As it struggles to emerge from 2003's ill-fated foray into drug discovery, Sequenom last week announced its new identity.
Harry Stylli, the San Diego, Calif.-based firm's new CEO, said in a conference call that the company will lay off about 30 percent of its workforce, cut costs, and focus its efforts on its core research market. All the while, Sequenom is going to be searching for partners in research and product development.
In its latest change in course, the company is applying experience gained in the research market to retool itself for greater utility in personalized medicine. Stylli emphasized the fine-mapping and molecular diagnostics potential of Sequenom's mass spec-based platforms, paying special attention to cancer, with the message that weeding through SNPs to build up its IP and platforms would provide a foundation for later disease assays and kits. The company has taken on a direction that is reminiscent of its original role as a SNP-genotyping player, although it will presumably take a different fork in the road this time.
Focusing on research in the near term for later molecular diagnostics "is not such a big leap for us because the early aspects of the molecular diagnostics opportunity and the core aspects of research opportunity are virtually identical," Stylli said during the call. "It's an extension of the technology that we have in the research business that seems to be creating a market pull for us."
"This will be a ferocious set of applications that we're looking to launch in the next 12 or so months."
But investors have yet to signal their approval. The company received a warning letter this week from the Nasdaq exchange because it failed to keep the closing price of its shares at or above $1 for 30 consecutive business days. Sequenom now has until March 15, 2006, to regain compliance by closing at or above $1 per share for at least 10 consecutive business days. If the company does not regain compliance by this deadline, or receive a 180-day extension from the exchange, its common stock will be delisted.
In second-quarter earnings released in July, Sequenom's revenues rose slightly to $6.2 million, versus $6 million in the year-ago quarter, an increase the company attributed to both the addition of new customers and the upgrading of the firm's analysis systems by existing customers.
Sequenom's research and development spending dropped to about $3 million in the second quarter from $5.7 million a year earlier.
The company posted a net loss of $6 million, or $.15 per share, versus a year-ago loss of $9.8 million, or $.25 per share. As of June 30, Sequenom had cash, cash equivalents, short-term investments, and restricted cash totaling $25.4 million.
Recent news hasn't been all bad. Sequenom said this week that it has sold two of its MassArray Compact genotyping systems each to the Broad Institute of MIT and Harvard and to the Wellcome Trust Sanger Institute, after positive fine-mapping beta tests of the company's iPlex assays.
Researchers at the Broad used the iPlex assays for fine mapping and biomarker validation of an international consortium study on type 2 diabetes. At the Sanger Institute, scientists used the iPlex approach for follow-up studies to genome scans.
In addition to laying off "around 44" workers, Sequenom will "strengthen" business development and strategic selling, operations, and product development, said Stylli. In the process, the firm will also hire a new head of sales and marketing, he said.
The firm "managed to obtain a voluntary salary reduction from a key top manager," and it will look for "creative outsourcing" possibilities, said Stylli. The company's top manager, Charles Cantor, "is very much involved, and will continue to have a strategic, as well as an external perspective for the business," he said.
In addition, chief financial officer Steve Zaniboni will step down during the fourth quarter because the company plans to consolidate the CFO position with that of the vice president of finance. That position is currently held by John Sharp.
Sequenom's landlord also granted it a two-year rent deferral for its corporate headquarters worth $3.2 million, and it will try to sublease some of its property for greater savings, the company said in a statement last week. Sequenom said it is also taking steps to lower costs by "reviewing its key supplier relationships."
The company expects the moves to save it between $7 million and $9 million in cash burn next year after recording a $1 million charge in severance and other costs.
Plans for Molecular Diagnostics
Beginning next quarter through 2007, fine mapping of the genome will lead Sequenom gradually into a position to play in molecular diagnostics, said Stylli. The area's $300 million market will continue to grow "for many, many years" as researchers try to whittle down the number of necessary SNPs, and to identify epigenetic markers, such as methylation, he said. Ultimately, the company hopes to produce "novel applications," assays, and kits, he added.
To stay competitive in fine mapping, Sequenom plans to use its new iPlex multiplexing platform to drive the cost per genotype down from five cents to three cents as soon as the third quarter of 2006, Stylli said. The company will eventually reach the elusive price of one cent per SNP, he added.
The company's iPlex will be fitted for quantitative gene-expression analysis, and then for methylation analysis, Stylli said. "This will be a ferocious set of applications that we're looking to launch in the next 12 or so months," he said. The area has "immense promise," but its dimensions are not yet known, he added.
Eventually, iPlex will enter the resequencing and mutation-detection markets, Stylli said.
These plans coincide with Sequenom's plan to introduce a lower-cost, lower-throughput platform in 2007.
Concerning its MassArray system, Sequenom plans to begin reducing prices, "something that the company has done only sporadically," Stylli said.
Stylli played up a Siemens study of MassArray versus four competitors' systems at four CLIA laboratories in the United States and Europe, which have so far found "cost advantages per test, high precision, very high throughput, and exquisite sensitivity."
Although Stylli named several aspects of the company's overhaul as "key," partnerships were perhaps the most repeated. "I believe to access the ultimate opportunities in molecular diagnostics, we're going to have to ally ourselves with major players who have a broad and deep commitment and access to the marketplace," including enlisting third parties to create MassArray assays, he said.
Stylli also mentioned collaborations as important to gain financing, develop business, expand the research market, "leverage content and biomarkers," build credibility, and validate its systems.
Stylli said during the call that several of Sequenom's customers and suppliers have expressed an interest in partnering, and that the company is "engaged in multiple discussions as we speak I'd say most of them are early stage, some are further along." Partnerships will start "emerging" within the next year, he added later.
To generate steady revenues, further collaborations, and proprietary markers, Sequenom is also planning to introduce services in quantitative gene expression and methylation in the fourth quarter. The company is also going to add agricultural genotyping services, Stylli said.
Another step is to "unlock and penetrate the installed base of mass specs," said Stylli. About 5,000 MALDI-TOF mass spec instruments are installed with manufacturers, a fraction of which are amenable to nucleic acid analysis, he estimated.
Chris Womack ([email protected])