SAN DIEGO, May 1, 2014 /PRNewswire/ -- Sequenom, Inc.
(NASDAQ: SQNM), a life sciences company providing innovative
genetic analysis solutions, today reported record revenue of
$46.3 million for the first quarter
of 2014, an increase of 20% compared to revenue of $38.5 million for the first quarter of
2013. First quarter 2014 revenues from diagnostic services
grew 27% compared to the first quarter of 2013, and 13% on a
sequential basis over the fourth quarter of 2013.
Total laboratory test volume increased to nearly 50,000 tests
accessioned in the first quarter of 2014, including 39,800
MaterniT21™ PLUS tests. "We are pleased with the continued
growth and 8% sequential increase in MaterniT21 PLUS tests,
especially as we focus on building more profitable test volume,"
said Harry F. Hixson, Jr., Ph.D.,
Chairman and CEO of Sequenom. "We continue to make progress
within the payor community, bringing the current number of lives
covered under commercial signed contracts to 118 million and
government programs to 24 million."
Revenues from the Sequenom Laboratories operating segment grew
27% to $37.1 million in the first
quarter of 2014, up from $29.1
million in the prior year period. Revenues from the
Sequenom Laboratories operating segment are recorded primarily on a
cash basis. International revenue, accounted for on the
accrual basis, contributed 12.5% of diagnostic services revenues in
the first quarter of 2014. Approximately $15.9 million of the diagnostic services revenue
reported for the first quarter 2014 are attributable to tests
performed in the same period. Approximately $21.2 million of the diagnostic services revenue
reported in the first quarter 2014 is related to payments collected
for tests performed in prior periods.
First quarter 2014 revenues from the Bioscience operating
segment decreased 2% from the same period in 2013, although
consumable revenue grew 9% over the same period. Sequenom
Bioscience launched four research use only panels in the last 18
months focused on personalized medicine and cancer research
markets. These panels include LungCarta™ Panel, for non-small
cell lung adenocarcinoma cancer research, UltraSEEK™ Oncogene Panel
for ultrasensitive detection, OncoFocus™ Panel for solid tumors and
iPLEX® Pro Sample ID Panel for sample
identification. Combined, these panels represented 7% of the
9% growth in consumable sales in the first quarter 2014 compared to
the first quarter 2013.
Total cost of revenues increased to $26.1
million for the first quarter of 2014, compared to
$24.5 million for the prior year
period. Cost of revenues increased due to the increase in
Sequenom Laboratories' test volumes and costs to support increased
testing capacity, as total tests accessioned increased 12% compared
to the same period in the prior year.
Overall gross margin for the first quarter of 2014 was 44% as
compared to gross margin of 36% for the first quarter of
2013. This improvement is attributable primarily to the
positive contribution from the Sequenom Laboratories business
resulting from higher cash collections during the quarter and
improved efficiencies in processing patient samples. Gross
margin for the Sequenom Laboratories business in the first quarter
of 2014 was 39%, as compared to 28% in the first quarter of 2013.
Gross margin for the Sequenom Bioscience business for the first
quarter of 2014 was 64% compared to 63% for the prior year
period.
Total operating expenses for the first quarter of 2014 declined
to $33.6 million, as compared to
total operating expenses of $41.0
million for the first quarter of 2013, and were down
sequentially from total operating expenses of $35.0 million for the fourth quarter of 2013.
Selling and marketing expenses decreased to $11.8 million for the first quarter of 2014 from
$13.7 million in the prior year first
quarter, resulting primarily from lower labor costs associated with
the benefit of the restructuring in the third quarter of 2013 and
efforts to control costs. Research and development expenses
decreased to $8.2 million for the
first quarter of 2014, as compared to $13.8
million in the first quarter of 2013, related primarily to
decreased labor, supplies and costs related to the Sequenom
Laboratories' North Carolina
facility which became operational in the second quarter of
2013, and the costs are now included in cost of sales.
General and administrative expenses for the first quarter of
2014 decreased to $12.8 million, as
compared to $13.5 million for the
first quarter of 2013, primarily due to expense reductions as a
result of our restructuring in the third quarter. Total
stock-based compensation expense was $3.0
million for the first quarter of 2014, a decrease from
$3.1 million in stock-based
compensation recorded for the first quarter of 2013.
During the first quarter, an additional restructuring charge of
$0.9 million was recorded in
connection with changes in assumptions regarding the expected
sublease income to be received for a facility the Company exited in
the third quarter of 2013.
Net loss for the first quarter of 2014 was $15.7 million, or $0.13 per share, as compared to net loss of
$29.4 million, or $0.26 per share, for the same period in 2013.
Adjusted net loss for the first quarter of 2014 was
$14.7 million, or $0.13 per share.
Net cash used in operating activities was $13.2 million for the first quarter of 2014,
compared to $19.7 million in the same
period in the prior year. The cash burn for the first quarter
of 2014 was $15.5 million, compared
to $13.6 million in the fourth
quarter of 2013. Annual royalty payments of $4.8 million and semi-annual debt service
payments of $3.3 million were made in
the first quarter of 2014. The cash burn for the first
quarter of 2014 excluding the annual royalty and semi-annual debt
service payments was $7.4
million. The Company also used cash for capital
investments of $0.4 million and debt
repayments of $1.9 million during the
first quarter of 2014. As of March 31,
2014, total cash, cash equivalents, and marketable
securities were $56.3 million.
"We are pleased to see sequential improvements in volume,
revenue, gross margin and expenses during the quarter, an
indication of steady growth, and improving profitability and cash
flow in 2014," said Paul V. Maier,
Sequenom's CFO. "Our focus on profitable volume and the
efforts of our sales, managed care and billing and collections
teams are helping us improve our collection cycle and
reimbursement."
Operational Updates
The MaterniT21 PLUS test has had
a positive response from the physician community based on the
superior attributes of the test and customer support offered by
Sequenom Laboratories. More than 80% of Maternal-Fetal
Medicine specialists and more than 6,500 Obstetrician/Gynecologists
in the United States have ordered
the test since its introduction.
Sequenom Laboratories also accessioned a record number of
patient samples for testing with its HerediT™ cystic fibrosis (CF)
carrier screening laboratory-developed test. The HerediT CF
test analyzes 136 mutations and five variants proven to be
clinically relevant in causing CF, integrating disease causing
mutations selected from the Johns Hopkins CFTR2 database. The
HerediT CF test analyzes nearly six times the number of clinically
relevant mutations currently available than the most common
commercial CF carrier screening test offerings.
Sequenom Laboratories played a key educational role at the
recent American College of Medical Genetics and Genomics (ACMG)
Annual Clinical Meeting in Nashville. Sequenom Laboratories
hosted an industry-sponsored symposium, entitled 'The Science of
Pregnancy Management: Moving Beyond NIPT through the Continuum of
Care' that was attended by approximately 350 providers, the full
capacity for the venue. Dr. Jeffery
Chapa (Cleveland Clinic), Dr. Lee
Shulman (Northwestern) and Dr. Mark
Evans (New York) were the
featured speakers at this symposium. Sequenom Laboratories'
clinical and research and development teams presented a total of
five posters covering a variety of diverse clinical aspects of the
MaterniT21 PLUS test, which is a testament to our exceptionally
strong science. Topics ranged from compelling, real clinical
case discussions to the detection of fetal sub-chromosomal
abnormalities, all determined through the sequencing of cell-free
DNA from maternal plasma by our laboratory.
The American Medical Association (AMA) Editorial Panel met in
February to consider adding a section of codes for next generation
sequencing tests or Genome Specific Procedures (GSP) with a
specific code for fetal aneuploidy. Sequenom Laboratories has
been notified, and it has been announced publicly, that its CPT
code application and request was accepted by the AMA. The
specific code has not been announced but should be posted on their
web site on or before June 1, 2014,
with implementation expected on January
1, 2015. We expect this new code to facilitate the
reimbursement process and reduce the time required for third-party
payors to process claims for payment.
Other updates include:
- Increased the volume of Medicaid tests to 16% in the first
quarter of 2014 from 14% in the fourth quarter, as we have begun to
increase the volume of Medicaid tests in 13 states that are now
reimbursing us while further limiting the Medicaid volume in states
that are not yet reimbursing for our tests.
- Unrecorded diagnostic accounts receivable are estimated to be
$42 to $46 million as of March 31, 2014.
- Two international license agreements and additional
international marketing agreements were signed, bringing the number
of countries with access to the MaterniT21 PLUS test, or similar
test provided by licensees, to 27.
In January 2014, the European
Patent Office ("EPO") issued patent EP2183693 B1, entitled
"Diagnosing Fetal Chromosomal Aneuploidy Using Genomic
Sequencing." The patent, which is exclusively licensed
to Sequenom, claims novel methods for detecting fetal aneuploidy
using sequencing and was the first patent filing made in the EPO
directed to such novel method.
On April 7, 2014, the U.S. Patent
and Trademark Office ("PTO") concluded, in favor of Sequenom, three
patent interference proceedings involving the use of DNA sequencing
for noninvasive prenatal testing for Down syndrome and other
chromosomal abnormalities. The PTO ruled that U.S. patent no.
8,008,018 and two additional patent applications, each licensed to
Verinata Health, Inc., lacked sufficient disclosure to meet the
written description requirement for the claims in the patent and
patent applications. The PTO entered a judgment canceling all
four of the '018 patent claims in the interference and refusing the
claims of the two patent applications. The PTO rulings are
subject to appeal to Federal District Courts or the Court of
Appeals for the Federal Circuit.
"We are encouraged by these decisions of the EPO and the PTO and
look forward to continued developments in this important area,"
said Bill Bowen, Senior Vice
President and General Counsel of Sequenom, Inc.
Non-GAAP Financial Measures
"GAAP" refers to
financial information presented in accordance with generally
accepted accounting principles in the
United States. To supplement the condensed
consolidated financial statements and discussion presented on a
GAAP basis, this press release includes non-GAAP financial measures
with respect to the quarter ended March 31,
2014. Management uses non-GAAP financial measures
because it believes the appropriate analysis of our performance
cannot be effectively considered while incorporating the effect of
items and charges that have not been experienced consistently in
prior periods. Furthermore, management believes that a cash
flow metric incorporating cash used by operations and certain other
uses of cash are important to understand the cash requirements of
the business. The Company reported the following non-GAAP
financial measures: "adjusted net loss" and "cash burn."
These non-GAAP financial measures are not in accordance with
or an alternative to GAAP.
Adjusted net earnings exclude the impact of charges associated
with restructuring our operations including the impairment of
intangible assets. Management believes those costs do not
reflect the ongoing performance of the core business.
Management uses adjusted net income or loss to prepare
operating budgets and forecasts and to measure our performance
against those budgets and forecasts. Management uses cash burn to
evaluate performance compared to forecasts. Cash burn is
calculated as the sum of net cash used by operating activities,
purchases of property, equipment and leasehold improvements, and
payments on long-term obligations. Reconciliations of net
loss, the GAAP measure most directly comparable to adjusted net
loss, and cash used by operating activities, the GAAP measure most
directly comparable to cash burn, are provided on the attached
schedule.
Conference Call Information
A conference call hosted
by Harry F. Hixson, Jr., Ph.D.,
Chairman and CEO, and other members of senior management will take
place today, May 1, at 5:00 pm ET (2:00 pm
PT) and will be webcast live on the Sequenom website.
To access the live conference call, dial 877-883-0383 in the
U.S. and 412-902-6506 for other international callers. Please
use code 4130222. For interested parties unable to listen to the
live webcast, a teleconference replay will be available through
Friday, May 16, 2014. The replay will
be accessible by dialing 877-344-7529 or 412-317-0088
internationally, and entering the conference number 10044794.
The conference call webcast is accessible through the
"Investors" section of the Sequenom website at
www.sequenom.com/invest. An online replay will be available
following the initial broadcast until Friday, May 16, 2014.
About Sequenom
Sequenom, Inc. (NASDAQ: SQNM) is a
life sciences company committed to improving healthcare through
revolutionary genomic and genetic analysis solutions. Sequenom
develops innovative technology, products and diagnostic tests that
target and serve discovery and clinical research, and molecular
diagnostic markets. Website: http://www.sequenom.com/.
About Sequenom Bioscience
Sequenom's Bioscience
division is a pioneer in the use of MALDI-TOF Mass Spectrometry for
detection of nucleic acids and precise quantification of genetic
variability. This proven platform has delivered highly accurate
results, driving biological understanding in clinical and
translational research. Cited in over 2,000 peer review journals,
Sequenom Bioscience's research-use-only MassARRAY® System is
routinely used in premier institutions and companies worldwide for
life science, basic research, and agricultural genomics.
About Sequenom Laboratories
Sequenom Laboratories, a
wholly owned subsidiary of Sequenom, Inc., is a CAP-accredited,
CLIA-certified and New York State
licensed molecular diagnostics laboratory, dedicated to the
development and commercialization of laboratory-developed tests
(LDTs) for prenatal and ophthalmic diseases and conditions.
SEQUENOM®, iPLEX®, LungCarta™, MaterniT21™ PLUS, HerediT™,
MassArray®, OncoFocus™, and UltraSEEK™ are trademarks of Sequenom,
Inc. All other trademarks and service marks are the property
of their respective owners.
Forward-Looking Statements
Except for the historical
information contained herein, the matters set forth in this press
release, including statements regarding the Company's focus on
building more profitable test volume, expectations of sublease
income for an exited facility, indications of steady growth and
improving profitability and cash flow in 2014 for the Company's
diagnostics business, the Company's expectations regarding
the timing of an announcement by The American Medical Association
regarding new CPT billing codes for fetal aneuploidy detection, the
timing of implementation for the new codes and the Company's
expectations regarding the impact of the new codes on its business,
reimbursement and third party payor payment processing, the
Company's commitment to improving healthcare through revolutionary
genomic and genetic analysis solutions, and Sequenom Laboratories'
dedication to the development and commercialization of
laboratory-developed tests for prenatal and ophthalmic diseases and
conditions, are forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are subject to
risks and uncertainties that may cause actual results to differ
materially, including the risks and uncertainties associated with
market demand for and acceptance and use of technology and tests
such as the MaterniT21 PLUS and HerediT tests, reliance upon the
collaborative efforts of other parties such as, without limitation,
healthcare providers, international distributors and licensees, the
Company or third parties obtaining or maintaining regulatory
approvals that impact the Company's business, government regulation
particularly with respect to diagnostic products and laboratory
developed tests, publication processes, the performance of designed
product enhancements, the Company's ability to develop and
commercialize technologies and products, particularly new
technologies such as noninvasive prenatal diagnostics, laboratory
developed tests, and genetic analysis platforms, the Company's
financial position, the timing and amount of reimbursement that
Sequenom Laboratories receives from payors for its laboratory
developed tests, the Company's ability to manage its existing cash
resources or raise additional cash resources, competition,
intellectual property protection and intellectual property rights
of others, litigation involving the Company, and other risks
detailed from time to time in the Company's most recently filed
reports on Form 8-K, and its most recently filed Annual Report on
Form 10-K/A and 10-K for the year ended December 31, 2013, and other documents
subsequently filed with or furnished to the Securities and Exchange
Commission. These forward-looking statements are based on current
information that may change and you are cautioned not to place
undue reliance on these forward-looking statements, which speak
only as of the date of this press release. All forward-looking
statements are qualified in their entirety by this cautionary
statement, and the Company undertakes no obligation to revise or
update any forward-looking statement to reflect events or
circumstances after the issuance of this press release.
SEQUENOM,
INC.
|
CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
|
(Unaudited)
|
(In thousands,
except per share information)
|
|
|
Three Months Ended
March 31,
|
|
2014
|
|
2013
|
Revenues:
|
|
|
|
Diagnostic
services
|
$
|
37,061
|
|
|
$
|
29,083
|
|
Bioscience product
sales and services
|
9,212
|
|
|
9,415
|
|
Total
revenues
|
46,273
|
|
|
38,498
|
|
Cost of
revenues:
|
|
|
|
Cost of diagnostic
services
|
22,770
|
|
|
21,079
|
|
Cost of bioscience
product sales and services
|
3,340
|
|
|
3,459
|
|
Total cost of
revenues
|
26,110
|
|
|
24,538
|
|
Gross
margin
|
20,163
|
|
|
13,960
|
|
Operating
expenses:
|
|
|
|
Selling and
marketing
|
11,769
|
|
|
13,657
|
|
Research and
development
|
8,161
|
|
|
13,834
|
|
General and
administrative
|
12,767
|
|
|
13,483
|
|
Restructuring
costs
|
929
|
|
|
—
|
|
Total operating
expenses
|
33,626
|
|
|
40,974
|
|
Loss from
operations
|
(13,463)
|
|
|
(27,014)
|
|
Other income
(expense), net
|
(2,027)
|
|
|
(2,334)
|
|
Loss before income
taxes
|
(15,490)
|
|
|
(29,348)
|
|
Income tax
expense
|
(184)
|
|
|
(12)
|
|
Net loss
|
$
|
(15,674)
|
|
|
$
|
(29,360)
|
|
Net loss per common
share, basic and diluted
|
$
|
(0.13)
|
|
|
$
|
(0.26)
|
|
Weighted average
number of shares outstanding, basic and diluted
|
116,134
|
|
|
115,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEQUENOM,
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Unaudited)
|
(In
thousands)
|
|
|
|
|
|
March 31,
2014
|
|
December 31,
2013
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash, cash
equivalents and marketable securities
|
56,328
|
|
|
71,257
|
|
Accounts receivable,
net
|
10,231
|
|
|
10,248
|
|
Inventories
|
13,015
|
|
|
16,968
|
|
Other current assets
and prepaid expenses
|
3,487
|
|
|
3,061
|
|
Total current assets
|
83,061
|
|
|
101,534
|
|
Property, equipment
and leasehold improvements, net
|
23,568
|
|
|
26,553
|
|
Other
assets
|
16,222
|
|
|
16,615
|
|
Total assets
|
$
|
122,851
|
|
|
$
|
144,702
|
|
|
|
|
|
Liabilities and
stockholders' equity (deficit)
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
9,846
|
|
|
$
|
9,954
|
|
Accrued
expenses
|
20,159
|
|
|
28,134
|
|
Long-term debt and
obligations, current portion
|
7,656
|
|
|
7,643
|
|
Other current
liabilities
|
4,627
|
|
|
3,910
|
|
Total current liabilities
|
42,288
|
|
|
49,641
|
|
Long-term
liabilities
|
139,202
|
|
|
141,564
|
|
Total stockholders'
equity (deficit)
|
(58,639)
|
|
|
(46,503)
|
|
Total liabilities and stockholders' equity (deficit)
|
$
|
122,851
|
|
|
$
|
144,702
|
|
SEQUENOM,
INC.
|
RECONCILIATION OF
GAAP NET LOSS TO ADJUSTED NET LOSS, AND CASH BURN
|
(Unaudited)
|
(In thousands,
except amounts per share)
|
|
|
Three months ended
March 31,
|
|
2014
|
|
2013
|
|
Amount
|
|
Per
Share
|
|
Amount
|
|
Per
Share
|
GAAP net
loss
|
$
|
(15,674)
|
|
|
$
|
(0.13)
|
|
|
$
|
(29,360)
|
|
|
$
|
(0.26)
|
|
Reconciling
item:
|
|
|
|
|
|
|
|
Restructuring
costs(1)
|
929
|
|
|
0.01
|
|
|
—
|
|
|
—
|
|
Adjusted net
loss(2)
|
$
|
(14,745)
|
|
|
$
|
(0.13)
|
|
|
$
|
(29,360)
|
|
|
$
|
(0.26)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
|
March 31,
2014
|
|
December 31,
2013
|
|
March 31,
2013
|
|
|
Cash
Burn:
|
|
|
|
|
|
|
|
Net cash used in
operating activities
|
$
|
13,173
|
|
|
$
|
10,608
|
|
|
$
|
19,666
|
|
|
|
Purchases of
property, equipment and leasehold improvements
|
433
|
|
|
994
|
|
|
4,124
|
|
|
|
Payments on long-term
obligations
|
1,906
|
|
|
2,047
|
|
|
1,833
|
|
|
|
Cash
burn(1)
|
$
|
15,512
|
|
|
$
|
13,649
|
|
|
$
|
25,623
|
|
|
|
|
|
|
|
|
|
|
|
(1) See accompanying
Non-GAAP Financial Measures section for description of Non-GAAP
adjustments
|
|
|
(2) Amounts may not
foot due to rounding.
|
|
|
|
|
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SOURCE Sequenom, Inc.