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As MaterniT21 Drives Spike in Diagnostic Revenue, Sequenom Predicts 25K Tests Sold in 2012


By Monica Heger

This story was originally published March 9.

Strong sales of Sequenom's sequencing-based MaterniT21 test to diagnose fetal aneuploidies helped the company more than double its fourth-quarter diagnostic revenue to $2.8 million from $1.2 million in the same period of 2010.

The company expects that growth to continue. In the first two months of 2012, it received 2,500 patient samples for the test, well above the 1,000 tests it conducted in the remaining months of 2011 following its October launch.

Test volumes have "grown steadily week over week" and "we're optimistic that this growth will continue," CEO Harry Hixson said in a conference call last week to discuss the company's 2011 fourth-quarter results. The company maintained its goal of billing a minimum of 25,000 tests in 2012.

The test was expanded this year to include detection of trisomy 13 and 18 and rebranded MaterniT21 Plus, following the publication of a validation study in the American Journal of Obstetrics and Gynecology (CSN 2/8/2012).

Hixson said that turnaround time for the test is averaging around seven to eight business days, below the advertised 10 business days, and the company has received reimbursement from payors in line with its expectations.

To keep up with the increased adoption of MaterniT21 Plus, the company has hired an additional 23 sales representatives and two additional regional directors, for a total of 47 prenatal sales representatives "working in all 48 continental states, including New York," Hixson said.

Additionally, Hixson said the company is looking to expand its test to other countries, including Germany, Austria, and Switzerland through its license agreement with GATC Biotech subsidiary LifeCodexx and by developing additional "international licensing partnerships with other groups in Europe and other countries throughout the world."


Sequenom is involved in a number of patent disputes with other companies looking to develop noninvasive sequencing-based diagnostic tests for fetal aneuploidy, including Verinata Health, Aria Diagnostics, and Natera, but Hixson declined to comment on the status of those lawsuits because the litigation is ongoing.

He said he would "leave it to the courts to decide."

The lawsuits all concern US Patent No. 6,258,540, a broad patent on the detection of cell-free fetal DNA from maternal plasma to which Sequenom holds exclusive rights.

Verinata Health has said that it plans to launch its test in March, but has not yet disclosed a price. The company uses a very similar strategy as Sequenom — shotgun sequencing on the Illumina HiSeq, and then an algorithm that evaluates the proportion of reads from chromosome 21 compared to another chromosome. Aria, meantime, is working on a targeted approach, which it claims will enable it to charge less than $1,000 per test (CSN 1/18/2012).

During the call, Ron Lindsay, Sequenom's director and vice president of research and development, said of the competitive landscape that "it's hard to understand how [other companies'] cost of goods could be different." Verinata is using the same methodology, he said, and while Aria, through "higher plexing," could see "some savings once they reach a high enough volume." However, given that Sequenom already has high volume, "we don't think that it will be a significant difference."


Sequenom currently offers its test as an out-of-network provider, billing insurance companies $2,700 and uninsured patients $1,900, but is working to gain in-network status. During the call, Paul Maier, the company's chief financial officer, said that the firm has received reimbursement from a "variety of insurers, including the top national insurance plans" that is "in line with expected percentage of list price." Payment ranges "mirror those we've received from other [lab-developed tests] for which we're regularly reimbursed," he added.

Company officials declined to disclose further details on average reimbursement rate, the range of reimbursement, or the percentage of its tests that are being reimbursed.

So far, reimbursement has come from HMOs and PPOs, but the company is also working to get reimbursement from Medicaid, for which it needs to file applications in each state and be granted an identification number. Bill Welch, executive vice president of diagnostics, said that the company had completed around two-thirds of those applications, but has not yet been granted identification numbers.

Welch added that the company has a goal to secure contracts with two national insurance providers this year, and said he expected contracts with other smaller payors as well that the company would be announcing over the next months.


The company's 2011 fourth-quarter revenues increased 12 percent to $15.5 million from $13.8 million in the fourth quarter of 2010, driven largely by a 130 percent increase in diagnostic services revenue to $2.8 million from $1.2 million in the fourth quarter of 2010. Fourth-quarter revenues from genetic analysis products and services were essentially flat at $12.7 million compared to $12.5 million in the year-ago quarter.

For the full year, total revenues rose 18 percent to $55.9 million from $47.5 million the previous year. Full-year revenues from diagnostic services more than tripled to $8.3 million from $2.6 million in 2010, while revenue from genetic analysis products and services increased 6 percent to $47.6 million from $44.9 million.

Full-year revenues fell short of analyst expectations and a 23 percent revenue increase the company had forecast in January (CSN 1/18/2012). Maier attributed the discrepancy to the method the company is using to report revenues from MaterniT21 Plus.

In January, "we assumed we'd be converting to accrual accounting," but the company later determined to instead stick with cash-based accounting until "we had sufficient historic data and the necessary controls," Maier said.

The firm's fourth-quarter R&D spending increased 25 percent to $13.1 million from $10.5 million in the prior-year period, and its SG&A expenses climbed 24 percent to $16.9 million from $13.6 million.

R&D spending for the year climbed to $53.6 million from $43.4 million, and its SG&A costs increased to $53.2 million from $50.7 million.

Sequenom finished the year with cash, cash equivalents, and marketable securities of $84.2 million.

Have topics you'd like to see covered by Clinical Sequencing News? Contact the editor at mheger [at] genomeweb [.] com.

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