Please ensure Javascript is enabled for purposes of website accessibility

Why Sequenom Jumped 14% Today

By Brian Orelli, PhD - Sep 17, 2015 at 1:06PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

UnitedHealthcare agrees to cover Sequenom's diagnostic tests.

What: Sequenom (NASDAQ: SQNM) jumped more than 14% on Thursday after announcing that UnitedHealth's (UNH 1.42%) 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

UnitedHealth Group Incorporated Stock Quote
UnitedHealth Group Incorporated
$502.67 (1.42%) $7.03

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.