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Analyst Downgrades Sequenom; New Benefits Provider Covering MaterniT21 Plus

NEW YORK (GenomeWeb News) – Investment bank Piper Jaffray today downgraded Sequenom's shares, citing increasing competition, as well as pricing pressures and legal concerns.

Separately, after the close of the market on Thursday, Sequenom said that its subsidiary, Sequenom Laboratories, has signed a national agreement with an unnamed "leading benefits provider" to provide coverage for the MaterniT21 Plus fetal aneuploidy test.

In a research note, Piper Jaffray analyst William Quirk downgraded Sequenom's shares to Neutral from Overweight and cut the price target on the stock to $2.50 from $5.00. He noted that while he anticipates MaterniT21 Plus to remain the leading non-invasive prenatal test in the near-term based on volume, as intellectual property hurdles fall and competition from other firms increase, "we believe the NIPT testing market could become commoditized over time creating a risk to Sequenom's NIPT test share."

In October, a federal court invalidated a key patent, US Patent No. 6,258,540, that underlies Sequenom's test, and though Sequenom is expected to appeal the decision, Quirk said that he believes the company's chances of success are "fairly limited."

"[W]ith its '540 patent now invalidated…we suspect competition is here to stay and could potentially increase over time," he said.

Also, the $2,750 list price for MaterniT21 Plus makes it the most expensive NIPT test being offered by the four leading companies in the US that offer such a product. Ariosa Diagnostics, Verinata Health, and Natera also offer NIPTs priced between about $795 and $1,500, according to Quirk. While MaterniT21 Plus offers more information — such as microdeletions, trisomy 16, and trisomy 22 — compared to other tests, he said that he believes that Sequenom's competitors will "enhance their offerings" over time.

Separately, Sequenom said on Thursday that it reached a deal with a benefits provider that increases the number of lives covered for MaterniT21 Plus to more than 113 million. A year ago Sequenom Chairman and CEO Harry Hixson said at an investor conference that a goal of the company in 2013 was to sign on three national payors, which would give it a total of 120 million lives under coverage for the test.

In morning trading on Friday, shares of Sequenom slipped almost 5 percent on the Nasdaq to $2.53.