Shares of Pacific Biosciences of California (NASDAQ:PACB) closed deep in red week following the news that the healthcare firm terminated its deal with Roche Holding Ltd. (ADR)(OTCMKTS:RHHBY). The two companies deal was signed in 2013. It permitted Roche to advance diagnostic products using Pacific SMRT technology and sell them across globe. Meanwhile, the company maintained its right to commercialize its products for fields outside the scope of human in vitro diagnostics.
The highlights
The deal allowed Roche the privilege to terminate the agreement for any reason. News came last week that Roche’s management decided to use that option. Dr. Michael Hunkapiller, the CEO of Pacific Biosciences, said that the clinical market and research industry and regulatory environment have grown in the last three years since they made a deal with Roche.
While they are upset with Roche’s decision to cancel the agreement, they know the in-and-out of this market and this decision does not have any impact on their near-term plans for business expansion in the same industry.
Roche’s decision to terminate the deal with Pacific poses huge questions on the firm’s future. It should be noted that Roche is a massive firm with resources that far surpass that of Pacific Biosciences. Many shareholders believed that this association would yield results for many years to come. However, Roche’s decision to cancel the deal puts an end to market hopes.
Looking at the bright side, it is worth mentioning that Pacific Biosciences is optimistic on its near-term future. Management reaffirmed that its service and product revenue can record growth of over 55% in 2016. Also, the company expects its revenue to surge by 40% to 60% in 2017. It’s all encouraging, but since this update poses new concerns about the firm’s long-term future, it is better to adopt a cautionary approach towards investing in the stock.
In the last trading session, the stock price of Pacific Biosciences gained marginally to close at $3.54.
