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CORRECTION: Sequenom's Q3 Revenues Drop 20 Percent as Net Loss Swells 43 Percent

This article has been corrected from an earlier version that said that Sequenom had "shelved" its SEQure Dx test following an investigation into mishandled data. The firm is continuing development of the test.

NEW YORK (GenomeWeb News) – Sequenom said after the market closed today that its third-quarter revenues dropped 20 percent while its net loss increased 43 percent.

The company also said that it amended its license with Isis Innovation, the tech-transfer company of the University of Oxford, regarding IP underlying its SEQureDx Down syndrome test. The firm is continuing development of the test following an investigation into mishandled R&D test data and results.

Sequenom generated $9.2 million in revenues for the three-month period ended Sept. 30, 2009, down from $11.6 million for the third quarter of 2008.

The San Diego-based firm said during a conference call following release of the results that the decrease was primarily due to continued softness in capital expenditures in the biological research market.

Consumables sales for the San Diego-based firm increased 9 percent to $5.4 million from $5 million year over year, while its systems-related sales dropped 36 percent to $3.7 million from $5.7 million in the year-ago period. Service revenues for Sequenom dwindled to about $100,000 from $900,000 year over year.

Sequenom's R&D expenses for the third quarter totaled $8.5 million compared with $7.1 million in the year-ago period. The company said that this increase reflected additional expenses associated with product development, sample collection for clinical trials, and expenses associated with its Clinical Laboratory Improvement Amendment-certified laboratory.

Sequenom also reported that its SG&A expenses increased to $12.6 million in Q3 from $10.7 million in the year-ago period as a result of increased legal expenses, higher stock-based compensation expense, higher facilities costs, and expenses associated with the contract sales force for its CLIA laboratory-developed test services.

Meantime, the company logged a net loss for the third quarter of $14.9 million, or $0.24 per share, compared with $10.4 million, or $0.18 per share for Q3 2008.

"The previously announced events surrounding our trisomy 21 program have been a major setback for the company," Harry Hixson, chairman and CEO of Sequenom, said in a statement. "The independent investigation has been concluded and a new senior management team has been put in place. New internal procedures and protocols have been implemented to reduce the likelihood of a recurrence of similar problems."

Hixson's comments referenced news in April that Sequenom would delay the launch of its SEQureDx Down syndrome test after it discovered that company employees had mishandled R&D test data and results.

The company had originally pushed back the launch of the test to Q3 of this year, but in September that delay became indefinite as the company terminated the employment of former President and CEO Harry Stylli, former Senior VP of R&D Elizabeth Dragon, and three other employees; as well as announced the resignation of former CFO Paul Hawran and Steve Owings, former vice president of commercial development for prenatal diagnostics.

During its conference call today, the company announced that earlier this month it amended its license agreement with Isis Innovation regarding US Patent No. 6,258,540 and its foreign equivalents, which comprise the underlying IP for the SEQureDx test.

Under the amended agreement, which was finalized on Nov. 3, Sequenom secured from Isis continued exclusive, royalty-bearing rights to the '540 patent and its foreign equivalents. In exchange, the company agreed to revise its milestones and to make an immediate one-time payment of $1 million, double royalty payments under the agreement during final 12 months of the patent term, and increase the specified minimum royalty amounts.

During the call, Hixson said that the company amended the license agreement to assuage fears that it may lose the license, a point brought up by investors during the previous quarter's conference call.

"Because of the [SEQureDx] test delay, we were at some risk of non-compliance under the license," Hixson told investors in the most recent call.

Sequenom ended the third quarter with cash, cash equivalents, and short-term marketable securities of approximately $50.1 million. During the company's conference call, officials said that in light of the ongoing internal investigation into the data-mishandling incident and related uncertainties that it would no longer provide revenue guidance "at least for the next several quarters."

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