What: Sequenom (NASDAQ:SQNM) jumped more than 14% on Thursday after announcing that UnitedHealth's (NYSE:UNH) health insurance group, UnitedHealthcare, will cover the company's MaterniT21 Plus, HerediT CF Carrier Screen, and HerediT Universal Carrier Screen tests starting October 1.
So what: The company's MaterniT21 Plus test is a blood test given to pregnant women that can detect extra chromosomes and select microdeletions in the genome of the fetus. A blood test carries less risks than an amniocentesis, which is the typical way fetal mutations are diagnosed. The test can also tell the parents the sex of the fetus and whether the women is carrying multiple fetuses.
The HerediT CF Carrier Screen tests for mutations that cause cystic fibrosis while the HerediT Universal Carrier Screen is a customizable test than can detect more than 2,000 mutations that cause more than 250 diseases.
UnitedHealthcare covers 43 million people throughout the United States, so gaining reimbursement for its tests from the insurance company is a very big deal for Sequenom. The company claims that 200 million people now have access to its tests through their insurance companies, so the addition of UnitedHealthcare gave Sequenom the potential to increase sales by 25%.
Now what: Undoubtedly Sequenom is more valuable today with the potential for additional sales. How much more is anyone's guess because we don't know the price that UnitedHealth agreed to pay for the tests. The large insurer has a lot of negotiating muscle, so Sequenom may have needed to offer a discount to woo UnitedHealth into covering the tests.
Investors may get some color on the reimbursement price from management when the company reports third-quarter earnings later this year, but they will have to wait until fourth-quarter results reported in early 2016 to see for themselves how the deal is impacting margins.
Brian Orelli has no position in any stocks mentioned. The Motley Fool recommends UnitedHealth. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.