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MaterniT21 Doubles Sequenom's Revenues; Firm Inks Deal with Blue Cross Blue Shield Association

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This story was originally published May 10.

Sequenom's 35,000 MaterniT21 Plus tests that it accessioned in the first quarter of 2013 helped drive its 158 percent spike in revenues to $38.5 million from $14.9 million in the first quarter of 2012, the company said last week during a conference call discussing its financial results.

Additionally, the firm announced that it has struck a five-year agreement with the Blue Cross Blue Shield Association to offer its testing services to the independent Blue Cross Blue Shield companies. It has also increased its diagnostic testing sales force to 84, from 50 in the prior quarter.

Sequenom said that total tests accessioned during the first quarter increased 250 percent year over year to more than 44,500 patient samples. 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.

Despite an increasingly competitive market — Ariosa Diagnostics, Natera, and Illumina-owned Verinata Health all now have competing tests on the market — Sequenom Chairman and CEO Harry Hixson estimated that the firm currently has more than 90 percent of the market share.

"Sequenom CMM continues to take advantage of its first-mover position in the noninvasive prenatal testing market," Hixson said during the conference call. He added that the company has "maintained its dominant market share."

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.

"We think that this business agreement will greatly facilitate reaching contracts with the remaining association members," Hixson said.

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.

Thus far, approximately 60 percent of US-based maternal fetal medicine specialists, and more than 3,300 Ob-Gyn physicians, have ordered the MaterniT21 Plus test since its introduction, Hixson said.

Bill Welch, the company's chief operating officer, said that last year the firm positioned itself to target primarily the maternal fetal medicine specialists. Its goal this year, he said, is to "add more reps to target the Ob-Gyns," of which there are around 8,000 in the US. "So, there's plenty of room to grow."

Lawsuit Update

Sequenom is currently involved in lawsuits with the other three US-based noninvasive prenatal testing firms. The firm is suing Ariosa, Natera, and Verinata Health for infringement of US Patent No. 6,258,540, a broad patent it holds in the space. Ariosa, Natera, and Verinata have also sued Sequenom.

Additionally, Ariosa was recently granted an inter partes review of the '540 patent (CSN 4/3/2012).

And last year, the US Patent and Trademark Office withdrew the issuance of a Sequenom patent application due to anticipation of patent interference.

This week, Hixson said that the USPTO has declared several other patent interferences. On May 3, a patent interference was declared between Verinata's US Patent No. 8,195,415, which it is asserting against Sequenom, 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.

"We are encouraged by the recent PTO interference decisions and we continue to stand behind the strength of our patent portfolio and our legal strategy," Hixson said. He declined to comment on the other legal matters.

Financials

Total revenues in the first quarter grew to $38.5 million from $14.9 million in the year-ago quarter. 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.

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, which were built to increase capacity for its MaterniT21 Plus test. Sequenom said the facility, which recently achieved CLIA certification, is expected to be operational 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. Sequenom also noted that legal expenses associated with patent litigation were up year over year.

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

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