What: Sequenom (NASDAQ: SQNM) reported its second-quarter earnings today, triggering a 28% drop in its share price on exceptional volume. Investors were apparently disappointed at the molecular diagnostic-maker's quarterly numbers, where it missed consensus for both diluted earnings per share and total revenue. Specifically, the company reported an $0.08 loss per diluted share, which was $0.03 higher than the Street was predicting. On the revenue side, the company generated $32.8 million for the three-month period, missing consensus by $3.3 million. Revenues also fell by a noteworthy 18% in the second-quarter relative to a year ago. 

So what: This hefty drop in revenue stems mainly from the settlement of Sequenom and Illumina's patent settlement case late last year, where the two companies joined forces to form the Noninvasive Prenatal Testing Intellectual Property patent pool. This event led to some of Sequenom's diagnostic customers switching over to a licensing deal in the first-half of this year, leading to higher licensing revenue but lower sales of its diagnostic services during the quarter. 

Now what: Management believes that the creation of this patent pool could drive licensing fees and royalties to at least $80 million by 2020. If so, that would be a huge jump from where it stands now -- i.e., only $1.9 million in the second-quarter. That's perhaps why the market seems so dubious over management's optimistic outlook regarding this particular revenue stream, evinced by today's massive sell-off.

My quick take is that the market is over-reacting to a bad quarter, and subsequently dismissing the latent value of this patent pool altogether. As a result, you may want to consider digging deeper into this small-cap healthcare stock following what looks, to me, like a somewhat unjustified double-digit drop in share price.