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Sequenom's Q2 Revenues Up 24 Percent

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Sequenom reported after the close of the market on Thursday that its second-quarter revenues had increased 24 percent year over year, helped along by growth in sales of its consumables and MassArray system.

For the three months ended June 30, revenues climbed to $11.4 million from $9.2 million a year ago, surpassing consensus Wall Street estimates of $10.6 million.

Its net loss for the quarter rose sharply to $59.1 million, or $0.86 per share, from $20.2 million, $0.33 per share, in Q2 2009, as the company took a non-cash charge of $40.3 million for the issuance of shares in conjunction with the settlement of consolidated federal class action lawsuits, and a $1.5 million fixed charge related to the settlement of consolidated derivative litigation.

On a non-GAAP basis, Sequenom's loss per share was $.25. Wall Street had estimated a loss of $0.26 per share.

During the second quarter, Sequenom also announced it had received approval from a federal court to settle a class action suit brought forward by shareholders of the company related to the mishandling of data on its SEQureDx test for fetal gene and chromosomal abnormalities.

Sequenom's shares opened Friday down 3 percent on the Nasdaq, but were even with Thursday's close of $5.99 shortly thereafter.

During the quarter, Sequenom's R&D spending inched up to $10.4 million from $10.2 million in Q2 2009. Its SG&A costs dropped to $13.7 million from $15.1 million a year ago.

As of June 30, the company had $67.7 million in cash, cash equivalents, and marketable securities, it said.

In a statement, Harry Hixson, chairman and CEO of Sequenom, said that the company had achieved a number of milestones during the quarter, adding, "I am pleased that we resolved many of our outstanding legal issues, and this will allow us to focus on achieving the remaining milestones of our 2010 business plan."

The spike in its second-quarter revenues came as sales of its consumables business rose to nearly $5.4 million from $5.2 million a year ago, and sales of its MassArray platform and related products increased to $5.3 million from $3.3 million.

Sequenom shipped 11 research-use only MassArray platforms during the quarter, and during the first half of the year the company "made significant progress in addressing the needs of the translational research market, and more than 80 percent of systems shipped in the US were to translational research institutes," the firm said.

Three of the 11 systems shipped in the quarter were the new MassArray Analyzer 4 system, which was launched in April, Hixson said during a conference call following the earnings release.

During the quarter, Sequenom was warned by the US Food and Drug Administration that it was improperly marketing an unapproved genetic test. The company believes that the test in question is Sequenom's SensiGene Fetal Rhesus D Genotyping test based on the SEQureDx technology. Late last month, the firm said that it was preparing a response to the agency, which also sent warning letters to 13 other companies in addition to Sequenom.

Hixson said that the company has sent its response to FDA, and reiterated that Sequenom continues to believe that because the test is not marketed to the general public and is meant for use only in its CLIA lab, it meets the definition of a laboratory-developed test.

"We have used our best efforts to comply fully and in good faith with the FDA's laboratory-developed test policy, and we will continue to work with FDA to ensure compliance as the FDA's policy evolves," Hixson said.

He also provided an update on Sequenom's development of its Trisomy 21 test and said that it remains a primary focus for the firm. He said that "significant" progress has been made in the development of the sequencing-based assay, and the firm has begun the final stage of internal verification to finalize the assay protocol.

The plan is to analyze about 450 blinded samples obtained from pregnant woman at increased risk for fetal trisomy 21. The internal study is expected to be completed by the end of the third quarter, he added, and if successful, a larger validation study would follow.

The company, however, will discontinue offering its SensiGene Fetal Sex Determination test as of September 15. Because the test is not reimbursable, patients have to bear the full cost of the test. "As a result sales have been disappointing," Hixson said.

The company's development of an LDT test for age-related macular degeneration "remains on track" and will be the next test that Sequenom's Center for Molecular Medicine — the company's CLIA-certified and CAP-accredited molecular diagnostics lab — brings to market. A launch is planned for the first half of 2011, Hixson said.

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