NEW YORK (GenomeWeb) – Sequenom ran 39,800 of its MaterniT21 Plus tests in the first quarter of 2014, 14 percent more than it ran in the first quarter of 2013, and an 8 percent jump over the previous quarter, helping to drive a 20 percent increase in revenues to a record $46.3 million.
Sequenom Laboratories, the firm's diagnostics business through which MaterniT21 is offered, saw a 27 percent increase in revenues to $37.1 million from $29.1 million, while Sequenom Bioscience saw a 2 percent decline to $9.2 million from $9.4 million in the first quarter of 2013. As the firm has previously said, it is exploring strategic alternatives for the Bioscience business and will provide an update later this year. For complete financial details please see earlier coverage from GenomeWeb Daily News.
Sequenom "continues to lead the industry in the number of NIPT tests performed for the US market and in reimbursement received," Chairman and CEO Harry Hixson said during a conference call discussing the firm's first quarter results.
Hixson added that the firm now has 118 million lives covered under contract by commercial payors and 24 million lives under contract by government programs. Previously, Sequenom said that changes to the coding structure have hindered its ability to collect reimbursement from commercial payors and especially from government payors. The Centers for Medicaid and Medicare Services last year changed the CPT codes, which caused "delays in payments," not only for Sequenom, but many diagnostic laboratories, CFO Paul Maier said during the call. Commercial payors tend to request additional information, delaying payment, while some government payors "have not yet implemented the new codes or have adopted negative coverage policies," Maier said.
As a result, in the second quarter of 2013, Sequenom implemented a program to reduce the volume of uncompensated Medicaid tests. The percentage of Medicaid tests dropped to 14 percent in Q4 2013, from 21 percent in Q3 2013 and 26 percent in Q2 2013.
Maier said that currently, 13 states are reimbursing for the test, and he expects the volume of Medicaid tests to pick up again. In Q1 2014, Medicaid tests inched up to 16 percent of the total, while revenues from government payors increased 104 percent to $4.7 million from $2.3 million in Q1 2013.
Nevertheless, payment for tests performed continues to be uneven. Maier said that $15.9 million of the firm's diagnostics revenues could be attributed to tests performed in the same quarter, while $21.2 million was payments collected from tests performed in previous quarters.
The firm did not specify its average per-test reimbursement rate, but Maier said that although the firm is pleased with reimbursement, the average rate has declined "due to the impact of lower per-test Medicaid payments, the impact of co-pays and deductibles in the first quarter, and pricing pressures."
While obtaining reimbursement has been somewhat complicated thus far, moving forward, the firm expects the process to be simplified. In February, the American Medical Association editorial panel discussed adding CPT codes specific for next-generation sequencing tests, including one specific for fetal aneuploidy. Maier said the firm submitted a CPT code application and request, which was accepted by the AMA. The code should be posted by June 1, 2014 and will go into effect by Jan. 1, 2015.
"We expect this new code to facilitate the reimbursement process and reduce the time required for third party payors to process claims for payment," he said.
Earlier this month, the US Patent and Trademark Office ruled in favor of Sequenom on three patent interference cases with Illumina's Verinata Health.
The judge in the case ruled that US Patent No 8,008,018 and two other patent applications "lacked sufficient disclosure to meet the written description requirement for the claims in the patent and patent application," Hixson said during the call. Though the ruling is subject to appeal, Hixson said that he was "very encouraged" by this development. In addition, in January, the European Patent Office granted a patent exclusively licensed to Sequenom that claims novel methods for detecting fetal aneuploidy with sequencing, he said.
The firm declined to disclose its intentions for enforcing this patent, but said that it has so far not asserted the European patent. The NIPT market in the US has been extremely litigious, with the four NIPT companies — Sequenom, Verinata Health, Ariosa, and Natera — all embroiled in legal disputes. Sequenom asserted a broad patent it holds in the space against the three other companies since it first launched its MaterniT21 test in October 2011, but in November, a federal court ruled that patent invalid because it covers a phenomenon of nature.
Low-risk vs high-risk markets
In January, Sequenom said that it planned to develop a lower cost noninvasive prenatal test based on an alternative platform.
Hixson reiterated the firm's intentions to do this by the end of the year, saying that it will position the company to address the low-risk market "if and when testing in the low-risk market becomes standard of care."
For the high-risk market, the company will continue to expand on its MaterniT21 Plus test. Hixson said that the "extended content" of the test, which includes trisomy 16 and 22 as well as the sub-chromosomal alterations that cause Di George syndrome, Cri-du-Chat syndrome, Prader-Willi/Angelman syndrome, and 1p36 syndrome "provides the most comprehensive information available in the NIPT market and has been received very positively in the market."
President and COO Bill Welch also noted that the firm plans to add additional sub-chromosomal alterations to the test and said that eventually it will be able to detect all sub-chromosomal alterations currently detected by invasive tests. Welch said that later this year an additional series of microdeletions would be added to the test. The microdeletions will be ones for which there are "known medical interventions and knowledge," he said.
Currently, because sub-chromosomal alterations are so rare, Sequenom's strategy for reporting is to only report positive findings, although moving forward the firm would like to eventually report both positive and negative findings.