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MaterniT21 Plus Test Adoption Drives Sequenom Q2 Revenues up 38 Percent

NEW YORK (GenomeWeb News) – Sequenom announced after the close of the market on Thursday that revenues spiked 38 percent year over year during the second quarter as the MaterniT21 Plus fetal aneuploidy test continued to see strong adoption.

For the period ended June 30, total revenues came in at $18.3 million, compared to $13.3 million a year ago, but missed the consensus analyst estimate of $19.2 million.

Genetic analysis product sales and services dropped 14 percent year over year to $10.1 million from $11.7 million, but revenues from the Sequenom Center for Molecular Medicine diagnostic services increased five-fold to $8.1 million from $1.6 million a year ago.

During the quarter, more than 20,000 total tests were accessioned including more than 13,000 MaterniT21 Plus tests, and since the test's launch in October, more than 20,000 MaterniT21 tests have been accessioned, the company said.

At the end of the first quarter, the 52-week run rate of MaterniT21 tests accessioned equated to about 30,000 tests. As of the last week of June, the annualized run rate increased to about 65,000 tests. Due to the increase, Sequenom on Thursday increased its internal goal to 50,000 MaterniT21 Plus tests billed in 2012 from an earlier goal of 40,000. In January, the company had set the bar at 25,000 billed tests.

On a conference call following the release of the company's earnings results, Harry Hixson, chairman and CEO of Sequenom, said that the firm will introduce process enhancements to the MaterniT21 Plus test "that will increase capacity in the San Diego laboratory to more than 200,000 tests per year."

Enhancements include the introduction of automation, improved bioinformatics, and additional efficiencies built into the process that will reduce costs on a per-test basis. An important clinical enhancement, he said, will add the ability to determine fetal sex, "which we feel will improve the clinical utility of the test for our physician customers and their patients."

Sequenom added that it plans to continue expanding its prenatal sales force by adding 25 new sales representatives during the third quarter, bringing the total to more than 75 diagnostic sales people.

David Ferreiro, an analyst at Oppenheimer, today raised his 2012 volume estimates for MaterniT21 to 55,000 tests, which would translate to about $24 million in revenues, but trimmed his estimate for total company revenues for the year to $79.1 million from $79.5 million for a loss of $.97 per share, up from a previous estimate of a loss of $.84 per share.

"The adoption rate is encouraging and could positively impact payor decisions, further
entrenching [Sequenom]," Ferreiro said, adding the firm's "established and expanding infrastructure represents a true obstacle for potential competition, in our view.'

Hixson also said that it has signed agreements to expand the availability of the test into international markets, specifically in northern and Eastern Europe, the Middle East and Japan.

Ron Lindsay, executive VP of R&D, added that the strategy for expansion into the international markets is two pronged, with one plan to make the test available in the largest international markets included in the so-called G5 countries — France, Germany, Japan, the United Kingdom, and the United States.

In Germany, Sequenom has licensed IP related to the test to LifeCodexx, which plans to launch its test in the coming months. Depending on how the launch occurs, "that will guide us to the next steps in Europe," he said, adding Sequenom is in discussions with at least two other potential partners for deals similar to the one it has with LifeCodexx.

In the smaller European nations, as well as the Middle East and Asia, there has been demand from patients who are covered by private insurance or are willing to pay for MaterniT21 Plus out of pocket, and "we have opened conduits for client bill," he said.

In other countries, arrangements are in place for the collection of samples from local agencies for shipment to Sequenom, which will then deliver the test data to the physicians who ordered the test, Lindsay said.

Sequenom's net loss for the second quarter widened to $29.6 million, or $.26 per share, from a net loss of $20.9 million, or $.21 per share, a year ago, and missed the consensus Wall estimate of a net loss per share of $.21.

During the quarter, R&D spending dipped to $13.9 million, down 19 percent from $17.1 million, while SG&A costs increased 68 percent to $21.3 million from $12.7 million.

The reduction in R&D spending, Sequenom said, resulted from decreases in research-related licensing and collaboration costs. Meanwhile, the SG&A spike reflected higher labor costs associated with increased headcount to support operations, the continued expansion of the diagnostic services infrastructure, and legal expenses.

The company is embroiled in several lawsuits with other developers of trisomy 21, 18, and 13 tests, including Natera, Ariosa Diagnostics, and Verinata Health. In the most recent development Sequenom last week appealed a decision by a federal court that denied a preliminary injunction it sought against Ariosa Diagnostics.

On the call Hixson said that the appeal reflects Sequenom's continued belief in the strength of its patent position, but he provided no further comments on the ongoing IP litigation.

The firm exited the second quarter with $98.6 million in cash, cash equivalents, and marketable securities.

Sequenom's shares were down 4 percent to $3.52 in early morning trading on the Nasdaq today.