HiFi's Not Very Pacific Waters

PacBio had a major shakeup early this month. First came a large round of layoffs, which caught several individuals who were very much the face of innovation on social media.  Next came the sudden retirement of CEO Christian Henry, who has appeared in this space multiple times, and the elevation of CFO Mark Van Oene to the top seat.  

One of the truly out-of-the-box ideas to be floated on social media after this is the idea of a reverse merger allowing Oxford Nanopore to engulf PacBio.  ONT would get a US stock listing and PacBio's cash, plus elimination of a competitor.  PacBio would probably be absolutely gutted, with perhaps the Circulomics sample preparation remaining or being divested via spinout or sale.  From an innovation point-of-view, it would be a horror - but the financial types would revel in the fees and point to the pure long read market just being too small and slow growing (in their view) to support two players.  Plus there is the threat of Illumina's TruPath technology adding to the challenge of prying short read shops into the long read arena.

I do still need to point out my unusual conflict-of-interest: my boss is the guy that takes orders from the Board of Directors, and Henry remains a director of my employer.  But other than jokes about sneaking up on me at work, it's never been an actual issue.

Henry's tenure was marked by a number of prominent events. Under prior management, PacBio had been claiming it was all but dead, doomed to be squashed by Illumina. Henry guided a complete turnabout in attitude, making it clear he felt PacBio could be a serious and ongoing concern.  He was famous/notorious for flashy marketing, hosting parties at ASHG and AGBT with musical acts even I had heard of.  Tellingly, the one time I could have gone, at AGBT in Hollywood Florida, I got immersed in a technical & market discussion and got to the party just before it wrapped up - and long after the name act had retired for the night.

Henry also took a lot of money from SoftBank in the form of loans.  SoftBank seemed like the perfect partner, willing to throw money at very speculative companies without asking many questions.  An attitude that definitely can be classified as gullibility in the case of SoftBank, which was given bonkers cash and no oversight.  PacBio spent the money a bit more on real technology, but made missteps.  The overhanging SoftBank loans are another part of the probably too-clever financial engineering logic of structuring the fantasy deal as PacBio buying ONT - that wouldn't make those loans come due.

The move that many of us in the field were skeptical of when it happened was to go into short read sequencing with what became Onso, driven by two expensive acquisitions - Omniome and Apton.  Omniome seemed to be close to launch when acquired, but whether that was untrue or PacBio just wanted to redesign it took some more incubation before launching as Onso.  PacBio's angle was that they would deliver ultra high accuracy short reads for areas, such as cell-free DNA, where short reads made sense, and ultra high accuracy long reads for everything else.

Except the market didn't emerge for ultra high accuracy short reads.  Onso also launched about the same time as Element's AVITI and Singular's G4.  So multiple competitors to Onso from the start rather than just head-to-head with Illumina NextSeq.  Before long Ultima was launching as well - not direct competition but certainly another draw on eyeballs and keyboards.  And Onso was competing purely on accuracy - it was slower, lower yielding, and higher cost per run.  And before long Element, Singular, and Ultima were all talking about their high accuracy running modes.

PacBio's other big technical stumble was a partnership with Invitae to develop an ultra high throughput sequencer to enable population-scale long read sequencing.  When initiated, it seemed perfect: a well-funded partner willing to bankroll the effort and then drive utilization of all the capacity it would create.  But Invitae went from high-flyer to basket case to bankruptcy, along the way jettisoning the PacBio relationship. 

PacBio also pursued long read cDNA sequencing via the commercialization of Kinnex technology developed at the Broad Institute, a wetlab approach to pack more cDNAs per HiFi read and therefore more cDNAs per HiFi flowcell.  Technically clever, but no gigantic market for long read cDNA sequencing has emerged - just as ONT has found with both their cDNA and direct RNA products.  

PacBio under Henry bet that dropping the cost of long read genomes would drive up demand in a way that would increase revenues despite dropping the cost per genome.  A reasonable bet, one that has worked repeatedly for Illumina - but launching Revio hasn't panned out in that way at a financial scale to make Wall Street happy. Further chemistry improvements have continued to drive down cost per genome, but also haven't driven the new demand to drive revenue growth to balance out and improve on those cost reductions.

Henry's PacBio also launched Vega, a compact benchtop unit rated at one human genome per run.  Some online have argued that Vega should have preceded Revio, and certainly in hindsight it looks that way.  But it could have been a good step, given that the compact Vega form factor is more palatable to many small biotechs than the huge floor mounted Revio. A reasonable argument - though a Vega launch first would have meant the compactness would have been about the only difference versus the Sequel IIe - little if any performance improvement.  As with any counterfactual, there's no way to know if a Vega-first strategy would have done any better.

Where will Van Oene steer PacBio?  I doubt it will be engaging in the ONT reverse merger. Nor any other reverse merger.  Might he broker a sale to a big player such as Danaher or Thermo?  Perhaps, but are they even in a buying mood?  And would they be willing to buy when retiring the SoftBank debt is a bitter pill inflating the required outlay?   Or will Van Oene drive more technical innovation?  Van Oene is rumored to be a strong proponent of the legendary Ultra High Throughput system that was being developed under the Invitae partnership.  Which brings up another COI of mine - if they really built such a system, I'd be elbowing my way to the head-of-the-line to pitch the back-end laboratory to keep such a ravenous maw fed with samples.

Any sort of new push faces the challenge that the financial well is not in great shape.  PacBio is public and can issue more shares to raise money, except their stock price is currently at $1.20 and with any dilution that price would sink further.  Given the NASDAQ rules about keeping shares above $1, Pacbio would want to be careful - a lot of dilution plus a market downturn could trigger all the messiness that comes with dropping below a buck a share.  And there's still the "if you build it, will they come?" question - a ultra high throughput system might not have buyers, or might just consolidate existing demand into a lower revenue package for the company.

PacBio has been a technical powerhouse, developing near sci-fi technology that relies on quantum mechanics to deliver single molecule analysis at very high scale.  They've tuned the system to deliver the highest accuracy sequencing data around - only in some important edge cases (e.g. where ONT's advantage in raw read length pays off) does a competitor deliver higher quality genotyping.  Their software developments have underpinned so many advances in long read technology; ONT's path to market was greatly eased by PacBio tilling the bioinformatics fields in advance.  But the market is a brutal filter, and long read tech just hasn't taken over any large genomics markets. If Henry's free spending on pop stars and short reads has robbed PacBio of financial flexibility to survive long enough to succeed, then that is a catastrophe for genomic science.  

So all eyes on Mark Van Oene as he tries to steer PacBio - let's wish him luck, because the alternative is a great technology potentially slipping away.

[2026-08-19 9:35 EDT - fixing the issues Wouter pointed out]