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Sequenom's Q1 Revenues More than Double

NEW YORK (GenomeWeb News) – Sequenom reported after the close of the market Thursday that its first-quarter revenues grew 158 percent year over year, driven by growth in its diagnostics business, and particularly from sales of its MaterniT21 Plus test for fetal aneuploidies.

The San Diego-based firm reported total revenues of $38.5 million, up from $14.9 million in the year-ago quarter, and surpassing the average Wall Street estimate of $38.3 million. Revenues from the Sequenom Center for Molecular Medicine, which provides the firm's diagnostics services, grew to $29 million from $4.8 million in the first quarter of 2012.

As of the first quarter of 2013, diagnostic revenues accounted for more than 75 percent of total revenue, up from 63 percent in the fourth quarter of 2012, the company said.

Total tests accessioned increased 250 percent to more than 44,500 patient samples during the first quarter. MaterniT21 Plus tests comprised around 35,000 of the total, up 40 percent from the approximately 25,000 tests accessioned in the fourth quarter of 2012.

At the end of the quarter, the annualized run rate for MaterniT21 Plus was over 140,000, and the firm expects to accession over 150,000 tests for the full year.

Sequenom is facing increased market challenges to the MaterniT21 test, with Ariosa Diagnostics, Natera, and Verinata Health, which is now owned by Illumina all now offering competing non-invasive prenatal screening tests in the US. And in Europe and Asia, Berry Genomics, BGI, and GATC Biotech subsidiary LifeCodexx, which licenses its IP from Sequenom, offer similar tests.

"Sequenom CMM continues to take advantage of its first-mover position in the noninvasive prenatal testing market," Sequenom Chairman and CEO Harry Hixson said on a conference call following the release of the financial results. He added that Sequenom CMM has "maintained its dominant market share," which he estimated at more than 90 percent.

The company also said that it accessioned a record number of patient samples for cystic fibrosis screening with its Heredi-T CF test.

"We are pleased to see sequential improvements in volume, revenue, and margin during the quarter, an indication of steady growth and sustained momentum in 2013," Sequenom CFO Paul Maier said in a statement.

Hixson said on the call that the firm has entered into a five-year, national agreement with the Blue Cross Blue Shield Association to offer independent Blue Cross Blue Shield companies access to Sequenom's laboratory testing services on a voluntary basis.

He noted that within the Blue Cross Blue Shield Association there are 38 independent plans covering 100 million lives, and Sequenom already has contracts with a number of these plans covering 24 million lives. The association agreement facilitates the contracting process with each of the independent plans, Hixson added.

As of the end of the first quarter, Sequenom has 70 million lives covered under contract, and company officials said its goal for the year is 120 million.

First-quarter revenues from the genetic analysis operating segment decreased 7 percent to $9.4 million from $10.1 million in the comparable period in 2012.

Sequenom's net loss for the quarter was $29.4 million, or $.26 per share, compared to a net loss of $24.4 million, or $.22 per share, for the same period in 2012, and short of the consensus Wall Street estimate of $.24.

Its R&D expenses increased 17 percent to $13.8 million from $11.8 million in the first quarter of 2012, primarily due to increased labor and supplies and costs related to the expansion of the Sequenom CMM North Carolina facilities. The North Carolina facility recently received CLIA certification and is expected to begin operations mid-year.

The firm's SG&A costs rose to $27.1 million, up 59 percent from $17.0 million during the first quarter of 2012, due to higher labors costs associated with the expansion of the Sequenom CMM sales force and increased headcount to support commercial operations. The company boosted its diagnostics sales force to 84 in the first quarter, up from 50 in the previous quarter.

Sequenom also noted that legal expenses associated with patent litigation were up year over year.

On that front, Sequenom said that the US Patent and Trademark Office declared a patent interference on May 3 between US Patent No. 8,195,415, which is held by competitor Verinata Health 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 inference between Verinata Health's patent No. 8,008,018 and patent application 13/070,275, which is exclusively licensed to Sequenom.

The company finished the quarter with $151.1 million in cash, cash equivalents, and marketable securities.

In Friday morning trade on the Nasdaq, shares of Sequenom were up 16 percent at $4.15.