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Sequenom Plans Sample-Prep Automation, Increased Multiplexing to Double MaterniT21 Capacity

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This story was originally published May 4.

Sequenom said last week that it is planning to increase multiplexing and automate sample prep for its MaterniT21 Plus test during the second half of the year, which will double its yearly capacity to 200,000 tests.

Additionally, it reported during a conference call to discuss its first-quarter earnings that the uptake of MaterniT21 Plus has been increasing weekly, and as of the last week of April, its accession run rate was more than 45,000 tests per year.

The company launched its noninvasive sequencing-based trisomy 21 test last October, and has since expanded it to include the diagnosis of trisomy 18 and 13 as well.

MaterniT21 uptake helped drive the company's 187 percent increase in diagnostic services revenue to $4.8 million in the first quarter, from $1.7 million in the first quarter of 2011.

"The acceptance of the MaterniT21 Plus LDT in the prenatal diagnostic community has exceeded our expectations," CEO Harry Hixson said during the call. Sequenom previously reported that its MaterniT21 test sales exceeded 4,900 for the quarter, and that it had revised its internal goal of annual test sales from 25,000 to 40,000 (CSN 4/18/2012).

This quarter the company also struck its first reimbursement deal, with Multiplan Incorporated, which provides coverage for the MaterniT21 test for more than 900,000 nationwide providers covering more than 55 million lives.

Hixson reaffirmed the company's goal of becoming an in-network provider with at least two national payors before the end of 2012 and said that the company is also "negotiating agreements with regional and local payor organizations" and working toward providing testing services to Medicaid patients.

Hixson also said that the company is continuing discussions with the US Food and Drug Administration, and reaffirmed the company's plan to submit a pre-market application to the FDA by the end of the year. Sequenom has already begun recruiting patients for the clinical trial, Hixson said.

Going forward, the company is planning improvements that will increase its testing capacity and reduce expenses.

"To manage the growing diagnostic services business and to ensure that we can meet anticipated market demand, we continue to invest considerable resources to expand our operational capabilities and improve our process efficiency, which should reduce cost of goods sold over time," Hixson said.

By mid-year Sequenom expects to increase its level of multiplexing, but officials did not provide details on the target level. Currently, it multiplexes four samples.

Additionally, it is planning to introduce automation steps to its sample-prep process, but did not elaborate.

These improvements will boost its capacity from 100,000 tests per year to 200,000 tests per year, without requiring additional sequencers, officials said.

Competitive Landscape

Recently, Sequenom competitor Verinata Health launched its trisomy test, Verifi, which diagnoses trisomy 21, 18, and 13, and is very similar to Sequenom's test. Bill Welch, Sequenom's senior vice president of diagnostics said that the company is "not concerned" about competition from Verinata.

The Verifi test is priced at $1,200, while Sequenom bills insurance companies $2,700 for MaterniT21 and charges uninsured patients $1,900. Verinata recently funded a cost-effectiveness study, which found that if women whose initial prenatal blood test yields an abnormal result are given the option of the Verifi test, health care costs could be reduced by 1 percent, invasive diagnostic procedures by 72 percent, and diagnostic-induced miscarriages by 66 percent compared to standard of care (CSN 5/2/2012).

Meantime, Ariosa Diagnostics, which recently published a clinical validation study of its trisomy test, is looking to offer a test at under $1,000 (CSN 3/28/2012).

Paul Maier, Sequenom's chief financial officer, said that even though Ariosa's test would be offered at a lower price, he was not concerned about the competition.

"Physicians make their decisions based on quality of clinical data and the need of the patient. They don't focus on the price of the test," he said. "We feel comfortable that pricing hasn't been an issue for the patient or physician."

Hixson noted that Sequenom's clinical validation study, published in Genetics in Medicine last October, is so far the largest published validation study for a noninvasive trisomy test (CSN 10/19/2011).

Sequenom is currently embattled in patent disputes with both Verinata and Ariosa, alleging that they infringe on 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.

Hixson declined to comment on the lawsuits, saying only that the company "continues to stand behind the strength of our IP position."

Recently, GATC Biotech subsidiary LifeCodexx completed a clinical validation study for its trisomy 21 test and is planning to launch its test soon as an in-vitro diagnostic in Germany, Switzerland, Austria, and Liechtenstein (CSN 5/2/2012). LifeCodexx licensed IP from Sequenom to commercialize the test in Europe.

On the call, Hixson said that Sequenom would continue to "pursue additional licensing partnerships with groups in Europe and the rest of the world."

Financials

Sequenom reported first-quarter revenues of $14.9 million, an increase of 10 percent over $13.5 million in the first quarter of 2011. First-quarter 2012 revenues from its Center for Molecular Medicine diagnostics services — which includes the MaterniT21 testing business — nearly tripled to $4.8 million from $1.7 million.

Revenues from its genetic analysis operating segment decreased 14 percent in the first quarter of 2012 as compared to the prior-year period.

Total operating expenses increased to $29.8 million from $21.6 million for the first quarter of 2011. This change reflects increased selling and marketing expenses resulting primarily from higher labor costs associated with increased headcount and an expanded diagnostic sales force, as well as increased research and development expenses associated with facilities allocation and overhead, higher operational supply expenses, and labor-related costs.

General and administrative expenses also increased for the first quarter, primarily due to increased facilities and legal expenses as compared to the same period one year ago.

As of March 31, 2012, total cash, cash equivalents, and marketable securities were $119.7 million.

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