Pacific Biosciences of California, Inc. (PACB) Earnings Call Transcript & Summary

Todd Friedman, Director, Investor Relations.

All right. Good morning, everybody. Thank you for joining us at PacBio's first ever Investor Day. Thrilled to be here in person in New York City with you all, and welcome to everybody joining in remotely as well. I hope you all had a chance to look at our latest sequencers out in the foyer, Revio and Onso. If you haven't, they'll be here all day. So during a break or lunch, feel free to get a demo. So real quick, the agenda, packed day, we'll have our leadership talking through everything from our strategy, our innovation, our new products, the markets we serve and some financial information as well. And we'll have 2 Q&A sessions throughout the day. So plenty of time to ask questions. And at any point, feel free to use the QR code on your table to take a look at the agenda. And then real quick, flashing up our safe harbor forward-looking statement. We'll be making forward-looking statements. Please refer to our SEC filings for more information. So with that out of the way, let's get the day started. [Presentation]

Please welcome to the stage, Christian Henry, President and Chief Executive Officer.

Thank you. Boy, this is a great day for us. I see so many old friends, new friends. And I just want to say thank you for joining us at what I hope is a very informative and, quite frankly, fun day. This is a great moment in our history where we are at the precipice of shipping 2 major new products. And what we wanted to do was share some of that excitement with you and tell you a little bit more about who we are as a company and what we are trying to achieve. But before we begin, maybe I'll just give you 2 seconds on my background. I am Christian Henry, the CEO. I've been with the company since September of 2020. And before that, I was -- I've been a biotech executive for a long, long time in life science tools. I did retire and come back to PacBio. And the reason why I retired and came back and actually came back much to disintegrate of my wife, by the way, is that I think there's so much more biology to uncover with DNA and DNA sequencing. And I do believe that the tools that scientists have had over the last 2 decades, while they've been remarkable are insufficient to power the future. And what I believe is that PacBio's technologies and capabilities put us in a position to really provide the insights and the biological resolution to drive the utility of the genome forward and create value for all of us, not just us, but also our children and their children. So this is going to be a fun day. I'm going to run through a few key objectives. Hopefully, by the end of the day, you will feel that you've learned a little bit about really our strategy for addressing this multibillion opportunity. You'll understand our new technologies and why we think they're poised to be so successful in the market. We also want to showcase the team we've built. Part of building a great company is creating a great team, and I'm very fortunate to have built a fantastic team, which you'll see many of those members today. Please take the time during the breaks to mingle with them and get to know them because I do think they are the ones that are really powering this company. Also, we want to demonstrate that we do have the business plan, the strategies and the capabilities to create a highly profitable company and create shareholder value. I want to take just a quick second to introduce a couple of our Board members that are here as well. And so over here is Kathy Ordoñez and Marshall Mohr. So if you get a chance, we're very happy that they've been able to make the trip. Thank you for coming. Okay. Now there's 5 core themes that we're going to discuss. And one thing you'll find out about me is I like to talk about things in 3s and 5s. First of all, our strategy is intended to drive growth and profitability. We believe we also have differentiated products that allow us to take on all comers in the market, both emerging companies and the large incumbent in the market. We think our technologies will allow us to acquire more customers and drive our growth. We still believe the sequencing opportunity is effectively unbounded at this point. We are still in the early innings of leveraging genomics in biology, and we do believe that PacBio technologies and our strategy can play a major role in the future. We have the leadership team, as I've already talked about, to win. And finally, we do believe that we can achieve positive cash flows within the forecast horizon that we're talking about today. I think that's of the most consistent questions that I get from investors. And many of you, I'm sure, sitting out there going, well, what does the model look like? What are the numbers? I want to get to the answers. And so I'm going to start with the answer first and then we will spend the day talking about how will we achieve these numbers. And so these are our objectives. First, we believe through 2026 that we can grow between 40% and 50% in the CAGR or greater than $500 million of revenue. Now for those of you that do the math, 50% would be well over $500 million. But one of the things I always talk about with our teams is that the road to $1 billion of revenue is through $500 million. And so we decided to peg our 2026 performance to $500 million or more. And you can -- you don't see the equal sign so it really is greater than $500 million. We expect that we'll have the opportunity to significantly improve our gross margins from where they are today. And by improving those gross margins, we will drive to a strongly cash flow positive business. And we expect to become cash flow positive during 2026. And so that's our expectation. And of course, once we achieve cash flow positive, we don't expect to go back. So those are the key 3 metrics that I want you to be thinking about as we go through the day. Susan has a lot more detail, so I don't want to steal her thunder. But that -- I thought it would be important for you guys to calibrate what we think our opportunity looks like today. So let's step back for a second and think about where we are in the world of biology and how our technology can really change the state of the art, change the mindset of researchers and clinicians about the utility of the genome. So what if an oncologist could provide a reference grade genome to every single patient. What if researchers could build a Cell Atlas that represents all isoforms, fundamentally changing the way gene expression is thought of. What if you could sequence 1 billion or more, 1 kb reads in 1 run, what could researchers do with that information? Or what if you could get 5 ohms in 1 run. All of us probably realize that the world is becoming more multi-omic all of the time. And our expectation is that with our capabilities, we can actually look at the genome, the epigenome, chromatin, transcriptome and the metagenome, all in 1 run. That's completely different than the paraden that exist today. And our technology that is available today can enable all of this, and [indiscernible] will make it scaled and economic. At every presentation that I give, I start by talking about our mission. And the reason why I want to spend a minute or 2 here is I want to paint a picture for you of the framework of how we manage the company. When I joined the company, we needed to create something that would galvanize all of us to move in one direction. And I mean all stakeholders, whether that's employees, Board members, customers, investors, we needed to have a North Star from which all of our strategies could emanate, and our North Star is enabling the promise of genomics to better human health. We use that as the guiding principle from which we derive our strategies and which we make decisions. And so having that, we also needed a strong set of values to define how the company works together. And this gives you some insight into how we think as a company, how we expect to work together to create groundbreaking new products, to drive innovation and to do it in a way that's timely, customer-friendly and ultimately creating value for all of our shareholders. And so our 5 values, be curious, focus on innovation, delight our customers, take action, take risks, execution matters and most importantly, working together. These are hallmarks of how we interact at PacBio to create value. And what I want to talk about is the notion that in order to move fast as a company, you have to have a framework with a strong mission, strong values and a strong strategy, which I'll walk through. And if you have that 3, if you're an employee in the center, we can focus our employees on pushing decision-making down into the organization, which allows us to move faster, which allows us to inspire our employees, which then allows us to create great products. But without that framework, that employee may have a difficult time making a tough decision. And so that's why I start each conversation with this concept of, what is our North Star what do we believe in as a company and then what are our strategies because it allows our employees to make decisions more quickly at the point of where expertise really is, such that we can create great products and shareholder value. But who are we today? We are -- we were founded in 2000. So most of you know us at some level. We've been around for a very long time. We are publicly traded, of course, on NASDAQ. We have nearly 400-plus patents at this point, and we have more -- we have basically doubled the size of our organization by joining the company at 770 employees, a little more than that actually. We have 8 global offices around the world. So when you're thinking about evaluating sequencing companies, you do have to assess whether the company has scale to meet the customers where they are. And one of the things I'm really proud of is that we've created that scale just in the last 2 years. So just to kind of look at some of the time lines of -- in the history of the company, how did we get to today. The company started in 2000, as I said, and it took a decade to get the first products out. And then over successive years, the company has made improvements to its fundamental smart sequencing technology, which is our single molecule real-time sequencing technology. And for those of you that don't know exactly what we do. What we do -- and when I talk to my 10-year-old about it, what we do is we take a semiconductor, and we put single molecules of DNA on that semiconductor, and we take movies of them. So that we can see what's happening, see the sequencing in real time. When you think about that kind of in the abstract sort of way, that's pretty cool. But when you think about it in the scale of what we're truly doing today, it's actually mind blowing. With Revio, we're taking 100 million movies simultaneously processing them and getting the highly accurate sequence the basis as well as the epigenetic data. That's pretty astounding when you think about what that really is. In 2020, I joined the confidence we talked about. And over the course of the last couple of years, we've been working on technology, and we've also been working on building an ecosystem because a sequencer onto itself is valuable, but it's not nearly as valuable as building an ecosystem around your products because those ecosystems are moats that provide competitive advantage. They're also enablers to enable new applications, new sources of revenue and new ways of working inside of the community. And so we've spent a lot of time in 2021 doing that. And then in 2022, we've been focusing on launching the ability to call [indiscernible] on Sequel IIe and that will obviously carry over into Revio. And of course, 3 weeks ago -- 3 weeks ago today, actually, we announced the launch of Revio and our new product, Onso as well. So we've been pretty busy over the last couple of years, setting the stage really for this day. So what are the core strategic drivers that are going to propel us forward. We'll spend a couple of minutes on those so that you can get a sense of what the core strategies are on how we are going to take these incredible part -- incredible products and drive revenue growth into the future. First, it's obvious to us and apparent that we see human health applications driving a significant percentage of our growth over the next decade. So today, we see a sequencing market of -- that's about $7 billion. And this is maybe a little bit different than some of our peers and what they say the sequencing market is. But what we're trying to represent is the actual dollars that are being spent today. The money flowing through the universe, so to speak, through sequencing applications. The biggest component of that is human genomics that 2 -- we estimate to be almost $2.5 billion and oncology, nearly $3 billion. And so those are the 2 biggest areas. We think those are the 2 biggest growth drivers over the next decade as well. And in this time horizon, we actually expect the entire market to double to $14 billion a year with human genomics driving that growth as well as oncology. And now you could see the oncology growth so much you're starting to -- you'll probably start to cut to the chase and why acquiring a short-read technology into that space was so important. We'll carry that through -- that theme through the rest of the day. But the bottom line is we have -- we participate in big markets that are growing quickly and the products that we have serve the 2 biggest portions of that growing market. The second core strategy or kind of philosophy or way that we think is that -- we think that multi-omics data will become more and more and more important over this time, right? And now our base time rise has been here is 2026, but actually did over the next decade, you're going to see the integration of multi-omics data in many different areas. And so whether that's genomics or epigenetics as we've been talking about or even things like proteomics and metabolomics, more and more clinicians will leverage these different omics data to create better decisions with respect to diagnosis and treatment of disease. With this as a core philosophy or a fundamental strategic driver, we're creating strategies to create, in fact, a multi-omic company. And I've talked about this a lot. -- is my vision for the company is to create a multi-technology company with multiple technology stacks with integration over the top of them as you can kind of think about in a decision support software or decision support capability. This includes long reads, short reads, other omics technologies that we will look at over time. But the objective is to have multiple technologies in the portfolio, so that we can leverage the best characteristics of those technologies in -- to serve our customers. And then within a technology stack, of course, we would like to have multiple products so that we can reach customers where they are, whether that's throughput or budget or both and also that we can create pathways so customers can start at our technology maybe at a starting point and then move up as their throughput requirements dictate for them. And so we see this as an incredible strategic advantage over the next several years as we become more multi-omic for several reasons. One, there's like if you look at long and short reads, for example, there's incredible synergy between the long read portfolio and the short read portfolio, not just from a technology perspective, but from a cross-selling perspective. And we're already seeing that with our customers asking for quotes that would carry both Onso and Revio. They are realizing they can get best-of-breed technologies from one company for prices that are actually more affordable than many other competitors out there. And so we see creating a multi-omics portfolio, an important part of our strategy to penetrate and create value in these markets. Leveraging these technologies gives us the ability to access the entire market. As I said a second ago, we expect the sequencing market to be double the size it is in 2026 at $14 billion. We think the long read market is going to grow the fastest in terms of CAGR. We are expecting it to grow north of 40% per year, with revenues well over $1 billion in the market. We think that short-read and other sequencing technologies will continue to grow in a mid-teens sort of way, but off of a much larger base, of course. And so that's still a very significant revenue opportunity for the company if we can bring highly differentiated products to the market. And hopefully, we'll convince you of that today. We also believe that a global scaled business model is essential to success in this market. The life sciences market is truly a global market. Researchers collaborate all around the world. And to be successful, you have to meet them where they are. You cannot participate in the Chinese market from the United States, for example. It sounds -- that's a pretty obvious statement. But the reality is if you're an emerging company, you don't have the infrastructure to meet the demands of the global marketplace. And from PacBio, given that we've been commercial since 2011, we have, with a global scale, the global manufacturing and supply chain capability as well as the ability to innovate. And the combination of all those gives us the ability to accelerate revenue growth and serve these customers and create competitive advantage. Finally, I'm going to emphasize this again and again and again. In order to win against competitors with larger market share, you have to bring new technologies and differentiated ideas to our customers. And it's a combination of not only differentiated products, but I'd say differentiated ideas. And what I mean by that is that you have to be a company that is willing to work with your customers. And one of our goals is to become the easiest company to work with in life sciences. And I do believe competitive advantage is created by the team that you have and how you actually work with your customers every single day. And so not only do you need the products that are highly differentiated and desired by these customers, but you also need to work with them in such a way that they feel inspired to be using your technology. They feel inspired to come talk to you at conferences because you're collaborating with them. And I think one of the things I hope that you'll see today is that our team is an inspiring team. And they want to work with customers. Jonas at lunchtime will go -- will really dive into the science behind why we are winning. And just his infectious enthusiasm for the science is compelling when we go and talk to all of our customers around the world. So that's kind of our high-level strategy. Now let's just talk for a couple of minutes about what happens in 2023. First, one of our core objectives has to be driving adoption of Revio. One of the core strategies that I came to the company with is how do we accelerate the Sequel IIe installed base as quickly as possible, even at the expense of some gross margin so that we can get those instruments in so that people can be using long-read technology and get used to the data and used to seeing the power of HiFi. And then from there, once we launch new products, that would be an incredibly fertile ground to go after and drive quick -- rapid adoption of the new products. Well, today, we have nearly 500 Sequel IIe's in our installed base. And so those are 500 places where I do believe Revio is immediately applicable, and we've already seen an overwhelming response from our existing customers as well as an incredible response for our new customers. Jeff Eidel, our CCO, He'll talk a little bit about that today. So that's got to be front and center of what we do, accelerate, accelerate, accelerate. We also have to continue focusing on Onso, our short-read platform and demonstrating how this accuracy matters. And Mark will talk a little bit about Onso a little bit later. And Jen will talk about the markets around Onso a little bit. And we think that it is a product that is going to transform the way people think about needle in a haystack application. And so our second priority here has to be driving that notion and getting that product to market. But that's not all. We're not stopping with Revio and Onso. This is just the beginning. In fact, we have development programs in flight right now inside the company, developing ultra-high throughput sequencers and that are -- that will make Revio look like mid-throughput, quite frankly. We have lower throughput long-read sequencers in development that will make long-read sequencing accessible to everyone at high accuracy and at HiFi -- with HiFi capability. And so the -- so driving those R&D programs forward so that we can rapidly launch products and build out this portfolio is essential to our strategy. And so Mark will talk a little bit about our product road map and where we're going with respect to that. We also know we need to get on that path to becoming a sustainable company. We've been very fortunate to raise a significant amount of capital over the last couple of years. And we've been aggressive in deployment of that capital to get to this day so that we could have products that would be fundamentally better than others in the market and make us much more competitive so that we could accelerate our growth. And now is the time to continue investing in the new products, but really start driving and getting leverage out of that -- those investments we've made. And so thinking about leveraging our infrastructure so that we generate -- we get to that positive cash flow is critical. And finally, expanding our partnerships, continuing to show why HiFi is just fundamentally better. Why long -- why short-read whole genomes, quite frankly, are insufficient for the biology and the resolution you need to truly understand the genome. And continuing with partnerships, such as our partnership with Children's Mercy of Kansas City, to continually demonstrate the power of long-read sequencing and in that case, in rare and undiagnosed disease, that still has to be a front and center message because now we have the product, we have applications and we have the marketplace that's inspired to use those products, but we need to keep pushing so that we accelerate into the future. So that's our -- those are the core elements of next year. Well, you'll hear me talking about quite a bit. Last thing I want to kind of cover before we -- I start moving on to everyone else is how does our -- how does the strategy get executed in practice? I find when I talk to employees and talk to other stakeholders, that it's not enough to just say, well, here are our strategies. You have to show people the context of how those strategies get unpacked over time and what are the implications. And I use this chart, and as I said, I'd like to do things in 3s. The first part of my strategy from joining the company was scaling the company. The company did not have a commercial presence sufficient to drive this incredible technology. And so we started -- when I joined the company in 2020 with creating scale, we started demonstrating the capabilities of HiFi and driving new product development. We had to get to Revio in order to make the company successful. And so that was really the first part of my strategy, scaling. The second part, we're starting to enter into in 2023, and that's the acceleration phase. And for those of you that have been part of companies that have gone from $100 million in revenue to $1 billion, I think most executives will say that is the most fun part of being in a company because you're seeing the adoption, you're seeing, you're delighting your customers and you're accelerating, and we're hitting that right now. And I think that's really this acceleration phase. The next 3 years, I call it, is really all about that. And I think it's going to be a lot of fun. Well you're going to see us continue to drive elasticity in this period, consumable growth, you're going to see us drive deeper into the clinic than we ever have in clinical translational research. And you'll see us over time start to really demonstrate to you how PacBio's technologies become clinical grade and get in and Mike Goloubef in his presentation and operations, will talk about how we're already setting the foundations to be a truly clinical company. And then finally, once you get through these first 2 phases, for now, I'm calling it durability or durable growth, where we have a consistent growth story. We have expanding profits and cash flows, and we've created a sustainable company that is really helping to change the world. And so that's how the strategies that I've outlined really manifest themselves over the next several years. Of course, we can't -- I can't do this without an incredible team. We have a team with deep experience, and you can see the level of understanding of this industry. And I think that's what separates us from many others is that we have a deep understanding and appreciation of the industry, the customer relationships, the investor relationships so that we can create a company that has significant competitive advantage creates moats and drives growth. And so I'm really proud to be working with all of these people. We've also built a Board -- We also have a Board of Directors that has deep tenure and site at PacBio. So they can help understand the -- not only the strategic past, but how that path relates to the future, and so I'm really excited to be working with this Board. And as I said, we have a couple of our Board members here this morning. Finally, we've created a Scientific Advisory Board, Euan Ashley, Jody Puglisi and Jay Shendure. And we had our first SAB meeting in the last couple of weeks. And what's amazing is that I -- we wanted to put a SAB in place so that they could help us see over the horizon. And I think what was really amazing to me was the level of expertise these folks have in all of the areas that we're interested in and how -- particularly you look at in -- Euan. Euan's focus on how do we get our technology deeper into the clinic right now. Jody's focused on kind of thinking about the technology in new ways. And Jay speaks for himself. He has so much deep expertise in the application area. And the combination has created some really spirited discussion, and we're going to leverage them as we drive our programs forward. So very excited about that. So now what I'd like to do is thank everyone, and we're going to have David Miller join us here in a second to start talking about the products.

Please welcome David Miller, Vice President of Product Marketing to the stage.

Well, thank you, everyone, for coming today. It's a true pleasure to be here and speak to you about our new long-read portfolio. As mentioned, my name is David Miller. I lead our product marketing group. And I wanted to give you a little background as well as to how I ended up at PacBio. I joined the beginning of last year and I had spent about a decade running NGS labs, a similar sort of amount of time running high-throughput marketing or product marketing at a short-read sequencing company. And after all that time of working in labs and looking at the technologies and looking at the data, I joined because I fundamentally believe that PacBio is the future of NGS. The technology that's coming out, the sequencing data that is being created is truly where the industry is going. And so it's amazing to be part of that. What I wanted to do in this session was really go a little deeper on some of the things that Christian touched on. So firstly, I will go into our new Revio system and give you some background around our smart technology and HiFi and why the industry, I think, is so excited and what's bringing so many of us together to work on this amazing platform. I'll also talk a little bit about how we think about the ecosystem, why we think that's differentiated, how it's helping us get this platform out and really scale up and why it's going to continue to drive growth in our space. And then finally, I'll touch a little bit on why I think that Revio and HiFi especially are differentiated relative to some of the other long-read technologies that are out there and hopefully give you a sense of how we think about the success that is really going to be enabled by Revio. So with that, I wanted to go and start, like I said, coming back to sort of the fundamentals of what we do and how the technology works because as Christian said, it's truly amazing to believe that we can watch 100 million single molecules of DNA replicate in real time. And that is really our single molecule real-time technology, our smart technology, if you will. But it all happens on our semiconductor chips that contain our zero-mode waveguides. Within those, that's where all the sequencing is happening. That's where we're able to attach a single polymerase and what's that single polymerase extend DNA in real time and really capture that sequence information. And so when you hear us talking about SMRT Cells and ZMWs, that is fundamentally where the sequencing is happening. And so a little bit of context, the on-market product today, the Sequel IIe that uses about 8 million ZMWs on an individual run. So watching 8 million molecules at a time. As we said, with Revio, we're scaling that up to 100 million. So that's 4 chips with 25 million ZMWs. And I'll go into those details shortly and why that's so important and fundamentally enabling for our customers. But within those ZMWs what is actually happening is that we are watching that polymerase extend and incorporate nucleotides that have a dye on them. And each of those dyes, we can detect and determine whether it's an A, a C, a G or T. And that's sort of shown in that middle panel there. But because we're doing this in real time, because we're watching this extend, what we're able to do is actually capture the time it takes for that nucleoside to incorporate and how long between those incorporations. And that's how we capture the epigenetic information, adding that extra arm to the data. And so when you think and hear about other people doing methylation, they're leveraging the same signal. We're using 2 different ways to capture both the sequence and the methylation information. We think that's really important and gives us an advantage when it comes to determining those 2 arms simultaneously. The final piece to the puzzle is really the HiFi technology. And so that is fundamentally our understanding of leveraging the informatics and the fact that we are sequencing circular molecules because we're going around and around that circle multiple times. We can take multiple looks at that DNA molecule, that original single DNA molecule and start to really understand what is going on there. And so that factor, coupled with a highly random error rate that we have, allows us to publish out all the areas. And that gets us to long and highly accurate read, something that no one else can really do. And that is what has captured the imagination of so much of our genomics community. So what can you do with HiFi? Well, the first thing to recognize is that it gives you a read length that's about 100x longer than a standard short-read sequencer. So where a short-read sequencer is generating sort of 150 base pairs of data, we're generating 15,000 to 20,000 base pairs of data. Couple that with the fact that, as I said, we're able to get to incredible accuracies. And so on the right, what you can see is a study from the precisionFDA that came out early last year, really showing that HiFi in green gives you the highest data quality. So now you've got a technology that gives you a hundredfold longer read length than the short read technologies and 10x the accuracy of the other long-read technologies. And it's this combination that is enabled so much. But I think it's important to know that HiFi is a lot more than just long and accurate sequencing. This is where it starts to become really important when we look at the other attributes of the technology. So we get incredible evenness of coverage. There's no GC-bias in our sequencing data. It allows us to sequence all throughout the genome and really detect all the variation that exists. That includes the methylation as I spoke about. So an incredibly important arm that we're starting to add and everyone gets off a PacBio sequencing run for free. Yes, we have that extraordinary accuracy, so you can really understand what's going on. And those long reads really help you do things like allele resolution phasing. And so now you can really start to get a full picture of the genomics and start to understand all the variants that are occurring in that sample. And so what we're showing here in the IGV plot, for those that are familiar on the left, is really looking at 3 different technologies: short reads, HiFi and noisy long reads. And each of these, you can see the trade-offs that are being made relative to HiFi. So in the short-read space, you're seeing those dropouts, those regions of high-GC that you can't sequence through. And importantly, in this diagram, those regions have variance. So you're missing variation there right off the bat. In the long read -- the noisy long read down the bottom, you're seeing all the errors coming through that's preventing you from calling variants accurately and truly understanding what's going on or getting that phasing information that's so important. And if you look at HiFi in the middle, you've got that incredibly clean, accurate data. You've got evenness of coverage. You've got all the variants called and you phase the region, this gene STRC into the 2 haplotypes. So this really, to me, summarizes why HiFi is so exciting and why so many people are interested in what we're doing with it. And it's data like this that has driven so many great studies to come out in recent years. And certainly, Jonas will go into much greater detail about the science over lunch. But I just thought if we think about genomes, transcriptomes and epigenomes, there's 3 terminal papers each demonstrating a first that came out in the last year or so. On the genome front, HiFi was right there when we sequenced the first telomere-to-telomere assemblies. So HiFi underpinned the ability to really get those complete view of the genome. On the transcriptome front, our colleagues at Broad will talk a little bit about some of the advantages we're seeing in the transcriptome space. We're the first to publish a single cell isoform catalog using HiFi. And then finally, with our new epigenetic technology, our colleagues at Children's Mercy were really able to use the technology to look at phage methylome and truly understand what is going on in some of the rare and undiagnosed genetic disease cases they have. So HiFi has captured everyone's imagination. And while we've had a decade of bringing products to market, as Christian said, and really scaling them up, we've gone from the original RS, we've increased throughput 10,000-fold we've increased read length over 100-fold, but the 2 things people kept asking for were, how can I get higher throughput for HiFi and how can you improve the sample economics. And I'm excited to say that that's exactly what Revio does. Revio gives us 15-fold increase sort of Sequel IIe and ASHI is in an era of the $1,000 HiFi genome. So you're getting all those benefits of epigenetics and phasing for $1,000 and Jen will do a really amazing job of walking through why that is so valuable and our community is telling us, this is something that they truly believe is going to change genomics. I think though it's important to note that the Sequel IIe platform remains on market. It is still a fantastic product and people will continue to use it for key applications. We've already seen folks express interest in keeping their Sequel IIe's for running things like AAV, microbial genomics, targeted resequencing. There is a long list of applications where the Sequel IIe remains incredibly powerful. And so that idea that we now have a multiproduct portfolio is truly exciting for us as we head out into the market this year. So let's go a little deeper on Revio. It's an exciting and amazing product, and hopefully, everyone's had a chance to see it out in the foyer and actually go hands on. But as we said, this product is really designed to deliver HiFi at scale. To us, you're in a new era of sample economics when it comes to HiFi sequencing. And so every Revio run is capable of generating 100 million ZMW of sequencing data. So watching, as we said, 100 million single molecules extend in real time. We're doing that in 24 hours. It gives us enormous benefits when it comes to lab operations and really achieving that 15-fold throughput increase that we mentioned relative to the Sequel IIe. And importantly, each one is putting out about 360 gigabases of HiFi data. So 4 whole human genomes at 30x coverage every 24 hours. So really delivering the scale that folks are looking for on this platform. But it's not just the scale. We wanted to build an incredible product that's really going to enable people to take advantage of it. So yes, we have that scale of 1,300 genomes per year driven by 25 million ZMW SMRT Cells, 4 independent stages that I'll talk about at a 24-hour cycle time, but it was important for us to make sure that we delivered a platform that was easy to use. It's one thing to have the capability to do something but being able to actually make it happen in real life in the lab is incredible important, especially as someone who's spent a decade running labs. So we've reduced the number of consumables people need to interact with and touch to load a sequencing run. We've implemented what we call a load and advanced capability. So for the first time on our platforms, you can come up while it is sequencing open the door and put on the next sequencing around, really getting to continuous operation, again, really improving lab operations. And for folks that have heard, we've actually removed nitrogen something that we've used on our systems for the past decade. That is no longer required and really opening up ease of installation into a number of labs. We also thought about the affordability beyond just the consumable costs. So we've made the loading as simple as possible. So your hands on time, your labor costs are down to just a minute per run. And we've decreased the file size that comes off the system. So all your computational costs have decreased. And importantly, just like on the Sequel IIe, all the compute you need to generate HiFi reads with methylation is on board. So we scaled the compute about 20-fold relative to the Sequel IIe remains. And so let me go into that in a bit more detail because I'm incredibly proud of what the team was able to achieve in getting so much into the same footprint as the Sequel IIe. So as I said, we've scaled the throughput or the performance of the compute about 20-fold relative to Sequel IIe and therefore about 40-fold relative to the original Sequel II. This is the first platform where we've been able to implement GPUs on instrument. We're taking advantage of the latest NVIDIA GPUs, and that is really powering what we've partnered with Google Health on deep consensus. It's deep consensus that is helping us with our HiFi regeneration. And as you can see in the middle plot, it's even improving the data quality relative to Sequel IIe. So by partnering with Google, which we announced at the beginning of the year at JPMorgan, we've now been able to move that software on instrument, reduce the run time down from days to hours and have it all happen on the instrument seamless to the user to get that optimized dam out at the end. Smaller file sizes to move around, smaller files to keep. So all in all, it makes for an incredible user experience to get to that do that data that they really want to read the HiFi reads. And so we really believe that Revio will be transformational for HiFi sequencing. The ability to sequence 1,300 genomes per year, the ability to get more reads out of every SMRT Cell, to run multiple cells in a single time. All of this is coming together to build a product that I think the community is incredibly excited about. And I think the numbers that the team will walk through will speak to just how excited they've been. I think the quote down the bottom, though, captures it incredibly well, someone who actually worked on the GAIIx to have someone say that this is the most important sequence or to launch since the GAIIx is incredibly powerful. So Brian Krueger, Vice President at Everly Health really believes that Revio is going to change the game when it comes to next-generation sequencing. So I wanted to go a little deeper on the 4 stages that we have on the system and how customers can use it. As we said, this is the first time we've enabled a feature like this on a PacBio system. And I think if you think about the flexibility it brings, it really will start to open up some exciting applications for folks. So one of those big markets we spoke about was oncology. And so you could imagine if you really wanted to understand the tumor of a patient you could, on one cell sequence, the normal genome, understand what the baseline is, understand their inherited risk. Then you could sequence on a couple of cells to their tumor, really understand somatic variation, see what's driving that cancer. And then finally, with our MAS-Seq kit that I'll talk about at the end, we can look at all the isoforms that are coming through in that tumor and understand the functional impact of it. And so in one run on Revio, you can get a complete genome, epigenome and transcriptome profile of a cancer sample as well as the patient's normal sample in 24 hours, which is pretty amazing. The data though, I think, speaks for itself was still generating that incredibly high quality, high accuracy, HiFi data. And so we have done runs and published some of these on our website showing the HG002 pedigree, so you can go in and dig in. Customers are already doing this, showing that there's no compromise moving from Sequel IIe to Revio. If anything, like I said, we're seeing slightly better performance on the new platform. Importantly, though, we want to make sure that the platform is still going to work for all those amazing applications that we've had over the years that have been real strength to PacBio. So the ability to sequence not only humans but also plants and animals. And so on this run, we actually included a combination of European mistletoe and we're able to get the same great performance out. So for customers that run core labs, work in mix samples or even have large research institutes, you can really look in both the human, the nonhuman space. So continuing to hold up that amazing pedigree that PacBio has of enabling science. But in the human space, it is incredibly important because we believe this is the platform that will unlock HiFi genomes. And so when we go and compare, as I said, we're actually seeing slightly better performance in some cases, relative to what we were doing in the precisionFDA challenge. So you can see on the right that our accuracies for both SVs and INDELs are slightly improved. And this is coming out of the gate. We think there's some opportunities for us to continue to work on the variant calling algorithms and push this further. And then on the right, you can see that the methylation that we just launched at the beginning of the year carries through and works just as well on Revio as well. So all the features and benefits that people love about HiFi but now with the scale and the price they were chasing all along. So as you said, it's one thing to build a fantastic sequencer, but we really want to make sure that we have a workflow in an ecosystem that supports its use. And so again, this is really important to me. And so the way that we think about this is really we're going to focus our development efforts around sort of the core of the workflow, the sequencing, some of the library prep, the on-instrument analysis. That's where we're going to invest and we're going to start to look at partnering both upstream and downstream to build out workflows to enable further applications and really drive growth in high-side sequencing. So we have a number of partners upstream that are focused on bringing automation to platform, allowing people to scale new workflows, new applications like targeted resequencing I'll talk about. And then on the downstream, we've partnered with folks like Google and Centeon to make sure that the variant calling algorithms are there to support digging into the data and extracting the most valuable information from it. All of this is designed to make sure that we have an increasing number of applications that we support on the platform. And so when it comes to those partners, as I said, we've partnered with folks like Hamilton Upfront, not only on our extractions with the Circulomics products that we acquired last year, but also on the library preps and instrument set up. So that is fully automated now. You can really run the instruments at scale. We've partnered with folks like Twist to bring targeted resequencing to the platform, just announced recently as a fully supported workflow, looking at sort of the 400 or so genes that aren't available in short reads or don't sequence well with short reads. And also looking at things that people really care about, like pharmacogenomics and HLA. All of that is available through targeted resequencing products with Twist. And then on the back end, really working with Google, not only on the deep consensus, but also on deep variant, so that you can really call all the variants coming out of the platform, make it as seamless and easy as possible and then start thinking how do we take that to the cloud and deploy these workflows. So this ecosystem we're starting to build, and we've been spending the last 2 years building, I think, really differentiates us and helps get the platform up and running as quickly as possible, knowing that we now have 15-fold the throughput of what we were offering last year. But the question we keep getting is, well, how does that compare to other long-read technologies in the space. And so I want to sort of give our perspective on where Revio sits relative to on-market products. And so Revio is certainly changing the game when it comes to how we compare to other technologies. And the most obvious comparison that we get is to high throughput nanopore sequencing. And so what you'll see is that with Revio across the board, there's a number of key areas that we're going to actually exceed what you're able to do on a nanopore sequence. So firstly, the price -- importantly, the price per genome is actually lower on revenue than it is on a high throughput nanopore sequencer. That read quality that we spoke about, all those benefits of HiFi, that's an order of magnitude better than it is on nanopore. You're getting that full complete view, able to call SNPs, INDELs and SVs, all off one run as well as the methylation and you're doing it in 24 hours. And so while it all comes down to about 1,300 genomes per year, the fact of the matter is that because of the workflow, because of all the investments we've made in simplifying and streamlining and building out that ecosystem, that 1,300 number is readily achievable to all labs. Something that I think we hear from many nanopore users is challenging to get to. So we're really excited for what Revio is going to offer relative to nanopore. And we've already seen amazing interest from a number of folks that haven't previously been invested in PacBio. The other technology that keeps coming up is the synthetic long reads or CLR, as it's called. And I think we need to be clear that from everything we understand and what we've heard, this is synthetic. The quote that came out at ASHG and in GenomeWeb, really said what we are doing when we have a long read, we have a number of short reads with marks and we're merging them together using those marks. That is the definition of a synthetic long read. And so they are taking short reads and merging them. And the way they seem to be doing that is by adding marks or errors into those reads so that they can reassemble them. And what that means is that you need to over sequence to get around those areas and to polish them out. And so the numbers that we're seeing is 5 to 7 fold. So it means that you're a synthetic long-read genome is probably somewhere in the order of $1,400 to $4,200 per sample. So again, more expensive than Revio. It means that you still can't get access because it's amplified to certain regions of the genome and your read length is even shorter. So you're not going to cover some of those genes that you really want end-to-end with phasing. You have a more complex workflow. You need to use informatics to do all of this. So on a number of fronts, these synthetic applications are really not going to deliver what a true native long read can do. Importantly, there's no data out there that we've been able to get access to, no peer-reviewed publications. And as I said, Jonas is going to walk through some of the 9,000 publications we have demonstrating the value of HiFi and PacBio sequencing. The final thing I'll say on this one is that those synthetic long rates seem to be limited in the applications that they take on. And so one thing that we're excited about, and we also launched at ASHG was the new MAS-Seq kit, the 10x Chromium 3 prime single cell kit is able to now be sequenced on PacBio, generating full-length single-cell isoforms. And so this is one of those applications that you can do with native long reads and with this new kit that you can't do with synthetic. When we look at this, what we hear from customers is the amount of excitement they get from truly understanding the biology of looking at isoforms, not just gene expression. And so you can see the quotes from customers there already using it. It's a game changer. We don't know enough about isoforms. This is going to allow us to do and uncover that diversity. My dream is to do single cell spatial transcriptomics with long reads and now I can. We are incredibly excited about this kit, not only because of what it enables, but because how we got here. This is a kit that we partnered with Broad on. It came out of a publication, a homebrew method and through partnership, we were able to improve it. So relative to the method that was published, we're now generating sort of 100 million reads, 100 million individual isoform reads off a Revio chip. So about a 5x increase in what the homebrew method was able to do, absolutely impressive and truly amazing and really something that we're seeing a lot of interest in. And so I thought I'd start to wrap up here in transition because this is one of those applications that we really think is going to move from short reads to long reads and really fuel a lot of the growth in Revio. It's clear that short reads cannot sequence the whole transcripts in single cell. All you're looking at is that 3 prime and getting a view of the gene expression, not the transcriptome. And so as we look at this quote from a neurology PI at a major research institute. To them, it's clear that in the next few years, long-read sequencing will be the de facto standard in transcriptomic research. We get such a comprehensive view of the gene regulation. It's already enabling us to uncover novel mechanisms that are associated with developmental disorders in disease. And so we really believe that it's actually the isoforms that are driving so much in the transcriptome or not just the gains. And so this is the way that we can look at that. And one of those areas that we really think will transition, as I said. But to close, I would just say that we understand, and obviously, we acquired Omniome to look at short reads because we do believe there are areas where short-read sequencing is the right tool for the job. A lot of the oncology research, looking at liquid biopsy, those are the areas where we really think that short-read sequencing will be the go-to technology. But what's important is that you need high levels of accuracy, and that's why we settled on Omniome. And so with that, I'm going to transition over and introduce Omniome. Thank you.

Please welcome to the stage Chief Operating Officer, Mark Van Oene.

Thanks for joining us today. I really appreciate all your time here. And Dave, thanks for that presentation. You get me so fired up when you talked about what we can do with Revio and does remind me why I joined PacBio. Yes, I want to build a company. I love building organizations. I've been on that ride with Christian from $100 million to $1 billion to $3 billion. And it was way more fun, that $100 million to $1 billion. And so with that in the backdrop of wanting to grow the company and then knowing what this technology in long reads could do with scale and affordability, I had to be a part of it. And Revio is the combination of that vision because I fundamentally believe that a whole human genome should be done with HiFi. You should not accept a short read genome without structural variation, without methylation without really understanding the impact of tandem repeats and phasing. And so fundamentally, the limitations were scale and throughput. And Dave, thanks for reminding what scale and throughput is going to do for us. But that doesn't mean the short read shouldn't also be accurate. And so when looking at the short-read market, we found a chemistry in this SBB chemistry that was completely differentiated from anything I've seen in close to 15 years. And we had to be a part of that accuracy and see how we can bring that to market to change some more paradigms for sequencing and address the entirety of the opportunity ahead of us. And so I'm going to talk a little bit this morning about Onso and some of the accuracy that we're seeing, I'll share a little bit more data on how we see that playing out in some oncology applications. And then I'll give a little bit more about our longer-term road map because as mentioned earlier today, Revio and Onso's launched next year are just the beginning of how we revolutionize our long-read opportunity and our short-read opportunity going forward over the next several years of the horizon. And so we talk about accuracy, and it should be a part of everything that's being done in development -- but for the last decade, there's been very little improvement in accuracy in short reads, which is why this SBB chemistry caught our attention. And what we're highlighting here is for you to think about the strategy of us having both technologies. None of these markets are best served by any one particular technology, but this combination of short and long reads with accuracy and scale and affordability, lets us really think about how we can enter short-read markets as they transition to long reads or support long-reach markets with the combination of short- and long-read data types. And so great examples, Dave highlighted how HiFi sequencing and complex disease research is primarily always going to be a long-read application going forward now that scale and affordability is there. But things like cancer is much more suited for a short-read technology if you think about early detection or monitoring of residual disease because the biology of cancer is very low frequency events, which requires a lot of depth of sequencing. And the samples and the essence of samples is typically liquid biopsy in which the DNA fragments are chopped up and relatively short, and so it's not ideally suited for long reads. And so you think of it the size of some of these market opportunities and how we can best serve those with the technology, this combination lets us play very differently. It also lets us enter into complex disease research where people are still doing panels and exomes and things that short reads are better for as those markets transition, and around the world, those will transition to different rates. But as those markets transition from targeted short-read panels to affordable long-read genomes with all the extra information they're going to get. And so this combination, we do believe will help us drive more Revio success as well as more Onso success because of the way we can support these customers. So if you dig into Onso a little bit more specifically, and I do hope you guys get a chance to look at it outside. This is a mid-throughput sequencer. So we're launching it with something around 500 million clusters and a couple of different kits. We see applications like liquid biopsy where most DNA fragrances are 180, 190 base pairs long. Now we do see application for single end 200 base pair read kits. We also think of applications like 2x100 reads, a lot of exomes today are 2x75. And so a 2x100 kit is very attractive for people that are doing targeted approaches with short reads. And then traditionally, people use paradigm 150s. And so we're going to have this combination of read links and kits available to our customers. on that launch. And the differentiator is it's no longer 80% or 85% Q30, right? We're going to be coming in with a spec at 90% Q40 and have confidence that we're going to be able to deliver on that accuracy of an order of magnitude improvement. And as Dave mentioned, not just for the long-read sequencer, it's also really important that we have an ecosystem around our short-read sequencer. And so we've built up the partnerships. We've built up the kit structures. We're going to enable people to take their workflows in their library preps and adapt those to get onto our own so sequencer. And so that entire ecosystem is a really important part of what we're also building out for the short-read platform. And as we said a few weeks ago, we are still on track. We continue to be on track to have first customer ship in the first half of 2023. And as we finalize some of the pricing in and around our regions, and we do expect them to be priced where mid-throughput sequencers, price the reagents. We'll start taking orders for the platform in the beginning of the year. And I will say early feedback we launched this with a bundle on the instrument. So Revio and Onso bundle for $849,000, much more interest in that than I even expected. And it's that combination of technologies for these researchers and the core labs to think about how they can use accuracy and differentiated technologies at a very affordable price for the 2 platforms to go and drive their research and discoveries forward. So a lot of the questions have been around the accuracy. And some people will say that accuracy doesn't really matter that much. And I just fundamentally disagree. I don't think the community has had access to Q40 and Q50 data to really understand what they can benefit from by this level of sensitivity. And so I'm going to walk through an experiment we've done and I apologize for those of you that this is going to be a little bit too technical. We're getting into the technical section of the morning here for people between Jen and myself. But we'll try to keep it fun for you. So this is an experiment we did and this is a SeraCare circulating tumor DNA sample. It's an industry standard. It's a great way to prove technologies and compare technologies. And we've run this with paraden 100 reads, and we worked with Agilent on this. And so Agilent has a comprehensive cancer panel that's an enrichment panel that we could use to look at a variety of cancer genes to see what sort of frequency of variation can we go and detect. And so if you start to look at the data, what we're comparing here in magenta, go figure, is the SBB data that we generated on Onso and in orange is not to be named SBS set of data. And you can see this is really looking at, at what sensitivity can you detect the expected variant percentages. And so a good spot to just anchor on is around here at around 0.1%, 90% of the time, we can detect that. This is using equal coverage. So this is a 6,000-fold coverage for SBB and 6,000-fold coverage for SBS. And so we're about 90% sensitivity at 0.1% frequency, and we continue to be able to go lower than that and still pick up these rare variants. And so that's great. But what does that really mean when you're starting to look to keep the data, does that sensitivity matter? And does that accuracy really make a difference? And this is the same experience. And now we're just looking at one of those IGF or IGV plots. I mean you can see that for the most part, these are Ts. And you would expect that. You're looking for that rare cancer variant that exists in this sample at a very low frequency of 0.1%. And so you start to see at the top there, and we've blown it up. that there are some different nucleotides called on the SBS data. And the easiest way to look is at the counts. And so you can see that there were 3 As, there were 9 Cs and there were 5 Gs. And for the most part, it was wild-type T, which you'd expect. So as a research you're looking at that, you're trying to figure out what happened? Is that an A, C or G, I've detected a variation? The reality is that because of the mismatch error rate on SBS, you really don't know. And this is that same SBB data from that sample in that same region, there were 0 As, 6 Cs and 0 Gs. So that sensitivity makes a difference, and it gives you the confidence that you now know -- what that variant was in this NRAS gene that's causing the cancer at a very low frequency. And so what the community is doing is they're trying to come up with different ways to overcome the mismatch error rate on SBS sequencing. And so they're using what they call unique molecular indices. And so we thought it would be more appropriate then to think about how would the community use this to overcome the sensitivity challenges. And so now we've done 6,000-fold coverage with SBB, no UMIs. We're just looking at our native SBS chemistry and 24,000-fold coverage on SBS. And so you've got about a fourfold extra cost to get to that coverage. And if you look at the data here, and again, this is a different gene we're looking at. You can see that on the SBB, there's 3,272 Cs and nothing else. And on the SBS, you've got mixed in there 11As and 4Gs and 3 Ts. So is there a variant there or not. Does this patient have cancer or not. You wouldn't know. And so even doing 4x more sequencing with using UMIs, and the complexities of the library prep and deconvoluting that, you still don't know the answer. Now you have to go and investigate because there may be a variant there. In fact, there's not. This is a perfectly wild-type sample, and there should be nothing else detected there, which is what we've identified. So these average plots can be misleading when you're an actual scientists looking at counts at these very, very low levels of sensitivity. And so this accuracy is going to matter. It's going to cost people a lot more to oversample to try to make up for it. and they're still not going to have the answers that they truly need in this market. So we feel really good about where we stand now with differentiated long and short-read technologies. As Dave went through in some detail, the scale and the throughput limitations on PacBio have been overcome. $1,000 clinical genome is the genome that will be adopted going forward for clinical applications. And we have a huge opportunity to drive into transcriptomics and epigenetics in ways that we didn't have 2 years ago. And Onso is to be proven, right? We see the evidence we're getting -- gaining confidence in what that accuracy is going to do, and we will see what the uptake of that is. But it's really important for us to support the customers with these 2 platforms. But we can't stop here, and it's really important for us to meet the customers where they are. Christian talks about how we have to always be just passionate about the customers. And not every customer wants exactly what we're delivering with Revio. And not every customer wants the mid-throughput version of an SBB sequencer. And so this is a graph and don't try to interpret the schematics. That's what our SMRT Cells actually look like. And as you can see, over time, they've become much more integrated SMRT Cells as we include optics and continue to push the density. But the point of this is for you to really to look at where we are in our road map of SMRT Cell development with Revio. We just made a huge leap from the Sequel IIe going from 8 million ZMWs to Revio with 25 million ZMWs. But we're still all on 8-inch or what they call 200-millimeter fabs. And that 8-inch wafer technology is still years behind where that semiconductor industry is. They've all moved on to the 12-inch, 300-millimeter wafer technology. And what Revio does and the big change we've done here is we've now moved to this backside illumination. And that's really important because that's what the 300-millimeter industry is now built upon. It gets the light source closer to our polymerases. It reduces our crosstalk inter noise, and it's going to let us go and further push on that pixel density for ZMWs. So that we can go beyond that 25 million. Huge leap forward for us. Revio is going to be critical for us to go and improve to the world what you can do at scale and affordability, but it's not where we're going to stop. We talked a lot about the Invitae collaboration a couple of years ago and how we're working on the N+1 chip. And that's what I'm indicating here with that ultra-high throughput schematic. So we're moving now to the 300-millimeter wafers, maintaining backside of illumination, putting in some different stacked components to that so that we can further improve that density and drive cost. And if you think about the cost profile and the margin profile changing over the next 3 to 4 years, going to 300-millimeter fabs is a really important component of that. These are both gets away from sole supplier, but these are ways for us to think about manufacturing with different providers at a more affordable cost because that's where the semiconductor world has moved. And so we're really excited about the progress we're making on this next even higher density SMRT Cell and continue to push to get into that platform that will enable us to do tens of thousands of genomes per year not hundreds or thousands of gene homes a year, but tens of thousands of genomes a year. And so within the timeline that Susan is going to walk you through, we will have Revio and we will have this ultra-high throughput sequencer. We also think it's really important to make long reads and HiFi sequencing accessible. And so it's not always just pushing to the high output, some of the batching effects and challenges people get into are real. And so you don't always want to just push to the highest possible throughput, lowest cost per gigabase. You also need to have things that are accessible to drive utilization of HiFi entry into HiFi technologies and expansion beyond that as the demand grows and through the different throughput levels of the system. And so we did announce a partnership with Berry Genomics, which is really built around how do you make a smaller footprint, low CapEx long-read sequencer, really important for things like transcriptomics, targeted DNA panels, microbiology applications, people don't always want to spend the $779,000 to get into higher throughput, lower cost things. It helps us segment the customers. It helps us become more global, and it's a very high priority project. And so going from Revio to bench top, I will say, is an easier thing than going from Revio to a higher throughput. So in the same time horizon, we will also be launching this partnership with Berry Genomics and getting into that benchtop long-read market. Now in Onso, that accuracy matters, and I don't think of it as $500 million reads. If it at least requires 4x more sequencing on SBS, think of that mentally as closer to 2 billion reads right? Because that's how much more sequencing that they need to do. And so I think of it as a mid-throughput, but a really high-end mid-throughput sequencer as it is. But let's face it. A lot of these different needle in haystack applications are really sequencing greedy. Some people will sequence 50,000, 60,000, 70,000-fold coverage, not 6,000 or 10,000. We had a great talk from Max, from Stanford last week. He's pushing on how does he get his error rates down to one in a million, not to one in a hundred thousand. And so really thinking about what that sensitivity is going to be meaningful for in picking up residual disease sooner, and Jen will talk you through some of that application. But we do need to push also into higher-density flow cells for COGS as well as for throughput and for market opportunity. And so also within this time frame, expect us to expand our short read SBB platform into higher throughput technologies and applications for enablement of those. We really do feel like we're setting ourselves up for a wonderful ride. It's going to be fun this path to greater than $500 million is where I enjoy being. But I want to remind you of some of the different market opportunities we have. Jen is going to go through great details, but human genomics, I do believe is where we're going to win with HiFi. And oncology is where I believe we're going to get some great beachheads and start to prove out the value of our SBB chemistry. Now neither of these are solely long read or short read. In oncology, transcriptomic is going to matter. RNA variation matters. Isoforms definitely matter. They're looking at less than half of the transcription today short reads. And so that oncology market that is big and fast growing is going to continue to be a focus for us on both technologies. I truly believe that things should be done in a completely unbiased fashion. Hypothesis free science is the science that wins. We're enabling that with genomics and transcriptomics. We're also enabling that now with microbiology applications. You don't have to just do 16S sequencing anymore. You can look at what that metagenomic information really is. And in plant and animal, I don't think it's restricted to de novo assembly of your rare species or organism or plant. More and more, you're seeing the genotyping world move from a raise to sequencing. These genotyping by sequencing applications and a big driver of our partnership with Corteva is where both long reads will help with all of the polypoid, but where the accuracy of long reads and the accuracy of the SBB are going to help them with genotyping by sequencing because you require much less depth, if you have confidence in that genotype call that you're calling. And so look for us to continue to also push in plant animal. We talk about better in human health. Part of that is supply chain of food. It is feeding the world. It is making sure we're for you infectious diseases and surveillance. And so just because we talk about better in human health, I don't want you to think that we're leaving the plant and animal and microbial world behind we're not. I mean on some of these new emerging technologies, AAV has been a great new thought around how we can use longer reads to look at the [indiscernible] and some of the different therapeutics. But what excites me is decentralizing HiFi data and decentralizing SBB. So that the brilliant scientists around the world can tell us what great new applications and methods they've come up with. This MAS-Seq collaboration with the Broad is a great example of that. We can start to think about transitioning gene expression to transcriptomes. It require some help from them. Somebody will come up with that next great use of HiFi, that next great use of SBB, and we're going to be ready there to partner and to catch them and be the best partners for the scientific community that we can be. With that, I'm going to turn it over to Jen, and thank you for your time.

Good morning, everybody. It is so exciting to be here in New York City and be here live with you all to share the exciting time in our space and particularly here at PacBio. I have the pleasure this morning in my section to share with you more details about the multibillion-dollar market opportunity that PacBio is going after. But before I launch into the slides, if you'll indulge me for just a minute, I'd like to share a little bit about my own story about how I came to be here at PacBio and I am so excited to be part of this organization. So I'm a geneticist by training. I've been in this space for a couple of decades now and have had the opportunity to see the incredible impact that technology has had on this space. It's always fascinating me, how genes, how genetic information and multi-omic information now plays a role in who we are as individuals that makes this all different also plays an incredibly important role in susceptibility to disease. And so really understanding teasing apart that puzzle has fascinated me from the beginning. But every major milestone in this field has been fueled by a technology revolution. 20 years ago, we saw that with the commercialization of micro rays, and what was uncovered, what was discovered with the use of that technology. About 10 years ago, we really saw short read sequencing come to the forefront, opened up tremendous insights into biology, and it's been a wild ride over the last 10 years. But we are at the inflection point for this entire industry. What is going to drive that inflection? It's going to come on 2 fronts. You've heard about long-read sequencing and the amount of information that is captured in long read, highly accurate, native sequencing is just off the charts. And we'll talk a little bit about that in this presentation. The second front that's going to catapult this industry into sort of the next step change is breaking through accuracy barriers. So with Onso, with SBB chemistries, finally, researchers and entrepreneurs have the tools in their toolbox to break through what's been limiting them with SBS chemistry. So it is an incredibly exciting time. It's an exciting time here at PacBio. It's an exciting time in our industry. And we're so thankful you decide to spend your morning learning about us in our space today. So thank you. All right. So let's dive into the markets. Well, I have 2 jobs to do this morning. Number one is to talk about our market. Christian already shared the punchline to it for you, but we will explore that in more depth, the segments of that market and what those drivers are. And part 2 of my mission up here is to explain to you and help you understand how PacBio is seeking to play in those markets and how we're going to win. So Christian already shared this with you. This is our sizing of the market. Now you probably heard other organizations. There's many ways to size of market. For us, the way we approached it is by looking at publicly available information from all of the major players in the space. We looked at their public statements about their growth trajectories over this time horizon. We access commercially available market reports, and we leverage the collective wisdom of our leadership team. So you saw when Christian put up our leadership team that almost all of us, many of us have decades of experience looking at genomic technologies. And all of that collective input is how we got to our $7 billion closing out 2022 this year. Now the growth rate for the industry as a whole is reasonably healthy. We have it pegged at about 18% CAGR over this time horizon, closing out 2026 at about $14 billion. So healthy growth across the board. The way we think about segments here at PacBio is we have 5 that we focus on: human genomics, oncology, plant and animal, microbiology and infectious disease, and then, quite frankly, a catch-all bucket, which we call emerging. Over this time horizon, we see growth, healthy growth, double-digit growth in every one of these market segments. But the real take-home story, the headliner story is in human biomedical research, which is the way we've segmented the market, that's human genomics and oncology, primarily. We see those market segments really taking off over this time period. And we'll talk a little bit about why in the coming slides. Now PacBio's growth story is a very similar story. Our growth story is primarily fueled by human genomic applications and oncology applications as well. We'll start with human genomics. So today, our revenue is about -- our revenue from this market segment is about 40% of our overall revenues. Over this time horizon, we anticipate very healthy growth at about a 50% CAGR over -- from now until 2026. We're starting this journey at less than 5% market share in this segment. We expect to grow to somewhere less than about 10% market share over this time horizon. Our oncology story is a little bit different. So we are at the starting line in oncology. Oncology represents less than 10% of our revenues currently. And I think it's fair to say that we are a massive player in the oncology space. Over this time horizon, we anticipate very healthy growth at about 75% CAGR out to 2026. Our starting line is less than 1% market share. And even with that very aggressive growth, we're only at sub 5%, low single digits market share by the 2026 time period. For me, the most striking piece of this particular side is that despite aggressive growth, despite our models that have us penetrating in key markets, even as we exit 2026, we are barely scratching the surface of what is this genomics revolution. So the amount of headroom beyond this time horizon is substantial, and we're excited for the next 4 years, but we're even more excited about the long-term play as well. So the take-home message is that PacBio's growth over the next 4 years is going to be fueled primarily by taking market share in key applications in the 2 markets we just described. So whole human genome sequencing, RNA analysis and targeted sequencing in both the human genomics space as well as the oncology space. So for whole human genomes, whether it's in the rare disease context or the complex disease contexts, PopGen or cohorts, clinical or research, honestly, it doesn't matter in this time period. Fundamentally, PacBio whole genome sequencing delivers more value for money. And you've started to see that story emerge in Christian's talk, Dave's talk, Mark's talk. And now again in mine, now scalable on Revio, so accessible. The economics work out and the throughput is there to catalyze this entire market to sort of the next major step change. The future of RNA sequencing is isoform sequencing, whether it's in single cell or bulk tissue whether it's in oncology or human genomics research, it is essential for truly starting to understand the functional implications of all of these variants that researchers have been studying for decades now. It has increasing utility in a clinical setting, primarily in rare disease for our story, and we'll show feedback from customers that basically paint the picture of why would anybody do short-read RNA sequencing, again, once they can get that full isoform information. And then targeted sequencing. So targeted sequencing is a big bucket of activities. Many use cases across many markets. For us, our story is really twofold. It's leveraging SBB and the accuracy that it brings to the table in the context of oncology applications primarily needle in a haystack use cases like liquid biopsy, but also other markets as well where that exquisite sensitivity is so important. And then the second part to our targeted story is on germline panels. So germline panel as a relatively cost-effective easy entry point for more and more customers to embrace HiFi technology, to address their research question and to go after some of their clinically challenging genes. The other point I'll make before we move on is that each one of these markets by themselves in 2026 is a multibillion dollar market. Our market share, again, is low single digits at best in each one of these today. And we have aggressive growth targets, but as we exit '26, again, we are barely scratching the surface of our market opportunity. So let's focus on whole human genomes. Well, what drives the market in this time period, 4 things. The first thing is expansion of clinical genomes. Expansion of clinical genomes for rare disease and increasingly so in routine genetic disease, more general genetic disease diagnoses. The second major driver is consolidation of legacy molecular technology on to the genome backbone. Why would you go through 5 or 6 different orthogonal technologies to try to get to an answer when you can knock it all out in one shot in one genome. The third driver, simply is just improved tools, improved workflows, improved analysis solutions, more understanding of the data, making genome sequencing more accessible to a larger swath of customers. And the fourth major driver for genomes over this time horizon is the conversion of these large population or cohort research projects, biobanks, et cetera. now to start doing their analysis off of a genome backbone. No longer do they really need to make that choice? Do I go with a couple of hundred dollar microarray? Or do I start to move my analysis onto genomes and get much more information? And so the conversion of those projects into genomes over this time horizon is something we also expect to fuel growth in genomes. So what does that look like? In our analysis, we pegged the market for genomes at about $1 billion today that equates to close to 1 million individual genomes being done, and PacBio's market share today is approximately 1% by volume. What we see over this time horizon again is a healthy growth rate of genomes and money being spent on genomes to the tune of about 5 million to 7 million samples being done by 2026. PacBio's market share at that time by volume, approximately 5% and the CAGR that you see in terms of money being spent growing at 50% to 60% overall. Now that's short-read genomes primarily, there will still be a lot of short-read genomes done in this time horizon. But the interest in growth story and the growth story that's incredibly important to PacBio is the growth of long-read genomes over this time horizon. We estimate about 120% to 130% CAGR by revenue across -- by dollars spent on genomes in the whole genome space for PacBio over this time horizon. So we are outpacing the market. Customers are starting to preferentially choose HiFi as their genome platform. Well, you'll ask the question why. Why is the customer going to choose HiFi, over a couple of hundred dollars short-read genome. Well, the answer is value for money. Not all genomes are created equal. Now gigabase is not a gigabase. It's not a gigabase when you really are looking for the answer and you need to get that answer. You don't want to waste your time with certainly in a clinical context, but in a research context, too. Why waste your time with something that's going to give you a half answer or a quarter answer. PacBio is delivering the new class of genomes and the new class of genomic data. The graphic on the right is meant to illustrate that point. So short-read genomes, they are great at looking at SNPs and small indels and they've been doing it now for a decade. HiFi can do that too, but we can do a whole lot more. And so stacking up the value, large indels, getting your haplotype and phasing information, getting methylation, getting structural variation, all in one shot all in one go, so that you miss nothing incredibly valuable, incredibly important. And as I was saying before, really ushering in that step change for the entire community. Now the story here is 2 parts, there is a clinical part and there's a research part. On the clinical part, we'll start with rare disease. Rare disease was the tip-of-the-spear for going into clinical genomes for short-read sequencing. It is for long-read sequencing, too. So there's a very clear market need. There's a very clear genetic value component here. And for those of you that have been in this space or have heard about rare disease, rare diseases, in fact, is not all that rare. It's about 30 million Americans suffer from a rare disease, somewhere between 300 and 400 individuals globally suffer from a rare disease. So collectively, it's not all that rare. But what we've seen from all the work that's been done, all of the all of the exome and now genome studies that are coming online, all done at short-read sequencing is that the diagnostic yield for these patients is plateauing at about 50%. So 1 out of 2 children that come in seeking a diagnosis walks away without a diagnosis today. It's great for the one that didn't get a diagnosis. It's good for their family, for closure to move on, but that's 50% of the population that's still searching for answers. And that's just not acceptable, not -- especially not acceptable when there's an alternative that can deliver more. So what we've seen with some of our partners in this space, and there was a paper that came out earlier this year from Cohen et al from Children's Mercy Hospital that basically started to show the increased diagnostic yield, the increased clinical power of a HiFi genome in their clinic. What they showed is that they detected 4x more coding structural variation, leveraging high-5 genomes. And that information translated to over 13% increased diagnostic yield in patients that previously had been sequenced on shore sequencing, but still walked away with no diagnosis. Now at least for that 13% of those patients, they were able to have some information that could help them in their journey going forward. Now Children's Mercy in Kansas City is not the only place that's starting -- starting to see this potential and is seeking for answers for those 50% of patients that they're trying to serve and have not been able to serve with short-read sequencing. Around the world, leading children's research centers, leading academic hospitals, leading children's hospitals have started to come to us. We've started to work with them more deeply to bring technology, to bring the HiFi technology, in particular, to bear on some of their more challenging cases. So rather than have a dozen centers around the world, reinvent the wheel over and over again, PacBio has partnered with these organizations and established a consortium of these like-minded forward-thinking pediatric centers to bring the power of HiFi more rapidly accelerate the technology to have impact in their clinics. And that's from things like sharing best practices, setting standards for the community and eventually sharing data. So the interpretation of genomes becomes easier and more accessible. Another thing about Revio -- Revio in particular and the HiFi technology is that it alleviates one of the, I would say, more insidious pain points for clinical lab. So especially in the acute setting, you've got a sick kid who's come in and needs answers fast. You've got a family that's tearing their hair out, trying to understand what's going on. It is not okay to sit on that sample for weeks, while you aggregate dozens, hundreds, even thousands of samples. So that you can get the best economics on your sequencing run. That's the decision that clinical labs have to face today. Do I run this? Do I get answers fast? Do I get back to that patient or that physician that's banging on my door? Or do I try to get the best cost economics by batching as many samples as I can on my flow cell? With Revio is $1,000 per genome whether you run one proband and try to get -- run the sample that you have in hand today, whether you've got a Trio, mom-dad and kid or you've got 4 pro brands, every single genome no matter how you slice it, no matter what your study to design is $1,000. So it eliminates that need to choose for the clinical lab director, for the clinical lab sort of workflow, do I batch and wait? Or do I move fast and deliver the best service to my customers? Now the alternative on a short-read platform probably is somewhere around the order of $1,300-ish, maybe all the way up to $4,200 or $5,200. It really has to do with is that lab willing to burn that entire flow cell to get an answer for that child quickly? Or are they going to wait and batch? And even with batching on the lower flow cells, it's still above a $1000 per genome. So ultimately, from a clinical lab workflow perspective, from an economics perspective, there's benefits here as well. So we talked a little bit about the rare disease use case. We've talked about sort of the acute use case in a pediatric setting. What about more generic -- genomically informed life, a genomically informed medical record. That's the future. That's, I think, where we all in this industry believe the space is going. But how do we get there? Well, it's about building value. It's about building insights. It's about building information across more and more variant classes, more and more information that you can extract from the genome. Now this graph here is meant to show that -- it's not just SNPs and indels. Yes, that's an important part. And there's been a tremendous amount of work done in that space by previous technologies, by microarrays, by short-read sequencing, but that's only part of the story. When you start to stack up the component parts actually drive disease and drive health and drive each of us to be different. It's structural variation. It's the dark regions of the genome. It's understanding phasing. Did you get that copy of the chromosome from your mom? Or did you get that copy of the chromosome from your dad? It makes a difference. And epigenetics. All of this stacks up to add more and more value to understanding who we are as individuals. And in the disease setting, what our response to therapy might be or what our prognosis is. Lining that all up now, PacBio delivers all of those classes of variation with confidence, highest accuracy, the most information possible for a genome. Alternatively, short-read genomes. They'll give you good SNPs and indels, moderate structural variation. Yes, you can detect some. You will get some phasing, but mediocre, you will absolutely not get the dark regions, you will not get methylation. Now -- as we've all heard, and as Dave pointed out, there's some organizations that are turning to synthetic using their short-read technology to try to stitch together synthetic long reads. Well, we don't know what those are going to look like. I have question marks here because the truth is nobody has actually seen the data. No customers have used those kits in their own hands. So jury is still out, but you definitely won't be getting methylation. You definitely won't be getting dark regions because those short reads that are being stitched together suffer from the same biases that the original short reads did. There's no getting around that. So when we start to stack up the value, when we start to stack up the information content and we actually look at the prices, there's a tremendous amount of value for money. And again, why waste your time getting half answers. But don't take my word for it. This is Brian Krueger. So he's been in the industry for a while. He likes to post on social media. I'm sure many of you have seen some of his many, many posts. He was at LabCorp for about 6 years as a Senior Director of some of their technology development there, recently moved to Everly Health in a leadership role. And I'm not going to read you this entire LinkedIn post, but draw your eye to the bottom part of this post, if you can see it from where you're sitting. Brian basically starts to do the math for us. He's stacking up a list of all of the different orthogonal molecular techniques to the clinical lab we have to use to get to an answer for an individual patient. That includes array CGH technology. It includes MLPA assays. It includes methylation profiling, and you start to stack all those up so that, that lab director can then deliver a fulsome analysis of that particular genome. We're talking thousands of dollars, not to mention having to maintain all these different assays in the clinical lab, drawing down on precious sample. So there's a huge host of workflow efficiencies that if you could knock all that out in one assay, tremendous benefit, benefit for the patient, benefit for the laboratory. So that was the clinical story. I want to shift now to the research space. So if we think about, okay, what do research studies look like in human genomics. In general, and I would say the last decade or so has been marked by investment in large-scale cohort studies doing statistical analysis. You've got a group of patients that suffer from a common phenotype or have a common phenotype, and you have a group of folks that sensibly don't have that phenotype and looking for statistical differences in one group's genomic profile versus in others. So as we think about the future of these studies, the future of biomarker discovery, what does that look like? Well, if you bear with me, I have a few postulates up here that I want to run through. The first one is that mutations of all variant classes underlie complex phenotypes. So complex phenotypes could be autism, complex phenotypes could be response to a particular therapeutic, power to detect those associations because this is a statistical experiment here is a function of 2 things. One is your ability to even detect that variant in the first place. You can't detect statistical association if you can't even measure the variant. Number 2 is sample size. So power is driven by sample size. And so what we did here is put forth for you all today a thought experiment. So our researcher has a $1 million budget for consumables. And that researcher needs to make a decision about what technology are they going to use. They're going to seek to use a technology that delivers the maximum power for discovery. So hypothetically, I'm an autism researcher, for example. I've got my $1 million grant. What am I going to do with that? How do I set myself up for success to make that next big discovery that unlocks new biology, that unlocks the missing heritability of autism in this example. Well, I could choose short-read whole genome sequencing. At $200 a pop, that seems like a great deal. I'm going to go with that. Okay. With my $1 million budget, I can sequence 5,000 samples. I'm going to have reasonably good power, very good power to detect associations and SNPs and indels because that's what my technology delivers. I'll also see some structural variation. That will be helpful. But can I get more? Do I see dark regions? No. So can I detect associations there? No. Missing close to 10% of the genome right off the bat. And then methylation absolutely blind. Well, I could do PacBio HiFi at 30x. For my budget at about $1,000 a pop, that's 1,000 samples. Well, this is going to be challenging because 1,000 samples, my ability to detect association is a function of seeing the variant with confidence and the number of samples in my study. Because I've had to reduce my samples, my power to detect across all these variations. Well, across SNPs and indels come down. Structural variation is actually a little bit better because you can see those much better on a long-read platform than you can on a short-read platform. But now I start to get some information about dark regions and some information about methylation. But still, I don't know, I don't know. Am I short changing myself. Well, there's a middle ground that actually delivers more information content than either of those 2 approaches. And that's looking at a lower depth HiFi genome. And so in this example, we just used 10 -- 10x steps, genome. It's a nice round number, and it equates to about $300-ish per sample. In this model, that gives you about 3,000 samples. So what we see is now you've got information content across the 4 classes of variation that we're looking at here. You've been able to boost your sample size and thereby increase power. You've increased power in SNPs and indels, but you've increased power significantly across the other classes of variation, which in the first example, on a short-read genome, you would have 0 power to explore. And so we think this is going to be incredibly compelling for those research studies that are looking to really understand complex phenotypes. If you are a researcher and are 100% convinced that the story of understanding the biology that you're interested in, totally and uniquely only sits in SNPs and indels great. Good for you. But -- there's a tremendous amount of biology. And going back to my first statement, these mutations exist in the population, and whether it's a SNP or a 10kb deletion or methylation signature, it's all contributing to biology. And it's up to this community to figure out what it's really doing so that we can use it, use it to understand to help better human health. And that's why we're all here. So that's the whole genome story, and I appreciate you bearing with me while I tell it because it's a good one, it's rich and it is going to really just change the game in terms of what we know about the role of DNA variation and epigenetics in the context of human genomics, in the context of many different use cases going forward. We're going to abruptly change gears now and talk about RNA. So RNA is a large market as well. There's a theme here. These are all large markets. In about -- in 2022, we estimate it being about $1.5 billion in this space for -- in the human genomics and oncology context and growing at a pretty healthy clip, somewhere between 15% and 20% over this time horizon, bringing us somewhere to about $2.5 billion to $3 billion by 2026. So what's driving this growth? Well, again, there's 4 things really driving this growth. The first one is the expansion, the continued expansion of single-cell technologies. And now as those technologies tend to push into the spatial concept that will also fuel growth. The second is from a funding trend. So government funding, funding agencies, an uptick in spending on multiomic studies. And so once you've done the DNA, the next obvious layer to put on in your multiomic study is an RNA approach. The third, and this is specifically talking about where PacBio is coming into the market is that long-read approaches and really moving from short-read kind of gene expression counting, which is RNA seek, to getting that full complexity of isoforms, it is a totally different piece. It is just exponentially more information and going to catalyze investment over this time horizon. And then the fourth one is transition of some of these RNA-based finding, some of these discoveries into more routine clinical use. So when I talk about RNA, I basically say, look, the future of RNA is isoforms, full-length isoforms, full stop, period, drop the mic. Why when you're getting -- when there's so much inherent biology in how genes are sliced and show up in different cells and tissues, would you keep using such a blunt approach to not see that exquisite complexity with short-read sequencing. Moving to long-read sequencing to me is just a no-brainer here. So what we've seen with some of the earlier studies that look at Iso-Seq which is doing a full-length isoform detection on bulk tissues that you can discover about 2.5x more novel transcripts and you can have a short-read sequencing. Moving to the single cell space and the MAS-Seq protocol, which is concatenating these isoform species so that you can leverage the power of long-read sequencing that delivers 30-fold more discovery power than short-read sequencing. And I think that's nicely illustrated by this graphic here, which was taken from the Al'Khafaji paper from earlier -- from late last year, that looks at CD45 cells and is looking at different species of CD45 cells by their isoform information on the top with short-read sequencing. So you get some differentiation, some exploring of the different cell types. But the resolution and the added information content that comes through when looking at that with long reads on the single cell level, and that's [indiscernible] the rainbow view of the same population of CD45 cells is just incredible. And so as the research community, as the world starts to truly explore the incredible biology of cell type to cell type what constitutes different tissues and needs to really understand that at the transcriptional level. This is the only way to go. Layer that on with some of the error rates that are being published. So researchers are trying to leverage short-read sequencing to do the same kind of work, but also from this Al'Khafaji paper, the error rate in reconstructing full-length isoforms from short-read sequencing is about 43%. 43% is awfully close to 50% error rate. And last time I checked it was pretty close to a coin flip. So that's really questionable to me. If you look at it on HiFi, though, it's 0.4%. So 2 orders of magnitude reduction in the error rate as you go from short-read to just actually directly measuring the isoform off of a long-read platform. And then looking at the price, we have sort of a model price worked out here at the bottom. You'll notice that short-read sequencing is a few hundred dollars less expensive -- but really, they are very close in the same ballpark. And with the added information content and just the exquisite amount of new insights that are going to come out of looking at all these different isoforms, it is reasonably competitive point that we're at there. Sums it up in this last quote from a customer, who's a Core Lab director and a professor here in New York City and basically said, look, like if you can get isoform sequences for about the same price, which is exactly what we're talking about here, why in the world would anyone still use short-reads? Which I think sums it up perfectly. And I'm very, very excited to see what this field will bring and what PacBio will do to catalyze this field over the next few years. Now it's not just about research. And so the second slide that I wanted to share about RNA is starting to look towards the clinic. This is a study by Viega et al all from earlier this year, and they use long-read sequencing. Now in this experiment, it was bulk tissue to study a number of different breast cancer samples. What they found in this paper, it's a fantastic paper that really shows, I think, the unknowns of what transcripts are and what splicing does. But basically, they looked at a number of breast cancer samples, and they had a few findings that I think are interesting here. Number one, they looked at HER2. So I think most of you have heard of the gene HER2. It's incredibly important in breast cancer. It's been studied for probably decades now. In this study, they found that about 70% or 2/3 of the isoforms that they found with long-read sequencing were brand new, not in the catalogs, never seen before. And so what that does is just sort of a data point, show that there's a tremendous amount of biology to be uncovered even for genes have been studied ad nauseam, we thought, but now there's new things to explore. The second piece to this is that they started to look at maybe the clinical impact of it. So they started to look at, okay, we've got these different splicing isoforms -- do they correlate to anything? Or is it just a kind of interesting research finding. And in fact, they did find that a signature of about 35 of these isoforms were correlated with survival statistics. So it starts to connect the dots and lay the bread crumbs for how these findings can start to be used in the clinic down the road. And then one last piece I'll pull from this paper just to whet your appetite a little bit is they start to talk about how isoform sequencing is going to be critical for them to really understand cell surface proteins and which isoforms are potentially being expressed on the surface of those cancer cells -- and for those of you that cover oncology or have been in this space for a while, you'll know that immunotherapies and understanding being able to design targets towards these mutated proteins is a critical and very important and very successful at this point, therapeutic class that continues to be invested and explored. So we're excited to see what role MAS-Iso-Seq, what full-length isoform sequencing can do in the therapeutic space as well. The last driver of growth for us is targeted sequencing and targeted sequencing also was a large market, about $4 billion today, growing somewhere between $6 billion and $8 billion in the 2026 time horizon. Target sequencing is a very big bucket. It's being used in many, many different contacts and different forms and flavors all over the world. And so the drivers are really just expanded use cases, expanded penetration into different customer types. As we think about the oncology piece of this, it's really exploding into those needle in a haystack applications like liquid biopsy. And we'll talk through some of this. So our story of growth in targeted sequencing is in 2 flavors. So one is in the germline panels. So we see target sequencing quite frankly, is a stepping stone to genomes. It's a reasonably low cost, a bite-size way to start to leverage HiFi data and get on to our platform, get familiar with the data and deliver the insights that are most important to individual labs. On this slide, I have a few examples of that. So on the left-hand side is perhaps the most research and it's dark regions. So we partnered with Twist, and Dave spoke to this a little bit. We partnered with Twist over the past year or so to develop panels, hybrid capture panels for our technology, for our long-read technology. And one of the first products that come off the shelf of that is what we're calling the dark regions panel. So we all know there's parts of the genome that short-read genomes just can't touch because they're too complex and whatever data you do get is suspect. Now HiFi can rewrite through that, no problem. But for all of the samples that have been run on short-read genomes for some of these studies where they've amassed tons of exons or tons of genomes. And really all they want is the dark regions. We've provided a way for them to augment their studies, to add on to their data banks, the dark read regions specifically on our platform. So we think that will be a really exciting top-up approach that some researchers will embrace. And second one is single-gene disorders, and this really falls also with carrier screening, but there are some incredibly important genes out there, things like the thalassemia genes or SMA or GBA, all of which have very clear clinical roles to play and have sort of been the bane of resistance in trying to get them to work on short-read sequencing. They're very complex genes with pseudogenes or repeat regions and they're just very challenging. So clinical labs have had to use other technologies to go after them. Now they can do it all on HiFi, and we see some labs trying to adopt targeted panels, most notably Berry Genomics is developing assays for thalassemia for the Southeast Asian population on our platform and is having tremendous success there. And then, of course, pharmacogenomics has been important and growing and also a very challenging class of genes. Now lastly, I'll wrap up with Onso. So as we think about our targeted sequencing story, a big component of that is targeted assays on our short-read platform. And I won't go through this graph in detail, but basically suffice it to say this is an experience with cancer, so a hypothetical patient and their experience with cancer from the growth of the tumor, that's the blue line and the relative proportion of ctDNA, tumor DNA in their bloodstream changing over the course of their therapeutic experience. So after surgery, tumor load drops, your cell-free DNA goes down very, very low. There's always a question, is the cancer gone? Or is it still there? Did the surgeon get it all? Is the therapy working? You really don't know until the tumor has now come back up. And it's high enough, the tumor load is high enough that you can start to see it with SBS. If we change the paradigm and actually lower that accuracy floor, now we can see tumor molecules potentially much earlier, much more sensitively and specifically at different stages in this hypothetical cancer patients life. And that's going to open up especially monitoring an MRD applications. If you think about monitoring an MRD, you are measuring time points over that patient for multiple sequential measurements. So from a market size perspective, it's much bigger than using liquid biopsy for therapy selection and it is fast and growing market with a tremendous amount of investment. We are very excited to see what this technology can do in the hands of laboratories -- clinical laboratories and research laboratories around the world to really explore are there new ways to detect cancer sooner. Now I'm out of time. They're going to give me the hook, I think. So I'll just wrap up with some of the other markets. We didn't have time to talk about them today. Each one of them is incredibly exciting. And I could spend another hour on each one of these, but I'll spare you that. They're growing. They're large markets and HiFi revenue and Onso are delivering competitive advantages for different applications that are relevant in each one of these markets. So I'll leave you with this. This is the same slide that Mark showed. We've talked about our markets. We've talked about the segments. We talked about some key applications and the applications where PacBio is going -- is playing and is playing to win and delivering tremendous value to the customer. The question mark is exactly that. What is going to come out of this? These technologies are exploring biology at a level that's never been seen before. And what we've all experienced from these technology step changes is that those discoveries then catalyzes new markets. I couldn't tell you what that is. I have some suspicions, but we don't know what that is, but we are very excited to see what it will be. And with that, I am going to end and leave it there, and we are going into a Q&A session. I think it's a 25-minute Q&A session. I'd like to call Christian, Dave and Mark up to the stage with me.

All right. Hello. So a 20-, 25-minute Q&A session and then a much needed break, I promise right after that. So I'll hand the mic over. Just raise your hand, and I'll run you the mic and just state your name and your firm, and we'll go from there.

Dan Brennan from Cowen. Obviously, I think the expansion in the market is something that resonates today, obviously, in terms of all the new applications and kind of customers you could approach. Can you just give us a sense maybe of, say, the existing number of customers that are on the SQL 2E today? And when we think about all these new kind of opportunities I'm sure you've done a lot of the math already. But like how much does this open up from like a new customer standpoint? Like when you think about '23 and '24, you've given the kind of 3- or 5-year growth rates, like how many new labs? How many new customers do you expect will be potential for the Revio? And I'm sure we'll learn more from Susan later in the presentation, but when you think about the capacity to sort those customers kind of where does that stand today?

Sure. Well, first of all, I want to thank everyone for hanging in with us. I know that first session was extensive. But I also want to thank Jen for standing up here for 45 minutes and then getting into questions. But Dan, to answer your question, today, we have roughly 400 or so SQL 2E customers, give or take. I think Jeff in his presentation, will talk a little bit more about that. But when you think about Revio, it really opens up the entirety of the market. And so we would expect to see hundreds and hundreds of new customers come to us with respect to the value that's created through Revio. So having the capabilities to deal with more than double the customers we have today over this time horizon, we've already built a lot of that infrastructure and put it in place. And it's really, as I said in my remarks, all about getting the leverage out of the commercial organization, out of the operations group. Mike Goloubef will tell you about how we're scaled in operations before the end so that you can get a picture of that. But at the end of the day, Revio, we fully expect to generate hundreds of new customers. And Jeff will give you some statistics just from our launch event, which will give you some confidence that that's in fact the case.

And Dan, I think it's not just the numbers of new customers. And yes, I do think Christian is right? There's going to be a lot of new customers. I think we're going to get them because of the exposure that they'll have to HiFi data. And if you think about our installed base, and in comparison to Revio, with 15x the output, really need 30 or 40 systems there to generate the world's current capacity for HiFi. And so the access to this and the utility of the data is going to really give people that opportunity to understand what they would get from being a part of our ecosystem.

And I think that's a really good point, Mark. This is the inflection point because now what happens is as more and more HiFi data gets out into the world, the flywheel starts and people start to see the power of HiFi and the applications. Oh, and by the way, it's affordable for me, where I can actually take those projects on. We've seen the same thing, albeit it was when I had a lot less gray hair as we dramatically scaled short-read sequencing platforms, we saw that massive adoption occur because that flywheel of data was generated. This is the same moment in time. In fact, we have some advantages now because we have a full suite of applications that we can take to the market. So we can make that flywheel move even faster and grow with all of the samples coming into HiFi.

Kyle Mikson with Canaccord Genuity. Just want to say it's been remarkable to see the transformation of the company in the past few years, Christian. So congratulations on that. It's been great. I guess I'll just ask one here. So I guess with the -- everyone kind of wonders what the giant [indiscernible] is going to be, right? I think Revio could be that. We have a short incumbent out there. Is it going to be Revio? Or do you think there has to be that next sequence or the next kind of like old try throughput platform? And then kind of jumping off that, how much lower on cost and higher in throughout could this next sequencer be agreement, I guess. I guess Revio is like 2.5 bold improvement in cost from the [indiscernible] . I mean can we see another type of improvement again?

I'll pass that to my head of R&D right here. Mark you want to take that one?

Yes. So I think Revio is the platform that's going to be wildly successful for us. When you think about that ultra-high throughput platform, it is another order of magnitude. And so we've been talking about how do we get a sequencer that can do tens of thousands of genomes a year, not thousands of genomes a year. And so think of that as another order of magnitude of output gains. And moving to that 300-millimeter wafer for that is a really important part for the COGS, which will give us that ability to price the genomes where we need to. Now I will say with -- from the last 3 weeks, we're not getting pushback on $1,000 long-read genome. Right now is coming to me and saying, "Oh, it's still just way too expensive. They're like, wow, that's really enabling and that's what I need. And so what I would say is we'll price it at that point in time when we're ready to. But if we're not getting a lot of pushback and the values there, and we can demonstrate the clinical utility of a long-read genome, then we're probably close to the right price. It's just -- at that point, it's just how do we bring in more people with even higher scale to make it a more routine application.

Yes, And I think part of that...

It could be more margin, right? And we have to decide what point do we share those cost benefits and those gains with the customer versus maintaining some margin. And I think we have to strike that right balance.

And that's the most important component of innovation is -- not only is it enablement, it's also figuring out how do you share the benefit of that innovation with your customers to drive elasticity of samples in the market. And if you can get into the fortunate position where you have innovation that allows you to have flexibility in pricing then you actually have much more control over how fast the market can expand and how much your gross margin can expand, which, quite frankly, we're playing for both.

Tejas Savant from Morgan Stanley. Christian, maybe one for you, just following up on that earlier question. You've typically sort of doubled throughput and halve the cost on an annual basis in the past. But given the step function improvements on the Revio, should we sort of think of the specs is essentially locked down for the next couple of years? And then that gets you to sort of line of sight to the ultra-high throughput platform. Is that the right way to think about it?

I wouldn't think about it that way, Tejas. So I would think about it as we're at the beginning of our journey even with Revio. The specs that we've created and the product the way it's performing now is nothing short of remarkable relative to where we've been, but it's still the beginning of that journey on the platform. We have lots of opportunity to continue to improve throughput. We're continuing to focus on driving accuracy up, continuing to focus on driving run times down even further. And this is a combination of chemistry and software principally. So we're not talking about major hardware changes to the Revio platform to get those benefits. And what you could imagine is where we get the product out and make it robust in the market and then over time, continue to improve and provide more value to our customers. As a matter of fact, we have -- the truth is we already have active programs ongoing to take us to Revio 1.1 and 1.5 and 2.0 or whatever, however you want to think about it. And then at the right time, and so actually, before I go there, Revio itself will be a very long-lived product because we will be continuing to prove it. But what Mark's talking about and what we're talking about is actually going even beyond Revio with another type of product that delivers ultra-high throughput for those customers that absolutely need it. and then also another product in the portfolio that has low throughput. So by the time we get through this time horizon of '26, we have multiple products in the sequencing market meeting the customers where they are with respect to capital, with respect to throughput requirements, all with the increasing flexibility to manage our pricing such that we can optimize gross margin with growth and develop the company that we all believe we can do.

Does the labs need to get used to running thousands of long-read genomes a year, right?

They haven't had that opportunity up to now. And so you want them to take a couple of years to scale and grow to get ready for something that's even higher throughput. And so we've got Revio there to help them scale to take on all of the infrastructure to do thousands of genomes a year. And on the Onso side, I think that's where your question was. We've done the optics, the design of Onso will enable higher output flow cells. And so that's -- it's not just this one flow cell we expect higher dose flow cells to follow on for Onso because we've engineered it that way. And when I'm talking about for getting into high throughput for a short-reads. At some point, you want billions of reads per flow sale, not just $500,000 -- or $500 million to $1 billion. So the higher throughput there would be a different technology in the future to really enable how much higher throughput levels of SBB chemistry.

Of course, as you pointed out, billions of Onso reads are very different than billions of other SBS reads in terms of what it really means and what you can do with the technology.

Yes. Got it. And just one quick follow-up. I want to talk about sort of the relative delta versus alumina, right? So you've gone from about 80 whole genomes to 1,300. They've gone from about 8,000 to 20,000 on their NovaSeqX plus. So the delta leaving aside the content and the methylation and all of the other advantages, has shrunk from about 100x on throughput to about 15x today. And to Jen's point, potentially even 10x if you find users who are willing to do a 15x sort of long-read genome. Can you talk a little bit about how big that market segment could be? Is there an element of customer education that's required? Or do you think people are already there in terms of viewing a 15x long-read genome as an effect of compromise that gets that throughput delta to within line of sight to where Illumina is?

Yes. I think that the -- I think what we're seeing is that scientists and researchers do understand the differences in different coverage models for the experiments that they're trying to do. And so when we're looking at looking at kind of whole genome population scale research people are very comfortable down at 8x to 10x. And when you're looking at oncology samples, perhaps the 30x isn't even enough. And so we have spent a lot of time in 2022 focusing on calibrating the world about what a PacBio genome is versus something versus another kind of genome and looking at that fold coverage because it is different. And in fact, at 15x, now you're at -- if you just run the math straight up of what we talked about, 2,600 genomes a year, which let's face it, in the vast, vast, vast majority of labs, that's a very nice, nice number to be at. Jen, do you want to add anything to that?

I think you summed it up nicely. I mean, really, it depends on what that particular individual is trying to accomplish. Are they doing a large research study. So they're comparing different groups of individuals against each other to understand associations. That's one use case that we talked about. The other one is in a truly clinical setting where you need to have extreme confidence that you're covering everything that you're getting the fullest picture of what's going on in that particular individual's genome. That's a very different use case. And so what we tried to paint today with some of the vignettes is the tunability of a HiFi genome depending on what that use case is, what the cost constraints are, et cetera. But fundamentally, no matter what coverage you're at, you're getting significantly more information across all the classes of variation than you ever possibly could with a short-read alternative. And I think that's really the take-home message. That's very helpful.

David Westenberg from Piper Sandler. So 2 questions, I'll just ask upfront. First one is on the synergies between the short read and the long-read platform. I definitely understand that the institutions do tend to be the same with the long and the short-read platforms. But I do find that the users tend to be a little bit different. So can you talk about the synergies in having both platforms and if it's maybe a function of convergence of projects that might be developing over the next few years that's driving it or if there's some sort of operational thing that you're going to be providing in order to really capture that synergy of long-read, short-read? And then my second question is for Jennifer. I think that was really interesting how you talked about how no matter how big the size of the project, you can get more a $1,000 genome on that. Can you talk about the mechanics of that? Because usually when I think of I think the user has to buy on Illumina. It's a flow cell and whether you use it or not, you burned it. So can you talk about the pricing model and that -- how that lets you do that?

Yes. Let's start with Dave. Dave, can you give some perspective on how people are going to use these technologies and the synergy between the 2 platforms?

Yes. Look, I think one of the most exciting is we're seeing and Mark slide up is that across all these different applications and markets. There is a place for both. And so when you look at some of these researchers, we're seeing folks that want to go out through discovery and long-read and then maybe you're going to follow it up in a different way with the short-read. And I think the oncology example is a really great one. You can get that deep complete view of what is going on in the cancer, maybe you're able to get a primary resection or a tissue sample. So that makes sense for the long-read. But then as you follow that person up, now maybe you switch across to liquid biopsies or you've got an FFPE sample you want to go and look at where the DNA is degraded. So there is always going to be that sort of synergy of how you bring these 2 together based on the biology that you're looking at. I think you're right, though, especially as we look at sort of our traditional customers around Core Labs and even service providers that you tend to have customers that gravitate one way or the other. But importantly, they want to have both technologies. And that's what we really saw coming out of ASHG, was a number of folks working up and saying, well, look, the CapEx market is opening up next year and people are looking at new technologies that are emerging. With you guys, I can buy both get that fantastic experience working with one company, get both products with high accuracy and really understand how to bring them together. So that's something we're really interested in. In terms of the longer-term view. Look, I think the first thing is around the ecosystem and how we build out those partnerships so that if we're using Hamilton automation or [ Miroculus ] or whoever it might be, that it works on both platforms. And that's really how we started thinking about the ecosystem is. Can they serve both the short and the long technologies that we have. Over time though, as Christian said, we really want to build out the capabilities to merge those data sets and bring them together so you can get the deepest insights into the biology.

And Jen, thinking about the flexibility and the economics around why we get $1,000 or less every time?

Yes, absolutely. So it's pretty straightforward. I mean the individual SMRT cell, the 25M SMRT cell is priced at $995, that's the price of the SMRT cell. Now that SMRT cell is going to deliver you enough data to do a whole human genome. And so it's $1,000 for the genome.

At least 30x.

. At least at 30x, exactly. And so when we think about Revio, it's been designed with these 4 independent stages in essence. And so whether you run one SMRT cell that's $1,000, you run 4 and get 4 genomes, each 1 of those is $1,000. It's sort of independently linked there or it's not linked. It's independent. Whereas on Illumina or other short-read technologies, I should say, it's -- you have to batch samples in order to get those better economies of scale. You have to put multiple samples on an individual flow cell. And so that yokes them together. And as I was saying in the example, forces a laboratory sometimes they have to choose, whether they get -- try to strive for the best economics by batching as many samples as they possibly can on that flow cell or, in some cases, move forward with the samples that they have to get a more expedient answer.

Julia Qin from JPMorgan. So I want to start with the broader strategy, Christian. You highlighted that obviously with the Revio order of magnitude including throughput and the ultra-high throughput coming, there's supposedly a lot of price elasticity to be expected. But at the same time, you're also expecting the short-read market to grow at a much higher rate, even off of a larger base. So in light of that, how would you think about the relative prioritization between the long-read and the short-read platforms? And what kind of considerations go into your decision in terms of resource allocation between the 2 platforms?

Thank you for the question. That's -- it is a critical question because it's part of the way driving to our path to cash flow breakeven and positive cash flows. But the way I think about it is that both Revio and Onso, short-read and long-read are both highly differentiated. And so we're going to keep fully investing in both platforms. We think our fastest growth opportunity is Revio in the short term because the reality is there's no product like it. There's never been a product like it. And with that product, we think we'll be able to achieve significant market penetration, take market share from existing short-read projects and move them over to Revio. And so that has to be kind of our #1 priority. But 1a really is on. So -- and I really do mean it in the 1a sense, because we do see Revio attacking a large market and attacking it with a highly-differentiated product that's perfectly suited for the market we're going after. That's the key. That's actually the fundamental thing and fundamental takeaway is that we're focusing Onso on specific markets. We don't want to make Onso the whole genome sequencer for example. It will do whole genome sequencing. It will do it for under $1,000, but that's not the point. The point is by having this broad portfolio that we can put the best-of-breed technology into the hands of our customers to help them answer their biologically relevant questions that they want to answer. And so by having that capability, we're able to really make -- push Revio into the broad markets and push Onso into the market that Revio doesn't serve as well, and now we cover the complete market with best-of-breed products. And so you'll see us -- you'll see us in '23, of course, get growth products to the market and ship those. And you'll see us through in this time horizon, continue to improve Revio and to continue to improve scale of Onso probably in that order, but quite frankly, in a lot of the development programs we have are basically all of them are in parallel at some level. And so we'll continue because through this time horizon through '26, right, it's all about accelerating. And it's all about multiple products into the market, best of breed, leveraging our commercial infrastructure driving consumable pull-through, which drives mix, which drives gross margin expansion, which allows us to -- with expense discipline, of course, drive a leverage over our whole P&L to in order to get to cash flow positive. I know I said a lot there, but does that make sense?

The only thing, if I can just add is getting 5% to 10% of the short-read market is great, and it's meaningful for us. But the goal is to make sure that we're the dominant long-read player as well. And so how do we make sure that we have a majority of market share in long-reads. And that's where we're taking Revio out fast and driving success of Revio is so important for us commercially.

That's a good point.

Great. And a follow-up, I appreciate the cost per sample comparisons you guys showed, which is very compelling. I'm curious in terms of the instrument pricing side, how do customers factoring the upfront instrument CapEx especially in light of that some of your competitors are selling no extra instrument or a low instrument CapEx proposition. And do you perceive different receptions to the instrument CapEx requirement among your different target customer segments?

Dave, do you want to take a stab at this one?

Yes. I'll take a start. So look, I think -- what we've come out with has been incredibly exciting and people are really interested. I think it's not so much about that upfront capital cost that we're being compared to. It's the hidden costs that are coming later. And so when you think about some of those platforms that give you very low-cost initial capital or initial instrument, you have to follow that out with huge amounts of compute, data processing, storage, et cetera, and quickly once you start looking at it, those costs rise. And that's why I think we see a lot of people not really scale up on those technologies. And so when you compare that back to us, when you really look at what you're getting and what you're able to do, generating 1,300 HiFi genomes with methylation every year, all that compute built in. It really ends up being when you amortize the cost out across a fully loaded genome highly comparable, if not better, on Revio. And I think as we start to have those conversations, people are becoming acutely aware of all those additional costs and why this is such a powerful platform and is priced so aggressively in the market, I would say, for what you get. I think if you compare that to some of the other short-read technologies that are coming out, and again, using a slide that Jen put together that unfortunately, we didn't have time to go into today. If you think about a hypothetical $1 million project budget, if you're spending $985,000 on a short-read sequencer or a high-throughput sequencer, that leaves you $15,000 for the actual sequencing. It's like 1 run. If you look at what we're doing here at [ 779 ], that's leaving you over $200,000 to really go in into 200 genomes or more. So as customers start looking at it, both on the load of free CapEx on the long-read side and the additional costs. It doesn't end up making as much sense as you may initially think. And then on the short-read side, that higher CapEx price is really limiting what you can do to the point that you get so much more out of these genomes. Again, it makes sense to really look at Revio as the game-changing option for whole genomes especially.

Yes. I mean I think even to shrink it, let's face it in life -- the truth is you get what you pay for. And the reliability of Revio, the history of PacBio delivering the consistency from run-to-run later, you'll -- Jeff will show some how well our instruments actually perform in the field every single day. How we put all the compute on board as Dave put out. There's a lot more hidden cost in those so-called low CapEx or free CapEx instruments that aren't fully appreciated until the customer gets into it. And I think with Revio, we now have the scale and the cost and the credibility, I believe, to really be successful against that argument.

Great. I think that's an excellent segue into the break. So we'll have about 20 minutes or so, stretch your legs, and we'll be back with more presentations, and there will be another Q&A session later as well. Thank you.

Thank you. [Break]

I'm Nathan Hammond from Stanford Health Care. We have begun looking at PacBio as a possible basis for our clinical testing in the future. We're very excited about what long reads can do for illuminating structural variation. It's very hard to call with short reads. We were concerned at first that while we might be getting better performance on structural variant calls, we might suffer a little bit in our small variant calling, which is a very important part of our clinical service. And so what I've been presenting on here at ASHG is that when we looked at the performance of small variant calls, actually, PacBio has really closed the gap and they look every bit as good as their competitors on the small variant calling. So we can use a single source of sequencing, get long-read data and do small variant calls as well as structural variance together.

Please welcome to the stage, Jeff Eidel, Chief Commercial Officer.

Hi, everyone. Good morning. I'm Jeff Eidel, PacBio's Chief Commercial Officer. And although I've been in the genomics space for about 17 years, both as a long-time employee of a short-read sequencing company as well as a customer of that sequencing company. I'm the new person on the block here at PacBio. I'm absolutely thrilled to be on the team. I've been with the company now for just about 3 months, and it's been an amazing ride. I came to PacBio because I love our mission. I enjoy the challenge of scaling the company, as Mark and Christian talked about scaling from $100 million up to $1 billion and beyond. And I love our strategy of providing customers with choice. Frankly, choice that customers haven't had in too long. And our products are going to give them that choice as the company with -- the only company to be able to offer native long-read and short-read sequencing platforms. So I'm thrilled about this opportunity and to bring these products to all of our customers around the world. So today, I'm going to talk about 3 main goals or 3 main things. Christian did a great job of going through the history of PacBio and reiterating the strategy of the company over the last several years. Mark and Dave talked about the revolutionary capabilities of our new technologies and Jen did an amazing job of convincing you about the market opportunities we have ahead of us. I'm going to talk about the team that's going to market, sell and support these products and really help us capitalize on these huge markets in front of us. I'm also going to talk about our global service and support teams and capabilities we have to enable a great customer experience from our customers around the world. And lastly, I'm going to give you some great examples of how this commercial engine and infrastructure that we've built have translated into amazing experience for our customers and real tangible revenue and order opportunity. So when I first started talking to Christian, back in the summer about joining PacBio, he walked me through the strategy that he talked about earlier. He gave me a nonconfidential view of the road map ahead of us from a technology standpoint. And then we started talking about the team that we've assembled on the commercial side. And I can instantly see the strategy and how it was coming to bear. And having been at the company now for 3 months and having the privilege to work with this team of 225 commercial employees, I'm absolutely thrilled to be a part of it and couldn't think of a better team to be a part of. Now drilling into that team, a little bit more. At the tip of the spear is our sales team. And we've invested heavily in the sales team over the last couple of years. We have nearly 70 commissioned sales reps around the world, across all 3 regions. And we also have 25 distributors who are authorized to sell our products in over 125 countries around the world. But it's not just about sales. We have almost an equally as big marketing group who's responsible for taking the customer requirements and translating them into the great products you've heard about today. They've worked on the great branding that you've seen over the last year or so. And they work tirelessly to pull off plan and execute the events like you saw a couple of weeks ago at ASHG. So transitioning back to the sales side. As I said, we've grown this team about 4 times since the start of 2021. And what really resonates with me is when I look at the experience of this team, on average, across those 7 years of reps, they have about 11 years on average of experience selling in the genomics and sequencing space. So it really gives us a competitive advantage in terms of those reps abilities to talk about our products with our customers, to understand the market and quickly reach those customers at a global sale -- scale. And when you look at the companies at which those reps have been a part of, it's not surprising, you can see all in the word cloud here. All companies that you're probably familiar with and not surprising also that many of them came from companies like Thermo Fisher and Illumina. In fact, our 3 regional GMs all held senior leadership positions in the commercial organization at Illumina before joining PacBio over the last 1.5 years or so. And there was a question earlier today from the audience about how does -- what does new customer growth look like? And what's that going to look like going forward? Well, I can tell you that this investment that we've made in our commercial organization infrastructure, certainly with the products that we've had up until this point with the Sequel platform. We've done an amazing job of growing that customer base. And since the start of 2021, we've added 91 new customers in terms of those customers who have purchased new systems from us and certainly diversified that customer base across the world. So switching gears, I'll talk a little bit about what I think is kind of our unsung heroes of our commercial organization. It's our team that's out there in the field, working with our customers, making sure that our systems stay up and running, and if they do happen to slow down or have an issue, get out there quickly to fix them. And one of the things I'll give PacBio a lot of credit for is having the foresight back in 2015 or 2016 to put together as part of the Sequel launch, something that we call Sequel Insights. And of course, we're going to have to rebrand this platform going forward with these new products that we've talked about today. But what Sequel Insight does today is give us the capability to remotely access and diagnose issues that may come up in the field. And let me be clear, we don't have access to customer data. We don't have access to anything but basic run metrics and information about how our instruments are doing in the field in terms of uptime. But of course, this tool isn't valuable to us unless our customers actually use it. What I'm happy to say here is that we've got almost 90% adoption of this platform across our installed base. And so with that tool, as well as the robustness that we have across our instrument base, especially with the Sequel platform. We've increased our mean time between failure or MTBF to greater than 300 days over the last 3 or 4 years. And many companies don't publish what this MTBF metric is, which is defined as the number of days between a failure that causes us to have to dispatch an engineer in the field. But I can confidently say that this 300-day MTBF or greater than 300 days, is amongst the industry lead and something that PacBio is certainly proud about. And lastly, on the service support team, I'm struck by the amazing tenure that we have within this team. On average, across those 70 or so people. We have about 4 years of -- they've been with the company for about 4 years. And so all 3 of these things, the Sequel Insight platform, the robustness of our systems as well as the experience and the tenure of our service support organization has led us to not have to scale the size of this support organization by nearly as much as our installed base over the last couple of years. That installed base that has grown over 200% since the start of 2021, with only a modest increase in the size of this team. But yet not sacrificing any of the service and support, and the customer experience that I think our customers deserve and expect from PacBio. So lastly, I'm going to give you some examples of, again, how this commercial infrastructure has really started to pay off for PacBio over the last couple of years and in the very near term. But before I do that, I've talked about sales, I talked about marketing. I've talked about our services and support organization, but I also want to give one shout out to our commercial operations group who works behind the teams to make sure that we have the systems and the tools and the training, and also enable our sales team and our market peers to be able to get the word out, and ultimately give quotes and collect orders from customers. So 3 weeks ago, as you all know, we launched Revio and Onso at ASHG. And there was a ton of work that went into that launch event, more than all of you will probably ever know. Extremely proud of everything that happened, and it culminated in a wonderful week for us at ASHG. We had a sold-out launch event on the Tuesday night on the 25th, absolutely stunning event that I think customers had a great time at. And from that day, on that Tuesday, we really stole the attention and stole the week, I think, at ASHG. So much so that throughout the course of those 4 or 5 days, we generated over 1,000 new customer leads. Those are 1,000 new researchers, 1,000 new potential users of our platforms that we didn't already track in terms of our marketing lead database. On top of that, we did an amazing job, I think, on the social media side of things. When you look across the different platforms that we track, we generated over 13 million social media impressions over the course of those 4 or so days. And when you compare those 13 million impressions, to those that yielded from our 2 competitors -- 2 of our main competitors. This was about 15x more impressions than those competitors generated during the course of that week. So we clearly stole the show by design and made a huge impact. But at the end of the day, what it really translates into or whatever it really comes down to is, "Okay, how is all this buzz, how all this excitement, this marketing push that we made over the course of the week and since then, how does that translate into new orders for Revio and Onso?" And I'm here to tell you today that I can safely say that our sales funnel today has never been in better shape. We have the most robust sales funnel that we've ever had here at PacBio. So I'm going to give you a couple of examples of that. At the launch event, couple of weeks ago. Christian talked about our launch partners with Broad Institute and Macrogen and Berry Genomics. And we're incredibly honored to have those 3 companies, our initial launch partners. And since that day, since that night, 3 weeks ago, the amount of customer enthusiasm and the amount of customer reach out to us in terms of wanting to get more information about Revio and Onso, and generate quotes for them and ultimately collect sales, has been truly amazing. And I'm really happy to tell you today that we are happy to announce some additional launch partners today. We've got companies like GrandOmics, JMDNA, HudsonAlpha, Haorui Genomics and [indiscernible] as well in Asia. And I'm going to leave you with one last story here. In the middle here, you've got the CEO who's in the middle of the picture here, Dr. Lee from DNA Link. As many of us did throughout the course of the week, at ASHG. We had lots of customer meetings, lots of customer dinners. And on the Thursday night of ASHG, our GM, Jason and our distributor in Korea took Dr. Lee and his team out to dinner, and we had a wonderful meal. Spent a couple of hours with him, talking about the products in his business. And at the end of the dinner, he was so excited. He grabbed the pen and he reached over, and he took Jason's hand, our GM and he wrote on it, the number of Revio systems that he wanted to order and he signed it and he said, "That's my order. That's my order for Revio." And that piece of paper that he's got in his hand there is the actual PO. So we've moved forward from a palm PO to an actual PO. But we're absolutely thrilled to have DNA Link as well as the rest of these companies as well as several others around the world from all 3 regions who have now ordered this product. We're off to a great start and more great things to come as well. So with that, I'm going to hand it over to Mike somebody who I'm going to keep very busy in terms of building systems that hopefully, our team will certainly sell in the coming years. Thank you very much.

Good morning, everybody. Thanks so much for coming. I'm Mike Goloubef. I'm the Senior Vice President of Manufacturing, Quality and Supply Chain. I've been with the company for just about 2.5 years. And before that, I spent 25-plus years at a number of other life science companies, including Thermo Fisher, Danaher, Applied Biosystems and MDSIX. So why did I join the company? Like Christian, I came out of retirement to join PacBio. Why did I do that? Look, the story is compelling. The products are terrific. We sell into an incredible customer base. But honestly, for me, it's about the employees, right? It's about the team that we've built, including the leadership team here today. But also, the team back home in the manufacturing sites and the people I work with every day. And look, I've been around a bit. And I can honestly tell you that the team we built in PacBio is burn on the best in the business. And I think it truly gives us a competitive advantage, and it makes the future look incredibly great for us. So I'm going to talk about a few things today. A couple of things that I'm going to touch on, our mission. And as Christian said, his mission is a guiding star or the North Star of our company. Similarly, our mission of manufacturing is our North Star. So it's something that my leadership team and I have spent the past year developing and I'm really happy to share that with you. I'm also going to touch on our current state capabilities, let you know who we are and what we do. I'm going to talk about the areas of focus as we continue to scale the business. And finally, I'm going to end up with just highlighting our future state in giving you a sense of what we're building out. So for us, it's all about the customer. It's about quality and it's about cost. Our customers tell us that over the past year, they've experienced the highest run performance they've ever seen. And really, this is again a testament to the products that we're developing and delivering to our customers, but it's about the team of people behind those. So our mission is to deliver an exceptional customer experience through superior product quality, at a cost and scale that maximizes profitability. So who are we? And what do we do? PacBio manufacturing is the network. It's a combination of our factories and our suppliers. On the factory side, we have 3 factories in the United States. We have 2 in California, and we have 1 in Baltimore, Maryland. Of the factories in California, our site at Menlo Park, which is also our headquarters, we manufacture instruments. We manufacture smart cells and small fill reagents, and that's principally for our Revio, Onso and Sequel IIe products. In San Diego, which has come to us through our acquisition of Omniome, we manufacture our flow cell technology and our large fill reagents. In Baltimore, Maryland, which came to us through our Circulomics' acquisition. It's the home of our Sample Prep and there, we manufacture our Nanobind discs and associated reagents. So as important as our factories are to us, our suppliers are equally important. And you'll notice on the left side of the slide here, we have a quiver of key suppliers and contract manufacturers that come from all parts of the world, particularly the U.S.A., Mexico and APAC. These are suppliers that provide unique capabilities, best in the business for what they do, and they provide us capability and capacity that we need to scale the business. This network has allowed us to produce 1,000 instruments to date, of which 500 of those are Sequel IIes. We've also produced in the last 2.5 years, 150,000 smart cells. And I'm happy to report that in the 2.5 years since I've joined, we have never missed a shipment. And that really is a clear competitive advantage for us. And look, I can't take the credit for that. This is truly a team effort. And I've got, again, like I mentioned at the beginning, [indiscernible], some of the best in the business. I also wanted to touch on this page some of the manufacturing and quality systems that truly separate us from our competitors. Our ISO 9001 and 14 -- 1345. So these quality systems, particularly the 1345, it allows us to consider manufacturing products for clinical markets. We've established that. So it's well established in our Menlo Park facility and provides the backbone for our processes and systems that we use to not only develop our products but manufacture and ship our products. This will shorten our timeline as we start to consider the transition from an RUO product to the IVD -- to the clinical market with IVD products. And you heard Jen talk about that, and Dave talk about that. So what other areas am I looking at as we continue to build those scale in the business? So you heard me talk about the network of key suppliers and contract manufacturers but also our factories. So we're going to start to continue to develop those factories so they become technology focused. So rather than 1 factory does all, those factors have become very technology-centric, and they'll be located closer to an R&D center. Similar to the key suppliers and contract manufacturers, we feel we've selected the right folks, but there's an opportunity to continue to leverage those folks for their capability and scale. Particularly in -- as we make the transition to IVD products. I'll talk a bit about that on the next slide. Business continuity planning. So we've done a great job of risk management in the business. You've heard all the stories about chips and chip supply. You've heard the stories about the ability to move goods globally. We've been able to manage that successfully despite these incredible headwinds. And you think about a company our size, what's really compelling to our suppliers is our story, the kinds of products we manufacture and the customers we serve and what they do with that. And our business is at the right size that we can fit in well within their capacity models and we get the allocations that we need. I'm happy to announce that as of this quarter, we've signed a long-term agreement with SilTerra. So if you think about the smart cell manufacturing, 3 critical suppliers, SilTerra's middleman in that supply. And we've managed it a long-term agreement to lock in 4 years of capacity and supply. So that takes us through the [indiscernible] in '25 M right through to the 2026 timeframe. So excited about that. So the network that we built takes us through to 2026. Finally, on this slide, I'd like to talk a little bit about cost. Cost is an important element of what we do. We continually try to drive costs down. And we do -- we're trying to do a better job of managing our cash. And those are imperative for us, and we're starting to build programs around that. I'm going to talk to that on the next slide. So what does PacBio manufacturing look like in the future? We'll have a factory network that will be technology focused, lower cost and closer to the customer. These manufacturing sites will now start to develop rapid prototyping and pilot manufacturing capability. So why is that important? That's important because they partner with the development teams to pull those new products faster through the development into manufacturing and state manufacturing with a design for manufacturing position, a cost position, a quality position that's required to scale that business. Our contract manufacturers, again, we feel we're positioned correctly with those, but they have access into lower cost. So as we continue to drive -- as we continue to grow our business and there's a need to continue to take our cost out to improve our gross margins, we have that advantage with the supply network that we have. IVD and clinical. So we will select suppliers that will provide the opportunity for us to manufacture our products in their sites. Their capabilities of a benchmark of Sanmina, et cetera, for instance, they have GMP suites, right? So they're well positioned to be able to provide those -- to manufacture and provide those products into our customers and be able to manage the rigor of audits and ongoing service of those parts and products. Cost and efficiency and yield. So we have launched a gross margin initiative. And we've identified 140 items of opportunity for us to improve our cost position, improve our cash position, eliminate waste. It's truly a business partnership, so it's not only manufacturing, but it's in partnership with development and commercial. And through that, we'll be focusing and tackling areas like yield improvement, utilization, efficiency, elimination of scrap. It will also look at high levels of design for manufacture for newly released products. So we hit the ground running. It will look at value engineering for products that are already in the field that are under cost pressure. And it will work with Jeff and the commercial team to look at price and other commercial strategies. If we do that correctly, if we embed that as part of our DNA, we'll continually drive a better cost position, and you'll hear Susan talk a bit about this as we continue to help out on the margin side. And finally, on the business continuity planning and supplier risk. You heard me talk about, "We've done a really good job of managing supplier risk." We need to take that up to the next level, which is around business continuity planning. So what is business continuity planning? It takes into consideration supplier risk, but it starts to think about things like redundancy. So what happens if 1 of our factories is impacted by an event? What happens at 1 of our suppliers is impacted by an event. We have to be able to quickly pivot to ensure that we are able to manage that supply seamlessly. And we feel we are starting to build that plan and we have a network of suppliers that certainly will allow us to do that. So look, I'm absolutely excited. We have the right team. We're well positioned through 2026. We're starting to think of 2026 and beyond. It truly is a partnership between ourselves and R&D as we move through this journey together. And I'm excited and confident that we'll deliver what the business needs. And with that, I'd like to turn it over to Susan Kim, our CFO.

So I got introduced to PacBio during the middle of the COVID pandemic. And having come from the tech industry, I got to learn about the company, I got to learn about the technology. I met Christian, I met members of the Board, I met members of the management team, and I got very excited by the potential for our technology and the impact we can have on human health. And so that's why I'm here today at PacBio. One of the takeaways this morning that all of you have seen is just how much progress we've made across the company. And in many respects, we're just at the beginning. And the journey forward is very exciting. But before I dive into the long-term financial targets, what I wanted to do is I wanted to take a moment to dive into a snapshot of where we are today. During Christian's first year at the company, you heard him talk a lot about needing to invest in the commercial organization, and that investment has paid off in spades. What you see is that over the last 12 months of the instruments that we shipped over that 12-month period, 40% of those shipments went to new customers. That has helped to grow our overall customer base to 400 today. We've also grown our Sequel II/IIe installed base to 494 and and growing that installed base has helped us to grow our consumable revenue. If you look over the trailing 12 months, that consumable revenue has grown 23% year-over-year, despite COVID lockdowns and macro pressures. We continue to develop our execution engine. We have launch new products. We have grown our installed base, and we continue to grow as a company, such that in Q3, we crossed the 1,000th instrument shipment mark. So we shipped our 1,000th sequencer in Q3. And so that is also very exciting. But I'm very proud of the fact that we continue to be well capitalized with $834 million of cash on our balance sheet as of the end of Q3. Now in terms of the financial targets. You've had Christian talk about our long-term strategy. You heard from Mark and Dave talk about our product road map. You heard Jen review our addressable market opportunity and the combination of all of that will contribute to our revenue growth, to grow our revenues, 40% to 50% CAGR out to 2026 and have a minimum revenue of $500 million. Our product road map is also what's going to contribute to our gross margin expansion to achieve gross margins in the 55% to 60% plus in the 2026 timeframe. Because of the investments that we've already made in the business, we could be very disciplined going forward with respect to our OpEx investments such that we can deliver sustained operating leverage as we continue to grow. And the combination of this will allow us to achieve cash flow positive in 2026. Before I talk about the revenue drivers, I thought I'd step back and take a moment to talk about how launching a new platform, especially a platform and higher throughput can expand our revenues. And so what you see here, the Revio platform. The Revio platform compared to previous generation platform. Revio with its higher throughput and therefore, lower cost of sequence and the relatively short CapEx payback period will increase the accessibility of HiFi for more labs across the world. You heard Jen share a lot about that. And so therefore, we expect the installed base for Revio to be larger than our previous generation platform. We will also continue to innovate and add enhancers on that platform to continue to make it a very attractive platform for more and more customers. So the life of that platform will be longer. With its higher throughput, we also had the ability to increase the consumable pull-through. And so the consumable pull-through after a couple of quarters of launch and shipments will be higher than the Sequel II. And so the combination of the both will expand our revenues and help us grow in '23 and beyond. Now executing on Revio and of course, Onso, is critical for us to be successful against our plan, but it doesn't stop there. We are also transitioning. You've heard us talk about this before. We are transitioning from a single platform to a multi-platform company. Launching new products at different throughput capacity and also launching products at shorter frequencies than we had in the past. And so more frequent product launches will help us to gain the momentum to have more new customer acquisition and to enhance the upgrade cycle with existing customers. We will be launching more higher throughput platforms, which will help to increase the pull-through as you see on Revio. And the way that we're going to do that is by reducing the run time, increasing the number of chips that can be run at the same time, and increasing the density of the flow cell, similar to what we demonstrated with the Revio platform. We will also continue to develop more end-to-end workflows, more solutions for different applications, which will also help to drive demand for our technology and help to grow our revenues. So showing and demonstrating the value of HiFi long reads for more and more applications, as you heard from Jen, and dramatically drop -- reducing the cost to sequence as you see on the Revio platform is going to increase our addressable market opportunity and help us to increase our market share, and that is what's going to support our revenue growth targets. I talked a lot about launching new products, expanding our product portfolio. And so what you see here is that in 2026, with $500 million minimum revenue that the mix of revenue is more diversified than it is in 2022. We're going to have revenues coming from our long-read platform and revenues coming from our short-read platform. What you don't see on here is also the fact that we're going to expand the platform in terms of different throughput capacities. So we're going to have a lower throughput that you heard Dave share. We're going to have our mid-throughput platform. We're also going to have higher throughput platforms. So if we were to break that out, that diversification of sources of revenue that helped drive our growth is even greater than what is shown here. The other element of this graph that I wanted to point out is that purple slice, which is our consumable revenue. And today, roughly about 40% -- mid-40% of our revenues is consumable revenues. As we launch higher throughput platforms into the market, that percentage is going to grow. In other words, our consumable revenue is going to grow faster than our overall revenues. We're going to also have a short-read platform, and so we're going to have consumable revenue coming from our short-read platform. And so therefore, the total consumable revenue mix out in the 2026 timeframe is going to be over half our revenues. Consumable revenues are higher margin than our instrument revenues. And so that's going to be the starting point in terms of improving our gross margins and will actually be the largest driver to increasing gross margins over this timeframe. So that's what I've labeled here as product mix. Expanding and growing our consumable revenue is going to contribute to us improving our gross margins for the company. Growing our overall revenues will also increase our gross margins and expand our gross margins through volume. So let me take a moment to dive deeper into how volume improves both, our instrument gross margin and our consumable gross margins. What you see here is the breakdown of our cost of goods sold for instruments and consumables. And you see it broken down by materials, overhead and labor. With higher volume, you get to spread the fixed cost over more units. So therefore, the per unit cost goes down. Higher volume also allows you to have volume pricing, which also helps to improve your costs. One of the things that you'll see on the instrument side, and we've already demonstrated this with Revio is that we are going to continue to have common components across platforms, which helps to further get the economies of scale from the benefit of having higher volume, but the other aspect is that it helps to mitigate inventory risk as demand moves from 1 platform to the other. You've heard Mike talk about contract manufacturers and the benefit of contract manufacturers in terms of supporting first capacity of demand. Well, the other benefit of contract manufacturers is that as our revenue grows, we do not have to make the commensurate investment in our fixed cost infrastructure that we can keep that where it is and still be able to grow our revenues from where we are today. Now on the consumables side, what you'll notice is that the mix is more diversified, i.e., more labor and overhead as a percent of the total COGS mix. And so what that means is that as volumes increase, you get more leverage in terms of gross margin expansion with higher volumes of consumable revenue. So the gross margin on consumables is going to expand even faster. There are opportunities to improve our gross margins on the consumable side, such as introducing automation, especially with respect to reagent manufacturing. But also, as our volumes grow to manufacture in larger batches, again, to spread the labor and overhead costs over more units. But then you've also heard Mark talk about moving from 8-inch to 12-inch wafers, which has the same benefit of spreading those costs over more units. And so there's quite a bit of opportunities, a number of different opportunities to expand our gross margin, and it starts with product mix and then, of course, volume. There are other contributions to expanding our gross margins. And before I go into it, I did want to highlight that having Mike as our leader in the manufacturing organization and as a partner for me, we share a passion in terms of driving efficiencies to reduce our cost structure. And so manufacturing efficiencies is also going to contribute to our gross margins. You heard Mike talk about 140 different opportunities. Well, we'll see. We'll see about that. But over this timeframe, we are going to have manufacturing efficiencies expand our gross margin. There is a very tight close early integration and partnership between manufacturing and R&D when it comes to the technology development, which helps to improve the cycles of learning and to be able to benefit from manufacturing efficiencies early in the quarter -- early quarters after our product launch. You heard Mike talk a lot about quality and testing and improving our yields. And so therefore, that helps to reduce the cost that would otherwise hit our P&L. So efficiencies is going to help expand our margins. There's also an opportunity as we launch new products, and we demonstrate more and more value for our products, especially for our customers that we can price to that value. Having said that, pricing is not going to be a big contribution to our gross margin expansion in this forecast horizon. Now of course, the last element of the P&L in terms of getting to a point where we turn the business cash flow positive is OpEx investment. We are going to be very disciplined with our OpEx investment and prioritize the investments we make against our product road map, which is going to fuel our growth going forward. One of the other things that we did this past year was actually reorganize the R&D organization around centers of excellence to deploy key capabilities such as biochemistry, bioinformatics, instrument engineering to the programs that need that talent the most at the point in time when that talent is needed. And so that helps to drive efficiencies. There are opportunities to outsource components of our R&D. But where we get really excited is continuing to partner with others in the sequencing ecosystem and with our customers to continue to innovate, develop new applications, which will help to continue to drive demand for our technologies. A prime example of that is the Broad Institute and the Maxi kit that we launched last month. We've made quite a bit of investments in our commercial organization, which has helped to generate more awareness for PacBio and our technology than ever before. You heard Jeff talk about all of the momentum and buzz and excitement for PacBio at ASHG. And so what we've done is we started to get that flywheel of demand moving. And so therefore, to accelerate our revenue growth going forward, we don't have to make the commensurate level of investment going forward. We've been investing in the business, which has helped to enhance employee productivity across the company. And so therefore, to support this revenue growth, we believe that our headcount growth will be limited. Let me just take a step back and walk through kind of the breakdown of our OpEx, and it's an estimate for 2022. And what you see here is that 40% of our spend in OpEx is headcount related. Another 20% is noncash stock-based compensation expense. So that's something to factor in when you think about us turning cash flow positive. And then another 40% is non-headcount-related spend. This spend-head has grown for us in 2022. And that's because of where Revio and Onso were in their relative cycle of the development programs because we were nearing the platform launch. And towards the end of a development cycle close to a platform launch, that expense base rises. And so going forward, by us staggering our platform launches, non-headcount-related expenses will moderate and is well within our control in terms of how much we spend in each year. So as you can see, our expectation is that our OpEx will grow roughly 5% CAGR out to 2026. And the combination of all of that is how we get to cash flow positive. It is very exciting because we have come so far, but we are also just getting started. We've expanded the foundation to scale the business. We are now focused on accelerating our growth and then moving into durable growth in the outer years. And so it's a very exciting time for PacBio. And with that, I'd like to call Christian, Jeff and Mike, and we can do Q&A.

Maybe I'll ask -- it's Dan Brennan from Cowen. Maybe I'll ask multiparter since last time I asked one. I guess the first one would be, you've kind of got to the point in not giving the order numbers. I'm wondering if you'd be comfortable giving a sense of where orders are today, number one. Number two, when we look at the past product cycles, when we think about how long it took for the next-gen product to exceed the installed base of the fire. The S-1, it took 6 quarters after the RS launch, but the Sequel II, it took 11 quarters after the Sequel I launch. I'm just wondering, given the fact that you're planning to certainly a bigger opportunity and an installed base that will exceed it is kind of 3 years the right ZIP code for that. And then probably the most important one would just be on the pull-through. Obviously, that's potentially the most exciting part of the revenue model, the fact that you've got a theoretical $1 million, $1.3 million pull-through on this product, which is 5x greater than the Sequel IIe. So like how do we think about on a per-platform basis, like what do you think the customer utilization will look like? In the prior platforms, it's been around 50% of the theoretical max. I'm wondering, is that the right ZIP code to think about ultimately where this settles out?

That's a mouthful. Let's see if we can unpack that. Maybe start with our thoughts on installed base and pull-through. We do believe that we have more scale than we've ever had, so that we can accelerate our installed base. And my expectation is that we could do better than the Sequel II and IIe installed base. So our expectation is, we have more capability, we have more reach, and as a result, I think we can move faster. And so that's the first thing. With respect to pull-through, Holter's tricky, right? We haven't really given specific pull-through for Revio yet. Because the simple fact is, we just don't know yet. And we will unpack that over the next several quarters. But what's exciting is that, of course, you pointed it out exactly. At 1,300 genomes at $1,000 a genome, it's $1.3 million a year, which is massive. Now most systems don't run that high, and most customers won't pay $1,300 a genome because what we will do -- or I'm sorry, $1,000 a genome, most customers will actually pay less than that. And so what we will do is balance the elasticity gain from lowering -- getting the price right with the kind of our pull-through expectations. Typical systems historically have run anywhere from, say, 25% to 40%, 50% utilization, give or take. And what's interesting about the question is actually the users that get the best prices are the ones that probably go first. And we'll set the table. And so their pull-through, although they may be more higher utilization, may in fact not -- it may not be straight math, right? 50% times $1,000 of genomes, Oh, it's $0.5 million of pull-through. That's probably not the way to think of it. However, we do fully expect it to be a multiple of Sequel IIe. I mean there's no question about that. And that's really the point, right? If we can create systems with higher pull-through and with Susan pointing out that not only do we have the opportunity to grow gross margin just because the product mix changes between consumables and instruments, but we have a lot of opportunity to grow the consumable gross margin. And so we're going to get a double benefit there. And I think I kind of addressed -- sorry. Why don't you comment on that? So I tried to point on that one but no.

Answer your question directly, we're not giving any commentary directly on the number of orders we received. I think what I will say is, you can see on my last slide, the tremendous amount of enthusiasm in terms of customer reaction to these products. Each of those customers that are shown on the slide have each ordered at least one and several of them, multiple orders. And that's not an all-inclusive list of the customers who have ordered across every single region as well. I think customers have been incredibly enthusiastic about our customer loyalty programs and think that we've treated them very fairly in terms of compensating them from a discount perspective on Revio in terms of some of the more recent purchasers of Sequel IIe. So that certainly helped as well. And I think from a regional perspective, as you can see by the names on the slide, we've had a really strong start in APAC. So the team has done a great job there. Obviously, the European market is driven more by tenders. And so those orders will come, but they have to go through that process. And I expect AMR to really accelerate here throughout the course of Q4 and into Q1. So I expect that we'll give a little bit more color on order volume sometime in early to mid-Q1, I think is the point.

Yes. I mean I think at the end of the day, the vast majority of those you saw on the list are multi orders and significant orders. So obviously, that doesn't give you the answer, but we're thrilled -- I mean we're -- it's been remarkable. It just -- it really has been remarkable about how fast -- it's a $779,000 a piece of gear, and it's just blows my mind. It actually blows my mind because we're all sitting still in this economic backdrop of uncertainty, right? We've talked about that on our Q3 call. We talked about it in Q2. We'll probably keep talking about it because I do think the world is in a really interesting place. But when you have new technology that fundamentally changes the game, it actually helps to start to insulate you from that. And given the fact that the order book has been so strong, it really starts to help us to plan out our factory capabilities over the first half of next year.

The only other comment I'll add, given you asked a couple of questions there. But with respect to consumable pull-through, the early conversations for Revio, certainly, customers have been very excited by the platform. But what's interesting to me was that some customers were so excited that they were going to place a multi-instrument order. They don't necessarily have the samples to fill all that capacity, but they are, by historical nature, going to fill that capacity. So you have some labs such as that. But then in other cases, you have labs where they have multiple instruments. They have multiple Sequel IIs and they decide to start with just 1 Revio and then they plan to build the business case to purchase their second Revio. But building that business case and the financial case becomes much easier, again, because of the short payback period on that CapEx investment. And so they're going to have some of that variability in the early quarters. So I wouldn't use that first couple of quarters of us shipping the platform and the consumable pull-through as indicative of what the steady state pull-through will be because of that dynamic.

And I'm sure on our calls, we will [indiscernible] as we launched the new platform, we would really pause on for several quarters to figure out truly what we think the consistent pull-through would be. But nonetheless, it's going to be a multiple of what we do today and will completely change the look of our P&L.

Question, one for you on just 1,000 new customer leads at ASHG that you highlighted. Is there any color you can share on staging or how you've sort of gone about qualifying those leads, either by sort of customer type or by customer budget or an intent to purchase a bundle versus a single platform?

Jeff, do you want to?

Yes. We're still in the process of reaching out to all of those customers. It's obviously a big number. I think the interest is going to be spread across the markets and the applications that the team has talked about. And like I said, I think the bundle has been a really interesting package for customers as well. And we've seen a lot of uptake from that. In fact, while we were sitting here earlier in the talk, I looked to check my e-mail. We got an order for one of those bundles just as we were speaking here as well. So those orders, I think, in terms of Sequel IIe and Revio bundles, or Revio and Onso bundles are starting to come in. It's a slightly higher price point. When you think about it, it's actually a great deal, for customers, especially on the long-read side that want to get started with Sequel IIe now, and then grow into that capacity that Revio will deliver for them as well.

Yes. I think to be clear, there's -- we have 2 kinds of bundles. We have the bundle where you can buy a Sequel IIe now and take Revio later. And we also have a bundle where you can buy Revio and Onso. And it's nice to see, you're doing some actual work while we're up here on stage.

Got it. That's helpful. And then, Susan, one for you on gross margins. Nicely ahead of at least where we were in '26 in our model. Is there any color you can share on just steady-state gross margins on the IIe versus Revio, both on the instrument side as well as on the consumables side?

Yes. So the way that I'll answer that right now because it is early for us to guide 2023, is that when we launch a new platform in the early quarters, it generally does tend to be very expensive, and so the margins can be lower. And then I also talked about the fact that we do improve the cost, we reduce that cost and that helps to improve gross margins, especially because of that early integration between manufacturing and R&D, early in the technology life cycle. So I think what you're going to see is that Revio probably follows that same pattern in terms of having some of the margins maybe be lighter than what the steady-state gross margins will be, and then it will improve over time. And then, of course, the consumable revenue and having that grow to be -- grow faster, that will help to pull our overall gross margins up.

Christian, one for you on just 1,000 new customer leads at ASHG that you highlighted. Is there any color you can share on staging or how you've sort of gone about qualifying those leads, either by sort of customer type or by customer budget or an intent to purchase a bundle versus a single platform?

Jeff, do you want to...

Yes, we're still in the process of reaching out to all of those customers. It's obviously a big number. I think the interest is going to be spread across the markets and the applications that the team has talked about. And like I said, I think the bundle has been a really interesting package for customers as well. And we've seen a lot of uptick from that. Back we were sitting here earlier in the talk, I looked and check my e-mail, we got an order for one of those bundles just as we were speaking here as well. So those orders, I think, in terms of Sequel IIe and Revio bundles, or Revio and Onso bundles are starting to come in. It's a slightly higher price point. When you think about it, it's actually a great deal for customers, especially on the long range side. They want to get started with Sequel IIe now, and then grow into that capacity that Revio will deliver for them as well.

Yes. I think to be clear, there's -- we have 2 kinds of bundles. We have the bundle where you can buy a Sequel IIe now and take Revio later. And we also have a bundle where you can buy Revio and Onso. And it's nice to see you're doing some actual work while we're up here on stage.

Keeping up with the volume.

Got it. That's helpful. And then, Susan, 1 for you on gross margins. Nicely ahead of at least where we were in 2016 in our model. Is there any color you can share on just steady-state gross margins on the IIe versus Revio, both on the instrument side as well as on the consumables side?

Yes. So the way that I'll answer that right now because it is early for us to guide 2023, is that when we launch a new platform, in the early quarters, it generally does tend to be very expensive, and so the margins can be lower. And then I also talked about the fact that we do improve the cost. We reduce that cost, and that helps to improve gross margins, especially because of that early integration between manufacturing and R&D early in the technology life cycle. So I think what you're going to see is that revenue probably follows that same pattern in terms of having some of the margins maybe be lighter than what the steady state gross margins will be, and then it will improve over time. And then, of course, the consumable revenue and having that grow to be -- grow faster, that will help to pull our overall gross margins up.

But I do think it's fair to say, okay, just the Revio platform as a whole will be a significantly higher gross margin than where we are today with the Sequel IIe, if for nothing else other than the incremental pull-through in that and the mix change. But relative to the capability, we expect improvements on both sides interim and consumable.

I'm actually's impressed with Tejas having a 2026 gross margin target.

Can you talk about the capacity that your current -- or percent of your current customers that are running at full capacity? Should we think about them as being the first ones to adopt Revio? And then just in terms of the pace of the upgrade cycle, you gave so much information that I hate to like try to get squeezed even more detail on this, Susan. But it does imply probably a front-loaded instrument cycle because you have all those consumables coming in 2026. So just the way to think about that. And I have 1 more question on OpEx because I won't lay out too much of questions, go ahead.

What was the first part of the question again?

Higher throughput customers.

Higher throughput customers.

[indiscernible] running at a capacity.

Let me answer that 1 first, and then you can go on the gross margin. But I think look, very few of our customers, if any, are hardly -- are running at full capacity. However, that doesn't -- that's actually not the driver for buying a Revio. Buying a Revio is 2 components. One, it's economically better even if you're not running at full capacity. Yes, you have to come up with the capital, but we've already seen that capital is available and that hasn't been a gate. But it's also at some level, an aspirational purchase that customers we see already are looking at one-for-one replacements of -- and remember, 1 Revio is 15x more powerful than 1 Sequel IIe. And so you have to think about the expansion of Revio in both -- for the high-throughput labs that are already running very effectively as just an economic juggernaut and allows them to create the skill they want and actually take share from short reads because, as Jen pointed out, it just does more. And so you have that aspect. For the lower throughput customers, there's still Revio buyers. And the reason for that is because it gives them the ability to expand over time. And the per run costs are very -- are cheaper. And so coming up with the barrier, the capital barrier isn't that significant. And so I would say, at some level, there's a bit of emotion. Scientists are people, too, and they have these. There's really probably no need for your iPhone 14 if you have an iPhone 8, right? But people go through those upgrade cycles. It's a similar kind of thing, albeit in a little bit of a different world. And Susan, if you want to comment on the front-loading of instrumentation, that would be great.

Yes. So to answer your question, with respect to Revio, let's start with Revio and then go over kind of the time frame out to 2026. The Revio platform is so transformational that we expect a lot of our Sequel II customers to upgrade to Revio. And so that is going to have the effect of initially increasing the relative mix towards instruments. And then as our customers start to use their boxes, that's going to grow our consumer revenues. And so then, therefore, the mix of consumable revenue will grow over time relative to our total. In the initial periods, probably as we're shipping a bunch of boxes and then our customers are ramping on those boxes, the consumable pull-through would be a little bit lighter. And then, of course, as we ship more boxes and we expand the installed base, then it will kind of settle into that bimodal distribution that you probably heard us talk about in the past in terms of having the high users really using their box at a high rate, which helps to increase the consumable pull-through. But we're also going to be selling the Revio box to customers that have maybe a lower utilization. And so you'll end up seeing kind of this bimodal distribution is our expectation. And then the average will settle out where it is. But the other thing that also helps to improve consumable pull-through is the fact that a dynamic that you often see with our platform launches in terms of the time between 1 platform launch to the next has been relatively long. And so then you go through the cycle where you increase consumable pull-through and then maybe it settles back down as the market expects another platform to come. What we're going to do going forward is we're going to be focused on shortening the time frame between 1 platform launch to another. It's not going to be a replacement of our existing platform, but it's going to expand our product portfolio at different throughput capabilities. And in particular, as we launch higher throughput platforms, that's further going to help accelerate our consumable revenue, and therefore, help our consumable pull-through. And we're going to do that both on the long-read side, and the short-read side. And so that's how our overall consumable revenue mix grows over time.

Yes, I think that composition is really a big component of this, is by the time you get out to 2026, our Revio customers are operating at full tilt. But between here and there, we will have launched other platforms that will be generating lots of consumables, too. And so on balance, the layering effect, so to speak, of instrument placements with respect to consumables in the year-by-year makes it so that you get to a steady state where consumables are a very significant part of the business. And whether we achieve that steady state in '26 or not, it's still up for debate, but you will see that impact our P&L even as early probably as '24, '25, but you'll see that improve through '26 and then out into the future horizon as well.

I got a really, really long answer to that. So I'll pass the next one. I'll just -- I'll just make it really, really, really short then. Just as we think of 2026 P&L, should we think about this mature sequencing P&L, 20% R&D; 10%, G&A; 20%, SG&A; maybe 25%, sales and marketing, I mean, and that's the cash flow breakeven. Trying to ask a quick 1 because you gave you a really, really, really nice detailed long one [indiscernible].

We have a tendency to long detail. That is a good question. The composition of the total P&L, I would argue that we're probably not still fully mature in steady state. I think we'll still be in a heavy growth mode. As Susan pointed out, through this horizon, we think our CAGR with respect to operating expenses can be pretty moderate. And she pointed out 5% on the slides. And the reason for that, of course, is the opportunity to stagger our product launches a little more effectively so that we don't have the bolus of nonheadcount-related expense. In terms of the traditional metrics, how much R&D, et cetera, that will actually really be dependent on a couple of different things: One, how fast do we get towards the clinical opportunity, because I expect if the clinical opportunity is accelerated, then we probably will be spending a lot of more resources on preparing to be clinical, so to speak. And that affects the whole company. And two, on the SG&A side, our commercial organization, the reality is we're in a pretty good scaled spot today. And that was the plan, right? To scale it well in front of where -- we're well in front of where the demand, where the actual revenues would come in and we're in that spot now. But there may be opportunities for us to specialize more and that might require a different -- a little bit different composition. Still fitting within that spend envelope, but allocating the dollars in different ways. And so I think for today, it's -- I mean, obviously, we have the models that put all of it together. But today, it's probably a little bit too early to tell the, is it going to be 20%? Is it going to be 22%? Is it going to be 31% or 18%? It's still a bit early for us to tell '26 explicitly.

Great. And I think we have time for 1 or 2 more questions to time.

Kyle Mikson from Canaccord. I'll probably be quick here. So just on beyond '23 kind of order book. A lot of like several multiunit orders seems like, that's quite a few that could be over like 14 units, $11 million in revenue for instruments. Are all those going to be shipped and installed in the first quarter of '23, hopefully? And maybe just talk about like backlog conversion throughout 2023. So like just a lot going on lateralized just could be just here.

Sure. Jeff, you want to talk about how we might feather out shipments?

Yes. I think some of the units that we have ordered will ship in Q1. But we've set the expectation with customers that it will happen throughout the course of 2023. We have a lot of customer demand as we've talked about here. And so we want to be fair in how we allocate those first couple of quarters of instruments. But certainly, the customers that have ordered now are going to get -- the single units they're going to get those. The multiunits, we'll phase those out. But I would expect the early customers to receive 1 or 2 in the first quarter as well?

Yes. I think the strategy here for having a great product launch is all about picking the customers and being thoughtful about how you do your shipments. And so what that means in our context is that some of our highest throughput, high user customers will get their instruments first likely. And that way, they have the most experience. And so we can manage them through the transition to Revio, and then we'll ship of both orders and then we'll stop for a while. And we'll stop for a while. And by a while, I mean, weeks. We'll stop for weeks, so that we make sure that everyone has a super smooth experience, and we understand how successful the launch is. We've done this a few times before in our careers. So we can -- we know we have a playbook that we think works. For those with significant multiunit orders, as Jeff pointed out, we'll feather those out over several quarters probably, because we want to make sure that all of our customers get the opportunity to enjoy the power of Revio. And so that will be an important part of how we think about this. It also gives us the opportunity to perhaps be in a bit of a backlog situation, which is always good for being able to predict your revenues a little bit better, right? Today, nearly all of our demand comes from revenue generated within the quarter. If you can get to a steady state where you always have a little bit of backlog carrying forward, it really helps as you manage and grow your business. But of course, you don't want that to be too long because it's a race or race model, and you want to get those consumables flowing as fast as possible.

That was great. And then, Susan, just on gross margin. Compared to today, it's 20 percentage points higher, I guess, it is a little bit higher than what we were expecting about that time by 2026. I guess, what your margins kind of inflect in your opinion based on the mix of the product revenue, and how do you kind of think about all these new instruments being launched? And how that sort of just like a headwind tomorrow and maybe like without that, I mean, could you get to 70% in the near term?

What percentage in the near term did you say?

Well, I said like without the obviously new products launching on the instrument side, like what could the gross margin number maybe be mid-60s possibly?

Well, so certainly over time. Certainly over time. So it is true that, as I mentioned, consumable margins are higher than instrument margins. And so as we launch a new product, and if more of that revenue is on the instrument side, then it can have the effect of diluting our gross margins. Having said that, we also have opportunities to find ways to improve our instrument gross margin. And then, of course, that pull to lift our overall company gross margin is happening because of the consumable revenues. So a lot of it is around new applications to drive demand for our instruments and had those instruments running, but also launching higher throughput platforms. And so that is what's going to help to improve our gross margins as a company. We also have additional opportunities that we are thinking through in terms of improving gross margins, some of which we alluded to in the presentation, both between Mike and myself, to further drive efficiencies to improve gross margin. So can our gross margins be in the mid-60% over the long term? Most certainly. Our consumable margins can have a long runway in terms of expanding and improving. And so that's mostly going to be what lifts our gross margins, but also so do our instrument margins as well.

But Kyle, the 1 thing I would want to add is that this is a new paradigm. Today starts a new paradigm for PacBio in the sense that we are going to be launching new products more and more often, and that will -- those platforms -- when we talk about launching into plan, it's really only a 1 or 2 quarter kind of costs, so to speak, as you get -- as you ramp up to speed of capability. But as our revenue base gets bigger, that impact becomes less and less. And so you can expect from us to be much more focused on more platforms into the market, driving that strategy that I started the day with multiple technologies across a stack, multiple products within that technology, which are generally platforms and ecosystems around those platforms, and then ultimately, creating a layer of integration that, quite frankly, companies haven't done yet. And that's -- and it will be our challenge to make that happen and do it successfully. But I fully believe that, that's the feature of genomics. And that's why I do think PacBio is the future of sequencing.

Great. Well, I think that's a good transition now into lunch. So we'll take the next 20 minutes or so, and we'll have another course coming out we could finish up, and then Jonas will come on to wrap up the day with some of those paradigm shifts that Chris and Jeff mentioned. Thank you. [Break]

[indiscernible] PacBio sequencer depending on the subgroup of pediatric cohort, we see an increase in the year losses between 10% to 30% with the newest sequencer and the new solutions that are being offered. It's going to change that so much, the scalability of doing research to bring it to another level of thinking about expanding since the customer -- now we want to expand the use of long-reach sequencing for different version and diagnosis. But our main thing that we didn't want to do is a clinical validation as using long-read sequencing. So it's going to make a big difference in the validation process and also how we can bring it now to a clinical test and not just using for the research cases.

Please welcome to the stage, Co-Founder and Chief Scientific Officer, Jonas Korlach.

Thank you very much. Hello, everyone. It's a real privilege to speak to you today. I will try to enhance your lunch experience by telling you about some of the fundamental paradigm shifts that our customers have achieved through the use of our technology. And I would also like to give you my perspective of what it means for our business. By way of introduction, Jeff told you about the Sequel Insights System. And so here is the graph of the cumulative data output by our global customer base. And you can see that this is an exponentially growing shape. So the output of data is accelerating, and we can certainly expect that with the Revio system, this acceleration will be even steeper in the future. And we are very pleased that last month, our customers surpassed 25 [ peta ] basis. That's 25 million, billion basis. Truly remarkable. Now in the research space, what our customers do with these data, they publish papers. And so you see the graph of the peer-reviewed publications has been very similar shape. More and more papers are coming out. You noticed there's no y-axis on this graph. And the reason for that is because it's getting harder and harder to get a exact count of the number of publications. That's mainly because a few years ago, PacBio is always in the title of the abstract. Now as it becomes mainstream, sometimes it's buried in the supplementary method somewhere, and so it's very difficult to get. But the conservative estimate is that there are now over 9,000 peer-reviewed publications speaking about and demonstrating the power of HiFi sequencing. So what are these customers saying? So I've listed here a few reasons for the last few months. And so I'm not going to obviously read all of these, but I hope it gives you a little bit of a sentiment of what our customers are saying about HiFi being the current gold standard, being helpful for understanding regions that previously a drastic improvements in variant detection, heralding a new era, overcoming limitations, the accuracy and the high reproducibility and then autism that remain the mystery for several years, potentially having great benefits in the clinic and so forth. So our customers in these publications are really highlighting the value and the power of HiFi sequencing. Also, our customers through these research publications compare HiFi sequencing to other technologies. So whether it's Illumina sequencing, ONT, Sanger sequencing, you see similar statements, artifacts in short-read data, otherwise missed through Illumina sequencing, carried more effectively characterizing genetic variation in smaller sets of high-quality long-age sequencing data. Accurate long reads outperforming those that did not. Our customers are calling for greater uptake of highly accurate long reads in the future and then overcoming things that are misdiagnosed by conventional method and so forth. And so through those statements or through their work, I'd like to now describe to you 10 fundamental paradigm shifts that changed the way that researchers look at biology that they look at genomics that have been powered by HiFi sequencing. So the first one is -- and this has been highly publicized, and we mentioned that a human genome was completed for the very first time, the telomere consortium. And as you know, the assembly was directly built from the HiFi reads. I'm not going to spend more time on it because you've all heard this in late March. But what I would say is what does it mean for our business? Well, in the course of this project, the researchers use all the available technologies and genomics are available, and that allowed them to evaluate the relative contributions of each sequencing technology to generating a T2T genome. And so in this process and now with other human and also planned animal genomes, my interactions with the researchers, they have communicated to me that they believe that HiFi sequencing contributes 98% of what it takes a T2T genome. And so I expect that we're going to do this a few more times with the KitchenSync approach and really get to true T2T. But then in a production setting on a mass production scale, HiFi sequencing will be the workhorse and will be good enough because you get almost all of the information that there is to get. Now the second paradigm shift is that the human genome doubled in size this year. So that's pretty cool. That doesn't happen every year. And I can tell you, it won't happen again because 6 gigabases is the right answer. For the longest time, when you ask the researchers, how big is the human genome, they would say 3 gigabases. But that was because of a technological limitation of not being able to segregate the 2 copies that each of you have in every single cell, you have a copy of 3 gigabases from your mother and a copy of 3 gigabases from your father. And so this is a series of preprints by the Human Pangenome Reference Consortium stating, we no longer consider collapsed 3 gigabases genome assemblies as state-of-the-art, but instead consider 2 genomes for every deploy genome assemble that is 6 gigabases to 3, versus 3 gigabases, where the parental haplotypes, that's the parental copies from the mother and from the father, are phased and fully resolved. So that's a fundamental paradigm shift. And what does it mean for our business? It means that now the researchers can fully resolve both copies of the genome. And HiFi sequencing is the only technology that is capable of doing so. In fact, this preprint, which has now been published in nature about 3 weeks ago, shows that PacBio HiFi sequencing can face and separate the haplotypes at over 95% and competing long-read technology is only about 50%. So there's a big difference between what HiFi sequencing can do and what other technologies can do. The third paradigm shift is one of these preprints and that's a human pangenome reference. So until this paper, as you know, the human reference genome was a single linear genome, and here for the first time the HPRC, the consortium, has built a new human genome reference out of many individuals. This is completely and solely based on PacBio HiFi sequencing, 47 genetically distinct individuals. And remember the 2 copies? So that 94 parental copies. They have excellent qualities, completeness, accuracy, base pay accuracy. And this preprint immediately shows the dramatic benefits that you get from moving from a single linear reference to a reference that captures much more of the diverse, the genetic diversity across the human population with different ethnicities. So they added about 5% of the genome. They added over 1,500 gene duplications and immediately show drastic improvements in variant calling, resolving complex regions, tandem repeats, improving RNA seq mapping, chip seq mapping and so forth. What does this mean for business? It means that now we are seeing these 5%. We're seeing these gene duplications. But they can only be seen with HiFi sequencing. So it can no longer be justified to take short read genomes and try to do 2 whole genome sequencing. Now this leads me into the transition of the next paradigm shift, which is a big one, and that's what I call whole genome sequencing with the W. Let me explain to you where this is coming from. A little less than a year. We lost one of the giants in human genetics, Debbie Nickerson from the University of Washington. And in 2014, there was a NHGRI workshop of the future of genomics. And I want to play your little clip. She's in the audience, so you will hear her voice and she said this. [Presentation]

So typical Debbie. If you knew her, very direct. And so she set this in 2014, recognizing that short-read whole-genome sequencing goes in sequence the whole genome. And so we are so pleased to see that her vision and her request that she did 6 years -- 8 years ago, is now becoming realized. It leads to certain breakthroughs, such as the paper that we mentioned already before, with more sales of diagnostics and the 13% was mentioned by Jen I think it's worth noting that if you read the paper, Tony Postini and the researcher of Children's Mercy, actually point out that for most of the cases, they found pathogenic variants. So the diagnostic yield was much higher, but they couldn't yet count it into the 13% because this was seen for the very first time, they call this the end of 1 problem that we need to catch up with the databases, we need to catch up with understanding what is causing. But I've had so many conversations with him where he said, I'm sure that, that is causing the disease, but I can't yet count it in the 13%. So Jen also mentioned, as a reminder, the difference between a true HiFi whole genome sequence and what you can do with short reads. You get all the information. And it was with the Revio system now, it was so exciting to have conversations with researchers who now are changing their thinking and say, now we can consider for every individual and every patient coming into our cancer center or into a medical center, giving them a high quality of true whole genome that we can then use, that has all the information, and we can use that genome as a platform and we can mine that with bioinformatics for the types of information that we want to look at. Now as was also mentioned, the short read technologies have tried to convert some of these Xs into check marks. And so I just want to mention 1 thing that, in my opinion, so a lot has been written about Infinity CLR, but 1 aspect that I think has not received as much attention as it should is the fact from the Illumina presentations showing that in many cases, you get the wrong answer. Researchers will get the wrong answer. So this is a screen shot from the Illumina presentations that have been shown multiple times. This is a short region. And if you look at this region and compare it to the gold standard HiFi, you recognize that there are 3 errors. And this just in the short region. There are 2 incorrect SNPs, small variants. And then over here, the phasing is wrong. So first of all, you see that out of the 14 reads, because the reads are so short, only 3 of them are informative, and 3 out of the 4 give you the wrong answer. In contrast, HiFi sequencing, all 14 reads give you the correct answer and give you the 2 haplotypes. So I think it's really -- data are not available, as was mentioned. And even from the presentations that Illumina has given, it's very clear that researchers will get the wrong answer because of the errors that are introduced, which I think is very significant. With regard to the short reads, from the screen charts, you can measure the fragment size distributions. And you can see most of the reads are 2 kb or 4 kb. That's not long enough to resolve genes like SMN12,PMS2 and so forth. So on this graph, HiFi sequencing isn't even on the graph, it's somewhere around peer. So we've written several blog posts, commenting at the various stages throughout the years about the difference, the HiFi difference that clearly differentiates [indiscernible] long reads from synthetic long reads. Coming back to what researchers can do with actual true accurate long reads, the next paradigm shift is out-of-the-box 5-based sequencing. We mentioned the methylation capability. The paradigm shift here is that -- this is taking us from methylation analysis, which until now has always been at the population scale because of the low resolution can now go to the individual level. So this paper presents us with a scoreboard, 117 hypermethylation events detected with HiFi versus 8 with short read Bisulfite sequencing. That's the hallmark of a paradigm shift. I couldn't see it before at all. Now I can see all the epigenetics that is there. And for the first time, at the individual level, it allows you to link the genetic variance to the epigenetic information. So here, there's a structural variant in 1 of the copies, and you immediately see in the reads how that changes. You can see these are red when the structural variation is here. When it's not there, it's not red, you can link at the individual patient level. And so what does this mean for our company? This is like a blue ocean opportunity because that was not possible before. Children's Mercy, again, is leading the way to add the epigenetics layer at the patient level. The next paradigm shift, as you see from the icon, it's about RNA and isoform sequencing. And I want to give a bit of an introduction. This is you all learned this in high school, the central dogma of molecular biology, where you have a gene that is transcribed into a message, that's RNA, and that's then translated into a protein. Well, that's grossly incomplete because the actual central dogma molecular biology looks more something like this, where from a gene through a process called splicing, the RNA message is being processed into many multiple isoforms, and these isoforms then give rise and are translated to protein isoforms. And these protein isoforms from the same gene have different functions. Sometimes they can have the opposite function. So from the same gene, you make 2 protein isoforms and they have the opposite antigonistic biological function. If you're just counting gene expression, you will not understand what is happening. If gene expression goes up, is it the plus isoform or the minus isofor? And you can even have something like this where your gene expression profile does not change, but there's clear changes between the isoforms. A few more things that we know about this process, it's highly abundant. Over 95% of all human genes that have more than 1 coding regions called exon are subject to this process and alternatively spliced. The average number of isoforms per gene is estimated to be 7 or more. And we already know that 15% of inherited diseases and cancers are associated with this alternative splicing. So there are many papers that now represent the paradigm shift that goes from gene expression analysis to isoform expression analysis. That's a phrase that I borrowed from this paper from the Broad Institute. And there are many more papers. I just put them on until I ran out of space. I did want to put in 2 very recent contributions that were shown at ASHG, at the bottom, highlighting how we are now starting to understand the role of the differential isoforms in disease. So you can see here isoform usage, different schizophrenia. This is about Alzheimer's disease and so forth. So there are many learnings about the complexity of the transcriptome that PacBio Iso-Seq has provided just a couple of more examples. 2,900, that's about 12% of all brain-expressed human genes are heritable at the isoform level. What does that mean? It means you have 2 copies, 1 from the mother, 1 from the father. They're different, so they make different isoforms. And it matters which of those copies is being transmitted to your offspring and will change the heritability, GWAS studies and so forth. So you will not understand GWAS studies if we don't look at the isoform level. PacBio has also shown, and now that we have the full catalog, we can compare what was possible before. These are 2 cancer studies showing that 20% to 40% of everything that's there can be resolved on short-read sequencing. So you're missing 60% to 80% of the biology that's there that cannot be highlighted with PacBio sequencing. On the plant and animal side, the paradigm shift that we've seen is that no plant or animal has a genome too complex or too large that would prevent it from getting a high-quality HiFi genome. Just 2 examples. This is a locus. It's causing a terrible devastation in Africa. 3x the size of the human genome. So this researcher said, it's like an 18-wheeler next to a compact car, which would be like the fruit fly and so forth. And they got a high-quality genome using HiFi This, I think, is the current record holder. This was presented about 6 weeks ago by the Sanger Institute. It's the measle genome. So perfect timing for the season coming up. The holiday season, 100 billion basis. that's 30x the size of the human genome. And in fact, in this graph, 1 of those squares is the size of the parenteral copies of a human genome. So that's the human genome. And that's the measle [indiscernible] genome, done with HiFi sequencing, very neatly arranged each of those crosses a chromosome. And so what does that mean for our business? We certainly fully expect that we will continue this leadership position where PacBio has been the core technology in biodiversity studies, in conservation genomic studies, I don't even have time to talk about agragenomics. So every single species, every single strain of crops or livestock can get the HiFi genome, can get a high-quality genome and now affordable with the Revio system. With regard to microbiomes, our customers have demonstrated unprecedented resolution of microbiomes. This paper alone here, this paper resolves to completeness more members of the microbial community than all of the studies that have been done before. That's the hallmark of the paradigm shift. We've seen several papers after that, that the resolution is now unmatched to what can be -- could be done before, and this has been described in various publications and then also on genome web and so forth. Another paradigm shift in the area of gene therapy. So these AAV vectors that are used for research with the ultimate purpose to be injected into people for fixing their genetic defects until PacBio sequencing. It was not possible to properly QC and properly sequence those materials. And so now that we are able to do this with HiFi sequencing, we see that there are quite a number of unwanted molecules that I think you want to know about before you go on with your clinical trial or before you go on thinking about ultimately using it for therapy. And so we've gotten really great interest from the industry that is engaged in AAV in gene therapy to now use PacBio HiFi sequencing as a new paradigm shifting tool that will really allow them to accelerate the research and to have much safer reagents that are considered ultimately for gene therapy. Before I talk about the last paradigm shift, I just want to mention that I've been really pleased to see increased adoption by clinical labs. I have listed here a few publications and genes and diseases that are now have transitioned from the research into the clinical lab environment. This was a from Nationwide Children's, a new pipeline, and in this paper, the authors commented that, "the ability to generate long accurate reads uniquely poises long-read sequencing to revolutionize clinical NGS applications. So we're seeing the start of that, and I can't be more excited to see what the Revio system will be -- will translate to in this particular area. And then we're seeing growing by the scientific community. And Mark mentioned this, as more data, as more instruments go out there, scientists do what they do best. They're being creative, they're being brilliant and developing new methods, new applications. And we're leveraging this and we're seeing this. Some of them make it into our products. So this is the principal method behind our MAS-Seq that we just released. Deep consensus is now being -- is already incorporated in the Revio system. Some are a little bit more experimental and proof of principle like [indiscernible] and [indiscernible] on the bottom. And then we have [indiscernible] seq or completely new ways of to simplifying the template preparation. We are working -- we're very -- feel very privileged to work in close partnership and close collaboration with these groups and then we can evaluate them, whether we want to take them internally, put them into products or whether we want to have those as customer-supported applications. So it's pretty remarkable that the Onso system hasn't even been on the market, and we already have 1 paradigm shift. So this is extraordinary accuracy and sensitivity for short reads. This is what we presented at the AGBT conference, showing unprecedented limits of sensitivity. This is 0.001%. That's 100 molecules with a resistance mutation being detected confidently in the presence of 10 million molecules without it. So this task of finding the needle in the haystack is being made much easier. Mark talked about this. And I'm so excited by all the paradigm shifts that will come to pass as the high-quality short-read sequencing will get into the hands of our customers. So with that, I'd like to close. And if you allow me, I'd like to do so with a personal note. It so happens that Thursday of next week, turns out that Thanksgiving this year, marks the 25th anniversary of the inception of the original idea of single molecule real-time sequencing, and this is a scanned image of the drawing that I put in my lab notebook, so idea, watch DNA polymerase, make DNA thereby sequence. And so the very next day, I met Steve Turner, our CTO, and that was the beginning of the long partnership and friendship that Steve and I have enjoyed over all these years. And of course, it was Steve who was really the heart and soul of this journey and then also the company he found -- as you all know, he founded the company. He was the driver behind getting the first round of investment. And then on the technical side, he not only invented the [indiscernible], one of the principal pillars of the technology and figured out how to make them. But he had so many numerous other inventions and developments that led to where we are today. So I'd like to ask Steve to stand, and I'd like to ask all of you to recognize his immeasurable contribution to [indiscernible] technology. Now personally, if you ask me what the top 2 time periods over a quarter century with the technology, with PacBio where I would say one of them is when we got the technology to work. That's the dream of a method developer. And when we saw the first signs of life, the first pulse of the polymerase, which happened in this laboratory. This is the basement of [indiscernible] Cornell University where I did my PhD work, and Steve was graduate and postop there as well. So this is where the first pulses of polymerase incorporating DNA we're seeing. But the second time is this time, it's right now. And that is because we're now producing real products that fulfill the needs of our customers. I think the community has understood for a few years that HiFi sequencing gives you the highest quality, but they have the limitations with regard throughput, with regard to cost. And what's so exciting now is we're standing on the foundation of all these paradigm shifting, performance and publications that can now be scaled up. And so I couldn't be more excited by the potential and by what's going to come to pass next year and the year after that as the researchers really can scale this paradigm shifting sequencing performance. I'm also just as excited about the extraordinary accuracy of the Onso system, because that will allow us to talk to any researcher who's got any sequencing project, no matter what's a long-read project or a short-read project, what kind of samples they have. And I think that will be very powerful that we are the one-stop shop for giving you the best quality at the appropriate scale. And so all the speakers before me told you why they're at PacBio, so I'm going to do that at the end. I'm at PacBio because I couldn't imagine any other place in the life sciences where this type of paradigm changing developments happen, the leadership team with the experience with their passionate energy. The entire team at PacBio who worked so tirelessly on bringing these products to market, working with our customers, providing excellent support. And then the scientific community. It's just so motivating, it's so inspiring to see what they can do with the technology. The enthusiasm that they have telling me that for a few years, they weren't able to solve this problem. Now they finally can. And so it's been the thrill of my professional career. I couldn't imagine being anywhere else. And so with that, I thank you very much for your attention. Thank you.

Please welcome back to the stage, Christian Henry.

It's pretty hard to follow that presentation. You think about a science presentation over lunch and you're trying to you're trying to say, well, hopefully, everyone will kind of follow the science, but hopefully, the food is really good so that everyone's kind of happy and satiated. But the reality is you saw that enthusiasm out of Jonas and his passion for the science and what we're trying to get done. And that's really what this is all about. This is all about changing a paradigm that's existed for a very long time. And now we're at the precipice of the ability to fundamentally turn the entire industry here. And so I thank Jonas for his passion. I really appreciate it. And I thank Steve for his commitment as well. It's so great to see the founders of the company. I thought it was really important to have them here at this day as we kind of move forward on our new journey. A couple of other housekeeping things before I get to the final takeaways. I'd like to personally thank, and on behalf of the management team, I'd like to thank Todd Friedman and Tanya Boyaniwsky, in particular. Todd, as you know, is our Head of Investor Relations. And when I told him, I think I told him probably in August, I said, "I want to have an Investor Day, and I do want it to be awesome. He delivered and hopefully, you guys really enjoyed the day and you learned something. But the reality is, it's also behind the scenes, Tanya. Tanya, can you stand up, please? So every single person on the management team knows that this day wouldn't have happened without Tanya's persistence, her commitment and her understanding of how to bring us all together. And so we just are really appreciative. And of course, the organizers to Jane Maine and her crew, thank you for that. But as we kind of wrap up, I think today, we tried to hit really 4 areas. And I think we were able to spend some really good time talking about the power of our technology and our ability to go after these really big markets with great technology and a great strategy. We shared Revio and Onso with you as the beginning of our road map to the future. And hopefully, everyone got a chance outside in the foyer to take a look at the instruments. And I know the team out there was thrilled to spend time with all of you, because all of your questions and your excitement for the instruments as well. So thank you for that. The other thing, it's very clear that this is a very capable team. We have expertise across the board from product development and research, to operations, to marketing. You heard from Jen and Dave, really 2 of the premier life sciences marketers, and we're very fortunate to have them on the team. Of course, I'm also extremely fortunate to have Mark and Susan and Jeff as partners here, as we kind of push forward. So hopefully, you come away from today understanding that this is a complete team. We have deep experience and we see the future really quite well. And finally, hopefully, Susan convinced you that we have a very strong path to creating a highly successful business with positive cash flows, growing revenue streams, durable value creation, and this is really the opportunity for us to transform the way the market thinks about PacBio, because we definitely have the products, the market opportunity, the team and the ability to execute. When I started at the company and at JPMorgan in 2021, I said it would take us 2 years to get to this day, and turns out I was right. And so with that, I want to thank all of you for your attention today. I want to thank the entire leadership team for all of your support and for helping to build the next PacBio. So with that, have a great afternoon. We'll be hanging around for questions if people have some individual questions. But enjoy your week, and thank you for your interest in PacBio. Cheers.