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Sequenom's CEO 'Puzzled' by Illumina's Buy of Verinata, Lays out 2013 Goals at JP Morgan

This article has been updated from a previous version to clarify the company's reimbursement goals for 2013.

SAN FRANCISCO (GenomeWeb News) – Sequenom Chairman and CEO Harry Hixson on Wednesday expressed confusion over Illumina's decision to acquire Verinata for a price that could climb to $450 million.

In a presentation at the JP Morgan Healthcare Conference here, Hixson said he received a call from Illumina CEO Jay Flatley Sunday informing him of the deal, which would make Illumina the owner of Sequenom's competitor in the non-invasive fetal aneuploidy testing space.

Hixson said that Sequenom was "puzzled" by Illumina's purchase, which complicates its relationship with a key partner. Illumina is the exclusive supplier of sequencing platforms for Sequenom's MaterniT21 Plus test, creating some uncertainty around that agreement, which was signed in 2011 and expires in mid-2016.

Hixson added that Flatley has assured him that the relationship between the firms will not be affected by the acquisition.

Ron Lindsay, Sequenom's executive vice president of strategic planning, added that even if Illumina exits the picture as the firm's sequencing supplier, Sequenom has explored other technology options and will be prepared if it happens.

"We're one of Illumina's biggest customers … and we'll continue to do what we've been doing" to expand adoption of MaterniT21 Plus, Hixson said.

He also said that regardless of Illumina's purchase of Verinata, as well as Verinata's marketing deal with PerkinElmer announced on Wednesday, Sequenom remains confident it can remain the dominant player in non-invasive fetal aneuploidy testing. Earlier this week, the company said that full-year 2012 revenues are expected to increase 59 percent year over year, largely on the strength of MaterniT21 Plus sales. By year's end, the run rate for the test exceeded 120,000 on an annualized basis.

Sequenom is also involved in litigation with a number of its competitors, including Verinata, Ariosa Diagnostics, and Natera, over intellectual property related to noninvasive prenatal sequencing. In July, Sequenom appealed a decision by a federal court denying its request for a preliminary injunction against Ariosa, and Hixson on Wednesday said that the US District Court for the Northern District of California would be hearing oral arguments in the case that day. The case involves US Patent 6,258,540.

Additionally, a competitor - speculation is that it is Verinata – has filed for patent interference with the US Patent and Trademark Office for US Patent No. 8,340,916, which the USPTO was set to issue but then withdrew in December. Sequenom licenses the technology covered by the patent.

While the various patent disputes may not be resolved for some time, Hixson said that in a worse case scenario, things will remain status quo, and other players in the space will continue to play catch-up with Sequenom. If the suits are resolved in Sequenom's favor, he said, it would be a major obstacle for its competitors.

Specifically addressing the patent interference proceedings on the '916 patent, Hixson said that he is confident that Sequenom will come out ahead since the inventor of the technology, Dennis Lo at the Chinese University of Hong Kong, submitted his patent application more than a year before Stephen Quake at Stanford filed for a patent on similar technology that underlies Verinata's Verifi test.

During his presentation, Hixson also laid out goals for Maternti21 Plus that the company is targeting for 2013. They include adding sex chromosome aneuploidy testing capabilities, expected to happen in the first quarter. Also, the firm has set a minimum of 150,000 MaterniT21 Plus tests to be accessioned during the year, though Hixson said that 200,000 tests would be achievable.

Sequenom has set a goal to secure three national payors during the year, which would give it a total of 120 million lives under coverage for the test.

The vast majority of MaterniT21 Plus testing is done in the US, though the company has deals in other countries covering the technology behind the test. About 5 percent of samples for the test come from outside the US, and Hixson said Sequenom is exploring strategies for possibly creating direct sales channels for the test internationally.

Outside of MaterniT21 Plus, Hixson added that Sequenom plans to file for 510(k) clearance of its MassArray platform by mid-year. The company had previously said that it planned to submit by the end of 2012.

In its Genetic Analysis business, of which MassArray is a part, Sequenom also will expand its menu of research-use-only panels, though Hixson did not provide details.