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William Blair Upgrades Sequenom to Outperform

NEW YORK (GenomeWeb) – Investment bank William Blair today upgraded its rating for Sequenom's shares to Outperform on expectations of continued adoption of the molecular diagnostic firm's non-invasive prenatal testing technology and recent business developments that could increase revenues.

Analyst Brian Weinstein previously had a Market Perform rating on Sequenom. In a research note, he noted five reasons for the upgrade, including a William Blair survey of more than 100 obstetricians, gynecologists, and women's health professionals that indicated "a high likelihood of … NIPT moving quickly into the $1 billion-plus average-risk pregnancy market."

Looking only at the high-risk pregnancy space in the US, Weinstein said that Sequenom could accession at least 200,000 tests in 2017, or about 30 percent of the total NIPT market, which would translate to between $150 million and $200 million in revenues. Meanwhile, revenues from the average-risk pregnancy market could "begin to emerge in the next couple of years."

Additionally, he pointed to the recent agreement with Quest Diagnostics to offer Sequenom's MaterniT21 Plus test, which "provides added market coverage, provides a distribution channel into the average-risk space, and dampens the near-term prospects for a competitor." The deal could further add to Sequenom revenues if Quest develops its own NIPT and it expands international market opportunities for MaterniT21 Plus.

Sequenom also said this month that it had reached a deal with an unnamed insurer to offer the MaterniT21 Plus test as a covered benefit. The deal, Weinstein said, provides Sequenom favorable pricing and a move to accrual accounting. He further noted that the sale of the firm's bioscience business to Agena Bioscience for $31.8 million, results in a "more secure cash situation" for Sequenom.

Lastly, Sequenom has made "favorable progress" on the IP front, he said, and added that total revenues of $250 million in 2017 for the company would not be a "major leap of faith and [we] see this as potentially quite conservative."

In Monday afternoon trading shares of Sequenom on the Nasdaq rose around 2 percent to $3.65.