By Monica Heger
This story was originally published Aug. 5.
As it readies the launch of a laboratory-developed version of its sequencing-based trisomy 21 test, Sequenom is adding to both its sales and clinical lab team, and has also licensed additional technology from longtime collaborator Dennis Lo of the Chinese University of Hong Kong, the company said last week in its quarterly earnings call with investors.
Additionally, it is continuing its discussions with payors about reimbursement for the test — now named MaterniT21 — as well as with the US Food and Drug Administration about gaining approval for an in vitro diagnostic version of the test. The company's San Diego-based Center for Molecular Medicine is now also accredited by the College of American Pathologists, as well as CLIA-certified.
Revenue in the second quarter rose more than 18 percent to $13.3 million from $11.4 million in the second quarter of last year.
Second-quarter spending for R&D and sales and marketing rose in line with preparations for the commercial launch of the MaterniT21 test. Research and development spending jumped 66 percent to $17.1 million from $10.3 million in the second quarter of last year, while sales and marketing expenses increased 5 percent to $7.7 million from $7.3 million in the year-ago period. The company expects that these expenses will continue to increase as it adds to its sales team.
Sequenom narrowed its second-quarter net loss to $20.9 million from $59.1 million in the comparable period of 2010, due primarily to a reduction in legal expenses.
The company plans to hire 20 sales representatives by the end of August. So far, it has added clinical lab specialists and expanded its physician support services team and medical affairs group by an undisclosed number of employees. The company also has a plan in place to increase its sales force in 2012 and years ahead.
"We are moving forward with our expansion strategy," CEO Harry Hixson said in the call discussing the company's second-quarter results. This expansion has included "accelerated hiring in the second quarter to build the capacity necessary to meet the commercial opportunity that lies ahead."
Hixson reiterated the company's plan to launch MaterniT21 in the fourth quarter of this year or early next year, upon publication of its clinical validation study, which it completed earlier this year. Upon launch, the company expects to have a minimum capacity to run 100,000 tests annually (CSN 5/10/2011).
The company will initially offer the test as an LDT, but is also in discussions with the US Food and Drug Administration to achieve in vitro diagnostic approval for the test.
"We're moving as briskly as we can with the FDA on the plan for the IVD trial and submission," Hixson said, but declined to elaborate further, saying that the conversations are "confidential," and "we're not going to give everyone else a road map on how to do this."
Hixson added that Illumina, with whom it recently struck a supply deal for sequencers and consumables (CSN 7/12/2011), would also work with Sequenom in the submission process for IVD approval, although it would not share in the cost of that process.
Sequenom is also in discussions with payors for reimbursement of the test. Hixson said the company has targeted 28 payors and spoken with 25, and that the company has been "pleased with the way the discussions have been going." Although no payors have yet entered into contracts, Hixson said he did not expect them to until after the test is launched and the results of the clinical trial are public. He also reiterated that pricing for the test is expected to be comparable to amniocentesis, which can range between $1,500 and $3,000.
The increase in Sequenom's R&D expenses for the quarter was primarily due to a $4.3 million licensing agreement with Dennis Lo from the Chinese University of Hong Kong.
The company declined to disclose the specifics of the agreement, or what technology was licensed, but Lo has been a longtime collaborator of the company and the trisomy 21 test is based on technology developed in his lab. Additionally, he recently published a method for the detection of trisomy 13 and 18 (CSN 7/6/2011).
Hixson said during the company's first-quarter earnings call in May that the company had recently signed a licensing agreement with the Chinese University of Hong Kong for exclusive worldwide rights, except for Hong Kong, to intellectual property covering prenatal diagnostics, prognostics, and analysis for research and commercial purposes.
"Among the other rights, these license agreements cover intellectual property relating to fetal whole genome sequencing, and size-based genomic analysis of fetal nucleic acids," Hixson said at the time.
Officials this week declined to comment on whether the firm plans to license IP related to Lo's trisomy 13 and 18 study, but that work "shows where we are likely to go," said Ronald Lindsay, executive vice president of research and development.
However, it is more difficult to detect trisomy 13 and 18 than trisomy 21 due to the number of cases necessary for sufficient statistical power. To validate a test for trisomy 18 detection, for instance, Lindsay estimated that between 80 to 100 cases would be necessary, and the incidence for trisomy 13 is even lower.
"We will certainly report to physicians when we see trisomy 13 and 18 … but we won't have any precision around that in our initial offering," Lindsay said in this week's call. The second generation of the test, however, will be "more statistically powered," he added.
Sequenom will face competition from other companies, including Verinata Health, which is planning a sequencing-based trisomy 21 test and has said it will also test for other aneuploidies, although has not disclosed which ones.
However, Sequenom has said that it believes its intellectual property is broad enough to cover other sequencing-based trisomy 21 tests, and that competitors would have to license the technology (CSN 7/27/2011).
Despite a recent focus on the launch of its sequencing-based test, Sequenom said that its MassArray genotyping business is still doing very well, and it does not expect to transition solely to sequencing-based diagnostics.
"A lot of people have assumed sequencing is going to take over everything," said Lindsay. "I think that's proven to be a little slower and a little more complicated then people imagined."
Even in oncology, where sequencing is expected to make a big impact, "we've made a lot of progress with our OncoCarta panel for research purposes," Lindsay said. "Our MassArray still offers a lot of value where other techniques won't work or where sequencing is potentially too expensive or too complicated."
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