NEW YORK (GenomeWeb News) – Investment bank Jefferies today upgraded shares of Sequenom to Buy following a survey of US commercial payors that suggests the San Diego-based firm is gaining "meaningful traction" in getting coverage for its MaterniT21 Plus LDT test.
Jefferies upgraded Sequenom's shares from Hold and maintained the price target on its shares at $7.
In a research note, Jefferies analyst Jon Wood cited his firm's survey of 20 regional and two national insurers representing 44 million lives, or about 15 percent of the insured population in the US. According to the survey, Sequenom has captured in-network agreements serving 60 percent of covered lives from the survey for its test which detects for trisomy 21, 18, and 13.
"Including out-of-network status," Wood added, "63 percent of members represented in our survey have access to MaterniT21 [Plus], while only 13 percent and 15 percent are authorized to receive Verinata [Health's] verifi and Ariosa [Diagnostic's] Harmony, respectively."
In addition to Sequenom's success in securing reimbursement, Wood said that the reimbursement rate the San Diego-based company receives is "more than adequate to support meaningful economic profit generation."
"[O]ur survey suggested a weighted average MaterniT21 reimbursement rate of 42 percent of list price, including 79 percent within regional plans, which we believe will account for a greater proportion of [Sequenom's] total claims relative to the mix represented in our survey," Wood said. "Such disclosure suggests levels that are more than adequate to deliver substantial economic profits to [Sequenom] shareholders, in our view."
Sequenom launched its test a little more than a year ago giving MaterniT21 Plus first-to-market advantage over verifi, which was launched in March, and Harmony, made available in May in partnership with Laboratory Corporation of America.
But, the Jefferies survey found other advantages that Sequenom has over its competitors. The Jefferies survey asked respondents about their perceptions about analytical and clinical data robustness, and though half said that they believe the tests offered by Sequenom, Verinata, and Ariosa were relatively comparable, 36 percent saw Sequenom as having the most robust data, compared to 14 percent from Ariosa, and none for Verinata.
Wood added that though Sequenom's test, listed at about $2,700, is significantly more expensive than verifi, which lists for about $1,200, and Harmony, which lists for about $1,000, almost all respondents, 96 percent, "indicated price has essentially no bearing on the decision of whether to offer in-network status for a sequencing-based non-invasive prenatal test for fetal aneuploidy."
Sequenom has captured about 12 percent of the US high-risk pregnancy market, he estimated, and by 2016, the company could have a 37 percent share of the market.
"Such a forecast contemplates meaningful incremental traction from under-capitalized competitors, even though such entities have failed to gain momentum to date," Wood wrote in his note.
In Monday afternoon trade shares of Sequenom on the Nasdaq were up 4 percent at $3.74.