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Sequenom Revenues Up 14 Percent as Testing Volumes Fall in Q3

This article has been updated from a previous version that incorrectly stated that Dirk van den Boom will be elected as chairman of the board.

NEW YORK (GenomeWeb) – Sequenom reported after the close of the market Tuesday that its third-quarter diagnostic revenues increased 14 percent over diagnostic revenues in the third quarter of 2013.

The San Diego-based firm brought in total revenues of $37.9 million for the three months ended Sept. 30, all from its Sequenom Center for Molecular Medicine business, compared to diagnostic revenues of $33.3 million in the third quarter of 2013.

In June, Sequenom sold its bioscience business to Agena Biosicence for $31.8 million.

The company's revenues fell short of the consensus Wall Street estimate of $42.8 million.

The firm also said today that Harry Hixson, the former CEO, will resign from his position as chairman of the board of directors, effective March 31, 2015. The board of directors intends to elect Dirk van den Boom, chief scientific and strategy officer, to the board.

Total patient samples accessioned decreased by more than 3 percent in the quarter to 46,600 samples. Around 38,500 of those tests were for the MaterniT21 Plus test, which was on par for MaterniT21 Plus tests in the year ago quarter. Compared to the second quarter of 2014, MaterniT21 Plus tests decreased by 2,300 tests.

Sequenom attributed the decline in testing volumes to competitive activities as well as the impact of seasonal prenatal testing rates. Despite the lower test volumes, CFO Carolyn Beaver said on a conference call following the release of the Q3 results that the firm still has a goal of becoming break even and cash-flow positive in the fourth quarter, however, "our ability to achieve this goal is dependent on a number of factors, including the amount incurred for legal expense, which may vary from our expectations and the timing of payments."

Sequenom also estimates it has unrecorded accounts receivable for tests performed between $33 million and $36 million.

As of Sept. 30, more than 142 million lives are covered by commercial payors for the MaterniT21 Plus test. Medicaid is covering additional lives in 15 states.

"Sequenom continues to focus on obtaining profitable units while also achieving significant cost reductions in our operations," CEO Bill Welch said in a statement. "In addition to focusing on profitable samples, we believe testing volumes were impacted by increased competitive activity, likely a consequence of changes of NIPT service providers by the two national reference laboratories."

Welch said on the call that other NIPT service providers have recently increased their competitive activity through "aggressive billing policies," including the "routine waiving of patient payment responsibilities."

Sequenom also said today that it began receiving samples from Quest Diagnostics in early October as part of an agreement the two firms signed in June. In the statement, Welch said the samples from Quest have contributed to "record levels" of testing volumes so far in the fourth quarter, although noting that it is early in the quarter.

In addition, Sequenom expects that Quest will begin offering its own NIPT test in the first half of 2015 under a license agreement it signed with Sequenom.

In July, Sequenom announced clinical data for its second noninvasive prenatal test, VisibiliT, which provides risk scores for common fetal chromosomal aneuploidies. Today, the company said that in the third quarter it completed its launch activities and anticipates receiving VisibiliT test samples from several international markets in the fourth quarter. Welch said on the call that the company will introduce the test in the US in the first quarter of 2015.

Sequenom's R&D expenses in the quarter were $6.1 million, down 29 percent from $8.6 million in the year ago quarter, while SG&A expenses fell 26 percent to $16.9 million from $22.9 million. In addition, Sequenom didn't repeat the $5.7 million restructuring charge from Q3 2013.

The firm's net loss was $6.1 million, or $.05 per share, compared to $28.1 million, or $.24 per share, in the previous quarter. It beat analysts' consensus estimate for a loss of $.09 per share.

Sequenom finished the quarter with $71 million in cash, cash equivalents, and marketable securities.

Sequenom's shares dropped 6 percent to $3.11 in Wednesday morning trade on the Nasdaq.