Shares of Pacific Biosciences surged another 9% in Thursday’s pre-market trading after the gene sequencing company announced a $900 million investment from SB Management, a subsidiary of SoftBank Group. Shares closed 16% higher on Feb. 10.
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As part of the investment, SoftBank will buy $900 million in convertible senior notes due 2028 with an initial conversion price of $43.50 for each share of Pacific Bio (PACB). The conversion price represents a 10% premium to the company’s closing price as on Feb. 9, 2021. The notes will bear an annual interest of 1.5%.
Pacific Bio CEO, Christian Henry said, “This strategic investment by SoftBank validates our leadership position in the long-read DNA sequencing market and enables us to further accelerate our growth strategies.”
Henry added, “Currently, we offer one of the most accurate and complete sequencing solutions on the market and this financing will enable us to continue to expand our product portfolio and advance our commercial expansion as we seek to transform the field of genomics.”
Separately, Pacific Bio released its FY20 and 4Q results. The company reported diluted earnings per share (EPS) of $0.37, which fell short of analysts’ estimates of $0.42. Revenue declined 3% year-on-year to $27.1 million, but exceeded consensus estimates of $24.8 million. (See Pacific Biosciences stock analysis on TipRanks)
Following the investment announcement, Cantor Fitzgerald analyst Kyle Mikson reiterated a Buy rating and a price target of $45 on the stock. Mikson said, “…the investment from SoftBank would significantly increase PACB’s cash position (to over $1 billion from about $300 million currently) and help fund the company’s growth objectives.”
“As a reminder, 2021 will likely be an “expansion” year for PacBio as the company aims to double its sales force by year-end. In our view, the SoftBank investment is a large vote of confidence in PacBio’s technology and future opportunity.” Mikson added.
The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 2 analysts recommending a Buy. The average analyst price target of $48.50 implies a 5.7% upside potential to current levels.
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