Qin, now that PacBio has slashed the cost of its uncompromising long-read technology. PacBio has placed the new system with some test customers that it will identify at its Nov. 15 investor day. Revio will become generally available in February, at about $780,000 each. The CEO expects most sales will go to users doing research, not clinical testing. Later in 2023, PacBio will take a more direct shot at Illumina, with a mid-throughput sequencer called Onso that will compete for clinical lab business by offering accuracy that Henry says will exceed Illumina's. PacBio's new offerings impressed Kyle Mikson, who follows the sequencing industry for Canaccord Genuity. He rates the stock a Buy, as does J.P. Morgan's Qin. She expects the new products to lift PacBio sales from $140 million this year, to about $670 million by 2028. At that point, she says, the long unprofitable start-up could start yielding the earnings that justify her $10 price target. |
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