100% Results From Sequenom

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When you're right, your shares are right, too.

Sequenom (Nasdaq: SQNM) made two announcements yesterday that prove it's serious about shifting its focus from being a supplier of research tools toward adopting a more clinical focus. And the share price is responding nicely -- up some 33% so far today.

The company said it tested another 219 samples with its noninvasive prenatal Down syndrome test and got the same results as it did with the first 201 samples: 100% accuracy, no false positives (saying Down syndrome is present when it isn't), and no false negatives (saying there isn't Down syndrome when there is). You just can't get any better than that.

And the results look especially good when you consider that the currently available tests can identify only 70% to 90% of samples and carry a false-positive rate of up to 5%.

Sequenom still hasn't tested enough samples to release the product, though. It expects to test 3,000 to 5,000 samples in all before the expected launch in the middle of next year. But the new data should give investors confidence that the early results weren't a fluke. I know I'm impressed.

Sequenom also announced yesterday that it had acquired the Center for Molecular Medicine, a Clinical Laboratory Improvement Act (CLIA)-certified clinical diagnostics laboratory. It paid just $4 million for the lab, of which 90% will be paid for in the company's (now more valuable) stock. It's also setting up collaborations with the two nonprofits that used to own the lab. The CLIA-certified lab and another one that Sequenom is building in its hometown of San Diego are necessary for the company to begin testing clinical samples.

Other companies, such as Affymetrix (Nasdaq: AFFX), Illumina (Nasdaq: ILMN), and Invitrogen (Nasdaq: IVGN), have either expanded from laboratory research to diagnostic testing or are planning to, but I don't think they've done it at such a feverish pace as Sequenom has. The company has obviously figured out what diagnostic-test makers such as Genzyme (Nasdaq: GENZ) and Myriad Genetics (Nasdaq: MYGN) already know -- there's serious money to be made in diagnostic tests.

It still has some time before it'll be profitable, but Sequenom might be well on its way to becoming the next ultimate growth stock.