Core Viewpoint - The company reports a 10% year-over-year revenue growth driven by HiFi sequencing technology, with strong international growth in APAC (+53%) and EMEA (+35%) regions, maintaining full-year revenue guidance of $155 million to $165 million, representing a midpoint growth of 1-7% [2] Financial Performance Analysis - Q2 revenue reached $39.8 million, reflecting a 7% quarter-over-quarter and 10% year-over-year increase [3] - Revenue breakdown: Instrument revenue at $14.2 million (down 4% YoY), Consumables at $18.9 million (up 11% YoY), and Service revenue at $6.7 million (up 57% YoY) [3] - Non-GAAP gross margin improved to 38.3%, exceeding expectations due to higher consumables profit margins [3] - Cash balance stands at $315 million, above expectations, with projected annual cash burn of $115 million, an improvement of $72 million YoY [3] Key Drivers - Revenue growth is primarily driven by international expansion (combined APAC/EMEA growth of 45%) and new customers for the Vega system (60% from new clients) [4] - Ongoing uncertainty in U.S. academic funding continues to suppress instrument demand, while consumables show resilience [4] - Cost optimization measures led to an 18% year-over-year reduction in operating expenses [4] Business Operations - The Revio system has a cumulative deployment of 297 units (15 new units in Q2), with 60% targeting new customers and one-third entering clinical laboratories [5] - The Vega system has a cumulative deployment of 73 units (38 new units in Q2), with 70% used for non-whole genome applications (e.g., microbiome sequencing) [5] - Consumables account for 15% of clinical revenue, with clients like Quest entering commercialization [5] Technological Innovation - The Spark chemical reagent has improved throughput by 33% and reduced sequencing costs, now covering 90% of operations [6] - Multi-purpose intelligent cells (in development) are expected to lower customer costs and enhance company gross margins [6] Market Expansion - Strong international growth includes rare disease research in Nordic hospitals and population sequencing projects in Southeast Asia [8] - Collaborative cases include Haorai Gene in China promoting transfusion medicine applications and Target ALS for global genomic research [8] Future Outlook and Planning - Short-term goals for 2025 include maintaining revenue guidance of $155 million to $165 million, with double-digit growth in consumables offsetting instrument declines [9] - Targeting non-GAAP gross margin improvement to 37-40% (with expectations to exceed 40% by year-end) and controlling operating expenses between $235 million and $240 million [9] Mid to Long-term Strategy - Aiming for positive cash flow by 2027 [10] - Plans to expand clinical and population genomics markets through HiFi technology and multi-omics solutions [10] CEO Insights - The CEO emphasizes the unique advantages of HiFi technology (long reads and simultaneous epigenetic detection) and aims to lower adoption barriers through innovation [11] - Reiterates financial discipline and focuses on clinical translation and scale effects, with a goal to become a leader in genomic medicine [11]

Core Insights - PacBio reported an adjusted loss per share of 13 cents for Q2 2025, an improvement from a loss of 20 cents per share in the previous year, exceeding the Zacks Consensus Estimate by 27.8% [1] - Total revenues for PacBio in Q2 2025 reached $39.8 million, reflecting a year-over-year increase of 10.4% and surpassing the Zacks Consensus Estimate by 9.1% [2] - The company updated its revenue outlook for 2025 to a range of $155 million to $165 million, compared to the previous guidance of $150 million to $170 million [13] Revenue Analysis - PacBio's total revenues were $39.8 million in Q2 2025, up 10.4% year over year, and exceeded estimates by 9.1% [2] - Revenue from the Americas was $17.7 million, down 15% year over year, attributed to government funding challenges [3] - The Asia-Pacific region saw revenues of $12.6 million, a significant increase of 53% year over year, driven by Revio and Vega placements [3] - EMEA region revenues improved by 35% year over year, totaling $9.5 million, supported by strong demand for Revio and Vega platforms [6] Segment Performance - Total product revenues were $33.1 million, a 4.2% increase from the previous year [7] - Instrument revenues decreased by 3.4% year over year to $14.2 million, primarily due to lower shipments of the Revio system [7] - Consumables revenues rose by 11.2% year over year to $18.9 million, with annualized Revio pull-through per system at $219,000 [8] - Service and other revenues surged by 57% year over year to $6.7 million, driven by increased service contract revenues related to Revio [8] Margin and Expense Trends - Adjusted gross profit increased by 15.1% year over year to $15.2 million, with adjusted gross margin expanding by 100 basis points to 38% [9] - Sales, general, and administrative expenses decreased by 21.2% year over year to $36.2 million, while research and development expenses fell by 41.5% to $22.5 million [9] - Total operating loss was $44.9 million, significantly reduced from $175.8 million in the prior year [10] Financial Position - PacBio ended Q2 2025 with cash and investments totaling $314.7 million, down from $343.1 million at the end of Q1 2025 [11] Strategic Developments - PacBio achieved a milestone with the publication of the Platinum Pedigree benchmark, enhancing the performance of AI-based variant calling tools [15] - The company joined the 1000 Genomes Long Read Project, contributing to isoform-level transcriptome sequencing [16] - A new distribution agreement with Haorui Gene aims to expand HiFi sequencing adoption in China [17]

Core Insights - Pacific Biosciences reported Q2 2025 revenue of $39.8 million, exceeding analyst expectations of $36.62 million, with a non-GAAP EPS loss of $(0.13), better than the forecasted $(0.17) [1][2] - The company experienced year-over-year improvements in revenue and gross margin, attributed to cost controls and a favorable product mix, but continues to face net losses and a decrease in cash reserves [1][5] Financial Performance - Revenue (GAAP) for Q2 2025 was $39.8 million, a 10.6% increase from Q2 2024's $36.0 million [2] - Non-GAAP gross margin improved to 38%, up 1 percentage point from 37% in the previous year [2] - Non-GAAP operating expenses decreased by 18.1% year-over-year to $58.1 million, reflecting effective cost management [2][7] - Cash reserves fell to $314.7 million from $509.8 million in the same quarter last year, a decline of 38.3% [2][6] Business Overview - Pacific Biosciences specializes in advanced DNA sequencing platforms, focusing on long-read sequencing systems like the Revio and Vega instruments [3] - The company serves academic labs, commercial testing firms, and hospitals, emphasizing the accuracy and completeness of its genomic data [3] Strategic Focus - The company is prioritizing technological innovation, particularly its HiFi long-read sequencing technology, to maintain a competitive edge [4] - Strategic partnerships and regulatory awareness are critical for success in the rapidly evolving industry [4] Recent Developments - The quarter saw a return to revenue growth, driven by increased sales of consumables and services, with the Vega benchtop sequencer gaining traction [5] - The company shipped 38 Vega systems but experienced a decline in Revio shipments, reflecting reduced spending in academic and government sectors [5][9] - Annualized pull-through for Revio systems decreased to approximately $219,000 from $251,000 in the previous year [6] Future Outlook - Revenue guidance for fiscal 2025 is projected between $150 million and $170 million, with expectations of improved gross margins above 40% by year-end [10] - Non-GAAP operating expenses are anticipated to decrease by 14% to 17% from fiscal 2024, with a cash burn forecast of around $115 million for 2025 [10] - The company aims to reach cash flow breakeven by the end of 2027, with a focus on increasing Vega system placements and stabilizing consumable pull-through [11]

Core Insights - Pacific Biosciences of California (PACB) reported revenue of $39.77 million for the quarter ended June 2025, marking a year-over-year increase of 10.4% and exceeding the Zacks Consensus Estimate by 9.06% [1] - The company posted an EPS of -$0.13, an improvement from -$0.20 a year ago, with a surprise of 27.78% compared to the consensus estimate of -$0.18 [1] Revenue Breakdown - Revenue from Product - Instrument was $14.15 million, slightly below the average estimate of $10.9 million, reflecting a year-over-year decline of 3.7% [4] - Revenue from Product was $33.08 million, surpassing the average estimate of $31.18 million, with a year-over-year increase of 4.2% [4] - Revenue from Service and other reached $6.68 million, significantly exceeding the estimated $5.09 million, representing a year-over-year increase of 56.6% [4] - Revenue from Product - Consumable was $18.93 million, below the average estimate of $20.29 million, but still showing a year-over-year growth of 11.4% [4] Stock Performance - Shares of Pacific Biosciences have declined by 6.8% over the past month, contrasting with a 1.2% increase in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Company Performance - Pacific Biosciences reported a quarterly loss of $0.13 per share, better than the Zacks Consensus Estimate of a loss of $0.18, and an improvement from a loss of $0.20 per share a year ago, resulting in an earnings surprise of +27.78% [1] - The company posted revenues of $39.77 million for the quarter ended June 2025, exceeding the Zacks Consensus Estimate by 9.06% and showing an increase from $36.01 million in the same quarter last year [2] - Over the last four quarters, Pacific Biosciences has surpassed consensus EPS estimates three times and topped consensus revenue estimates three times as well [2] Stock Performance - Pacific Biosciences shares have declined approximately 24.6% since the beginning of the year, contrasting with the S&P 500's gain of 7.9% [3] - The current consensus EPS estimate for the upcoming quarter is -$0.16 on revenues of $40.08 million, and for the current fiscal year, it is -$0.64 on revenues of $155.44 million [7] Industry Outlook - The Medical - Instruments industry, to which Pacific Biosciences belongs, is currently ranked in the bottom 41% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact the stock's performance [5]

Financial Data and Key Metrics Changes - The company reported revenue of $39.8 million for Q2 2025, representing a 7% sequential increase and a 10% year-over-year growth compared to Q2 2024 [6][23] - Non-GAAP gross margin was 38.3%, exceeding expectations due to a favorable product mix, particularly from consumables [7][26] - The company ended the quarter with approximately $315 million in cash investments, reflecting cost discipline and lower-than-expected operating expenses [7][28] Business Line Data and Key Metrics Changes - Instrument revenue was $14.2 million, down 4% year-over-year due to funding constraints affecting higher CapEx purchases [7][24] - Consumables revenue totaled $18.9 million, up 11% year-over-year, driven by strong demand and utilization [7][25] - Service and other revenue grew approximately 57% to $6.7 million, attributed to increased Revio service contract revenue and a large population sequencing program [25] Market Data and Key Metrics Changes - Revenue from the Americas decreased by 15% to $17.7 million, impacted by government funding headwinds [26] - Asia Pacific revenue increased by 53% to $12.6 million, driven by increased REVIO and VEGA placements [26] - EMEA revenue rose by 35% to $9.5 million, supported by strong REVIO placements in clinical settings [26] Company Strategy and Development Direction - The company aims to increase the adoption of its long-read sequencing platforms and drive towards positive cash flows [6] - The introduction of Spark chemistry is expected to enhance throughput and reduce costs, contributing to increased HiFi adoption [8][33] - The company is focused on expanding its clinical footprint and has made significant progress in clinical sequencing applications [18][19] Management's Comments on Operating Environment and Future Outlook - Management noted that while the macroeconomic environment remains challenging, international growth is strong, particularly in EMEA and APAC [10][41] - The company is maintaining its full-year revenue guidance, expecting growth in consumables revenue to offset declines in instrument revenue [10][29] - Management expressed optimism about the adoption of HiFi sequencing technology in clinical workflows, despite uncertainties in the U.S. academic funding landscape [11][40] Other Important Information - The company is developing a multi-use SmartCell capability to reduce costs per genome and improve gross margins [22][34] - The company has joined the 1,000 Genomes Long Read Project, contributing to large-scale population genomics initiatives [16] Q&A Session Summary Question: Impact of macro situation on instruments and consumables - Management acknowledged that the tough macro environment impacts instrument sales, particularly among academic customers, but consumable utilization remains healthy [37][39] Question: Dynamics of Vega instrument revenue - Management indicated that many new customers are transitioning from outsourcing to insourcing, leading to a more balanced supply and demand in the market [43][45] Question: Clinical customer adoption and consumables contribution - Currently, approximately 15% of consumables revenue comes from clinical customers, with expectations for continued growth as these customers validate their assays [50][51] Question: Near-term order activity for Vega and Revio - Management noted a significant number of near-term opportunities for Vega, which could translate into orders depending on NIH funding resolution [76][80] Question: Pricing strategy in light of tariffs - The company has not adjusted pricing for tariffs and has not seen significant impacts from tariffs thus far [92][93] Question: Future growth opportunities in EMEA - Management highlighted that growth in Europe is driven by various initiatives beyond just large-scale projects, with significant opportunities in rare disease programs [97][99]

Financial Performance - Q2 2025 product and service revenue reached $39.8 million, a 7% sequential increase and a 10% increase compared to Q2 2024[12] - Consumable revenue increased by 11% year-over-year, with Revio pull-through in the low-to-mid $200,000s per system[12] - Instrument revenue increased sequentially but decreased by 4% year-over-year due to funding constraints[12] - Non-GAAP gross margin was approximately 38% in Q2 2025, compared to 37% in Q2 2024[45, 47] - Q2 2025 non-GAAP operating expenses were $58.1 million, an 18% decrease compared to Q2 2024[47] - Cash burn was approximately $28 million in Q2 2025, with expectations for improvement in the second half of the year[46] System Placements - 15 Revio systems were shipped in Q2 2025, with 60% going to new customers and one-third to Dx/LDT and hospital labs[12] - 38 Vega systems were shipped, with nearly 60% going to new customers[13] - Cumulative Revio shipments reached 297, and Vega shipments reached 73[14] Guidance - Full-year revenue guidance is maintained at the midpoint, narrowing the range to $155 million to $165 million, representing 1% to 7% growth over 2024[21, 22] - The company expects mid-teens growth in consumables revenue and a mid-teens decline in instrument revenue[22]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and related disclosures for the company [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements for Pacific Biosciences of California, Inc., including the balance sheets, statements of operations and comprehensive loss, statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining significant accounting policies, financial instruments, balance sheet components, convertible senior notes, restructuring activities, commitments, equity plans, net loss per share, and segment information [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific points in time | (In thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | **Assets** | | | | Cash and cash equivalents | $54,803 | $55,370 | | Investments | $259,932 | $334,561 | | Total current assets | $413,397 | $495,681 | | Intangible assets, net | $17,163 | $389,572 | | Goodwill | $317,761 | $317,761 | | Total assets | $825,470 | $1,260,447 | | **Liabilities** | | | | Total current liabilities | $59,754 | $66,299 | | Convertible senior notes, net, non-current | $646,436 | $647,494 | | Total liabilities | $763,981 | $753,853 | | **Stockholders' Equity** | | | | Total stockholders' equity | $61,489 | $506,594 | - Total assets decreased by approximately **$435 million** from December 31, 2024, to June 30, 2025, primarily due to a significant reduction in intangible assets, net, from **$389.6 million to $17.2 million**[9](index=9&type=chunk) - Total stockholders' equity decreased substantially from **$506.6 million** at December 31, 2024, to **$61.5 million** at June 30, 2025[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) This section details the company's revenues, expenses, and net loss over specific reporting periods | (In thousands, except per share amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $39,766 | $36,013 | $76,919 | $74,823 | | Gross profit | $14,684 | $5,938 | $13,313 | $17,220 | | Operating loss | $(44,853) | $(175,846) | $(473,787) | $(257,208) | | Net loss | $(41,930) | $(173,319) | $(468,005) | $(251,497) | | Basic net loss per share | $(0.14) | $(0.64) | $(1.57) | $(0.93) | - Total revenue increased by **10%** for the three months ended June 30, 2025, compared to the same period in 2024, and by **3%** for the six months ended June 30, 2025, compared to the same period in 2024[10](index=10&type=chunk) - Operating loss significantly increased for the six months ended June 30, 2025, to **$(473.8) million** from **$(257.2) million** in the prior year, primarily due to higher amortization of acquired intangible assets and impairment charges[10](index=10&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section outlines the changes in the company's equity accounts over a specific period, reflecting net loss, stock issuances, and other comprehensive loss | (In thousands) | Balance at December 31, 2024 | Net loss | Other comprehensive loss | Issuance of common stock in conjunction with equity plans | Share-based compensation expense | Balance at June 30, 2025 | | :--------------- | :--------------------------- | :------- | :----------------------- | :-------------------------------------------------------- | :------------------------------- | :----------------------- | | Total Stockholders' Equity | $506,594 | $(468,005) | $(155) | $1,959 | $21,096 | $61,489 | - Total stockholders' equity decreased significantly by **$445.1 million** during the six months ended June 30, 2025, primarily due to a net loss of **$468.0 million**, partially offset by share-based compensation expense and common stock issuance[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section reports the cash generated and used by the company's operating, investing, and financing activities | (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(73,433) | $(129,945) | | Net cash provided by investing activities | $70,517 | $42,701 | | Net cash provided by financing activities | $1,959 | $6,401 | | Net decrease in cash, cash equivalents, and restricted cash | $(957) | $(80,843) | | Cash, cash equivalents, and restricted cash at end of period | $56,635 | $101,790 | - Net cash used in operating activities decreased by **$56.5 million**, from **$(129.9) million** in the first six months of 2024 to **$(73.4) million** in the same period of 2025[13](index=13&type=chunk) - Net cash provided by investing activities increased by **$27.8 million**, from **$42.7 million** in the first six months of 2024 to **$70.5 million** in the same period of 2025[13](index=13&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES](index=9&type=section&id=NOTE%201.%20ORGANIZATION%20AND%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note describes the company's business and outlines the key accounting principles and estimates applied in preparing the financial statements - Pacific Biosciences is a life science technology company focused on designing, developing, and manufacturing advanced sequencing solutions, including HiFi long-read sequencing technology, for various applications like human germline sequencing, plant and animal sciences, infectious disease, and oncology[14](index=14&type=chunk)[15](index=15&type=chunk) - The company's unaudited condensed consolidated financial statements are prepared in conformity with U.S. GAAP and include all adjustments necessary for fair presentation, consistent with the 2024 Annual Report[17](index=17&type=chunk)[18](index=18&type=chunk) - Significant accounting estimates include inventory valuation, fair value of contingent consideration, acquired intangible assets, useful lives of assets, impairment assessments, and income tax provisions[19](index=19&type=chunk) - The company classifies investments in debt securities as available-for-sale at fair value and evaluates unrealized losses for credit-related impacts, recognizing non-credit related losses in accumulated other comprehensive income[21](index=21&type=chunk) - New accounting pronouncements pending adoption include ASU 2023-09 (Income Tax Disclosures), ASU 2024-04 (Convertible Debt Instruments), and ASU 2024-03 (Income Statement Expense Disaggregation), with impacts currently being evaluated[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) [NOTE 2. FINANCIAL INSTRUMENTS](index=11&type=section&id=NOTE%202.%20FINANCIAL%20INSTRUMENTS) This note details the company's financial instruments, including their fair value measurement and classification - Financial instruments are measured at fair value using a three-level hierarchy, with cash, cash equivalents, and restricted cash primarily classified as Level 1 or Level 2, and investments (corporate debt, U.S. government & agency securities) as Level 2[31](index=31&type=chunk)[34](index=34&type=chunk) | (In thousands) | June 30, 2025 (Total) | December 31, 2024 (Total) | | :-------------------------------- | :-------------------- | :------------------------ | | Cash and cash equivalents | $54,803 | $55,370 | | Investments | $259,932 | $334,561 | | Short-term restricted cash | $300 | $690 | | Long-term restricted cash | $1,532 | $1,532 | | Contingent consideration liability | $0 | $18,700 | - The fair value of the contingent consideration liability related to the Apton acquisition was reduced to **$0** as of June 30, 2025, from **$18.7 million** at December 31, 2024, due to the decision to cease development of the high-throughput short-read system and resulting changes in expected future revenues[39](index=39&type=chunk)[40](index=40&type=chunk) | (In thousands) | Fair Value (June 30, 2025) | | :--------------- | :------------------------- | | Due in one year or less | $214,595 | | Due after one year through five years | $48,816 | | Total | $263,411 | - Investment income decreased to **$3.4 million** for Q2 2025 (from **$6.5 million** in Q2 2024) and **$7.3 million** for YTD 2025 (from **$13.8 million** in YTD 2024), primarily due to lower cash and investment balances[44](index=44&type=chunk)[160](index=160&type=chunk)[179](index=179&type=chunk) [NOTE 3. BALANCE SHEET COMPONENTS](index=14&type=section&id=NOTE%203.%20BALANCE%20SHEET%20COMPONENTS) This note provides a breakdown and analysis of specific asset and liability accounts on the balance sheet, including inventory, goodwill, and intangible assets | (In thousands) | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Inventory, net | $53,839 | $58,755 | | Inventory reserve | $(33,787) | $(22,768) | - Goodwill was assessed for impairment as of March 31, 2025, and April 1, 2025, with no impairment found, despite a decline in stock price and revised strategic plans. In 2024, impairment charges of $93.2 million and $51.3 million were recorded[46](index=46&type=chunk)[47](index=47&type=chunk) - An impairment charge of **$15.0 million** was recognized for acquired in-process research and development (IPR&D) during the six months ended June 30, 2025, due to the decision to cease development of the high-throughput short-read sequencing platform[51](index=51&type=chunk)[53](index=53&type=chunk) | (In thousands, except years) | As of June 30, 2025 (Net Carrying Amount) | As of December 31, 2024 (Net Carrying Amount) | | :--------------------------- | :---------------------------------------- | :-------------------------------------------- | | Developed technology | $17,163 | $374,572 | | Customer relationships | $0 | $0 | | Total | $17,163 | $374,572 | - Accelerated amortization of **$359.3 million** was recognized in Q1 2025 for developed technology from the 2021 Omniome acquisition, reflecting a revised estimated useful life due to the cessation of high-throughput short-read platform development[55](index=55&type=chunk) - Total deferred revenue as of June 30, 2025, was **$20.6 million**, with **$14.9 million** current and **$5.7 million** non-current, primarily from service contracts[59](index=59&type=chunk) - The aggregate amount of transaction price allocated to remaining performance obligations was **$56.6 million** as of June 30, 2025, with approximately **72%** expected to be converted to revenue in the next twelve months[60](index=60&type=chunk) | (In thousands) | Balance at June 30, 2025 | | :--------------- | :----------------------- | | Product warranty reserve | $2,688 | [NOTE 4. CONVERTIBLE SENIOR NOTES](index=17&type=section&id=NOTE%204.%20CONVERTIBLE%20SENIOR%20NOTES) This note describes the terms, carrying amounts, and fair values of the company's convertible senior notes - In November 2024, the company exchanged **$459.0 million** of 2028 Notes for **$200.0 million** of 2029 Notes, **20,451,570 shares** of common stock, and **$50.0 million** cash, resulting in a **$154.4 million gain** on debt restructuring[64](index=64&type=chunk)[75](index=75&type=chunk) - The 2029 Notes bear **1.50% interest**, mature on August 15, 2029, and are convertible at an initial rate of **204.5157 shares per $1,000 principal amount** (approx. **$4.89/share**)[66](index=66&type=chunk)[67](index=67&type=chunk) - The carrying amount of the 2029 Notes liability as of June 30, 2025, is **$213.5 million**, with an estimated fair value (Level 2) of **$161.9 million**[79](index=79&type=chunk) - The 2030 Notes, issued in June 2023 for **$441.0 million**, bear **1.375% interest**, mature on December 15, 2030, and are convertible at an initial rate of **46.5116 shares per $1,000 principal amount** (approx. **$21.50/share**)[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | 2030 Notes Interest Expense | $1,756 | $1,752 | $3,511 | $3,524 | | 2028 Notes Interest Expense | $0 | $1,802 | $0 | $3,604 | - As of June 30, 2025, the estimated fair value (Level 2) of the 2030 Notes was **$291.3 million**[93](index=93&type=chunk) [NOTE 5. RESTRUCTURING](index=22&type=section&id=NOTE%205.%20RESTRUCTURING) This note details the company's restructuring initiatives, including associated charges and their impact on financial results - In Q1 2025, the company implemented an expense reduction initiative, including workforce reductions, to prioritize HiFi sequencing, incurring **$5.4 million** in restructuring charges (employee separation and other costs)[97](index=97&type=chunk) - The 2025 restructuring also led to **$388.5 million** in additional costs, including **$359.3 million** in accelerated amortization of intangible assets, **$15.0 million** in IPR&D impairment, **$8.0 million** for excess inventory, and **$3.8 million** for purchase commitment losses[99](index=99&type=chunk) | (In thousands) | Employee Separation Costs | Other Costs | Total | | :--------------- | :------------------------ | :---------- | :---- | | Expense recorded in YTD 2025 | $4,787 | $563 | $5,350 | | Cash paid during YTD 2025 | $(4,463) | $0 | $(4,463) | | Amount recorded in current liabilities as of June 30, 2025 | $324 | $563 | $887 | - The 2024 restructuring initiative, which included workforce reductions and closing the San Diego office, resulted in cumulative charges of **$26.1 million** to date, with no new charges in Q2 2025[101](index=101&type=chunk) - The 2024 restructuring included **$8.1 million** in accelerated amortization and depreciation for the San Diego office's right-of-use asset and leasehold improvements, and **$3.6 million** for excess inventory[102](index=102&type=chunk) [NOTE 6. COMMITMENTS AND CONTINGENCIES](index=24&type=section&id=NOTE%206.%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the company's contractual obligations, legal proceedings, and indemnification arrangements - The company amended its corporate headquarters lease, extending the term to April 30, 2034[105](index=105&type=chunk) - The company accrues liabilities for legal proceedings when probable and estimable, but does not believe current pending matters will have a material adverse effect, though litigation is inherently unpredictable[106](index=106&type=chunk)[107](index=107&type=chunk) - The company indemnifies directors and officers, and certain third parties, against losses and claims, with no additional liability recorded as of June 30, 2025[109](index=109&type=chunk) [NOTE 7. EQUITY PLANS AND SHARE-BASED COMPENSATION](index=24&type=section&id=NOTE%207.%20EQUITY%20PLANS%20AND%20SHARE-BASED%20COMPENSATION) This note describes the company's equity incentive plans, share-based compensation expense, and related stock activity - Stockholders approved an amendment to the 2020 Equity Incentive Plan on June 4, 2025, reserving an additional **23 million shares**, bringing total available shares for future issuance under various plans to **13.5 million** as of June 30, 2025[111](index=111&type=chunk)[112](index=112&type=chunk) | (shares in thousands) | Outstanding at December 31, 2024 | Granted | Canceled | Expired | Outstanding at June 30, 2025 | | :-------------------- | :------------------------------- | :------ | :------- | :------ | :--------------------------- | | Stock Options | 10,509 | 8,290 | (1,892) | (358) | 16,549 | | (shares in thousands) | Outstanding at December 31, 2024 | Granted | Vested | Forfeited | Outstanding at June 30, 2025 | | :-------------------- | :------------------------------- | :------ | :----- | :-------- | :--------------------------- | | Restricted Stock Units (RSU) | 14,211 | 11,814 | (4,179) | (2,939) | 18,907 | | Performance Stock Units (PSU) | 392 | — | — | — | 392 | - Shares issued under the ESPP were **1.75 million** for YTD 2025, compared to **1.19 million** for YTD 2024, with an additional **4.0 million shares** reserved in Q1 2025[116](index=116&type=chunk) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total share-based compensation expense | $11,895 | $17,219 | $21,096 | $36,744 | - Share-based compensation expense decreased by **$5.3 million** for Q2 2025 and **$15.6 million** for YTD 2025 compared to the prior year periods, primarily due to restructuring activities[117](index=117&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk) [NOTE 8. NET LOSS PER SHARE](index=26&type=section&id=NOTE%208.%20NET%20LOSS%20PER%20SHARE) This note provides the calculation of basic and diluted net loss per share, including the factors affecting share count | (In thousands, except per share amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(41,930) | $(173,319) | $(468,005) | $(251,497) | | Basic net loss per share | $(0.14) | $(0.64) | $(1.57) | $(0.93) | | Diluted net loss per share | $(0.14) | $(0.64) | $(1.57) | $(0.93) | | Weighted average shares outstanding (Basic) | 300,162 | 272,385 | 298,519 | 270,982 | - Net loss per share (basic and diluted) improved to **$(0.14)** for Q2 2025 from **$(0.64)** for Q2 2024, but worsened to **$(1.57)** for YTD 2025 from **$(0.93)** for YTD 2024[123](index=123&type=chunk) - Shares issuable upon conversion of convertible senior notes (**61.4 million**) and equity awards (**44.6 million**) were excluded from diluted EPS calculation for YTD 2025 due to their antidilutive effect[123](index=123&type=chunk) [NOTE 9. SEGMENT AND GEOGRAPHIC INFORMATION](index=27&type=section&id=NOTE%209.%20SEGMENT%20AND%20GEOGRAPHIC%20INFORMATION) This note presents revenue breakdowns by geographic region and product type, reflecting the company's single operating segment - The company operates in one reportable segment: development, manufacturing, and marketing of integrated platforms for genetic analysis[124](index=124&type=chunk) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Americas | $17,687 | $20,757 | $33,990 | $38,435 | | Europe, Middle East and Africa | $9,467 | $7,022 | $18,707 | $15,378 | | Asia-Pacific | $12,612 | $8,234 | $24,222 | $21,010 | | Total revenue | $39,766 | $36,013 | $76,919 | $74,823 | | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Instrument revenue | $14,150 | $14,678 | $25,166 | $33,703 | | Consumable revenue | $18,933 | $17,068 | $39,030 | $33,052 | | Service and other revenue | $6,683 | $4,267 | $12,723 | $8,068 | | Total revenue | $39,766 | $36,013 | $76,919 | $74,823 | - Consumable revenue increased by **11%** for Q2 2025 and **18%** for YTD 2025, driven by higher Revio consumables sales and initial Vega consumable shipments[126](index=126&type=chunk)[150](index=150&type=chunk)[168](index=168&type=chunk) - Instrument revenue decreased by **4%** for Q2 2025 and **25%** for YTD 2025, primarily due to lower Revio system sales (**15 units** in Q2 2025 vs. **24** in Q2 2024; **27 units** in YTD 2025 vs. **52** in YTD 2024), partially offset by Vega system sales (**38 units** in Q2 2025; **66 units** in YTD 2025)[126](index=126&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=29&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides a detailed discussion and analysis of the company's financial condition and results of operations, including an overview of its business, strategic objectives, and financial performance for the three and six months ended June 30, 2025, compared to the prior year. It also covers liquidity, capital resources, critical accounting policies, recent accounting pronouncements, and off-balance sheet arrangements [OVERVIEW AND OUTLOOK](index=29&type=section&id=OVERVIEW%20AND%20OUTLOOK) This section provides a summary of the company's business, strategic objectives, and key financial highlights for the reporting period - Pacific Biosciences is a life science technology company specializing in advanced sequencing solutions, including HiFi long-read technology, for various applications[128](index=128&type=chunk)[129](index=129&type=chunk) - Key strategic objectives for 2025 include: full-scale release of the Vega benchtop platform, accelerating Revio platform adoption with SPRQ chemistry, investing in future product launches, and progressing clinical strategy[132](index=132&type=chunk)[135](index=135&type=chunk) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------- | :----------------------------- | :----------------------------- | | Revenue | $76.9 M | $74.8 M | | Gross profit | $13.3 M | $17.2 M | | Operating loss | $473.8 M | $257.2 M | | Cash, cash equivalents, and investments (as of period end) | $314.7 M (June 30, 2025) | $389.9 M (Dec 31, 2024) | - Operating loss increased by **$216.6 million** for YTD 2025, primarily due to **$382.4 million** in restructuring-related costs, including **$359.3 million** in accelerated amortization of acquired intangibles and **$15.0 million** in impairment charges[141](index=141&type=chunk) - The sales cycle for Revio instrument purchases remains elongated due to funding uncertainty (NIH, academic), procurement delays, and slower sample volume increases from new and existing customers[137](index=137&type=chunk) [RESULTS OF OPERATIONS](index=32&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the company's financial performance, including revenue, expenses, and profitability, for the reported periods [Comparison of the Three Months Ended June 30, 2025 and 2024](index=32&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030,%202025%20and%202024) This section compares the company's financial results for the three-month periods ended June 30, 2025, and 2024 | (In thousands, except percentages) | 2025 | 2024 | $ Change | % Change | | :--------------------------------- | :---------- | :---------- | :---------- | :------- | | Total revenue | $39,766 | $36,013 | $3,753 | 10% | | Product revenue | $33,083 | $31,746 | $1,337 | 4% | | Service and other revenue | $6,683 | $4,267 | $2,416 | 57% | | Gross profit | $14,684 | $5,938 | $8,746 | 147% | | Operating loss | $(44,853) | $(175,846) | $130,993 | (74)% | | Net loss | $(41,930) | $(173,319) | $131,389 | (76)% | - Instrument revenue decreased by **$0.5 million (4%)** in Q2 2025, with **15 Revio units** sold compared to **24** in Q2 2024, partially offset by **38 Vega unit sales**[148](index=148&type=chunk)[149](index=149&type=chunk) - Consumables revenue increased by **$1.9 million (11%)** in Q2 2025, driven by higher Revio consumables sales and initial Vega consumable shipments[150](index=150&type=chunk) - Gross profit increased by **$8.7 million (147%)** in Q2 2025, primarily due to lower cost of revenue and higher consumables sales, with restructuring-related charges being not significant in Q2 2025 compared to **$4.6 million** in Q2 2024[153](index=153&type=chunk)[154](index=154&type=chunk) - R&D expense decreased by **$16.0 million (41%)** in Q2 2025, and SG&A expense decreased by **$9.7 million (21%)**, both primarily due to personnel and related cost reductions from restructuring activities[155](index=155&type=chunk)[156](index=156&type=chunk) - No impairment charges were recognized in Q2 2025, compared to a **$93.2 million goodwill impairment charge** in Q2 2024[157](index=157&type=chunk) [Comparison of the Six Months Ended June 30, 2025 and 2024](index=36&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) This section compares the company's financial results for the six-month periods ended June 30, 2025, and 2024 | (In thousands, except percentages) | 2025 | 2024 | $ Change | % Change | | :--------------------------------- | :---------- | :---------- | :---------- | :------- | | Total revenue | $76,919 | $74,823 | $2,096 | 3% | | Product revenue | $64,196 | $66,755 | $(2,559) | (4%) | | Service and other revenue | $12,723 | $8,068 | $4,655 | 58% | | Gross profit | $13,313 | $17,220 | $(3,907) | (23%) | | Operating loss | $(473,787) | $(257,208) | $(216,579) | 84% | | Net loss | $(468,005) | $(251,497) | $(216,508) | 86% | - Instrument revenue decreased by **$8.5 million (25%)** for YTD 2025, with **27 Revio units** sold compared to **52** in YTD 2024, partially offset by **66 Vega unit sales**[166](index=166&type=chunk)[167](index=167&type=chunk) - Consumables revenue increased by **$6.0 million (18%)** for YTD 2025, driven by higher Revio consumables sales and initial Vega consumable shipments[168](index=168&type=chunk) - Gross profit decreased by **$3.9 million (23%)** for YTD 2025, primarily due to increased cost of revenue from restructuring activities (**$12.4 million** in YTD 2025 vs. **$4.6 million** in YTD 2024), including **$3.8 million** for purchase commitment losses[170](index=170&type=chunk)[171](index=171&type=chunk) - R&D expense decreased by **$30.4 million (37%)** and SG&A expense decreased by **$13.3 million (15%)** for YTD 2025, both due to restructuring-related personnel and cost savings[172](index=172&type=chunk)[173](index=173&type=chunk) - Impairment charges for YTD 2025 were **$15.0 million** (related to IPR&D), a decrease from **$93.2 million** (goodwill impairment) in YTD 2024[174](index=174&type=chunk)[175](index=175&type=chunk) - Amortization of acquired intangible assets increased significantly by **$353.1 million** for YTD 2025, primarily due to **$359.3 million** of accelerated amortization related to developed technology from the Omniome acquisition[176](index=176&type=chunk) - A change in fair value of contingent consideration resulted in an **$18.7 million gain** for YTD 2025, reducing the liability to **$0**, due to the decision to cease development of the high-throughput short-read system[177](index=177&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=39&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the company's ability to generate and manage cash, its financial position, and funding requirements - As of June 30, 2025, cash, cash equivalents, and investments totaled **$314.7 million**, a **19% decrease** from **$389.9 million** at December 31, 2024[180](index=180&type=chunk)[141](index=141&type=chunk) - The company believes existing liquidity will fund projected operating requirements beyond the next 12 months, but historically incurs operating losses and negative cash flows, potentially requiring additional capital[180](index=180&type=chunk)[181](index=181&type=chunk) - Expense reduction initiatives, including workforce reductions, were implemented in Q2 2024 and Q1 2025 to lower annualized operating expenses and support cost savings[182](index=182&type=chunk) - The contingent consideration liability of **$25.0 million** from the Apton acquisition was estimated at **$0** as of June 30, 2025, due to the decision to discontinue development of the high-throughput sequencer[184](index=184&type=chunk) | (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(73,433) | $(129,945) | | Net cash provided by investing activities | $70,517 | $42,701 | | Net cash provided by financing activities | $1,959 | $6,401 | - Cash used in operating activities for YTD 2025 was **$73.4 million**, primarily due to a **$468.0 million net loss**, partially offset by non-cash items like **$367.4 million amortization** of intangible assets and **$21.1 million share-based compensation**[187](index=187&type=chunk) - Cash provided by investing activities for YTD 2025 was **$70.5 million**, mainly from **$195.4 million** in investment maturities, partially offset by **$118.0 million** in investment purchases and **$5.0 million** in intangible asset purchases[189](index=189&type=chunk) - Cash provided by financing activities for YTD 2025 was **$2.0 million**, from common stock issuance through equity plans[191](index=191&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=41&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) This section highlights the accounting policies that require significant judgment and estimation in preparing the financial statements - The company's financial statements rely on estimates and judgments affecting reported asset, liability, revenue, and expense amounts, with evaluations performed on an ongoing basis[193](index=193&type=chunk) - There have been no changes to the significant accounting policies disclosed in the 2024 Annual Report[194](index=194&type=chunk) [RECENT ACCOUNTING PRONOUNCEMENTS](index=41&type=section&id=RECENT%20ACCOUNTING%20PRONOUNCEMENTS) This section provides information on new accounting standards and their potential impact on the company's financial reporting - Information regarding recent accounting pronouncements is detailed in Note 1. Organization and Significant Accounting Policies[195](index=195&type=chunk) [OFF-BALANCE SHEET ARRANGEMENTS](index=41&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) This section discloses any transactions, agreements, or other contractual arrangements that are not recorded on the balance sheet but may have a material impact - As of June 30, 2025, the company had no off-balance sheet arrangements[196](index=196&type=chunk) - The company enters into standard indemnification arrangements with third parties, directors, and officers, with maximum potential future payments not determinable, and no additional liability recorded as of June 30, 2025[197](index=197&type=chunk)[198](index=198&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=42&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses the company's exposure to market risks, primarily related to interest rates and its investment portfolio. It highlights the fixed interest rates of its convertible senior notes and the potential impact of interest rate changes on the fair value of its marketable securities - The 2030 and 2029 Convertible Senior Notes have fixed annual interest rates (1.375% and 1.50% respectively), limiting economic interest rate exposure, though their fair value may fluctuate with interest rates and stock price[200](index=200&type=chunk) - As of June 30, 2025, cash equivalents and available-for-sale investments totaled **$314.7 million**[201](index=201&type=chunk) - A hypothetical **100 basis-point increase or decrease** in interest rates would affect the fair value of the investment portfolio by approximately **$1.5 million**[202](index=202&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=42&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of the company's disclosure controls and procedures at a reasonable assurance level as of June 30, 2025, and reports no material changes in internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[204](index=204&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[206](index=206&type=chunk) [PART II. OTHER INFORMATION](index=43&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section includes legal proceedings, risk factors, and other miscellaneous disclosures not covered in the financial information [ITEM 1. LEGAL PROCEEDINGS](index=43&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section details ongoing and resolved legal proceedings, including patent infringement lawsuits in the U.S. and China. It covers the PGI District Court matter, the Take2 District Court matter (which was resolved through patent purchase), and a closed proceeding in China, emphasizing the unpredictable nature and potential costs of litigation - The PGI District Court matter (patent infringement) is ongoing, with a trial date set for October 5, 2026, following appeals and a transfer to the Northern District of California[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk) - The Take2 District Court matter (patent infringement) was resolved by the company's purchase of the '794 patent from CUHK on March 7, 2025, leading to the discharge of all outstanding litigation claims and patent challenges[210](index=210&type=chunk)[211](index=211&type=chunk) - A patent infringement proceeding in China related to the '441 Patent was closed after the Supreme People's Court upheld the invalidation of all claims of the CN321 patent on May 29, 2025[212](index=212&type=chunk) - The company accrues for contingent losses when probable and estimable, but does not believe current matters will have a material adverse effect, acknowledging litigation's unpredictable nature and potential impact on resources[214](index=214&type=chunk) [ITEM 1A. RISK FACTORS](index=45&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section outlines significant risks that could adversely affect the company's business, financial condition, and results of operations. These risks span commercialization challenges, financial sustainability, operational disruptions, intellectual property protection, regulatory compliance, market volatility, and geopolitical tensions - Key risks include the ability to successfully market and sell products, achieve profitability, implement expense reduction initiatives, repay debt, integrate acquisitions, develop and manufacture products, manage new product introductions, retain key personnel, penetrate nucleic acid sequencing applications, and manage supply chain dependencies[216](index=216&type=chunk) - The company has incurred significant losses and expects to continue doing so, with no assurance of achieving or sustaining profitability, and expense reduction initiatives may not fully succeed or could be disruptive[224](index=224&type=chunk)[228](index=228&type=chunk) - The company may not have sufficient cash to meet debt obligations or fund long-term operations, potentially requiring additional capital that may dilute existing stockholders[231](index=231&type=chunk)[232](index=232&type=chunk) - Acquisitions and strategic investments carry risks such as integration difficulties, failure to realize benefits, diversion of resources, and potential dilution of stockholders' ownership[235](index=235&type=chunk)[238](index=238&type=chunk) - Dependence on sole-source suppliers for critical components, manufacturing complexities, and long lead times pose risks to product supply, quality, and cost, potentially harming the business if disruptions occur[255](index=255&type=chunk)[256](index=256&type=chunk)[258](index=258&type=chunk) - The company faces intense competition, unpredictable and lengthy sales cycles, and reliance on a limited number of customers, which can lead to revenue fluctuations and pricing pressures[265](index=265&type=chunk)[271](index=271&type=chunk)[280](index=280&type=chunk) - Intellectual property risks include challenges to patent validity, reliance on licensed IP, and the potential for infringement claims from third parties, which can be costly and divert resources[295](index=295&type=chunk)[298](index=298&type=chunk)[306](index=306&type=chunk) - Regulatory risks include potential FDA regulation of products as medical devices, export control restrictions (especially to China), and compliance with evolving data privacy laws (e.g., CCPA, CPRA, HIPAA), which could increase costs and impede commercialization[311](index=311&type=chunk)[314](index=314&type=chunk)[327](index=327&type=chunk)[386](index=386&type=chunk)[388](index=388&type=chunk)[389](index=389&type=chunk) - Risks related to common stock ownership include high price volatility, potential dilution from future stock sales, and anti-takeover provisions in charter documents[338](index=338&type=chunk)[340](index=340&type=chunk)[344](index=344&type=chunk) - Risks related to the convertible notes include the inability to raise funds for cash settlement or repurchase upon a fundamental change, and operating restrictions imposed by the 2029 Notes' Letter Agreement[353](index=353&type=chunk)[358](index=358&type=chunk) - General risks include unfavorable global economic/political conditions, disruptions to international business, reliance on third-party carriers, and the potential for IT system breaches or AIML technology liabilities[364](index=364&type=chunk)[366](index=366&type=chunk)[378](index=378&type=chunk)[381](index=381&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=86&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section states that there were no unregistered sales of equity securities or use of proceeds during the reporting period - No unregistered sales of equity securities or use of proceeds occurred during the last fiscal quarter[395](index=395&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=86&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section indicates that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities occurred during the last fiscal quarter[396](index=396&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=86&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section states that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the company[397](index=397&type=chunk) [ITEM 5. OTHER INFORMATION](index=87&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section confirms that none of the company's directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the last fiscal quarter - None of the company's directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the last fiscal quarter[399](index=399&type=chunk) [ITEM 6. EXHIBITS](index=88&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including organizational documents, equity incentive plans, and certifications - Exhibits include Amended and Restated Certificate of Incorporation, Third Amended and Restated Bylaws, 2020 Equity Incentive Plan, and certifications from the CEO and CFO[401](index=401&type=chunk) [Signatures](index=89&type=section&id=Signatures) This section contains the required signatures from the President and Chief Executive Officer, Chief Financial Officer, and Vice President and Chief Accounting Officer, certifying the report's submission - The report is signed by Christian O. Henry (President and CEO), Jim R. Gibson (CFO), and Michele Farmer (VP and Chief Accounting Officer) on August 7, 2025[407](index=407&type=chunk)

[Second Quarter 2025 Financial Results Overview](index=1&type=section&id=1.%20Second%20Quarter%202025%20Financial%20Results%20Overview) PacBio reported sequential and year-over-year revenue growth in Q2 2025, with improved financial performance and operational milestones [Summary Financial Performance (Q2 2025 vs Q2 2024)](index=1&type=section&id=1.1.%20Summary%20Financial%20Performance%20(Q2%202025%20vs%20Q2%202024)) PacBio achieved sequential and year-over-year revenue growth to **$39.8 million** in Q2 2025, with cash and investments at **$314.7 million** Q2 2025 vs Q2 2024 Key Financial and Operational Metrics | Metric | Q2 2025 | Q2 2024 | | :-------------------------------- | :------------ | :------------ | | Revenue | $39.8 million | $36.0 million | | Instrument revenue | $14.2 million | $14.7 million | | Consumable revenue | $18.9 million | $17.0 million | | Service and other revenue | $6.7 million | $4.3 million | | TM Revio systems | 15 | 24 | | TM Vega systems | 38 | — | | Annualized Revio pull-through per system | ~$219,000 | ~$251,000 | | Cash, cash equivalents, and investments | $314.7 million | $509.8 million | [GAAP Financial Performance](index=1&type=section&id=1.2.%20GAAP%20Financial%20Performance) GAAP results for Q2 2025 showed significant improvements, with increased gross profit and reduced operating expenses and net loss [Gross Profit](index=1&type=section&id=1.2.1.%20Gross%20Profit) GAAP gross profit significantly increased to **$14.7 million** in Q2 2025 compared to **$5.9 million** in Q2 2024 GAAP Gross Profit (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :----------- | :------------ | :------------ | | GAAP Gross Profit | $14.7 million | $5.9 million | [Operating Expenses](index=1&type=section&id=1.2.2.%20Operating%20Expenses) GAAP operating expenses substantially decreased to **$59.5 million** in Q2 2025 from **$181.8 million** in Q2 2024 GAAP Operating Expenses (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :-------------------- | :------------ | :------------ | | GAAP Operating Expenses | $59.5 million | $181.8 million | | Non-cash share-based compensation | $11.0 million | $16.1 million | [Net Loss and EPS](index=1&type=section&id=1.2.3.%20Net%20Loss%20and%20EPS) GAAP net loss significantly improved to **$41.9 million** (EPS **$0.14**) in Q2 2025 GAAP Net Loss and EPS (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :---------------- | :------------ | :------------ | | GAAP Net Loss | $41.9 million | $173.3 million | | GAAP Net Loss per Share | $0.14 | $0.64 | [Non-GAAP Financial Performance](index=1&type=section&id=1.3.%20Non-GAAP%20Financial%20Performance) Non-GAAP results for Q2 2025 showed improved gross profit and margin, with reduced operating expenses and net loss [Gross Profit and Margin](index=1&type=section&id=1.3.1.%20Gross%20Profit%20and%20Margin) Non-GAAP gross profit increased to **$15.2 million** (margin **38%**) in Q2 2025 Non-GAAP Gross Profit and Margin (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :-------------------- | :------------ | :------------ | | Non-GAAP Gross Profit | $15.2 million | $13.2 million | | Non-GAAP Gross Margin | 38% | 37% | [Operating Expenses](index=1&type=section&id=1.3.2.%20Operating%20Expenses) Non-GAAP operating expenses decreased to **$58.1 million** in Q2 2025 from **$71.0 million** in Q2 2024 Non-GAAP Operating Expenses (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :----------------------- | :------------ | :------------ | | Non-GAAP Operating Expenses | $58.1 million | $71.0 million | [Net Loss and EPS](index=1&type=section&id=1.3.3.%20Net%20Loss%20and%20EPS) Non-GAAP net loss improved to **$40.0 million** (EPS **$0.13**) in Q2 2025 Non-GAAP Net Loss and EPS (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :-------------------- | :------------ | :------------ | | Non-GAAP Net Loss | $40.0 million | $55.2 million | | Non-GAAP Net Loss per Share | $0.13 | $0.20 | [Operational Highlights and Strategic Updates](index=1&type=section&id=1.4.%20Operational%20Highlights%20and%20Strategic%20Updates) PacBio achieved significant scientific and commercial milestones, including key publications, collaborations, and market expansion - Published the Platinum Pedigree benchmark in Nature Methods, improving **AI-based variant calling accuracy** and setting a new standard for evaluating complex genomic variation using PacBio HiFi sequencing[7](index=7&type=chunk) - Joined the 1000 Genomes Long Read Project to contribute **isoform-level transcriptome sequencing** using the Kinnex RNA kit and Revio system[7](index=7&type=chunk) - Expanded distribution in China through a new agreement with Haorui Gene, providing access to **clinical lab networks** and supporting PacBio HiFi sequencing[7](index=7&type=chunk) - PacBio HiFi sequencing powered the **first Arab human pangenome**, enhancing understanding of genetic diversity in Middle Eastern populations[7](index=7&type=chunk) [Management's Commentary](index=2&type=section&id=1.5.%20Management's%20Commentary) CEO Christian Henry highlighted the return to revenue growth, reduced operating expenses, and decreased cash burn due to solid execution - PacBio returned to both **sequential and year-over-year revenue growth** in Q2, while continuing to reduce operating expenses and cash burn[8](index=8&type=chunk) - Performance reflects **solid execution**, from disciplined cost management to growing adoption of HiFi sequencing platforms[8](index=8&type=chunk) - Encouraged by **Revio's momentum in clinical settings** and Vega's continued expansion into new markets, positioning PacBio for sustainable growth[8](index=8&type=chunk) [Company Information and Disclosures](index=2&type=section&id=2.%20Company%20Information%20and%20Disclosures) This section provides essential information about PacBio, its non-GAAP financial measures, and forward-looking statements [About PacBio](index=2&type=section&id=2.1.%20About%20PacBio) PacBio is a premier life science technology company specializing in advanced sequencing solutions for various research applications - PacBio (NASDAQ: PACB) is a **life science technology company** specializing in advanced sequencing solutions[10](index=10&type=chunk) - Products include **HiFi long-read sequencing**, addressing applications such as human germline sequencing, plant and animal sciences, infectious disease, microbiology, and oncology[10](index=10&type=chunk) - PacBio products are provided for **Research Use Only** and are not for use in diagnostic procedures[11](index=11&type=chunk) [Non-GAAP Financial Measures Statement](index=2&type=section&id=2.2.%20Non-GAAP%20Financial%20Measures%20Statement) PacBio provides non-GAAP financial measures as supplemental information to GAAP results, offering consistency and comparability for investors - Non-GAAP results are reported for basic net income/loss per share, net income/loss, gross margins, gross profit/loss, and operating expenses, as **supplemental information to GAAP**[12](index=12&type=chunk) - Non-GAAP measures are considered helpful for **consistency and comparability** with past financial performance but have limitations and should not be viewed in isolation[12](index=12&type=chunk) - Excluded items from non-GAAP measures include **amortization of intangible assets**, changes in fair value of contingent consideration, impairment charges, restructuring-related expenses, and benefits from income taxes[13](index=13&type=chunk) [Forward-Looking Statements](index=3&type=section&id=2.3.%20Forward-Looking%20Statements) This section highlights forward-looking statements subject to various risks and uncertainties, including product development and market expansion - Statements regarding **cost-saving plans**, financial guidance, product reception, market expansion, customer use, and product performance are forward-looking[16](index=16&type=chunk) - Forward-looking statements are subject to **risks and uncertainties**, including challenges in product development, manufacturing, marketing, potential order cancellations, competition, supply chain disruptions, and legal claims[16](index=16&type=chunk) - PacBio disclaims any obligation to revise or update these statements, except as required by law[16](index=16&type=chunk) [Unaudited Condensed Consolidated Financial Statements](index=4&type=section&id=3.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated GAAP financial statements, including statements of operations and balance sheets [Statements of Operations (Three Months Ended June 30, 2025)](index=4&type=section&id=3.1.%20Statements%20of%20Operations%20(Three%20Months%20Ended%20June%2030%2C%202025)) This section presents the detailed GAAP income statement for the three months ended June 30, 2025, compared to prior periods Unaudited Condensed Consolidated Statements of Operations (Three Months Ended, in thousands, except per share amounts) | (in thousands, except per share amounts) | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--------------------------------------- | :------------ | :------------- | :------------ | | Total revenue | $39,766 | $37,153 | $36,013 | | Total cost of revenue | $25,082 | $38,524 | $30,075 | | Gross profit (loss) | $14,684 | $(1,371) | $5,938 | | Total operating expense | $59,537 | $427,563 | $181,784 | | Operating loss | $(44,853) | $(428,934) | $(175,846) | | Net loss | $(41,930) | $(426,075) | $(173,319) | | Net loss per share: Basic | $(0.14) | $(1.44) | $(0.64) | [Statements of Operations (Six Months Ended June 30, 2025)](index=5&type=section&id=3.2.%20Statements%20of%20Operations%20(Six%20Months%20Ended%20June%2030%2C%202025)) This section provides the detailed GAAP income statement for the six months ended June 30, 2025, detailing year-to-date performance Unaudited Condensed Consolidated Statements of Operations (Six Months Ended, in thousands, except per share amounts) | (in thousands, except per share amounts) | June 30, 2025 | June 30, 2024 | | :--------------------------------------- | :------------ | :------------ | | Total revenue | $76,919 | $74,823 | | Total cost of revenue | $63,606 | $57,603 | | Gross profit | $13,313 | $17,220 | | Total operating expense | $487,100 | $274,428 | | Operating loss | $(473,787) | $(257,208) | | Net loss | $(468,005) | $(251,497) | | Net loss per share: Basic | $(1.57) | $(0.93) | [Balance Sheets (As of June 30, 2025)](index=6&type=section&id=3.3.%20Balance%20Sheets%20(As%20of%20June%2030%2C%202025)) The balance sheet as of June 30, 2025, details assets, liabilities, and stockholders' equity, with cash and investments at **$314.7 million** Unaudited Condensed Consolidated Balance Sheets (in thousands) | (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | **Assets** | | | | Cash and investments | $314,735 | $389,931 | | Total Assets | $825,470 | $1,260,447 | | **Liabilities and Stockholders' Equity** | | | | Convertible senior notes, net | $646,436 | $647,494 | | Stockholders' equity | $61,489 | $506,594 | | Total Liabilities and Stockholders' Equity | $825,470 | $1,260,447 | [Reconciliation of Non-GAAP Financial Measures](index=7&type=section&id=4.%20Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section provides detailed reconciliations of GAAP to Non-GAAP financial measures [Net Loss and EPS Reconciliation](index=7&type=section&id=4.1.%20Net%20Loss%20and%20EPS%20Reconciliation) This section reconciles GAAP net loss and basic net loss per share to their non-GAAP counterparts for Q2 and YTD 2025 and 2024 Reconciliation of GAAP to Non-GAAP Net Loss and EPS (in thousands, except per share amounts) | (in thousands, except per share amounts) | Q2 2025 | Q2 2024 | YTD Q2 2025 | YTD Q2 2024 | | :--------------------------------------- | :------------ | :------------ | :------------ | :------------ | | GAAP net loss | $(41,930) | $(173,319) | $(468,005) | $(251,497) | | Non-GAAP net loss | $(39,951) | $(55,241) | $(84,356) | $(126,640) | | GAAP basic net loss per share | $(0.14) | $(0.64) | $(1.57) | $(0.93) | | Non-GAAP basic net loss per share | $(0.13) | $(0.20) | $(0.28) | $(0.47) | [Gross Profit and Operating Expense Reconciliation](index=7&type=section&id=4.2.%20Gross%20Profit%20and%20Operating%20Expense%20Reconciliation) This section reconciles GAAP gross profit and total operating expenses to their non-GAAP equivalents for Q2 and YTD 2025 and 2024 Reconciliation of GAAP to Non-GAAP Gross Profit and Operating Expense (in thousands) | (in thousands) | Q2 2025 | Q2 2024 | YTD Q2 2025 | YTD Q2 2024 | | :--------------------------------------- | :------------ | :------------ | :------------ | :------------ | | GAAP gross profit (loss) | $14,684 | $5,938 | $13,313 | $17,220 | | Non-GAAP gross profit | $15,215 | $13,216 | $30,216 | $25,841 | | GAAP gross profit (loss) % | 37% | 16% | 17% | 23% | | Non-GAAP gross profit % | 38% | 37% | 39% | 35% | | GAAP total operating expense | $59,537 | $181,784 | $487,100 | $274,428 | | Non-GAAP total operating expense | $58,089 | $70,984 | $119,808 | $158,192 | [Additional Information](index=2&type=section&id=5.%20Additional%20Information) This section provides details on the quarterly conference call and contact information for investor and media inquiries [Quarterly Conference Call Details](index=2&type=section&id=5.1.%20Quarterly%20Conference%20Call%20Details) Management hosted a quarterly conference call on August 07, 2025, to discuss financial results, with access via dial-in and webcast - Conference call held on **August 07, 2025, at 5:00 p.m. Eastern Time**[9](index=9&type=chunk) - Investors can access the call by dialing **1-888-349-0136** (or 1-412-317-0459 for international callers) and requesting to join the 'PacBio Q2 Earnings Call'[9](index=9&type=chunk) - The call was webcast live and is available for replay at **https://investor.pacificbiosciences.com**[9](index=9&type=chunk) [Investor and Media Contacts](index=3&type=section&id=5.2.%20Investor%20and%20Media%20Contacts) Contact information for investor relations and media inquiries is provided for direct communication - Investor contact: **Todd Friedman at ir@pacb.com**[18](index=18&type=chunk) - Media contact: **pr@pacb.com**[18](index=18&type=chunk)

Core Insights - PacBio reported a revenue increase in Q2 2025, achieving $39.8 million compared to $36.0 million in Q2 2024, marking a year-over-year growth [1] - The company has successfully reduced operating expenses and cash burn while maintaining revenue growth [6] Financial Performance - Instrument revenue for Q2 2025 was $14.2 million, slightly down from $14.7 million in Q2 2024 [1] - Consumable revenue increased to $18.9 million from $17.0 million year-over-year [1] - Service and other revenue rose to $6.7 million from $4.3 million in the same period last year [1] - GAAP gross profit for Q2 2025 was $14.7 million, up from $5.9 million in Q2 2024, with a non-GAAP gross profit of $15.2 million compared to $13.2 million [2] - Non-GAAP gross margin improved to 38% in Q2 2025 from 37% in Q2 2024 [2] Operating Expenses and Losses - GAAP operating expenses decreased to $59.5 million in Q2 2025 from $181.8 million in Q2 2024 [3] - Non-GAAP operating expenses also fell to $58.1 million from $71.0 million year-over-year [3] - GAAP net loss for Q2 2025 was $41.9 million, significantly reduced from $173.3 million in Q2 2024 [4] - Non-GAAP net loss for the same period was $40.0 million, down from $55.2 million [4] - GAAP net loss per share improved to $0.14 from $0.64 year-over-year [4] Product and Market Developments - The company sold 15 Revio™ systems in Q2 2025, down from 24 in Q2 2024, while it sold 38 Vega™ systems, which were not sold in the previous year [1] - Annualized Revio pull-through per system was approximately $219,000, down from $251,000 [1] - PacBio has expanded its distribution in China through a new agreement with Haorui Gene, enhancing access to clinical lab networks [6] - The company contributed to the 1000 Genomes Long Read Project, focusing on isoform-level transcriptome sequencing [6] Cash and Investments - As of June 30, 2025, PacBio had cash, cash equivalents, and investments totaling $314.7 million, down from $509.8 million a year earlier [1]