NEW YORK (GenomeWeb News) – Piper Jaffray today downgraded shares of Sequenom to Neutral, saying that its fight to stay ahead of competitors in the non-invasive fetal chromosome abnormalities testing space may result in greater costs to the company, while its ability to get reimbursement remains uncertain.
The investment bank previously had an Overweight rating on the San Diego-based firm. Piper Jaffray also lowered the price target on Sequenom's shares to $5 from $6.50.
Analyst William Quirk said in a research note that as a number of smaller competitors enter into the Trisomy 21, 18, and 13 testing space, Sequenom management "seems resigned to a protracted siege, intent to scale their tests-delivered numbers (and hence better economics) as a way to pressure their smaller competitors."
While that strategy to pressure its competitors and "wait out the ongoing competitive fight" can be successful in the long term, it "suggests more pronounced spending in the near term" for the firm, he continued.
Sequenom launched its test, called MateriT21 Plus, almost a year ago, and since then adoption of it has ramped up quickly. At the end of August, Sequenom announced it had signed several distribution deals for the test, and as a result raised its expected 52-week run rate for the test to 70,000 total samples from 65,000.
At the same time though, several firms including Verinata Health, Ariosa Diagnostics, and Natera have either launched similar tests or are about to do so. LifeCodexx, which licenses technology from Sequenom, has also launched its T21 test in parts of Europe.
With an estimated $1 billion non-invasive T21 testing market at stake, legal challenges in the space have proliferated. Ariosa, Verinata, and Natera have each sued Sequenom, which in turn has sued Ariosa and Natera.
Quirk also said that Sequenom continues to negotiate with payors about reimbursing for MaterniT21, and the company remains confident that it will receive a positive coverage decision from at least two of the six biggest private payors.
"We remain optimistic that Sequenom is attracting more attention from the payor community, but remind investors that coverage decisions are difficult to predict and frequently take longer than anticipated," Quirk said. "Accordingly, our diligence continues to suggest limited traction at this stage and we believe coverage may slip into 2013."
In afternoon trading shares of Sequenom on the Nasdaq were down almost 6 percent to $3.72.