Pacific Biosciences of California (PACB) 2018年年度報告「NASDAQ」.pdf

1、K UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549 Form 10-K(Mark One)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31,2018 OrTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF

2、1934For the transition period from to Commission File Number 001-34899 Pacific Biosciences of California,Inc.(Exact name of registrant as specified in its charter)Delaware16-1590339(State or other jurisdiction ofincorporation or organization)(I.R.S.EmployerIdentification No.)1305 OBrien DriveMenlo P

3、ark,CA 9402594025(Address of principal executive offices)(Zip Code)(Registrants telephone number,including area code)(650)521-8000Securities registered pursuant to Section 12(b)of the Act:Title of Each Class Name of Each Exchange on Which Registered Common Stock,par value$0.001 per shareThe NASDAQ S

4、tock Market LLCSecurities registered pursuant to Section 12(g)of the Act:None Indicate by check mark if the registrant is a well-known,seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 o

5、r Section 15(d)of the Act.Yes No 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 1934during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and

6、(2)has been subject to such filingrequirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T(232.405 of this chapter)during the preceding 12 months(or f

7、or such shorter period that the registrant was required to submit and post suchfiles).Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,and will not be contained to thebest of registrants knowledge,in definitive proxy or i

8、nformation statements incorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K.Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company or anemerging growth company.See the def

9、initions of“large accelerated filer,”“accelerated filer,”“smaller reporting company”and“emerging growth company”inRule 12b-2 of the Exchange Act.(Check one):Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting company Emerging growth company If an emerging growth company,in

10、dicate by check mark if the registrant has elected not to use the extended transition period for complying with any newor revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 1

11、2b-2 of the Exchange Act).Yes No Aggregate market value of registrants common stock held by non-affiliates of the registrant on June 30,2018,based upon the closing price of CommonStock on such date as reported by NASDAQ Global Select Market,was approximately$428,497,000.Shares of voting stock held b

12、y each officer and directorhave been excluded in that such persons may be deemed to be affiliates.This assumption regarding affiliate status is not necessarily a conclusive determinationfor other purposes.Number of shares outstanding of the issuers common stock as of February 22,2019:150,959,952 DOC

13、UMENTS INCORPORATED BY REFERENCE:Portions of the registrants definitive Proxy Statement relating to its 2019 Annual Meeting of Stockholders to be held on June 18,2019 are incorporatedby reference into Part III of this Annual Report on Form 10-K where indicated.Such Proxy Statement will be filed with

14、 the U.S.Securities and ExchangeCommission within 120 days after the end of the fiscal year to which this report relates.Pacific Biosciences of California,Inc.Annual Report on Form 10-K Page PART I Item 1.Business1 Item 1A.Risk Factors8 Item 1B.Unresolved Staff Comments31 Item 2.Properties31 Item 3.

15、Legal Proceedings31 Item 4.Mine Safety Disclosures33 PART II Item 5.Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchasesof Equity Securities34 Item 6.Selected Financial Data37 Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations

16、39 Item 7A.Quantitative and Qualitative Disclosures about Market Risk48 Item 8.Financial Statements and Supplementary Data49 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure79 Item 9A.Controls and Procedures79 Item 9B.Other Information81 PART III Item 10.Di

17、rectors,Executive Officers and Corporate Governance81 Item 11.Executive Compensation81 Item 12.Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters81 Item 13.Certain Relationships and Related Transactions,and Director Independence81 Item 14.Principal Accounta

18、nt Fees and Services81 PART IV Item 15.Exhibits,Financial Statement Schedules81 Item 16.Form 10-K Summary84 Signatures 85 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Discussions under the captions“Business,”“Risk Factors”and“Managements Discussion and Analysis of Financial Conditionand Results

19、 of Operations”contain or may contain forward-looking statements that are based on the beliefs and assumptions of themanagement of Pacific Biosciences of California,Inc.(the“Company,”“we,”“us,”or“our”)and on information currently available to ourmanagement.The statements contained in this Annual Rep

20、ort on Form 10-K that are not purely historical are forward-looking statementswithin the meaning of Section 27A of the Securities Act of 1933,as amended,and Section 21E of the Securities Exchange Act of 1934,asamended(the“Exchange Act”),and include,but are not limited to,our statements regarding the

21、 merger agreement and proposed mergerwith Illumina,Inc.(“Illumina”),the Early Access Program,the expected timing of commercial shipments of Sequel II Systems and SMRTCell 8M products,the attributes and sequencing advantages of SMRT technology and the Sequel System,market opportunities,strategicand c

22、ommercial plans,including strategy for our business and related financing,expectations regarding the conversion of backlog torevenue and the pricing and gross margin for products,manufacturing plans including developing and scaling of manufacturing anddelivery of our products,research and developmen

23、t plans,product development including,among other things,statements relating tofuture uses,quality or performance of,or benefits of using,products or technologies,updates or improvements of our products,intentionsregarding seeking regulatory approval for our products,competition,expectations regardi

24、ng unrecognized income tax benefits,expectations regarding the impact of an increase in market rates on the value of our investment portfolio,the sufficiency of cash,cashequivalents and investments to fund projected operating requirements,the effects of recent accounting pronouncements on our financ

25、ialstatements and other future events.Such statements may be signified by terms such as“anticipates,”“believes,”“could,”“estimates,”“expects,”“intends,”“may,”“plans,”“potential,”“predicts,”“projects,”“seeks,”“should,”“target,”“will,”“would”or similar expressionsand the negatives of those terms.Forwa

26、rd-looking statements involve known and unknown risks,uncertainties and other factors that maycause our actual results,performance or achievements to be materially different from any future results,performance or achievementsexpressed or implied by the forward-looking statements.Factors that could c

27、ause or contribute to such differences include,but are notlimited to,those discussed under the heading“Risk Factors”in this report and in other documents we file with the Securities and ExchangeCommission(“SEC”).Given these risks and uncertainties,you should not place undue reliance on forward-looki

28、ng statements.Also,forward-looking statements represent managements beliefs and assumptions as of the date of this report.Except as required by law,weassume no obligation to update forward-looking statements publicly,or to update the reasons actual results could differ materially fromthose anticipat

29、ed in these forward-looking statements,even if new information becomes available in the future.ITEM 1.BUSINESSMerger with Illumina,Inc.On November 1,2018,we entered into an Agreement and Plan of Merger with Illumina,Inc.(“Illumina”)and FC Ops Corp.,a wholly-owned subsidiary of Illumina(the“Merger Ag

30、reement”)pursuant to which Illumina will acquire us for$8.00 per share of our common stock inan all-cash transaction and FC Ops Corp.will be merged with and into us(the“Merger”),with us surviving the Merger and becoming a wholly-owned subsidiary of Illumina.Completion of the transaction is subject t

31、o terms and conditions set forth in the Merger Agreement,includingexpiration or termination of any waiting periods applicable to the consummation of the Merger under the United States Hart-Scott-RodinoAntitrust Improvements Act of 1976,as amended,and clearance under the antitrust laws of certain non

32、-United States jurisdictions.At a SpecialMeeting of Stockholders held on January 24,2019,our stockholders,among other things,approved the adoption of the Merger Agreement.Weand Illumina have each received a request for additional information and documentary material,commonly referred to as a“second

33、request,”from the United States Federal Trade Commission(the“FTC”)in connection with the Merger.The FTCs“second request”has the effect ofextending the waiting period applicable to the consummation of the Merger until the 30th day after substantial compliance by us and Illuminawith the“second request

34、,”unless the waiting period is extended voluntarily by the parties or terminated sooner by the FTC.The parties haveentered into a timing agreement with the FTC that extends the waiting period of the“second request”to mid-2019.We and Illumina continue toexpect the Merger to be completed in mid-2019,a

35、t which time we will become a wholly-owned subsidiary of Illumina and will cease to be apublicly-traded company.No assurance can be given that the required regulatory approvals will be obtained or that the required conditions toclosing will be satisfied,and,even if all such approvals are obtained an

36、d the conditions are satisfied,no assurance can be given as to the terms,conditions and timing of the approvals.For more information about the effects of our agreement to be acquired by Illumina please see Item 1ARisk Factors under the section“Risks Related to Our Business”.OverviewWe design,develop

37、 and manufacture sequencing systems to help scientists resolve genetically complex problems.Based on our novelSingle Molecule,Real-Time(SMRT)sequencing technology,our products enable:de novo genome assembly to finish genomes in order tomore fully identify,annotate and decipher genomic structures;ful

38、l-length transcript analysis to improve annotations in reference genomes,characterize alternatively spliced isoforms in important gene families,and find novel genes;targeted sequencing to more comprehensivelycharacterize genetic variations;and real-time kinetic information for epigenome characteriza

39、tion.Our technology provides high accuracy,ultra-long reads,uniform coverage and the ability to simultaneously detect epigenetic changes.PacBio sequencing systems,includingconsumables and software,provide a simple and fast end-to-end workflow for SMRT sequencing.Our current products include the Sequ

40、el instrument and the Sequel SMRT Cell 1M,which together are capable of sequencing up toapproximately one million DNA molecules simultaneously.We are continuously developing new products including the SMRT Cell 8M,which is designed to have up to eight times as much throughput capability as the curre

41、nt Sequel SMRT Cell 1M.We commenced our EarlyAccess Program for the SMRT Cell 8M chip and platform,the Sequel II System,in January 2019 and the five Early Access sites selected haveinstalled and operated their Sequel II Systems.Based on the early performance of the Sequel II Systems at these sites,w

42、e expect to begincommercial shipments of Sequel II Systems and SMRT Cell 8M products in the early part of the second quarter of 2019.Our customers and our scientific collaborators have published numerous peer-reviewed articles in journals including Nature,Science,Cell,PNAS and The New England Journa

43、l of Medicine highlighting the power and applications of SMRT sequencing in projects such asfinishing genomes,structural variation discovery,isoform transcriptome characterization,rare mutation discovery and the identification ofchemical modifications of DNA related to virulence and pathogenicity.Ou

44、r research and development efforts are focused on developing newproducts and further improving our existing products,including continuing chemistry and sample preparation improvements to increasethroughput and expand our supported applications.By providing access to genetic information that was prev

45、iously inaccessible,we enablescientists to confidently increase their understanding of biological systems.Pacific Biosciences of California,Inc.,formerly Nanofluidics,Inc.,was incorporated in the State of Delaware in 2000.Our executiveoffices are located at 1305 OBrien Drive,Menlo Park,California 94

46、025,and our telephone number is(650)521-8000.The Underlying ScienceGenetic inheritance in living systems is conveyed through a naturally occurring information storage system known as deoxyribonucleicacid,or DNA.DNA stores information in linear chains of the chemical bases adenine,cytosine,guanine an

47、d thymine,represented by thesymbols A,C,G and T respectively.Inside living cells,these chains usually exist in pairs bound together in a double helix by complementarybases,with A of one strand always binding to a T of the other strand and C always binding to G.In humans,there are approximately three

48、 billion DNA base-pairs in the molecular blueprint of life,called the genome.These three billionbases are divided into 23 chromosomes ranging in size from 50 million to 250 million bases.Normally,there are two complete copies of thegenome contained in each cell,one of maternal origin and the other o

49、f paternal origin.When cells divide,the genomes are replicated by anenzyme called DNA polymerase,which visits each base in the sequence,creating a complementary copy of each chromosome using buildingblocks called nucleotides.Contained within these chromosomes are approximately 23,000 smaller regions

50、,1 called genes,each one containing the recipe for a protein or group of related proteins.The natural process of protein production takes place insteps.In a simplified model,the first step is transcription,a process in which an enzyme called RNA polymerase uses DNA as a template tosynthesize new str

51、ands of messenger RNA,or mRNA.The mRNAs are then translated into proteins by ribosomes.The resulting proteins go on toplay crucial roles in cellular structure and function and thus the operation of biological systems.Numerous scientific approaches have evolved to adapt to the emerging awareness of t

52、he magnitude of complexity embedded in biologicalsystems.The field of genomics developed to study the interactions among components in the genome and the massive quantities of associateddata.Subsequently,proteomics,transcriptomics and a number of other related fields emerged.Advances in biology over

53、 the next decade are expected to be shaped by a more detailed understanding of the fundamental complexity ofbiological systems.These systems vary among individuals in previously unrecognized ways and are influenced by factors including time,molecular interactions,and cell type.Importantly for the fu

54、ture of genomics,the first few whole-genome sequencing studies of disease have shown that rare mutations play acritical role in human disease.These mutations would not have been detected in earlier studies because too few people,or perhaps only oneperson,carry the specific mutation.In addition,it is

55、 now understood that structural changes to the genome in which whole sections are deleted,inverted,copied or moved may be responsible for a significant fraction of variation among individuals.The scope of these structural changeschallenges the very idea of a reference genome.Recent discoveries have

56、highlighted additional complexities in the building blocks of DNA and RNA,including the presence of modifiedbases.It has long been known that in humans and many other organisms,the cytosine bases can be chemically modified through the addition ofa methyl group in a process called methylation,resulti

57、ng in modified bases such as 5-methylcytosine(5-mC)and N4-methylcytosine(4-mC).These chemical modifications have been shown to play a role in embryonic development,have important impacts on diseases such as cancerand can even affect the characteristics of offspring for multiple generations.More rece

58、ntly,it has been discovered that other modified bases,such as 5-hydroxymethylcytosine,8-oxoguanine and many others,play important physiological roles.For example,in bacteria,N6-methyladenine(6-mA)has been shown to play an important role in pathogenicity.Another source of complexity derives from the

59、processing of RNA molecules after being transcribed from the genome.The majority of allgenes code for different forms of a protein that can be made depending on the structure of the RNA molecule,referred to as splice variants.Adetailed understanding of both the expression pattern and regulation of t

60、hese variants is believed to play an important role in a number ofcritical biological processes.Recent advances in our understanding of biological complexity have highlighted the need for advanced tools such as the PacBio RS IISystem and the Sequel System to study DNA,RNA and proteins.In the field o

61、f nucleic acid sequencing,incremental technological advanceshave provided novel insights into the structure and function of the genome.Despite these advances,scientists have not been able to fullycharacterize the human genome and the genomes of other living organisms because of inherent limitations

62、in these tools.Evolution of SequencingIn order to understand the limitations of current nucleic acid sequencing technologies,it is important to understand the sequencingprocess.This consists of three phases:sample preparation,physical sequencing,and analysis.The first step of sample preparation is t

63、o eitherbreak the target genome into multiple small fragments or,depending on the amount of sample DNA available,amplify the target region using avariety of molecular methods.In the physical sequencing phase,the individual bases in each fragment are identified in order,creatingindividual reads.The n

64、umber of individual bases identified contiguously is defined as read length.In the analysis phase,bioinformaticssoftware is used to align overlapping reads,which allows the original genome to be assembled into contiguous sequence.The longer the readlength,the easier it is to assemble the genome.Sang

65、er SequencingThe first automated sequencing methodology,often referred to as“Sanger sequencing,”was developed by Frederick Sanger in 1977.Withthis technology,during sample preparation,scientists first make different sized fragments of DNA each starting from the same location.Eachfragment ends with a

66、 particular base that is labeled with one of four fluorescent dyes corresponding to that particular base.Then all of thefragments are distributed in order of their length by driving them through a gel.Information regarding the last base is used to determine theoriginal sequence.Under standard condit

67、ions,this method results in a read length that is approximately 700 bases on average,but may beextended to 1,000 bases.These are relatively long read lengths compared with many next-generation sequencing methods.However,Sangersequencing is limited by the small amounts of data that can be processed p

68、er unit of time,referred to as throughput.Short-read SequencingSeveral commercial DNA sequencing tools emerged in 2005 in response to the low throughput of Sanger sequencing.Now commonlyreferred to as“short-read sequencing”,these methods achieve much higher throughput by sequencing a large number of

69、 DNA molecules inparallel,but with the tradeoff of shorter read lengths.In most short-read sequencing methodologies,tens of thousands of identical strands are anchored to a given location to be read in aprocess consisting of successive flushing and scanning operations.The“flush and scan”sequencing p

70、rocess involves sequentially flushing inreagents,such as labeled nucleotides,incorporating nucleotides into the DNA strands,stopping the incorporation reaction,washing out2 the excess reagent,scanning to identify the incorporated base and finally treating that base so that the strand is ready for th

71、e next“flush andscan”cycle.This cycle is repeated until the reaction is no longer viable.Due to the large number of flushing,scanning and washing cycles required,the time to result for short-read sequencing methods can belonger,sometimes taking days.This repetitive process also limits the average re

72、ad length produced by most of these systems under standardsequencing conditions to approximately 35 to 600 bases.The short-read sequencing technologies require a large number of DNA molecules during the sequencing process.To generate enoughDNA molecules,a copying method called PCR amplification is r

73、equired during sample preparation.This amplification process can introduceerrors known as amplification bias.The effect of this bias is that resulting copies are not uniformly representative of the original templateDNA.In cases where the original template DNA contains regions of relatively high G-C

74、content or relatively high A-T content,the PCRamplification process tends to under-represent these regions.As a result,these regions,which may contain entire genes,can be completelymissed.In summary,while short-read sequencing methods can offer very high throughput and low cost per identified base,t

75、heir disadvantages caninclude limited read length,variation in sequence coverage with regard to representation bias and accuracy,dependence on amplification,longtime to result,and/or a need for many samples to justify machine operation.The PacBio Solution Single Molecule,Real-Time Technology We have

76、 developed our SMRT technology,which enables single molecule,real-time detection of biological processes,to address many ofthe limitations of previous sequencing technologies.By providing long read lengths,elimination of the dependence on amplification duringsample preparation(which can result in am

77、plification bias),very high consensus accuracy,and the ability to detect DNA base modifications,thePacBio RS II System and the Sequel System can provide more comprehensive and higher quality information of DNA and RNA sequence as wellas epigenetic regulation and DNA damage.Pacific Biosciences SMRT T

78、echnologySMRT technology enables the observation of DNA synthesis as it occurs in real time by harnessing the natural process of DNAreplication,which in nature is a highly efficient and accurate process actuated by the DNA polymerase.The DNA polymerase attaches itself to astrand of DNA to be replica

79、ted,examines the individual base at the point it is attached,and then determines which of four building blocks,ornucleotides,is required to complement that individual base.After determining which nucleotide is required,the polymerase incorporates thatnucleotide into the growing strand being produced

80、.After incorporation,the enzyme advances to the next base to be replicated and the processis repeated.To overcome the challenges inherent in real-time observation of the natural activity of the DNA polymerase,an enzyme measuringapproximately 15 nanometers(nm)in diameter,we offer and support three ke

81、y innovations:The SMRT CellPhospholinked nucleotidesThe PacBio RS II and Sequel instruments The SMRT CellOne of the fundamental challenges with observing a single DNA polymerase molecule working in real time is the ability to detect theincorporation of a single nucleotide,taken from a large pool of

82、potential nucleotides,during DNA synthesis.To resolve this problem,we utilizeour nanoscale innovation,the zero-mode waveguide,or ZMW.The ZMWs in our SMRT Cells consist of holes in an opaque layer,measuring only tens of nanometers in diameter forming nanoscalewells.The small size of the ZMW causes th

83、e intensity of visible laser light,which has a wavelength of approximately 600nm,to decayexponentially in the ZMW.Therefore,laser light shined into the ZMW from below is blocked from reaching the sequencing solution above theZMW,providing selective illumination of only the bottom portion of the nano

84、scale well.DNA polymerases are anchored to the bottom of theglass surface of the nanoscale wells using proprietary techniques.Nucleotides,each type labeled with a different colored fluorophore,are thenflooded above an array of ZMWs at the required concentration.When the labeled nucleotides diffuse i

85、nto the bottom portion of the nanoscalewells,which contain the anchored DNA polymerases,their fluorescence can be monitored.When the correct nucleotide is detected by thepolymerase,it is incorporated into the growing DNA strand in a process that takes milliseconds in contrast to simple diffusion whi

86、ch takesmicroseconds.This difference in time results in higher signal intensity for incorporated versus unincorporated nucleotides,which creates a highsignal-to-noise ratio.Thus,the ZMW provides the ability to detect a single incorporation event against the background of fluorescently labelednucleot

87、ides at biologically relevant concentrations.Our DNA sequencing is performed on proprietary SMRT Cells,each having an array ofZMWs.The SMRT Cells for the PacBio RS II System each contain approximately 150,000 ZMWs,whereas the SMRT Cells for the SequelSystem each contain approximately one million ZMW

88、s.The SMRT Cells for the Sequel II System currently in development containapproximately eight million ZMWs.Each ZMW is capable of containing a DNA polymerase molecule bound to a single DNAtemplate.Currently,our immobilization process randomly distributes polymerases into ZMWs across the SMRT Cell,ty

89、pically resulting inapproximately one-third to two-thirds of the ZMWs having a single template.3 Phospholinked NucleotidesOur proprietary phospholinked nucleotides have a fluorescent dye attached to the phosphate chain of the nucleotide rather than to thebase.As a natural step in the synthesis proce

90、ss,the phosphate chain is cleaved when the nucleotide is incorporated into the DNA strand.Thus,upon incorporation of a phospholinked nucleotide,the DNA polymerase naturally frees the dye molecule from the nucleotide when it cleavesthe phosphate chain.Upon cleaving,the label quickly diffuses away,lea

91、ving a natural piece of DNA without evidence of labeling.The PacBio RS II and Sequel InstrumentsThe PacBio RS II and Sequel instruments conduct,monitor,and analyze single molecule biochemical reactions in real time.We no longermanufacture the PacBio RS II instrument;however,we continue to service an

92、d support installed PacBio RS II instruments.The instruments useextremely sensitive imaging systems to collect the light pulses emitted by fluorescent reagents allowing the observation of biological processes.Computer algorithms are used to translate the information that is captured by the optics sy

93、stem.Using the recorded information,light pulses areconverted into either an A,C,G or T base call with associated quality metrics.Once sequencing is started,the real-time data is delivered to thesystems primary analysis pipeline,which outputs base identity and quality values,or QVs.To generate a con

94、sensus sequence from the data,anassembly process assembles the different fragments from each ZMW based on common sequences.SMRT Sequencing AdvantagesSequencing based on our SMRT technology offers the following key benefits:Longer read lengthsSMRT technology has been demonstrated to produce read leng

95、ths that are significantly longer than those of previous sequencingtechnologies.Long read lengths are necessary to span repetitive regions to efficiently assemble genomes.Long read lengths are animportant factor in enabling a comprehensive view of the genome,as they can reveal multiple types of gene

96、tic variation such asstructural variants.High consensus accuracyUsers of SMRT technology can achieve very high consensus accuracy due to the attributes of SMRT sequencing,including long readlengths,lack of reliance on amplification during sample preparation(which can result in amplification bias),an

97、d lower systematic bias.Users of short-read sequencing technologies often cannot achieve comparable results due to their shorter read lengths and systematicbias.More uniformity and less systematic error The sample preparation step for SMRT sequencing is compatible with but does not require amplifica

98、tion;when amplification is notused during sample preparation,the reads are not subject to amplification bias.Importantly,this allows for uniform identification of allbases present in a DNA sample and uniform sequence coverage.As a result,SMRT sequencing can detect and identify regions andentire gene

99、s that may be missed by short-read sequencing technologies.In addition,SMRT sequencing can achieve high accuracywhen sequencing through complex and highly repetitive regions,whereas other sequencing methods are unable to resolve suchregions,which can often result in poor accuracy.Ability to observe

100、and capture kinetic informationThe ability to observe the activity of a DNA polymerase in real time enables the PacBio RS II and Sequel Systems to collect,measureand assess the dynamics and timing of nucleotides being added to a growing DNA strand,referred to as kinetics.It is well established inthe

101、 scientific community that chemical modification of DNA such as the addition of a methyl group,known as methylation,can alterthe biological activity of the affected nucleotide.The PacBio RS II and Sequel Systems detect changes in kinetics automatically bycapturing and recording changes in the durati

102、on of,and time period between,each of the fluorescent pulses during a typicalsequencing analysis.Integrated software can then translate these kinetic signatures into uniquely characterized modified bases such as6-mA,4-mC and 5-mC.Other sequencing systems,which rely on a sample preparation amplificat

103、ion step or are limited by signalresolution,are unable to directly measure this type of kinetic data.FlexibilityOur sequencing systems have the ability to scale the throughput and cost of sequencing across a range of small to large projects.Theycan be used with a variety of sample types and can outp

104、ut a range of DNA lengths.Our ProductsWe entered the market with our first commercial product,the PacBio RS System,during the second quarter of 2011 and launched thehigher performance PacBio RS II System during the second quarter of 2013.In September 2015,we announced the Sequel System,which isbased

105、 on the same underlying SMRT technology as the PacBio RS II System,but can achieve up to approximately seven times the throughputwith newly-designed SMRT Cells.We are planning on introducing a new system in 2019,the Sequel II System,which is designed to achieveapproximately eight times the throughpu

106、t of the current Sequel System,utilizing our new SMRT Cell 8M chip.Our sequencing systems provideaccess to a wide range of applications and are designed for expandable improvements to performance capability and new applicationcapabilities through chemistry and software enhancements without necessita

107、ting changes to instrument hardware.4 PacBio SystemsThe PacBio RS II and Sequel Systems conduct,monitor,and analyze biochemical sequencing reactions.The PacBio RS II and Sequelinstruments are integrated units that include high performance optics,automated liquid handling,a touchscreen control interf

108、ace andcomputational hardware and software.Each instruments high performance optics monitor the ZMWs in a SMRT Cell in real time.Theautomated liquid handling system performs reagent mixing and prepares SMRT Cells.Each instruments touchscreen control interface is theusers primary control center to de

109、sign and monitor experiments.The computational hardware and software in each instrument is responsible forprocessing the sequencing data produced by the SMRT Cells.Both the PacBio RS II System and the Sequel System have been designed toallow for performance improvements to be easily integrated into

110、the systems.We no longer manufacture the PacBio RS II instrument;however,we continue to service and support installed PacBio RS II instruments.ConsumablesCustomers must purchase proprietary consumable products to run either the PacBio RS II System or Sequel System.Our consumableproducts include our

111、proprietary SMRT Cells and reagent kits.One SMRT Cell is consumed per sequencing reaction,and scientists can choosethe number of SMRT Cells they use per experiment.For the PacBio RS II instrument,eight SMRT Cells containing approximately 150,000ZMWs each are individually and hermetically sealed then

112、 packaged together into a streamlined 8Pac format.Sequel System customerspurchase a similarly packaged,four SMRT Cell format with approximately one million ZMWs each.The Sequel II System currently indevelopment will also use a similarly packaged,four SMRT Cell format with approximately eight million

113、 ZMWs each.We offer several reagent kits,each designed to address a specific step in the workflow.A template preparation kit is used to convert DNAinto SMRTbell double-stranded DNA library formats and includes typical molecular biology reagents,such as ligase,buffers and exonucleases.Our binding kit

114、s include our modified DNA polymerase,and are used to bind SMRTbell libraries to the polymerase in preparation forsequencing.Our sequencing kits contain reagents required for on-instrument,real-time sequencing,including the phospholinked nucleotides.Product EnhancementsSince the introduction of our

115、products in 2011,we have continued to significantly enhance the performance of PacBio sequencingsystems through a combination of sample preparation protocol enhancements,software releases,and new sequencing reagent chemistries.Byproviding an increasing number of longer reads per instrument run,the n

116、ew chemistries have enabled users to assemble more genomes to a highquality.We have continually improved our software to expand the number of supported applications such as large genome assembly,structuralvariant analysis,sequencing of transcript isoforms produced from genes,and phasing of haplotype

117、s in large amplicons.Market for Our ProductsOur customers use our products for sequencing genomes and transcriptomes across a wide range of organisms.Initially,customers inresearch,government and commercial markets used the PacBio RS and RS II Systems to generate more complete assemblies of small an

118、dmedium size genomes,such as bacteria and fungi,and for sequencing targeted regions of larger genomes such as humans and plants.Asthroughput and read lengths have increased,the complexity and size of genomes being resolved with SMRT sequencing havegrown.Scientists now use SMRT sequencing to generate

119、 genome assemblies of humans,plants&animals,characterize transcriptomes throughfull-length isoform sequencing,and phase complex genomic regions like full-length human leukocyte antigen,or HLA,genes.With continuedperformance improvements of our products,we anticipate increasing both mindshare and mar

120、ket share within research and commercial marketssuch as human biomedical research,plant and animal sciences,microbiology&infectious disease,and immunogenomics.There are a number of emerging markets for sequencing-based tests,including molecular diagnostics,which represent significant potentialopport

121、unities for our products.The development of these markets is subject to variability driven by ongoing changes in the competitivelandscape,evolving regulatory requirements,government funding of research and development activities,and macroeconomic conditions.Introductions of new technologies and prod

122、ucts,while positive to the overall development of these markets,may result in greater competitionfor the limited financial resources available.As we continue to expand into these emerging markets,the development of our business will beimpacted by the variability of the factors affecting the growth o

123、f these markets.Pacific Biosciences StrategyKey elements of our strategy include:Offer differentiated products based on our proprietary SMRT technologyOur SMRT technology provides a window into biological processes that has not previously been available.The combination of ourproducts and underlying

124、SMRT technologys ability to deliver long read lengths,high consensus accuracy,low bias,and kineticinformation affords the scientific community a new tool to conduct research not possible with other sequencing technologies.Enhance product performance and introduce new products to increase market shar

125、e.The design of our sequencing systems allows for significant performance improvements.Our flexible platforms are designed togenerate a recurring revenue stream through the sale of proprietary SMRT Cells and reagent kits.With continued performance5 improvements of our products,we anticipate increasi

126、ng both market recognition and market share within the markets for ourproducts.We plan to introduce additional product enhancements over time to further reduce DNA sequencing project costs and time toresult while expanding application solutions.Create a global community of users to enhance informati

127、cs capabilities,develop sample preparation solutions,and driveadoption of our products in new application and market areas.We work closely with our customers and collaborators to develop new applications and demonstrate SMRT sequencing capabilities onscientifically relevant projects.We partner with

128、members of the informatics community to develop and define standards for workingwith single molecule,real-time sequence data.We maintain the PacBio DevNet site,a website on which we make available varioussoftware tools and information about our SMRT sequencing technology to support academic informat

129、ics developers,scientists andindependent software vendors interested in creating tools to work with SMRT sequencing data.This gives the user flexibility toperform further analysis of the sequencing data through third-party software or share data with collaborators.To help maximize theflexibility and

130、 functionality for users,our secondary analysis algorithms are made available under open source licenses.We also makeavailable on our main corporate website various methods developed internally and externally for simplifying and enhancing samplepreparation protocols.Leverage SMRT technology and comm

131、unity engagement to expand application capabilities and penetrate new markets.We plan to leverage our customers successes with SMRT sequencing to expand the capabilities of our products for applications ourcustomers have identified as high-value based on the differentiating attributes of our technol

132、ogy.Early applications identified by ourcustomers include:whole genome sequencing,targeted sequencing of complex regions,isoform discovery and characterization,resolution of complex populations,and epigenetic analysis.Our customers have been particularly successful sequencing plant andanimal genomes

133、 with our products.We plan to develop whole product solutions around these applications,making it easier forcustomers who are not typically early adopters of new technology to take advantage of SMRT sequencing.In the long term,we believe that our SMRT technology may also be adapted for RNA transcrip

134、tion monitoring,direct RNAsequencing,protein translation and ligand binding.We believe these applications can create substantial new markets for ourtechnology.Marketing,Sales,Service and SupportWe market our products through a direct sales force in North America and parts of Europe and through distr

135、ibution partners in Asia,certain other parts of Europe,the Middle East and Africa,and Latin America.Our sales strategy involves the use of a combination of salespersonnel and field application scientists.The role of our sales personnel is to educate customers on the advantages of SMRT technology and

136、the applications that our technology makes possible.The role of our field application scientists is to provide on-site training and scientifictechnical support to prospective and existing customers and to encourage customer utilization of our SMRT sequencing technology.Our fieldapplication scientist

137、s are technical experts,often with advanced degrees,and generally have extensive experience in academic research andcore sequencing lab experience.Service for our instruments is performed by field service engineers.These field service engineers are trained by experienced personnel totest,trouble-sho

138、ot,and service instruments installed at customer sites.In addition,we maintain an applications lab team in Menlo Park,California composed of scientific experts who can transfer knowledgefrom the research and development team to the field application scientists.The applications lab team also runs fou

139、ndational scientificcollaborations and proof of principle studies,which help demonstrate the value of our product offering to prospective customers.Our business is subject to seasonal trends.See“Risk Factors Seasonality may cause fluctuations in our revenue and results ofoperations”for additional in

140、formation.CustomersOur customers include research institutions,commercial laboratories,genome centers,clinical,government and academic institutions,genomics service providers,pharmaceutical companies and agricultural companies.In general,our customers will isolate,prepare and analyzegenetic samples

141、using PacBio sequencing systems in their own research labs,or they will send their genetic samples to third party serviceproviders who in turn will sequence the samples with PacBio systems and provide the sequence data back to the customer for further analysis.For example,customers in academic resea

142、rch institutions may have bacteria,animal,or human DNA samples isolated from various sources whileagricultural biology companies may have DNA samples isolated from different strains of rice,corn or other crops.Excluding contractualrevenue from the Development,Commercialization and License Agreement

143、dated September 24,2013(the“Roche Agreement”)with F.Hoffman-La Roche Ltd(“Roche”),which has now been terminated,for the years ended December 31,2018 and 2017,one customer,GeneCompany Limited,our distributor for China and Hong Kong,accounted for approximately 26%and 31%of our total revenue,respective

144、ly.Excluding contractual revenue from the Development,Commercialization and License Agreement dated September 24,2013(the“RocheAgreement”)with F.Hoffman-La Roche Ltd(“Roche”),which terminated in February 2017,for the year ended December 31,2016,no customeraccounted for more than 10%of our total reve

145、nue.We believe that the majority of our current customers are early adopters of sequencing technology.By focusing our efforts on high-valueapplications,and developing whole product solutions around these applications,we seek to drive the adoption of our products across a broadercustomer base and int

146、o numerous large-scale projects.In general,the broader adoption of new technologies by mainstream customers can take anumber of years.6 We currently sell our products to a number of customers outside the United States,including customers in other areas of North America,Europe,Middle East,Africa,Asia

147、 Pacific and South America.Roche-related contractual revenue has been classified as revenue from the UnitedStates.Revenue from customers outside the United States totaled$44.7 million,or 57%of our total revenue during fiscal 2018,compared to$54.3 million,or 58%of our total revenue,during fiscal 2017

148、,and compared to$41.0 million,or 45%of our total revenue,during fiscal 2016.BacklogAs of December 31,2018,our instrument backlog was approximately$4.6 million,compared to$4.1 million as of December 31,2017.Wedefine backlog as purchase orders or signed contracts from our customers which we believe ar

149、e firm and for which we have not yet recognizedrevenue.We expect to convert this backlog to revenue during 2019;however,our ability to do so is subject to customers who may seek tocancel or delay their orders even if we are prepared to fulfill them.ManufacturingOur principal manufacturing activities

150、 are performed at our headquarters in Menlo Park,California.We currently perform some of themanufacturing and all of the final integration of our instruments in-house,while outsourcing most sub-assemblies to third-party manufacturers.With respect to the manufacture of SMRT Cells,we subcontract wafer

151、 fabrication and processing to semiconductor processing facilities,butconduct critical surface treatment processes internally.We also subcontract the packaging of SMRT Cells,and bring them back in-house forfinal testing.In addition,we manufacture critical reagents in-house,including our phospholinke

152、d nucleotides and our DNA polymerase.We purchase both custom and off-the-shelf components from a large number of suppliers and subject them to significant qualityspecifications.We periodically conduct quality audits of most critical suppliers and have established a supplier certification program.Wep

153、urchase components through purchase orders.Some of the components required in our products are currently either sole sourced or singlesourced.Research and DevelopmentOur SMRT technology requires the blending of a number of unique disciplines,namely nanofabrication,physics,photonics,optics,molecular

154、biology,engineering,signal processing,high performance computing,and bioinformatics.Our research and development team is ablend of these disciplines creating a single,cross-functional/operating unit.We have also established productive working relationships withtechnology industry leaders,as well as

155、leading academic centers,to augment and complement our internal research and development efforts.Weplan to continue our investment in research and development to enhance the performance and expand the application of our current products,and introduce additional products based on our SMRT technology.

156、Our goals include further improvements in sequencing read length andmappable data per SMRT Cell,chemistry and software enhancements,and enhancements in sample preparation and bioinformatics tools thattake advantage of the capabilities of our products.In addition,our engineering teams will continue t

157、heir focus on increasing instrumentcomponent and system reliability,reducing costs,and implementing additional system flexibility and versatility through the enhancement ofexisting products and development of new products.Intellectual Property Developing and maintaining a strong intellectual propert

158、y position is an important element of our business.We have sought,and willcontinue to seek,patent protection for our SMRT technology,for improvements to our SMRT technology,as well as for any of our othertechnologies where we believe such protection will be advantageous.Our current patent portfolio,

159、including patents exclusively licensed to us,is directed to various technologies,including SMRT nucleicacid sequencing and other methods for analyzing biological samples,ZMW arrays,surface treatments,phospholinked nucleotides and otherreagents for use in nucleic acid sequencing,optical components an

160、d systems,processes for identifying nucleotides within nucleic acidsequences and processes for analysis and comparison of nucleic acid sequence data.Some of the patents and applications that we own,as well assome of the patents and applications that we have licensed from other parties,are subject to

161、 U.S.government march-in rights,whereby the U.S.government may disregard our exclusive patent rights on its own behalf or on behalf of third parties by imposing licenses in certaincircumstances,such as if we fail to achieve practical application of the U.S.government funded technology,because action

162、 is necessary toalleviate health or safety needs,to meet requirements of federal regulations,or to give preference to U.S.industry.In addition,U.S.governmentfunded inventions must be reported to the government and U.S.government funding must be disclosed in any resulting patent applications.As of De

163、cember 31,2018,we own or hold exclusive licenses to 297 issued U.S.patents,79 pending U.S.patent applications,193 grantedforeign patents and 75 pending foreign patent applications,including foreign counterparts of U.S.patent and patent applications.The full termof the issued U.S.patents will expire

164、between 2019 and 2036.We also have non-exclusive patent licenses with various third parties tosupplement our own large and robust patent portfolio.Of our exclusively licensed patent applications,22 issued U.S.patents,one pending U.S.patent application,and 15 granted foreignpatents are licensed to us

165、 by the Cornell Research Foundation,which manages technology transfers on behalf of Cornell University.We havealso entered into a license agreement with Indiana University Research and Technology Corporation,or IURTC,for U.S.Patent No.6,399,335,which relates to nucleoside triphosphates that include

166、a labeling group attached through the terminal phosphate group in the triphosphatechain.We have also entered into a license agreement with GE Healthcare Bio-Sciences Corp,or GE Healthcare,for several U.S.and foreignpatents and pending patent applications related to labeled nucleoside polyphosphate c

167、ompounds.7 We are involved in legal proceedings for patent infringement with Oxford Nanopore Technologies Ltd.(“ONT Ltd.”)and OxfordNanopore Technologies,Inc.(“ONT Inc.”)in the United States.Please see Item 3 titled“Legal Proceedings”for more information.Other Sequencing Solutions There are a signif

168、icant number of companies offering nucleic acid sequencing equipment or consumables.These include,but are notlimited to,Illumina,Thermo Fisher Scientific Inc.(“Thermo”),ONT Ltd.,Roche,and Qiagen N.V.(“Qiagen”).Many of these companiescurrently have greater financial,technical,research and/or other re

169、sources than we do.They also have larger and more establishedmanufacturing capabilities and marketing,sales and support functions.We expect the competition to intensify within the overall nucleic acidsequencing market as there are also several companies developing new sequencing technologies,product

170、s and/or services,including ONT Ltd.and Roche.Increased competition may result in pricing pressures,which could harm our sales,profitability or share of supply.In order for us to maintain and increase our sales,we will need to demonstrate that our products deliver superior performance and value asa

171、result of our key differentiators,including single molecule,real-time resolution,the combination of very high consensus accuracy and longread lengths with the ability to detect real-time kinetic information,fast time to result and flexibility,as well as the breadth and depth of currentand future pro

172、ducts and applications.EmployeesAs of December 31,2018,we had 401 full-time employees.Of these employees,157 were in research and development,101 were inoperations and service,88 were in marketing,sales and customer support,and 55 were in general and administration.With the exception of ourfield-bas

173、ed sales,marketing and service teams,substantially all of our employees are located at our headquarters in Menlo Park,California.None of our employees are represented by labor unions or are covered by a collective bargaining agreement with respect to their employment.We have not experienced any work

174、 stoppages,and we consider our relationship with our employees to be good.Available InformationOur website is located at .The information posted on or that can be accessed through our website is not incorporated byreference into this Annual Report on Form 10-K,and the inclusion of our website addres

175、s is an inactive textual reference only.Our AnnualReport on Form 10-K,Quarterly Reports on Form 10-Q,Current Reports on Form 10-K and amendments to reports filed or furnished pursuant toSections 13(a)and 15(d)of the Securities Exchange Act of 1934,as amended,are available free of charge through the“

176、Investors”section of ourwebsite as soon as reasonably practicable after we electronically file such material with,or furnish it to,the SEC.The SEC also maintains awebsite that contains our SEC filings.The address of the site is www.sec.gov.Additionally,we use our website as a channel of distribution

177、 for important company information.Important information,including pressreleases,analyst presentations and financial information regarding us,as well as corporate governance information,is routinely posted andaccessible on the“Investor Relations”section of the website,which is accessible by clicking

178、 on the tab labeled“About Us-Investors”on ourwebsite home page.In addition,important information is routinely posted and accessible on the blog section of our website,which is accessiblethrough our website at well as our Twitter account(pacbio).Information on or that can be accessed through ourwebsi

179、te or our Twitter account is not incorporated by reference into this Annual Report on Form 10-K,and the inclusion of our website addressis an inactive textual reference only.ITEM 1A.RISK FACTORSYou should consider carefully the risks and uncertainties described below,together with all of the other i

180、nformation in our publicfilings with the Securities and Exchange Commission,which could materially affect our business,financial condition,results of operationsand prospects.The risks described below are not the only risks facing us.Risks and uncertainties not currently known to us or that we curren

181、tlydeem to be immaterial also may materially affect our business,financial condition,results of operations and prospects.Risks Related to Our BusinessThe announcement and pendency of our agreement to be acquired by Illumina could adversely affect our business.On November 1,2018,we entered into a def

182、initive agreement to be acquired by Illumina.Uncertainty about the effect of the proposedacquisition on our customers,employees,partners and other parties may adversely affect our business.Our employees may experienceuncertainty about their roles or seniority following the acquisition.There can be n

183、o assurance that our employees,including key personnel,canbe retained,or that we will be able to attract and retain employees to the same extent that we have previously been able to.Any loss ordistraction of such employees could adversely affect our business and operations.In addition,we have divert

184、ed,and will continue to divert,significant management resources toward the completion of the acquisition,which could adversely affect our business and operations.Partieswith which we do business may experience uncertainty associated with the acquisition,including with respect to8 current or future b

185、usiness relationships with us.Uncertainty may cause customers to refrain from doing business with us,which could adverselyaffect our business,results of operations and financial condition.The parties must obtain certain regulatory approvals in order to complete the transactions contemplated by the M

186、erger Agreement;if suchapprovals are not obtained or are obtained with conditions,the acquisition may be prevented or delayed or the anticipated benefits of theacquisition may be reduced.Consummation of the acquisition by Illumina is conditioned upon,among other things,the absence of any law or orde

187、r prohibiting orrestraining the acquisition or any law making the consummation of the acquisition illegal and the expiration or termination of the waitingperiod(and any extensions thereof)applicable to the acquisition under the U.S.Hart-Scott-Rodino Antitrust Improvements Act of 1976,asamended(“HSR

188、Act”).We and Illumina have each received a request for additional information and documentary materials(commonly referredto as a“second request”)from the United State Federal Trade Commission(“FTC”)in connection with the Merger.The FTCs“second request”has the effect of extending the waiting period a

189、pplicable to the consummation of the Merger until the 30th day after substantial compliance byus and Illumina with the“second request,”unless the waiting period is extended voluntarily by the parties or terminated sooner by the FTC.Theparties have entered into a timing agreement with the FTC that ex

190、tends the waiting period of the“second request”to mid-2019.In the EU,the acquisition is not reviewable under Council Regulation(EC)No.139/2004.The transaction is a relevant mergersituation which will be notified to the UKs Competition and Markets Authority(CMA)under the Enterprise Act 2002,as amende

191、d by theEnterprise and Regulatory Reform Act 2013.At any time before or after the acquisition is consummated,any of the U.S.Department of Justice,the Federal Trade Commission,U.S.state attorneys general,or the CMA could take action under the antitrust laws in opposition to theacquisition,including s

192、eeking to enjoin completion of the acquisition,condition completion of the acquisition upon the divestiture of assets ofIllumina,us or their and our respective subsidiaries,or impose restrictions on Illuminas post-acquisition operations.Any such requirements orrestrictions may prevent or delay compl

193、etion of the acquisition or may reduce the anticipated benefits of the acquisition.No assurance can begiven that the required regulatory approvals will be obtained or that the required conditions to closing will be satisfied,and,even if all suchapprovals are obtained and the conditions are satisfied

194、,no assurance can be given as to the terms,conditions and timing of the approvals.Formore information about the effects of a failure to complete the acquisition,see the risk factor below entitled“The failure to complete theacquisition by Illumina could adversely affect our business.”The failure to c

195、omplete the acquisition by Illumina could adversely affect our business.Consummation of our acquisition by Illumina is subject to several conditions beyond our control that may prevent,delay,or otherwiseadversely affect its completion.If any of these conditions are not satisfied or waived,it is poss

196、ible that the acquisition will not be consummatedin the expected time frame(or at all)or that the definitive agreement may be terminated.If the proposed acquisition is not completed,the shareprice of our common stock may decrease to the extent that the current market price of our common stock reflec

197、ts an assumption that atransaction will be completed.In addition,under circumstances specified in the definitive agreement,we may be required to pay a terminationfee of$43 million to Illumina.Further,a failed transaction may result in negative publicity and a negative impression of us in the investm

198、entcommunity.Any disruption to our business resulting from the announcement and pendency of the transaction and from intensifyingcompetition from our competitors,including any adverse changes in our relationships with our customers,employees,partners and other parties,could continue or accelerate in

199、 the event of a failed transaction.There can be no assurance that our business,relationships with other parties,liquidity or financial condition will not be adversely affected,as compared to the condition prior to the announcement of the acquisition,if theacquisition is not consummated.While the acq

200、uisition by Illumina is pending,we are subject to business uncertainties and contractual restrictions that could harm ouroperations and the future of our business or result in a loss of employees.Pursuant to the terms of the Merger Agreement,we are subject to certain restrictions on the conduct of o

201、ur business.These restrictionsgenerally require us to conduct our businesses in the ordinary course,consistent with past practice,and subject us to a variety of specifiedlimitations,including the ability in certain cases to enter into material contracts,acquire or dispose of assets,incur indebtednes

202、s or incur capitalexpenditures,until the proposed merger becomes effective or the Merger Agreement terminates.These restrictions,which are standard for atransaction of this type,may inhibit our ability to take actions outside of the ordinary course of our business that are inconsistent with our past

203、practice but which we may consider advantageous and limit our ability to respond to future business opportunities and industry developmentsthat may arise during such period.The pendency of the acquisition may also divert managements attention and our resources from ongoingbusiness and operations.Our

204、 customers,employees,partners and other parties may have uncertainties about the effects of the acquisition.Inconnection with the acquisition,it is possible that some customers and other persons with whom we have a business relationship may delay ordefer certain business decisions or might decide to

205、 seek to terminate,change or renegotiate their relationship with us as a result of theacquisition.If any of these effects were to occur,it could materially and adversely impact our revenue,earnings,cash flows and other businessresults and our financial condition,as well as the market price of our co

206、mmon stock and our perceived acquisition value,regardless of whetherthe acquisition is completed.In addition,whether or not the9 acquisition is completed,while it is pending we will continue to incur costs,fees,expenses and charges related to the acquisition,which maymaterially and adversely affect

207、our financial condition.The Merger Agreement limits our ability to pursue alternatives to the acquisition.The Merger Agreement contains provisions that make it more difficult for us to enter into alternative transactions.The MergerAgreement contains certain provisions that restrict our ability to,am

208、ong other things,solicit,initiate or knowingly encourage or knowinglyfacilitate the submission of inquiries,proposals or offers relating to or that would reasonably be expected to lead to any acquisition proposalfrom a third party.The Merger Agreement also provides that our board of directors will n

209、ot change its recommendation that our stockholdersadopt the Merger Agreement and will not approve any agreement with respect to an acquisition proposal,subject to limited exceptions.In addition,upon adoption of the Merger Agreement by our stockholders,our right to terminate the Merger Agreement in r

210、esponse to asuperior proposal was eliminated.While we believe these provisions are reasonable,customary and not preclusive of other offers,the provisionsmight discourage a third party that has an interest in acquiring all or a significant part of us from considering or proposing such acquisition,eve

211、n if such party were prepared to pay consideration with a higher per-share value than the currently proposed merger consideration.Furthermore,the requirement to pay a termination fee under certain circumstances may result in a third party proposing to pay a lower per-shareprice to acquire us than it

212、 might otherwise have proposed to pay because of the added expense of the$43 million termination fee that maybecome payable by us in certain circumstances.Several lawsuits were filed and additional litigation may arise in connection with the acquisition by Illumina,which could be costly,divertmanage

213、ments attention and otherwise materially harm our business.We are aware of five lawsuits that were filed in connection with the merger agreement and the merger.Three putative class actioncomplaints,captioned Wang v.Pacific Biosciences of California,Inc.,et al.,No.3:18-cv-7450(N.D.Cal.),Morrison v.Pa

214、cific Biosciences ofCalifornia,Inc.,et al.,No.3:18-cv-7654(N.D.Cal.),and Speiser v.Pacific Biosciences of California,Inc.,et al.,No.3:19-cv-0072(N.D.Cal.),were filed in the United States District Court for the Northern District of California on December 11,2018,December 20,2018,and January 4,2019,re

215、spectively.A fourth putative class action complaint,captioned Rosenblatt v.Pacific Biosciences of California,Inc.,et al.,No.1:18-cv-2005(D.Del.)was filed in the United States District Court for the District of Delaware on December 18,2018.An individual complaint,captioned Washington v.Pacific Biosci

216、ences of California,Inc.,et al.,No.5:18-cv-7614(N.D.Cal.),was filed in the United States DistrictCourt for the Northern District of California on December 19,2018.These lawsuits asserted claims under Section 14(a)and Section 20(a)of theExchange Act in connection with the disclosures contained in the

217、 preliminary proxy statement that we filed with the SEC on December 5,2018,the definitive proxy statement that we filed with the SEC on December 18,2018,or both.The lawsuits named us and our directors as defendants.The complaints sought a variety of equitable and injunctive relief including,among ot

218、her things,enjoining the consummation of the mergerand awarding the plaintiffs costs and attorneys fees.While our management believed that the claims were without merit,we agreed to makesupplemental disclosures in exchange for plaintiffs agreement that the supplemental disclosures would moot their c

219、laims.The supplementaldisclosures were filed on Schedule 14A on January 18,2019.On January 29,2019,each plaintiff filed a voluntary dismissal of his or herlawsuit.Additional lawsuits may also be filed challenging the disclosures contained in the proxy statement and/or challenging other aspects ofthe

220、 acquisition by Illumina.Regardless of the outcome of the current or any future litigation related to the acquisition by Illumina,such litigation may be time-consuming and expensive and may distract our management from running the day-to-day operations of our business.The litigation costs anddiversi

221、on of managements attention and resources to address the claims and counterclaims in any litigation related to the acquisition byIllumina may materially adversely affect our business,financial condition and operating results.Litigation related to the acquisition may resultin negative publicity or an

222、 unfavorable impression of us,which could adversely affect the price of our common stock,impair our ability torecruit or retain employees,damage our relationships with our customers and suppliers,or otherwise materially harm our operations andfinancial performance.Unfavorable global economic or poli

223、tical conditions could adversely affect our business,financial condition or results of operations.General conditions in the global economy and in the global financial markets could adversely affect our results of operations,theoverall market for nucleic acid sequencing products may be particularly v

224、ulnerable to unfavorable economic conditions.A global financialcrisis or a global or regional political disruption could cause extreme volatility in the capital and credit markets.A severe or prolongedeconomic downturn or political disruption could result in a variety of risks to our business,includ

225、ing weakened demand for our lead productcandidates or any future product candidates,if approved,and our ability to raise additional capital when needed on acceptable terms,if at all.Aweak or declining economy or political disruption could also strain our manufacturers or suppliers,possibly resulting

226、 in supply disruption,orcause our customers to delay making payments for our services.Any of the foregoing could harm our business and we cannot anticipate all ofthe ways in which the political or economic climate and financial market conditions could adversely impact our business.10 We have limited

227、 experience as a commercial company and the commercialization and sales of our current or future products may beunsuccessful or less successful than anticipated.Our first commercial product launched in 2011 and we have had limited sales to date.As such,we have limited historical financial dataupon w

228、hich to base our projected revenue,planned operating expenses or upon which to evaluate our company and our commercialprospects.Furthermore,in September 2015,we launched the PacBio Sequel System,and concurrently began phasing out production of PacBioRS II instruments,and we are planning on introduci

229、ng the Sequel II System in 2019.Based on our limited experience in developing andmarketing our existing products and launching new products,we may not be able to effectively:manage the timeliness of our new product introductions,including the SMRT Cell 8M and Sequel II System,and the rate atwhich sa

230、les of our new products may cannibalize sales of our older products;drive adoption of our current and future products,including the Sequel II System;attract and retain customers for our products;provide appropriate levels of customer training and support for our products;implement an effective marke

231、ting strategy to promote awareness of our products;develop and implement an effective sales and distribution strategy for our current and future products;develop,manufacture and commercialize new products,including the new SMRT Cell 8M and Sequel II System we aredeveloping,or achieve an acceptable r

232、eturn on our manufacturing or research and development efforts and expenses;comply with regulatory requirements applicable to our products;anticipate and adapt to changes in our market;accommodate customer expectations and demands with respect to our products,increase product adoption by our existin

233、gcustomers or develop new customer relationships;grow our market share by marketing and selling our products to new and additional market segments;maintain and develop strategic relationships with vendors,manufacturers and other industry partners to acquire necessarymaterials for the production of,a

234、nd to develop,manufacture and commercialize,our existing or future products;adapt or scale our manufacturing activities to meet potential demand at a reasonable cost;avoid infringement and misappropriation of third-party intellectual property;obtain and maintain any necessary licenses to third-party

235、 intellectual property on commercially reasonable terms;obtain valid and enforceable patents that give us a competitive advantage or enforce existing patents;protect our proprietary technology;andattract,retain and motivate qualified personnel.The risks noted above,especially with respect to the mar

236、keting,sales,and commercialization of our products(including into themarkets that Roche would have addressed),may be heightened by the termination of our development,commercialization and licenseagreement with Roche,which became effective as of the first quarter of 2017.In addition,a high percentage

237、 of our expenses is and willcontinue to be fixed.Accordingly,if we do not generate revenue as and when anticipated,our losses may be greater than expected and ouroperating results will suffer.We have incurred losses to date,and we expect to continue to incur significant losses as we develop our busi

238、ness and may never achieveprofitability.We have incurred net losses since inception and we cannot be certain if or when we will produce sufficient revenue from our operationsto support our costs.While we achieved profitability for the quarter ended September 30,2015,this result was largely due to a

239、one-time gain onlease amendments.We have incurred net losses for all other fiscal periods,and,even if profitability is achieved in the future,we may not be ableto sustain profitability on a consistent basis.We expect to continue to incur substantial losses and negative cash flow from operations for

240、theforeseeable future.We are not cash flow positive and may not have sufficient cash to fund our current and planned operations.Our operations have consumed substantial amounts of cash since inception,and we expect to continue to incur substantial losses andnegative cash flow from operations for the

241、 foreseeable future.We believe that our growth will depend,in part,on our ability to fund ourcommercialization efforts and our efforts to develop new products,including the new SMRT Cell 8M and Sequel II System.Our existingresources may not allow us to conduct all of these activities that we believe

242、 would be beneficial for our future growth.As a result,we may needto raise additional funds through public or private debt or equity financing or alternative financing arrangements,which may includecollaborations or licensing arrangements.In the event that we enter into collaborations or licensing a

243、rrangements to raise capital,we may berequired to accept unfavorable terms.If we are unable to raise funds on favorable terms,or at all,we may have to reduce our cash burn rate andmay not be able to support our commercialization efforts,or to increase or maintain the level of our research and develo

244、pment activities.If weare unable to generate sufficient cash flows or to raise adequate funds to finance our forecasted expenditures,we may have to make significantchanges to our operations,including delaying or reducing the scope of or eliminating some or all of our development programs.We also may

245、have to reduce sales,marketing,engineering,customer support or other resources devoted to our11 existing or new products,or cease operations.Any of these actions could impede our ability to achieve our business objectives and couldmaterially harm our operating results.We have continued to experience

246、 losses and,if that trend continues,we may need to seek additional sources of financing for variouspurposes,including:expanding the commercialization of our products and launching new products,including the new SMRT Cell 8M and Sequel IISystem we are developing;funding our operations;andfurthering o

247、ur research and development.Additional funds may not be available on terms acceptable to us or at all,particularly in light of restrictions under our debt agreement.We have incurred and may further incur additional debt.Debt holders have rights senior to common stockholders to make claims on our ass

248、etsand the terms of our existing debt agreement restrict certain activities,including our ability to pay dividends on our common stock.We may notbe able to issue equity securities due to unacceptable terms and conditions to us in the capital markets.To the extent that we raise additionalfunds throug

249、h the sale of our common stock,continued downward fluctuations in our stock price could adversely affect such fundraising efforts.Furthermore,equity financings normally involve shares sold at a discount to the current market price,and fundraising through sales ofadditional shares of common stock or

250、other equity securities will have a dilutive effect on our existing investors.The shares may also be sold ata time when the market price for our common stock is low because we are in need of the funds,which will further dilute existing holders morethan if the market price for our common stock was hi

251、gher.If we are unable to successfully develop and timely manufacture our current and future products,including with respect to the Sequel System,the new SMRT Cell 8M and Sequel II System that we are developing and related products,our business may be adversely affected.In light of the highly complex

252、 technologies involved in our products,there can be no assurance that we will be able to manufactureand commercialize our current and future products on a timely basis or continue providing adequate support for our existing products.Thecommercial success of our products,including the Sequel System,d

253、epends on a number of factors,including performance and reliability of thesystem,our anticipating and effectively addressing customer preferences and demands,the success of our sales and marketing efforts,effectiveforecasting and management of product demand,purchase commitments and inventory levels

254、,effective management of manufacturing andsupply costs,and the quality of our products,including consumables such as SMRT Cells and reagents.Should we face delays in or discoverunexpected defects during the further development or manufacturing process of instruments or consumables related to our pro

255、ducts,includingwith respect to the new SMRT Cell 8M and Sequel II System we are developing,and including any delays or defects in software development orproduct functionality,the timing and success of the continued rollout and scaling of our products may be significantly impacted,which maymaterially

256、 and negatively impact our revenue and gross margin.The ability of our customers to successfully utilize our products will alsodepend on our ability to deliver high quality SMRT Cells and reagents,including with respect to the new SMRT Cell 8M we are developing.We have designed SMRT Cells and other

257、consumables specifically for the Sequel System,and we are developing,and may need to develop inthe future,other customized SMRT Cells and consumables for our future products,including the new SMRT Cell 8M we are developing for theSequel II System.We have transferred production of the Sequel System S

258、MRT Cells from a prototype chip vendor to a high-volumemanufacturer.Our production of the SMRT Cells for the Sequel System has been and may in the future be below desired levels,and we haveexperienced and may experience in the future manufacturing delays,product or quality defects,SMRT Cell variabil

259、ity,and other issues,including unanticipated delays and other issues in connection with our transition to the high-volume manufacturer.The performance of ourconsumables is critical to our customers successful utilization of our products,and any defects or performance issues with our consumableswould

260、 adversely affect our business.All of the foregoing could negatively impact our ability to sell our products or result in other materialadverse effects on our business,financial condition and results of operations.The development of our products is complex and costly.Problems in the design or qualit

261、y of our products may have a material andadverse effect on our brand,business,financial condition,and operating results,and could result in us losing our certifications from theInternational Organization for Standardization(“ISO”).If we were to lose ISO certification,then our customers might choose

262、not to purchaseproducts from us and this could adversely impact our ability to develop products approved for clinical uses.Unanticipated problems with ourproducts could divert substantial resources,which may impair our ability to support our new and existing products,and could substantiallyincrease

263、our costs.If we encounter development challenges or discover errors in our products late in our development cycle,we may be forced todelay product shipments or the scaling of manufacturing or supply.In particular,if the continued rollout of our current and future products,including with respect to t

264、he new SMRT Cell 8M and Sequel II System we are developing,is delayed or is not successful or less successful thananticipated,then we may not be able to achieve an acceptable return,if any,on our substantial research and development efforts,and ourbusiness may be materially and adversely affected.Th

265、e expenses or losses associated with delayed or unsuccessful product development or lackof market acceptance of our existing and new products,including the new SMRT Cell 8M and Sequel II System,could materially and adverselyaffect our business,financial condition and results of operations.12 Our res

266、earch and development efforts may not result in the benefits that we anticipate,and our failure to successfully market,sell,andcommercialize our current and future products could have a material adverse effect on our business,financial condition and results ofoperations.We have dedicated significant

267、 resources to developing our current products,including sequencing systems and consumables based onour proprietary SMRT sequencing technology and our Sequel System.We are also engaged in substantial and complex research anddevelopment efforts,which,if successful,may result in the introduction of new

268、 products in the future,including with respect to the new SMRTCell 8M and the Sequel II System we are developing.Our research and development efforts are complex and require us to incur substantialexpenses.We may not be able to develop,manufacture and commercialize new products,obtain regulatory app

269、roval if necessary,or achieve anacceptable return,if any,on our research and development efforts and expenses.Furthermore,we need to continue to expand our internalcapabilities or seek new partnerships or collaborations,or both,in order to successfully market,sell and commercialize our products in t

270、hemarkets we seek to reach.We must successfully manage new product introductions and transitions,including with respect to the new SMRT Cell 8M and Sequel IISystem we are developing,we may incur significant costs during these transitions,and they may not result in the benefits we anticipate.If our p

271、roducts and services fail to deliver the performance,scalability or results expected by our current and future customers,or arenot delivered on a timely basis,our reputation and credibility may suffer,our current and future sales and revenue may be materially harmed andour business may not succeed.F

272、or instance,if we are not able to realize the benefits we anticipate from the development and commercializationof the Sequel System or our future products,including with respect to the new SMRT Cell 8M and Sequel II System we are developing and alsothose future products that may be developed for cli

273、nical uses,it could have a material adverse effect on our business,financial condition andresults of operations.In addition,the introduction of future products,including with respect to the new SMRT Cell 8M and Sequel II System weare developing,has and may in the future lead to our limiting or ceasi

274、ng development of further enhancements to our existing products as wefocus our resources on new products,and has resulted and could in the future result in reduced marketplace acceptance and loss of sales of ourexisting products,materially adversely affecting our revenue and operating results.The in

275、troduction of new products has had and may in thefuture also have a negative impact on our revenue in the near-term as our current and future customers have delayed or cancelled and may in thefuture delay or cancel orders of existing products in anticipation of new products and we may also be pressu

276、red to decrease prices for ourexisting products.Further,we have experienced,and may in the future experience,difficulty in managing or forecasting customer reactions,purchasing decisions or transition requirements with respect to newly-launched products.We have incurred and may continue to incursign

277、ificant costs in completing the transitions,including costs of write-downs of our products,as current or future customers transition to newproducts.If we do not successfully manage these product transitions,including with respect to the new SMRT Cell 8M and Sequel II System weare developing,our busi

278、ness,reputation and financial condition may be materially and adversely affected.Our success is highly dependent on our ability to further penetrate the existing market for nucleic acid sequencing as well as the growth andexpansion of the market for our products.If our products fail to achieve and s

279、ustain sufficient market acceptance,we will not generateexpected revenue and our business may not succeed.Although the overall market for nucleic acid sequencing technology is well-established,the market for our Single Molecule,Real-Time(SMRT)Sequencing technology is relatively new and evolving.We c

280、annot be sure that our current or future products will gainacceptance in the marketplace at levels sufficient to support our costs.Our success depends,in part,on our ability to expand the overall marketfor nucleic acid sequencing to include new applications that are not practicable with other curren

281、t technologies and to introduce new productsthat capture a larger share of the growing overall sequencing market.To accomplish this,we must successfully commercialize,and continuedevelopment of,our proprietary SMRT Sequencing technology for use in a variety of life science and other applications,inc

282、luding uses byacademic,government and clinical laboratories,as well as pharmaceutical,diagnostic,biotechnology and agriculture companies,among others.For example,the sale and commercialization of the new SMRT Cell 8M and Sequel II System,and related products that we are developing,maynot be successf

283、ul.There can be no assurance that we will be successful in adding new products or securing additional customers for our current and futureproducts,including with respect to the new SMRT Cell 8M and Sequel II System we are developing.Our ability to further penetrate the existingmarket and any expansi

284、on of the market depends on a number of factors,including the cost,performance and perceived value associated withour products,as well as customers willingness to adopt a different approach to nucleic acid sequencing.Potential customers may have alreadymade significant investments in other sequencin

285、g technologies and may be unwilling to invest in new technologies.We have limitedexperience commercializing and selling products outside of the academic and research settings,and we cannot assure you that we cansuccessfully acquire additional customers in additional markets.Furthermore,we cannot gua

286、rantee that our products will be satisfactory topotential customers in the markets we seek to reach or that our products will perform in accordance with customer expectations.These markets are new and dynamic,and there can be no assurance that they will develop as quickly as we anticipate,that they

287、willreach their full potential or that they will be receptive to any of our products.As a result,we may be required to refocus our marketing efforts,and we may have to make changes to the specifications of our products to enhance our ability to enter particular markets more13 quickly.We may also nee

288、d to delay full-scale commercial deployment of new products as we develop them in order to perform quality controland early access user testing,including with respect to the new SMRT Cell 8M and Sequel II System we are developing.Even if we are able toimplement our technology successfully,we and/or

289、our sales and distribution partners may fail to achieve or sustain market acceptance of ourcurrent or future products across the full range of our intended life science and other applications.We need to continue to expand and updateour internal capabilities or to collaborate with other partners,or b

290、oth,in order to successfully expand sales of our products in the markets thatwe seek to reach,which we may be unable to do at the scale required to support our business.If the market for our products grows more slowly than anticipated,if we are unable to successfully scale or otherwise ensure suffic

291、ientmanufacturing capacity for new products to meet demand,if we are not able to successfully market and sell our products,if competitors developbetter or more cost-effective products,if our product launches and commercialization are not successful,or if we are unable to further grow ourcustomer bas

292、e or do not realize the growth with existing customers that we are expecting,our current and future sales and revenue would bematerially harmed and our business may not succeed.We rely on other companies for the manufacture of certain components and sub-assemblies and intend to outsource additional

293、sub-assembliesin the future.We may not be able to successfully scale the manufacturing process necessary to build and test multiple products on a fullcommercial basis,which could materially harm our business.Our products are complex and involve a large number of unique components,many of which requi

294、re precision in manufacturing.Thenature of our products requires customized components that are currently available only from a limited number of sources,and in some cases,single sources.We have chosen to source certain critical components from a single source,including suppliers for our SMRT Cells,

295、reagents andinstruments.Furthermore,we have transferred production of the SMRT Cells for our Sequel System from a prototype chip vendor to a high-volume manufacturer and we have experienced,and may in the future experience,unanticipated delays and other issues in connection with suchtransition.If we

296、 are required to purchase these components from alternative sources,it could take several months or longer to qualify thealternative sources.If we are unable to secure a sufficient supply of these product components on a timely basis,or if these components do notmeet our expectations or specificatio

297、ns for quality and functionality,our operations and manufacturing will be materially and adverselyaffected,we could be unable to meet customer demand and our business and results of operations may be materially and adversely affected.The operations of our third-party manufacturing partners and suppl

298、iers could be disrupted by conditions unrelated to our business oroperations or that are beyond our control,including but not limited to international trade restrictions.If our manufacturing partners or suppliersare unable or fail to fulfill their obligations to us for any reason,we may not be able

299、to manufacture our products and satisfy customer demand orour obligations under sales agreements in a timely manner,and our business could be harmed as a result.Our current manufacturing process ischaracterized by long lead times between the placement of orders for and delivery of our products.If we

300、 have received insufficient componentsto manufacture our products on a timely basis to meet customer demand,our sales and our gross margin may be adversely affected and ourbusiness could be materially harmed.If we are unable to reduce our manufacturing costs and establish and maintain reliable,high-

301、volumemanufacturing suppliers as we scale our operations,our business could be materially harmed.We may be unable to consistently manufacture our instruments and consumable kits,including SMRT Cells,to the necessary specifications orin quantities necessary to meet demand at an acceptable cost or at

302、an acceptable performance levelIn order to successfully generate revenue from our products,we need to supply our customers with products that meet theirexpectations for quality and functionality in accordance with established specifications.Our customers have experienced variability in theperformanc

303、e of our products.We have experienced and may continue to experience delays,quality issues or other difficulties leading tocustomer dissatisfaction with our products.Our production of SMRT Cells involves a long and complex manufacturing process,has been andmay in the future be below desired levels,a

304、nd we have experienced and may experience in the future manufacturing delays,product defects,variability in the performance of SMRT Cells and other products,inadequate reserves for inventory,or other issues.There is no assurance thatwe will be able to manufacture our products so that they consistent

305、ly achieve the product specifications and quality that our customers expect,including any products developed for clinical uses.Problems in the design or quality of our products,including low manufacturing yields ofSMRT Cells,may have a material adverse effect on our brand,business,financial conditio

306、n,and operating results,and could result is us losingour ISO certifications.If we were to lose our ISO certifications,then our customers might choose not to purchase products from us.There is alsono assurance that we will be able to increase manufacturing yields and decrease costs,or that we will be

307、 successful in forecasting customerdemand or manufacturing and supply costs.Furthermore,we may not be able to increase manufacturing to meet anticipated demand or mayexperience downtime in our manufacturing facilities.An inability to manufacture products and components that consistently meetspecific

308、ations,in necessary quantities and at commercially acceptable costs,will have a negative impact,and may have a material adverseeffect,on our business,financial condition and results of operations.Rapidly changing technology in life sciences and diagnostics could make our products obsolete unless we

309、continue to develop,manufactureand commercialize new and improved products and pursue new market opportunities.Our industry is characterized by rapid and significant technological changes,frequent new product introductions and enhancementsand evolving industry standards.Our future success depends on

310、 our ability to continually improve our products,to develop and introduce newproducts that address the evolving needs of our customers on a timely and cost-effective basis and to pursue new market14 opportunities.These new market opportunities may be outside the scope of our proven expertise or in a

311、reas where the market demand isunproven,and new products and services developed by us may not gain market acceptance or may not adequately perform in order to capturemarket share.Our inability to develop and introduce new products and to gain market acceptance of our existing and new products could

312、harmour future operating results.Unanticipated difficulties or delays in replacing existing products with new products or in commercializing ourexisting or new products in sufficient quantities and of acceptable quality to meet customer demand,including with respect to the new SMRTCell 8M and Sequel

313、 II System we are developing,could diminish future demand for our products and materially harm our future operatingresults.Increased market adoption of our products by customers may depend on the availability of sample preparation and informatics tools,some ofwhich may be developed by third parties.

314、Our commercial success may depend in part upon the development of sample preparation and software and informatics tools by thirdparties for use with our products.We cannot guarantee that third parties will develop tools that our current and future customers will find usefulwith our products,or that

315、customers will adopt such third-party tools on a timely basis or at all.A lack of complementary sample preparationand informatics tools,or delayed updates of such tools,may impede the adoption of our products and may materially and adversely impact ourbusiness.We operate in a highly competitive indu

316、stry and if we are not able to compete effectively,our business and operating results will likely beharmed.There are a significant number of companies offering nucleic acid sequencing products and/or services,including Illumina(with whomwe have entered into a definitive agreement to be acquired),The

317、rmo,ONT Ltd.,Roche,and Qiagen.Many of these companies currently havegreater name recognition,more substantial intellectual property portfolios,longer operating histories,significantly greater financial,technical,research and/or other resources,more experience in new product development,larger and mo

318、re established manufacturing capabilities andmarketing,sales and support functions,and/or more established distribution channels to deliver products to customers than we do.Thesecompanies may be able to respond more quickly and effectively than we can to new or changing opportunities,technologies,st

319、andards orcustomer requirements.In light of these advantages,even if our technology is more effective than the products or service offerings of these othercompanies,current and potential customers might purchase their products and/or services instead of our products.There are also several companies

320、that are in the process of developing or have already developed and commercialized new,competingor potentially competing technologies,products and/or services,including ONT Ltd.and its subsidiaries,against whom we have filedcomplaints for patent infringement in the U.S.District Court for the Distric

321、t of Delaware and,previously,with the U.S.International TradeCommission,in the High Court of England and Wales and in the District Court of Mannheim,Germany.ONT Ltd.previously filed claimsagainst us in the High Court of England and Wales and the District Court of Mannheim,Germany,also for patent inf

322、ringement,and itssubsidiary,ONT,Inc.,has filed counterclaims against us in the U.S.District Court for the District of Delaware seeking declaratory judgements ofnon-infringement,invalidity and unenforceability of the asserted patents,as well as antitrust,false advertising and unfair competitioncounte

323、rclaims that were subsequently dismissed by the Court.Roche is developing potentially competing sequencing products.Increasedcompetition may result in pricing pressures,which could harm our sales,profitability or market share.Our failure to further enhance our existingproducts and to introduce new p

324、roducts to compete effectively could materially and adversely affect our business,financial condition or resultsof operations.We may be unable to successfully increase sales of our current products or market and sell our future products.Our ability to achieve profitability depends on our ability to

325、attract customers for our current and future products,and we may beunable to effectively market or sell our products,or find appropriate partners to do so.To perform sales,marketing,distribution and customersupport functions successfully,we face a number of risks,including:our ability to attract,ret

326、ain and manage qualified sales,marketing and service personnel necessary to expand market acceptancefor our technologies;the performance and commercial availability expectations of our existing and potential customers with respect to new andexisting products;availability of potential sales and distr

327、ibution partners to sell our technologies,and our ability to attract and retain such sales anddistribution partners;the time and cost of maintaining and growing a specialized sales,marketing and service force for a particular application,whichmay be difficult to justify in light of the revenue gener

328、ated;andour sales,marketing and service force may be unable to execute successful commercial activities.We have enlisted and may continue to enlist third parties to assist with sales,distribution and customer support.There is no guaranteethat we will be successful in attracting desirable sales and d

329、istribution partners,that we will be able to enter into arrangements with suchpartners on terms favorable to us or that we will be able to retain such partners on a going-forward basis.If our sales and marketing efforts,orthose of any of our third-party sales and distribution partners,are not succes

330、sful,or our products do not perform in15 accordance with customer expectations,our technologies and products may not gain market acceptance,which could materially impact ourbusiness operations.Large purchases by a limited number of customers represent a significant portion of our revenue,and any los

331、s or delay of expected purchaseshas resulted,and in the future could result,in material quarter-to-quarter fluctuations of our revenue or otherwise adversely affect our resultsof operations.We receive a significant portion of our revenue from a limited number of customers.For example,for the year en

332、ded December 31,2017 and December 31,2018,one of our customers,Gene Company Limited,accounted for approximately 31%and 26%of our total revenue,respectively.Gene Company Limited is our distributor in China.Many of these customers make large purchases on a purchase-order basis ratherthan pursuant to l

333、ong-term contracts.As a consequence of the concentrated nature of our customer base and their purchasing behavior,ourquarterly revenue and results of operations have fluctuated,and may fluctuate in the future,from quarter to quarter and are difficult to estimate.For example,the cancellation of orders or acceleration or delay in anticipated product purchases or the acceptance of shipped products by