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Siemens Test of MassArray Is Positive As Sequenom Inches Toward Own ASRs

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Siemens this week finished preliminary testing of the diagnostics capabilities of Sequenom's MassArray Compact platform at two CLIA testing sites in the United States and Europe, a step toward producing assays to run on its flagship system.

The good news slightly preceded Sequenom's disappointing fourth-quarter 2005 earnings report, and a decision by the Nasdaq exchange to delist the company for failing to maintain a minimum bid price for its shares. (Sequenom will continue to trade on the exchange while the company appeals its case.)

Specialty Laboratories of Valencia, Calif., and Bioscientia Institut fur Medizinische Diagnostik in Ingelheim, Germany, evaluated the mass spec-based platform's "analytical data quality and workflow" by testing approximately 1,500 DNA samples for Factor V Leiden, Sequenom said this week in a statement. Specialty tested an additional 1,000 samples using a cystic fibrosis assay, the company added.

In Sequenom's statement, representatives of both laboratories reported full concordance of results obtained using the MassArray with results generated by competing technologies. This week's statement also touted the platform's ability to run multiple types of nucleic acid-based tests.

"This was a proof-of-concept study that Siemens underwrote," Sequenom CEO Harry Stylli said in a conference call this week with investors. "The findings were broadly based, very positive for our technology, and really herald the technology in the broader diagnostics field," he said.

Siemens has been testing the MassArray Compact against the platforms of four undisclosed competitors, Stylli said in a September conference call with investors. Siemens planned to "evaluate a range of platforms, because the link between molecular medicine, molecular imaging, and current imaging modalities is becoming more apparent," Murali Prahalad, vice president of business development at Sequenom, told Pharmacogenomics Reporter in October 2004.

The German conglomerate's medical division was interested in evaluating MassArray's genotyping, epigenetic analysis, and gene-expression analysis in diagnostics, said Prahalad.

The original agreement between Siemens and Sequenom called for the installation of MassArray Compact platforms at four clinical testing laboratories, but the companies have so far disclosed only Specialty and Bioscientia. The company acknowledged in documents filed with the SEC this week that the results from Specialty and Bioscientia represented preliminary findings from the 2004 benchmarking agreement with Siemens, but made no mention of tests ongoing elsewhere.

Sequenom also said it plans to complete development of a proprietary fetal DNA enrichment method in the third quarter, and to launch its iPLEX II system in the fourth quarter.

The range of diagnostics that Sequenom has had in mind as ASRs for use with MassArray has been fairly broad. The company expects to launch a research-use only prenatal diagnostic for Rhesus D "in early 2007," and it plans to "establish relationships with CLIA-certified laboratories" prior to the launch, according to documents filed with the SEC. The company also generally mentioned non-invasive prenatal diagnostic tests in its release about the benchmark tests, which were performed using cystic fibrosis and Factor V Leiden assays.

In a June statement announcing Bioscientia's collaboration, the company said it provided the German laboratory with deep vein thrombosis and HIV assays for analysis. And in an October 2004 conference call with investors, then-CEO Toni Schuh said the firm intended "to develop ASRs supporting genetic trace analysis for early cancer detection, pathogen identification, and veterinary diagnostics."

The company is counting on sales of these new products in 2006 to bolster slumping revenues, which fell to $19.4 million in 2005 from $22.5 million in 2004.

Sequenom's restructuring — announced in September — will "positively impact 2006," while its recently launched iPLEX multiplexing assay, along with the MassArray Compact will drive "top-line revenue growth in 2006," CEO Harry Stylli said in a statement.

The company estimated that these changes would lead to $24 million in 2006 revenues, a 24 percent increase over 2005.

For the quarter ended Dec. 31, 2005, Sequenom reported a 28-percent drop in revenues to $4.4 million from $6.1 million in the year-ago period. Net losses for the recent quarter increased to $7 million, or $.17 per share, from $6.6 million, or $.16 per share in the similar quarter last year.

The company spent $3 million on research and development in the fourth quarter, a 23-percent decline from $3.9 million from the year-ago period.

Separately, the company said that it plans to issue more than 54.5 million shares of common stock and around 32.7 million purchase warrants at $0.70 per share to raise $30 million by May 31.

— Chris Womack ([email protected])

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