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pacb-20200930x10q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-34899

Pacific Biosciences of California, Inc.

(Exact name of registrant as specified in its charter)


Delaware	16-1590339
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1305 O’Brien Drive Menlo Park, CA	94025
(Address of principal executive offices)	(Zip Code)

(650) 521-8000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	PACB	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes T No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes T No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large Accelerated Filer	T	Accelerated Filer	o

Non-accelerated Filer	o	Smaller Reporting Company	o
Emerging Growth Company	o

Table of Contents

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No T

Number of shares outstanding of the issuer’s common stock as of October 31, 2020: 180,212,604.

‎

Table of Contents

TABLE OF CONTENTS




PART I - FINANCIAL INFORMATION	PAGE No

Item 1. Financial Statements (unaudited):

Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019	4

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and NineMonths Ended September 30, 2020 and 2019	5


Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2020 and 2019	6

Condensed Consolidated Statements of Cash Flows for the NineMonths Ended September 30, 2020 and 2019	7

Notes to Condensed Consolidated Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3. Quantitative and Qualitative Disclosures About Market Risk	29

Item 4. Controls and Procedures	29

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	30

Item 1A. Risk Factors	30

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	54

Item 3. Default Upon Senior Securities	54

Item 4. Mine Safety Disclosures	54

Item 5. Other Information	54

Item 6. Exhibits	54

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

PACIFIC BIOSCIENCES OF CALIFORNIA, INC.

Condensed Consolidated Balance Sheets

(Unaudited)



	September 30,		December 31,
(in thousands, except per share amounts)	2020		2019
Assets
Current assets
Cash and cash equivalents	$	69,028	$	29,627
Investments		139,522		19,472
Accounts receivable		11,806		15,266
Inventory		15,940		13,312
Prepaid expenses and other current assets		3,212		3,369
Total current assets		239,508		81,046
Property and equipment, net		26,568		30,070
Operating lease right-of-use assets, net		30,700		32,827
Long-term restricted cash		3,500		4,000
Other long-term assets		42		42
Total assets	$	300,318	$	147,985
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	5,406	$	8,368
Accrued expenses		15,079		13,242
Deferred revenue, current		6,982		7,610
Operating lease liabilities, current		4,217		3,837
Notes payable, current		—		15,871
Deferred gain from Reverse Termination Fee		98,000		—
Other liabilities, current		584		225
Total current liabilities		130,268		49,153
Deferred revenue, non-current		1,761		1,951
Operating lease liabilities, non-current		38,793		41,964
Total liabilities		170,822		93,068

Commitments and contingencies

Stockholders’ equity
Preferred stock, $0.001 par value:
Authorized 50,000 shares; No shares issued or outstanding		—		—
Common stock, $0.001 par value:
Authorized 1,000,000 shares; issued and outstanding 179,937 shares and 153,119 shares at September 30, 2020 and December 31, 2019, respectively		180		153
Additional paid-in capital		1,241,002		1,120,999
Accumulated other comprehensive income		118		5
Accumulated deficit		(1,111,804)		(1,066,240)
Total stockholders’ equity		129,496		54,917
Total liabilities and stockholders’ equity	$	300,318	$	147,985

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

PACIFIC BIOSCIENCES OF CALIFORNIA, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)



	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share amounts)	2020		2019		2020		2019
Revenue:
Product revenue	$	15,749	$	18,484	$	41,798	$	53,191
Service and other revenue		3,333		3,431		9,959		9,770
Total revenue		19,082		21,915		51,757		62,961
Cost of revenue:
Cost of product revenue		9,228		12,188		22,874		32,786
Cost of service and other revenue		2,790		2,813		7,718		8,531
Total cost of revenue		12,018		15,001		30,592		41,317
Gross profit		7,064		6,914		21,165		21,644
Operating expense:
Research and development		16,467		14,962		46,727		45,357
Sales, general and administrative		14,772		20,066		54,846		58,915
Total operating expense		31,239		35,028		101,573		104,272

Operating loss		(24,175)		(28,114)		(80,408)		(82,628)
Gain from Continuation Advances		—		—		34,000		—
Interest expense		—		(664)		(267)		(1,933)
Other income (expense), net		467		(345)		1,143		518
Net loss		(23,708)		(29,123)		(45,532)		(84,043)
Other comprehensive income (loss):
Unrealized income (loss) on investments		(125)		(6)		113		47
Comprehensive loss	$	(23,833)	$	(29,129)	$	(45,419)	$	(83,996)

Net loss per share:
Basic and diluted net loss per share	$	(0.14)	$	(0.19)	$	(0.29)	$	(0.55)
Shares used in computing basic and diluted net loss per share		166,862		152,983		158,195		152,351

See accompanying notes to the condensed consolidated financial statements.

‎

Table of Contents

PACIFIC BIOSCIENCES OF CALIFORNIA, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)


						Accumulated
				Additional		Other				Total
				Paid-in		Comprehensive		Accumulated		Stockholders'
(in thousands)	Common Stock			Capital		Income (Loss)		Deficit		Equity
For the three months ended September 30, 2020
Balance at June 30, 2020	154,318	$	154	$	1,129,091	$	243	$	(1,088,096)	$	41,392
Net loss	—		—		—		—		(23,708)		(23,708)
Other comprehensive loss	—		—		—		(125)		—		(125)
Issuance of common stock in conjunction with equity plans	3,274		3		13,344		—		—		13,347
Issuance of common stock from Underwritten Public Equity Offering, net of issuance costs	22,345		23		93,575		—		—		93,598
Stock-based compensation expense	—		—		4,992		—		—		4,992
Balance at September 30, 2020	179,937	$	180	$	1,241,002	$	118	$	(1,111,804)	$	129,496

For the three months ended September 30, 2019
Balance at June 30, 2019	152,959	$	153	$	1,112,610	$	17	$	(1,037,026)	$	75,754
Net loss	—		—		—		—		(29,123)		(29,123)
Other comprehensive loss	—		—		—		(6)		—		(6)
Issuance of common stock in conjunction with equity plans	72		—		327		—		—		327
Stock-based compensation expense	—		—		4,062		—		—		4,062
Balance at September 30, 2019	153,031	$	153	$	1,116,999	$	11	$	(1,066,149)	$	51,014

For the nine months ended September 30, 2020
Balance at December 31, 2019	153,119	$	153	$	1,120,999	$	5	$	(1,066,240)	$	54,917
Net loss	—		—		—		—		(45,532)		(45,532)
Other comprehensive income	—		—		—		113		—		113
Adoption effect of Topic 326									(32)		(32)
Issuance of common stock from Underwritten Public Equity Offering, net of issuance costs	22,345		23		93,575		—		—		93,598
Issuance of common stock in conjunction with equity plans	4,473		4		14,170		—		—		14,174
Stock-based compensation expense	—		—		12,258		—		—		12,258
Balance at September 30, 2020	179,937	$	180	$