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Sequenom Provides Update on Patent Litigation; Plans to Bring NC Lab Online in 30 to 45 Days

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Sequenom reported this week at the Jefferies Global Healthcare Conference in New York that it has received a favorable determination in a patent interference lawsuit with Verinata Health.

In its presentation, the firm also provided an update on its operations, noting that its new laboratory in North Carolina recently underwent CAP inspection and is expected to be operational in 30 to 45 days.

Sequenom CEO Harry Hixson said during a presentation, which was webcast, that Dennis Lo of the Chinese University of Hong Kong and the inventor of the patents that Sequenom has licensed for its MaterniT21 Plus test was declared the "senior party" in patent interference disputes with competitor Verinata Health. Verinata Health licenses its patents in the field from Stephen Quake of Stanford University.

The two firms have been engaged in intellectual property lawsuits since Sequenom launched its test in October 2011. The patent interference suits are the most recent addition to the legal battle.

Last year, the US Patent and Trademark Office withdrew the issuance of a Sequenom patent application due to the anticipation of patent interference.

Then, in May, Sequenom said during a conference call discussing its first-quarter results that the USPTO had declared several other patent interferences. On May 3, a patent interference was declared between Verinata's US Patent No. 8,195,415, which it is asserting against Sequenom, and US Patent application 13/070,266, which is exclusively licensed to Sequenom. The USPTO also declared two additional patent interferences between patent applications licensed to another unnamed party and patent applications licensed to Sequenom, and redeclared an interference between Verinata's patent No. 8,008,018 and Sequenom's patent application 13/070,275 (CSN 5/15/2013).

The latest development — that Lo has been declared senior party in the patent interference dispute — is a "preliminary finding," but nevertheless a positive step because now the "burden of proof that he is not the first to invent is on the Quake group," Hixson said. He added that Lo filed his patent application 14 months before Quake.

As part of the determination that Lo is senior party in the dispute, Hixson said that the USPTO has pulled additional patents licensed by Verinata from Quake into interference, but did not specify which patents.

"A lot of things happen in interference, so nothing is guaranteed," Hixson added.

A spokesperson for Illumina, which owns Verinata, said that the company does not comment on pending legal matters.

Expanding testing capacity

Sequenom is also expanding testing capacity for its MaterniT21 Plus test with the planned addition of its laboratory in North Carolina. The firm finished building and validating the lab, which underwent CAP inspection this week, Hixson said, noting that he expects the lab to be operational in 30 to 45 days.

The addition of the lab will initially bump testing capacity to 300,000 tests per year, from the 200,000 tests per year it currently can run out of its San Diego facility. However, Hixson added, the North Carolina laboratory has the ability to increase capacity by at least another 100,000 tests annually.

The company has set an internal run rate of 150,000 tests for 2013, and by the end of the first quarter, it had already reached an annualized run rate of 140,000 tests.

"We feel confident that we'll achieve our internal goal," said Paul Maier, the company's CFO. "We've continued to see our run rate appreciate," including "record weeks" in the beginning of the second quarter.

Aside from expanding its own facilities in the US, Sequenom recently announced a licensing and marketing deal with Laboratoire Cerba in France. As part of the agreement, Sequenom will train Cerba employees, and Cerba will validate the test in its own laboratory and market it in France, Belgium, Luxemburg, Lebanon, Morocco, Algeria, Tunisia, Libya, Senegal, Ivory Coast, Burkina Faso, and Cameroon. The deal marks Sequenom's second international agreement, its first being with GATC Biotech subsidiary LifeCodexx in Germany.

The firm now has "major licensees in both of the two largest European countries," said Hixson and will "benefit from royalties from both of those agreements."

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