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Sequenom's Q3 Revenues Nearly Double

NEW YORK (GenomeWeb News) – Sequenom reported after the close of the market Thursday that its third-quarter revenues jumped 92 percent from the third quarter of 2012, driven by sales of its MaterniT21 Plus test.

The San Diego-based firm brought in total revenues of $44 million for the three months ended Sept. 30, up from $22.9 million for the third quarter of 2012 and up from $34.9 million in the second quarter of 2013. It beat the consensus Wall Street estimate of $40.6 million.

Chairman and CEO Harry Hixson said in a statement that the firm reported "record-breaking revenues for the third quarter, which primarily resulted from the continued adoption of the MaterniT21 PLUS test."

Revenue from diagnostics services, as carried out by its Sequenom Center for Molecular Medicine rose to $33.3 million from $12.5 million in the year-ago third quarter and accounted for 76 percent of total revenues.

The Sequenom Bioscience operating segment, which was formerly the genetic analysis segment, realized third quarter revenue of $10.7 million, up 3 percent from $10.4 million in the same period of 2012.

Within that business segment, Sequenom recently completed an early-access program validating ultrasensitive assays on its MassArray System, demonstrating it can detect mutations down to 0.1 percent frequency, and Hixson said on a conference call following the release of the financial results that the company plans to release research-use-only panels in oncology and rare blood antigen typing this year.

The company launched its MaterniT21 test for fetal aneuploides in October 2011 and has seen increasing uptake of the test. For Q3 2013, total tests accessioned increased 87 percent to 48,300, of which 36,600 were the MaterniT21 Plus test.

MaterniT21 Plus tests were up 2 percent sequentially from 36,000 in the second quarter of 2013 and 103 percent year over year from 18,000.

In October, Sequenom added additional indications to its MaterniT21 Plus test, dubbed Enhanced Sequencing Series, giving it the capability to detect some microdeletions as well as autosomal trisomies for chromosomes 16 and 22. Hixson said that these new capabilities will "help improve our competitive position going forward."

Already, he said that the firm estimates it has around 60 percent of the high-risk market in the noninvasive prenatal testing space.

During the quarter, Sequenom implemented a program to reduce the volume of uncompensated Medicaid tests, while continuing to work with state agencies to obtain reimbursement. As a result, the percentage of Medicaid tests declined to 21 percent in the third quarter from 26 percent in the second quarter, with the trend declining further to 17 percent in September.

Despite the reduction in Medicaid tests accessioned, the annualized run rate for the MaterniT21 Plus test continues to exceed the firm's goal of 150,000 samples.

Additionally, company officials said that experience with its in-house billing system, which it implemented in the second quarter of 2013, as well as experience with the new molecular coding system introduced by the Centers for Medicare and Medicaid Services, led to improved collections.

Sequenom said that it continues to work with the payor community, and as of Sept. 30, it had agreements covering approximately 90 million lives for the MaterniT21 Plus test. Hixson added that the company is on track of reaching its internal goal of inking agreements that cover 120 million lives by the end of the year. "Importantly, we are receiving payments as either in network or out of network from all major national payors," he said.

Sequenom's net loss for the third quarter of 2013 was $28.1 million, or $0.24 per share, down from a net loss of $30.2 million, or $0.26 per share, in the prior year quarter. Adjusted net loss, which excludes restructuring costs, was $22.1 million, or $.19 per share, beating analysts' expectations for a loss of $.22 per share.

The firm reported research and development expenses of $10.4 million in Q3 2013, down from $12.2 million in Q3 2012, while SG&A expenses were $26.5 million, compared to $22.8 million in the prior-year Q3. The increase in SG&A expense was primarily due to increased legal expenses associated with patent litigation, internal billing costs due to test volume growth, and increased efforts to collect revenues.

The firm also incurred a $6 million restructuring charge, which resulted in the elimination of around 75 positions and the exit from a facility planned for expansion.

"We have restructured our operations for renewed efficiencies and reduced the run rate of our operating expenses by approximately $13 million annualized, which will begin to take effect in the fourth quarter," Sequenom CFO Paul Maier said in a statement.

Late last month, the US District Court for the Northern District of California invalidated US Patent No. 6,258,540, a patent Sequenom held in the noninvasive prenatal testing field, saying it covers a phenomenon of nature, which is unpatentable.

Commenting on that ruling, Hixson said on the call that the firm "believes the decision is wrong and misapplies or ignores controlling law." He added that the ruling does not affect the foreign equivalents of the patent, which are still valid in Europe, Japan, Australia, Canada, and Hong Kong.

As of Sept. 30, Sequenom had $84.7 million in cash, cash equivalents, and marketable securities.

In Friday morning trade on the Nasdaq, shares of Sequenom were up 25 percent at $2.13.