Sequenom, Inc. (NASDAQ:SQNM), a life sciences company committed to enabling healthier lives through the development of innovative products and services, today reported total revenues of $27.6 million, total accessioned units of 46,400, and a net loss of $13.4 million, or $0.11 per basic and diluted share, for the first quarter of 2016.

“During the quarter, we executed on a number of key initiatives designed to return Sequenom to sustainable growth, resulting in quarter over quarter growth in our unit volume,” said Dirk van den Boom, Ph.D., President and CEO of Sequenom.  “Overall, we made meaningful progress toward achieving our goal of becoming financially self-sustaining while solidifying our position as a leader in reproductive health.”

Operational Updates

To date in 2016, Sequenom and Sequenom Laboratories made significant progress on several key corporate objectives:

  • Total tests accessioned in the first quarter of 2016 reflect growth of 10% in test volume compared to the fourth quarter of 2015.  Sequenom Laboratories’ total noninvasive prenatal test (NIPT) accessions in the first quarter of 2016 were up 3,900 units sequentially from the fourth quarter of 2015, for growth of 11%;
  • Completed the consolidation of Sequenom Laboratories’ North Carolina laboratory location into the San Diego laboratory location;
  • Enhanced San Diego laboratory productivity and restructured other key functions, consistent with the annualized cost reduction goal of greater than $20 million before the end of 2016;
  • Negotiated in-network contracts with Anthem Blue Cross and Blue Shield Health Plans for 11 states.  Sequenom Laboratories has coverage for over 200 million commercial lives and 46 million lives under Medicaid programs;
  • Filed a writ of certiorari asking the U.S. Supreme Court to decide if the claims of Sequenom’s ‘540 patent are directed to patent-eligible subject matter;
  • Launched Sequenom Laboratories’ testing portfolio into the average-risk pregnancy market and optimized its sales approach to better serve the obstetrician channel; and
  • Introduced a multi-faceted physician and patient customer experience program that seeks to provide a best-in-class experience at every step of the customer journey.

First Quarter 2016 Results

First quarter 2016 revenues of $27.6 million declined 27% from $37.8 million in the first quarter of 2015.  Revenues and unit volumes in the first quarter of 2016 were lower than the first quarter of 2015, primarily reflecting the conversion of certain laboratory customers to licensee status under the Pooled Patents Agreement, and a smaller amount available to collect during the first quarter of 2016 for testing services performed in prior periods.  This latter factor reflects the improvement in the timeliness of Sequenom Laboratories collections as a result of additional payor contracts.  These changes resulted in approximately $10 million in net revenue reduction for the first quarter of 2016 compared to the first quarter of 2015.

Total patient samples accessioned decreased by 12% to 46,400 patient samples during the first quarter of 2016, compared to the prior year’s first quarter.  Approximately 41,200 of those patient samples accessioned were for NIPT, including the MaterniT®  21 PLUS, VisibiliT and MaterniT® GENOME laboratory-developed tests, which is a 9% decrease in testing volume compared to the first quarter of 2015.  The decrease in tests accessioned was driven by the conversions of laboratory customers to licensee status, as described above, partially offset by the increase in tests accessioned for patients in the average-risk pregnancy market.

The total volume of tests from Sequenom’s core business increased by 7% over the first quarter of 2015, largely as a result of Sequenom Laboratories’ entry into the average-risk pregnancy market.  In this press release, “core business” refers to Sequenom’s revenue and unit volume excluding the effect of the conversion of certain laboratory customers to licensee status in 2015.  Notably, the volume of NIPT tests in Sequenom’s core business, which includes average-risk pregnancies, increased by 14% for the first quarter of 2016 over the first quarter of 2015.

License revenue was $2.2 million in the first quarter of 2016, compared to $2.1 million for the first quarter of 2015, and $2.3 million in the fourth quarter of 2015.  Sequenom continues to expect a total of $10 million in license fee revenue for 2016.

Total cost of revenues decreased to $16.8 million for the first quarter of 2016, compared to $19.3 million for the prior year period.  Cost of revenues decreased primarily due to the decrease in test volumes as a result of the conversion of certain laboratory customers to licensee status.

Gross margin for the first quarter of 2016 was 39% compared to gross margin of 49% for the first quarter of 2015.  The effect of laboratory customers who converted to licensee status, costs associated with Sequenom Laboratories’ laboratory consolidation and restructuring, the impact of entering the average-risk pregnancy market and increased MaterniT GENOME volume largely drove the decrease.  Incremental costs related to the laboratory consolidation reduced gross margin for the first quarter of 2016 by 3%.  Sequenom continues to expect gross margin to increase for the remaining quarters of 2016.

Total operating expenses for the first quarter of 2016 were $22.1 million, compared to $23.0 million for the first quarter of 2015.  Total operating expenses for the first quarter of 2016 were up only slightly from total operating expenses of $21.9 million for the fourth quarter of 2015, due to the costs associated with Sequenom Laboratories’ laboratory consolidation and other restructuring activities, which offset the benefit of reduced spending for research and development and general and administrative activities.

Operating loss for the first quarter of 2016 was $11.4 million, compared to operating income of $16.5 million for the same period in 2015.  Operating and net income for the first quarter of 2015 included a $21.0 million gain on the Pooled Patents Agreement with Illumina.  Net loss for the first quarter of 2016 was $13.4 million or $0.11 per basic and diluted share, as compared to net income of $14.3 million, or $0.11 per diluted share, and $0.12 per basic share for the same period in 2015.

Cash burn for the first quarter of 2016 was $10.4 million, compared to $9.4 million in the same period of 2015 and$4.7 million in the fourth quarter of 2015.  Cash burn increased in the first quarter of 2016 primarily due to reduced revenue collected for testing services performed in prior periods and delays in collections related to the launch of tests into the average-risk pregnancy market.  Cash burn in the first quarter also included semi-annual interest payments on Sequenom’s convertible debt.

Unrecorded accounts receivable for tests performed and recognized on a cash basis are estimated to be $16 million to $18 million as of March 31, 2016, the same as the estimate as of December 31, 2015.

As of March 31, 2016, cash, cash equivalents, and marketable securities totaled $66.1 million(Original Source)

Shares of Sequenom are down nearly 11% to $1.20 in after-hours trading. SQNM has a 1-year high of $4.57 and a 1-year low of $1.10. The stock’s 50-day moving average is $1.42 and its 200-day moving average is $1.53.

On the ratings front, Sequenom has been the subject of a number of recent research reports. In a report issued on March 3, Ladenburg Thalmann analyst Kevin Degeeter upgraded SQNM to Hold. Separately, on the same day, Piper Jaffray’s William Quirk maintained a Hold rating on the stock and has a price target of $2.10.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Kevin Degeeter and William Quirk have a total average return of 21.8% and -5.1% respectively. Degeeter has a success rate of 59.1% and is ranked #179 out of 3838 analysts, while Quirk has a success rate of 34.8% and is ranked #3354.

Sequenom, Inc. provides early patient management information. It develops and commercializes molecular diagnostic testing services that serve women’s health and oncology markets. The company was founded by Hubert Koester and Charles R. Cantor in 1994 and is headquartered in San Diego, CA.