The last couple of weeks have been quite encouraging for Sequenom (NASDAQ: SQNM). The company's stock rallied almost 35% since Nov. 7 following the third-quarter earnings report after market close. The company beat analyst estimates for both revenue and EPS by $3.4 million and $0.03, respectively. The news came as sweet relief after the company lost a patent ruling last month and its stock price sunk as much as 23%, garnering negative sentiment.
Sequenom has managed to increase the number of covered lives for its MaterniT21 PLUS non-invasive prenatal test to approximately 90 million in the U.S., and it expects to reach its goal of 120 million lives by the end of 2013. The company is receiving payments from all major national players, which is a healthy sign since the reimbursement environment has been challenging. Furthermore, the company reported an increased focus on the tests with acceptable reimbursements, with total of 48,300 tests accessioned. A total of 38,600 MaterniT21 PLUS tests were run in the third quarter, a 2% increase from the previous quarter.
Financial results
Sequenom's reported revenue for the third quarter of 2013 was $44 million, a 92% increase from the comparable period of 2012 and a 26% increase from the previous quarter of 2013. The increase was due to an increase in the company's revenue, recognized on cash from the Diagnostic Services of the company; a 166% increase was reported compared to the third quarter of 2012 and 36% to the previous quarter of 2013.
Sequenom reported net loss of $28.1 million for third quarter; as compared to $31 million for the previous quarter, this represents an almost 9.4% decrease. The R&D and SG&A expenses were down from the previous quarter. The company incurred restructuring charges of approximately $6 million associated with elimination of about 75 positions, however, as well as the decision to not occupy additional office space that had been leased. The restructuring is expected to decrease $13 million of personnel and facilities costs in 2014.
The cash and equivalents of the company as of Sept. 30 were $84.7 million, with a cash burn of $22.2 million. The cash burn came down almost 50% from the previous quarter's $44.2 million. The company has improved its cash collection methods and currently has $46 million-$51 million in uncollected amounts, made up of revenue not recognized on tests delivery.
The company is implementing programs to increase the reimbursement payments and to reduce the uncompensated Medicaid tests. This will result in increased revenue when the payments are recognized.
Bottom line
Sequenom is the pioneer in the NIPT industry and further strengthened its position with additional content for MaterniT21 PLUS test. The test has now started to report subchromosomal micro-deletions and autosomal trisomies presence for chromosomes 16 and 22, which should provide further value to health care professionals and patients.
The company reported results that were significantly higher than analyst estimates, which resulted in a surge in the company's stock price and positive investor sentiment. Sequenom was recently reiterated as a "buy" by the Maxim Group following its strong third-quarter results. The investor faith in the company has been slightly restored following the earnings release.
The company has promising products, and the commercialization of its MassArray System has the potential to bring increased value and profit to the company. All investments in development-stage biotechnology companies carry an inherent risk, however, so investors are encouraged to do their own due diligence before making any investment in Sequenom.
