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Hey, Sequenom, That's Great, But ...

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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.

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.

Read/Post Comments (4) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 18, 2009, at 3:35 PM, timd209 wrote:

    The health care version of SIRI? Another irresponsible mention of SIRI as an attempt by MF to bring down a company on its way to success.

    When will MF admit they were wrong about SIRI?

  • Report this Comment On September 18, 2009, at 5:30 PM, littledragon005 wrote:

    you must be a pay basher, or losing big time money on this to be a sore loser?

  • Report this Comment On September 18, 2009, at 6:58 PM, firestorm62 wrote:

    The author also has a bumpy ride if his ph.d has limited him to merely having articles published by mf.

  • Report this Comment On September 18, 2009, at 8:42 PM, LvTr8der wrote:

    This free article from MF reminds me of ACCORN community service.

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