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Sequenom Posts 34 Percent Gain in Revenues for Q4; Stock Drops

This story has been updated from a previous version to include comments from Sequenom's earnings call.

NEW YORK (GenomeWeb News) – Sequenom reported after the close of the market Thursday that its fourth quarter revenues climbed 34 percent from the fourth quarter of 2012, driven by sales of its MaterniT21 Plus test.

Shares of the San Diego-based molecular diagnostics firm dropped around 9 percent to $2.34 in early Friday trade on the Nasdaq, though, as it fell short of analysts' consensus estimate on the top line and company officials didn't provide guidance for test volume in 2014.

Sequenom brought in total revenues of $45.1 million for the three months ended Dec. 31, up from $33.7 million for the fourth quarter of 2012 and up from $44 million in the third quarter of 2013. It fell short of the consensus Wall Street estimate of $47 million.

"We believe that the increasing acceptance and adoption of the MaterniT21 Plus test by the US and international medical communities demonstrate a strong testament to Sequenom Laboratories' leadership position in noninvasive prenatal testing," Chairman and CEO Harry Hixson said in a statement.

Revenue from diagnostics services, as carried out by its Sequenom Center for Molecular Medicine rose to $32.7 million from $21.1 million year over year and accounted for 73 percent of total revenues.

The Sequenom Bioscience operating segment, which was formerly the genetic analysis segment, realized fourth quarter revenue of $12.4 million, down slightly from the $12.6 million in the fourth quarter of 2012.

On a conference call following the release of the results, Sequenom CFO Paul Maier said that the company is being reimbursed, on average, $1,200 per test, which is a 12 percent decline over its per-test reimbursement rate from the year-ago fourth quarter. He said the decline was due to competition, contract pricing, and CPT changes. He added that that amount includes reimbursement from both commercial and government payors.

"The lack of guidance for tests in 2014 is something that will not sit well with investors who have concerns about the competitive environment and how much of the high-risk market has been penetrated," William Blair analyst Brian Weinstein said in a note published this morning. "We were encouraged that management disclosed that the reimbursement for tests the company is getting paid on is $1,200, a healthy number that includes both in and out of network payments as well as government payers."

Previously, Sequenom said that it had implemented a program to reduce the volume of uncompensated Medicaid tests. In the fourth quarter 2013, Medicaid tests represented around 13 percent of total tests, compared to 21 percent in Q3 2013 and 26 percent in Q2 2013.

Additionally, the firm is continuing to work with states agencies, and Hixson said on the call that 12 state Medicaid programs are now reimbursing for the test, and the company is "continuing to make progress with other states." He predicted that "Medicaid volumes will continue to grow again."

As of the end of the year, Sequenom had 113 million lives under contract, including the recent signing an additional major payor, Aetna. "We are expecting multiple, additional agreements in the coming months," Hixson said on the call.

Sequenom's net loss for the fourth quarter of 2013 was $18.9 million, or $.16 per share, down from a net loss of $32.8 million, or $.29 per share, in the prior-year Q4. On an adjusted basis, its loss per share also was $.16, in line with analysts' consensus estimate.

The firm reported research and development expenses of $9.3 million in Q4 2013, down from $13.4 million in Q4 2012, due primarily to the completion of the validation of the MaterniT21 PLUS test at its North Carolina laboratory. SG&A expenses were $25.7 million, compared to $28.6 million in the prior-year Q4, due to lower personnel costs following a restructuring last summer.

As Sequenom previously announced, its full-year 2013 revenues were $162.4 million, up 81 percent from its 2012 revenues of $89.7 million, but just short of the Wall Street estimate of $164.3 million.

Diagnostic services accounted for 74 percent of total revenues, bringing $119.6 million for the year versus $46.5 million in 2012. Revenues from bioscience product sales and services were $42.9 million for the year, down from $43.2 million.

The firm noted that its unrecorded diagnostic accounts receivable were between $46 million and $51 million as of Dec. 31.

Sequenom accessioned 185,500 total tests in 2013, compared to 92,000 in 2012.

The firm's net loss for the year was $107.4 million, or $.93 per share, down from $117 million, or $1.03 per share. On an adjusted basis, its loss per share was $.88, matching analysts' consensus estimate.

For the full year, SG&A expenses increased to $105.6 million from $89.7 million, primarily due to the expansion of the firm's prenatal sales force. Its R&D expenses decreased to $46.5 million from $50.5 million in the previous year.

Overall, the spending increase was primarily the result of higher legal costs associated with patent litigation, restructuring costs of $6.0 million, higher billing and collections expenses due to increased test volumes, and higher selling and marketing expenses, the firm said.

As of Dec. 31, Sequenom had $71.3 million in cash, cash equivalents, and marketable securities.

For 2014, Hixson said that the company had two major goals: to be cash-flow break even by the end of the year, and to develop a low-cost NIPT on an alternative platform.