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Sequenom's Q4 Revenues More than Double; Shares Fall in Early Trade

NEW YORK (GenomeWeb News) – Sequenom reported after the close of the market Thursday that its fourth-quarter revenues more than doubled year over year, as the firm edged out the Wall Street estimate on the top line.

Despite the strong revenue growth, Sequenom's shares fell in early Friday trade as the firm missed estimates on the bottom line and gave limited information on test volume and reimbursement expectations for its flagship prenatal test.

The San Diego-based molecular diagnostics firm brought in total revenues of $33.7 million for the three months ended Dec. 31, compared to $15.5 million for the fourth quarter of 2011 and above the consensus Wall Street estimate of $32.2 million.

Sales for its diagnostic services jumped to $21.1 million from $2.8 million year over year, while revenues for its genetic analysis products and services were down slightly to $12.6 million from $12.7 million.

However, the company didn't provide the number of MaterniT21 Plus tests performed in the fourth quarter. The MaterniT21 Plus is a non-invasive pre-natal test that uses next-generation sequencing technology to detect fetal aneuploidies and was launched a little more than a year ago.

Its net loss for the quarter was $32.8 million, or $.29 per share, compared to a net loss of $22.2 million, or $.22 per share, for Q4 2011. Analysts, on average, had expected a loss per share of $.23.

Sequenom's R&D spending for the quarter was $14.3 million, up 9 percent from $13.1 million for Q4 2011. Its SG&A expenses jumped around 81 percent to $27.4 million from $15.1 million.

For full-year 2012 Sequenom reported revenues of $89.7 million, up 60 percent from $55.9 million in 2011. The average Wall Street estimate was $88.2 million.

The total revenues for the year were slightly above Sequenom's pre-announcement in early January of FY2012 revenues of $89 million.

The firm reported sales from diagnostic services of $46.5 million, compared to $8.3 million for the prior year. Genetic analysis product sales and services were $43.2 million for the year versus $47.6 million for 2011.

Sequenom said that its Sequenom Center for Molecular Medicine — its CLIA lab — accessioned approximately 92,000 test samples in 2012, which included more than 61,000 MaterniT21 Plus test samples. As of the end of the year, the annualized run rate for the MaterniT21 Plus test was more than 120,000 test samples accessioned, the firm said, with an average of more than 2,300 samples weekly.

Sequenom Chairman and CEO Harry Hixson said on a conference call following the release of the financial results that the firm's goal is to perform more than 150,000 MaterniT21 tests in 2013, "and we are confident that we will achieve this." He added that the firm will continue to update its annualized run rate when it reports its quarterly results "as a measure of our progress in penetrating the high-risk NIPT market."

The lack of information regarding test volumes and reimbursement negotiations left many of the analysts who cover the firm frustrated.

"While we understand some of the rationale for the company being guarded in what they disclose, from an investment perspective it makes it difficult to gain added comfort with the story, especially in light of all of the added competitive noise we have heard in the non-invasive prenatal testing market over the past several weeks," Credit Suisse analyst Vamil Divan wrote in a note published Thursday night.

Though Sequenom had a first-mover advantage in the NIPT market, it now faces challenges from several other test makers, including Ariosa Diagnostics, Natera, and Verinata Health, which was recently acquired by Illumina for $450 million.

Earlier this week, UnitedHealthcare became the latest in a growing list of national insurers to support the use of non-invasive prenatal diagnostic tests. UnitedHealthcare's policy decision is another boost to developers of NIPD tests and follows similar decisions by Aetna and Wellpoint, though reimbursement by the payors is still not guaranteed.

Sequenom posted a net loss of $117.1 million, or $1.03 per share, for the year, versus a net loss of $74.2 million, or $.75 per share, for 2011, and above the consensus analyst estimate for a loss of $.97.

The firm's R&D spending for the year was up 1 percent to $54.1 million from $53.6 million, while its SG&A expenses increased 71 percent to $86 million from $50.2 million.

"We made significant progress in our performance during 2012, with strong revenue growth during the fourth quarter as our diagnostic services revenues increased and our overall cash burn declined," Sequenom CFO Paul Maier said in a statement. "We look forward to continued growth in 2013 through greater testing volumes and revenues, as well as test capacity expansion. To meet the growing demand for its testing services, we expect Sequenom CMM's third laboratory location in North Carolina will become operational later this year."

Sequenom finished the year with cash, cash equivalents, and marketable securities of $175.9 million.

Shares of Sequenom dropped 10 percent to $4.04 in Friday morning trade on the Nasdaq.

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