Complete Genomics Stock Falls on Sales Decline, as Sequencing Gets Cheaper

Xconomy San Francisco — 

[Updated: 2:24 pm PT] Complete Genomics picked a bad day to have a bad day. The Mountain View, CA-based company that sequences entire human genomes lost more than one-fourth of its value today after it reported a decline in second-quarter revenue, partly driven by price decreases in its service, and a delay in getting enough all the DNA samples it needs from the Seattle-based Institute for Systems Biology.

The sell-off in Complete Genomics (NASDAQ: GNOM) happened during a down day for biotech stocks and the market in general. Complete Genomics stock fell $3.11 a share, or 27 percent, to $8.14 at 2 pm Eastern Time, while the broader market indexes were down about 3 percent.

A few key disclosures from Complete Genomics in today’s report rattled investors. Revenues in the quarter ended June 30 were $5.9 million. That figure was down from $6.8 million in the immediate prior quarter, and less than the roughly $7.2 million to $7.7 million that Wall Street was expecting, according to Quintin Lai, an analyst with Robert W. Baird. Part of the problem, Complete Genomics said, is that it didn’t receive as many biological samples as it expected from one of its biggest customers, the Institute for Systems Biology, which ordered 615 complete genome sequences in January. And while Complete Genomics scored a couple of big new contracts to deliver 2,700 new genomes over the next year, those new contracts are less lucrative than they would have been months ago, as the price of sequencing each genome continues to drop below $5,000.

“We were disappointed that lumpy DNA shipments to Complete Genomics caused a revenue shortfall in Q2 and an expected shortfall in Q3,” Lai wrote in a note to clients today. “However, we are encouraged that GNOM signed more orders in July than it received in all of [the first half of 2011]. We think the services-based whole human genome sequencing market is still in its infancy, and these large orders reaffirm our belief that GNOM is retaining its leadership position.”

Complete Genomics said revenues declined in the quarter, even though it was able to recognize revenue from sequencing 950 genomes in the quarter, up from 690 in the prior three-month period. The company said it still expects to reach its goal of shipping 4,000 completed human genomes back to customers this calendar year, although the delays from the ISB mean it will need to deliver a majority (2,400 genomes) in the second half to reach that goal.

CEO Cliff Reid said the company can still do that, because … Next Page »

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3 responses to “Complete Genomics Stock Falls on Sales Decline, as Sequencing Gets Cheaper”

  1. nanostring says:

    Yep! It’s aaaaaall ISB’s fault. In fact, those investors who were duped to buy into the May secondary, should be asking for their money directly from Lee Hood…

  2. Biotech veteran says:

    This is all sooooo predictable. I pity the poor investors who bought at the IPO – or, even worse, last month when it hit $15/share. “Build it and they will come” was the model for this company. Caveat emptor !