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Sequenom Posts 28 Percent Increase in Q4 Revenues as SEC Wraps up Investigation

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Sequenom reported after the close of the market on Tuesday that total revenues for the fourth quarter rose 28 percent on higher system and consumables sales.

Sequenom Chairman and CEO Harry Hixson also said that a nearly two-year old investigation by the US Securities and Exchange Commission may be coming to an end and the agency may bring civil injunction action against the firm.

For the three months ended Dec. 31, 2010, the San Diego-based company posted revenues of $13.8 million, up from $10.8 million during the year-ago period. It beat analysts' consensus forecast of $12.1 million in revenues.

MassArray and other product revenues rose to $6.1 million, a 24 percent increase from $4.9 million a year ago, while consumables revenues increased to $5.8 million from $5.2 million, a 12 percent climb.

During the quarter, the company placed 15 instruments, including 13 new MassArray Analyzer 4 systems, Hixson said on a conference call following the release of the firm's earnings results. For full-year 2010, 51 total instruments were placed, of which 27 were MassArray Analyzer 4 platforms.

Diagnostic revenues from testing services spiked nearly 12-fold to $1.2 million from $94,000 a year ago. Revenues were derived from Sequenom's Center for Molecular Medicine's SensiGene-branded laboratory developed tests for cystic fibrosis and fetal Rhesus D genotyping, CFO Paul Maier said during the call.

Contract research services increased 15 percent to $683,000 from $592,000, while research and other revenues slipped to zero from $22,000 a year ago.

The company increased its R&D spending to $10.5 million, up 5 percent from $10 million during the fourth quarter of 2009, and SG&A costs increased 6 percent to $13.7 million from $12.9 million, primarily due to increases in salary expenses and stock-based compensation expenses, Sequenom said.

For the quarter, the company saw a net loss of $22 million, or $.27 per share, compared to a net loss of $18.4 million, $.30 per share, a year ago.

Included in the net loss for Q4 2010 is a $6.5 million non-cash charge related to the settlement of class action lawsuit against the company stemming from Sequenom's mishandling of data surrounding its SEQureDx Trisomy 21 test.

Excluding that charge, Sequenom's non-GAAP net loss for the quarter was $15.5 million, or $.19 per share. Analysts had expected a loss per share of $.21.

During the conference call, Hixson said that an ongoing investigation by the SEC into the mishandling of the data may be wrapping up.

The SEC staff notified the company on Monday that the agency is considering bringing civil injunction action against Sequenom, "alleging that we violated certain anti-fraud and books of record" infractions.

As a result, the company plans to negotiate a resolution with the agency, which may take six to eight weeks, or longer, to be approved. "[W]e're happy this is coming to an end," Hixson said.

Sequenom said that it submitted a pre-IDE package to the US Food and Drug Administration for the SEQureDx Trisomy 21 test in October.

In December, the company started a clinical validation study for its trisomy 21 LDT test, which it anticipates finishing in the second quarter of 2011. Its Center for Molecular Medicine plans to bring the test to market by the end of the year, or early 2012, it said.

Sequenom also is on track to market a laboratory developed test for age-related macular degeneration later this year, it said.

For full-year 2010, Sequenom posted a 25 percent increase in revenues to $47.5 million from $37.9 million in 2009, exceeding the $45.7 million expected by Wall Street. MassArray and other product revenues shot up 36 percent to $20.4 million from $15 million, while consumables revenues rose to $22 million, up 7 percent from $20.5 million.

Diagnostic revenues jumped to $2.6 million from $94,000 a year ago. Contract research service revenues rose 14 percent to $2.5 million from $2.2 million. Sequenom saw no research and other revenues for the year, compared to $27,000 in 2009.

The company increased its R&D spending during the year to $43.4 million from $37.5 million, a 16 percent increase. Its SG&A spending shrank 8 percent to $50.7 million in 2010 from $55 million the previous year.

Sequenom's net loss for the year totaled $120.8 million, or $1.69 per share, compared to $71 million, or $1.16 per share. Included in the 2010 figure was a non-cash charge of $55.4 million related to the class action lawsuit settlement. Excluding that charge, its non-GAAP net loss for the year was $65.5 million, or $.91 per share.

The company said that as of Dec. 31, it had $135.5 million in cash, cash equivalents, and marketable securities.

In early Wednesday trade on the Nasdaq, shares of Sequenom were down 1 percent at $5.76.

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