Sequenom (Nasdaq: SQNM ) , the health-care version of Sirius XM Radio (Nasdaq: SIRI ) in terms of seemingly random volatility, was up as much as 12.7% yesterday because the company did what it said it would do.
Under the circumstances, I guess that's warranted.
(If you need to get caught up, you can read all about it here, but in short, the company announced last April that data for its Down syndrome test was "mishandled" by employees.)
On the second-quarter conference call last month, Sequenom said it would launch a test for cystic fibrosis this quarter or early next quarter. Lo and behold, it launched the test yesterday. While having clean enough data to launch a test is certainly a good thing -- three cheers for a lack of mishandling -- the cystic fibrosis test isn't going to make or break Sequenom.
Sure, Sequenom's test identifies 103 mutations, 80 more than the American College of Medical Genetics (ACMG) recommends testing for, but it's still only a $300 million market. There's much more potential in the Down syndrome market.
More importantly, launching the cystic fibrosis test doesn't tell us anything about whether the reexamination of its Down syndrome test will come back as good as the mishandled data looked originally. The Down syndrome test uses maternal blood to check tiny amounts of fetal DNA for the presence of an extra chromosome. The cystic fibrosis test measures small mutations in the DNA of the parents, from which collecting DNA isn't really a problem.
I'm bullish on the long-term prospects for diagnostic tests from companies like Myriad Genetics (Nasdaq: MYGN ) , Life Technologies (Nasdaq: LIFE ) and Abbott Labs (NYSE: ABT ) , especially as companion tests that figure out whether a drug works or not for an individual patient become more popular. Sequenom's move from being a supplier of equipment to running its own diagnostic tests was a good one. But its future is still very much dependent on whether the data for the Down syndrome test comes back clean.
Hold on investors, I think you've got a bumpy ride ahead.