William Blair Comments On Sequenom In Light Of IP Settlement With Illumina
William Blair analyst Brian Weinstein reiterated an Outperfom rating on Sequenom (NASDAQ:SQNM), following the news that Sequenom and Illumina reached an agreement to settle all pending IP claims between Sequenom and Illumina-owned Verinata and in so doing established a long-term IP structure that allows both parties to benefit from the expansion of the NIPT marketplace. No price target was provided.
Weinstein wrote, “We like this deal for Sequenom as it provides $50 million cash upfront and a stream of high margin patent-related payments through 2020, eliminates a significant amount IP litigation cost (several million dollars of legal expense was expected in 2015 due to the jury trial that would have occurred between the companies), provides a royalty for every NIPT that Illumina sells as an LDT, provides an additional potential royalty revenue stream from a possible IVD kit from Illumina, and guarantees access to Illumina technology for an extended period of time (though Sequenom has been working on validating other technologies as well and could use these as well if it chooses).”
The analyst added, “The only things Sequenom appears to give up in this deal are the right pursue an FDA cleared assay in the NIPT space (which we saw as unlikely anyway), some revenue from existing licensing agreements that it previously controlled on its own and what we assume is a small amount of revenue from the sale of its own line of LDTs in the space. But these lost revenue streams should (depending on the royalty split) be made up by the gain in royalty revenues from Illumina sales and new licensee royalties Sequenom did not have access to previously.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Brian Weinstein has a total average return of 26.3% and a 100.0% success rate. Weinstein has a 0.5% average return when recommending SQNM, and is ranked #469 out of 3412 analysts.