SAN DIEGO, July 29, 2014 /PRNewswire/ -- Sequenom, Inc.
(NASDAQ: SQNM), a life sciences company providing innovative
genetic analysis solutions, today reported total revenues of
$39.8 million for the second quarter
of 2014, an increase of 62% compared to revenues of $24.5 million for the second quarter of 2013.
The Bioscience business segment, which was sold on May 30, 2014, has been accounted for as a
discontinued operation and consequently its results have been
excluded from continuing operations for all periods.
Revenues from the Sequenom Laboratories business are recorded
primarily on a cash basis. In the second quarter, Sequenom
Laboratories began using accrual accounting for several third-party
payors. This accounting change during the quarter resulted in
a net revenue increase of $1.9
million, based upon accrued revenue of $5.7 million for those payors, compared to
$3.8 million in cash received during
the quarter from those payors for tests during the quarter.
International revenue, accounted for on an accrual basis,
contributed 12.3% of diagnostic services revenues in the second
quarter of 2014. In total, over 26% of our revenue in the
second quarter is accounted for on the accrual basis of
accounting.
Total patient samples accessioned increased over 7% to 50,100
patient samples during the second quarter of 2014, compared to the
prior year second quarter. Approximately 40,800 of those patient
samples accessioned were for the MaterniT21™ PLUS
laboratory-developed test (LDT), compared to approximately 38,000
in the second quarter of 2013, an increase of more than 7% compared
to the prior year quarter. On a sequential basis, the volume
of MaterniT21 PLUS tests increased by about 3% over the first
quarter of 2014, while total tests accessioned remained stable.
Sequenom Laboratories has continued to increase the volume of
Medicaid tests accessioned in 15 states that are now providing
reimbursement for its tests while limiting the Medicaid volume in
states that are not yet reimbursing for its tests. The volume of
Medicaid tests was 18% of total tests accessioned in the second
quarter of 2014 compared with 16% in the first quarter of 2014 and
26% in the second quarter of 2013, when Sequenom's reimbursement
policy for Medicaid was implemented. Sequenom Laboratories is
continuing to work with other Medicaid programs that have not yet
implemented the new molecular diagnostic codes following the coding
changes which were implemented at the beginning of 2013.
Sequenom Laboratories continues its negotiations with the payor
community. As of June 30, 2014, more
than 140 million lives are covered for the MaterniT21 PLUS test. We
now have agreements with three of the top five national payors,
including a master service agreement with the largest US insurance
association.
Total cost of revenues increased to $22.4
million for the second quarter of 2014, compared to
$20.6 million for the prior year
period. Cost of revenues increased primarily due to the increase in
Sequenom Laboratories' test volumes and costs to support increased
testing capacity.
Gross margin for the second quarter of 2014 was 44% as compared
to gross margin of 16% for the second quarter of 2013. This
improvement is attributable primarily to the increase in
collections for tests performed in the current and prior quarters,
the change to accrual accounting for certain payors and improved
efficiencies in processing patient samples.
Total operating expenses for the second quarter of 2014 were
$30.6 million, as compared to total
operating expenses of $33.1 million
for the second quarter of 2013, primarily as a result of the
completion of the validation of the North
Carolina laboratory site in the second quarter of
2013. Total operating expenses for the second quarter of 2014
were up sequentially from total operating expenses of $28.7 million for the first quarter of 2014 as a
result of the non-cash stock compensation expense related to the
retirement of the former chief executive officer and the additional
restructuring costs related to the exited facility which the
Company has been unable to sublease. Excluding these amounts, total
operating expenses for the second quarter of 2014 were $28.4 million, in line with the first quarter of
2014.
Selling and marketing expenses decreased to $7.9 million for the second quarter of 2014 from
$10.0 million year-over-year,
resulting primarily from lower labor costs related to the
restructuring completed in the third quarter of 2013 and a
reduction in the associated expenses. Research and development
expenses of $7.1 million for the
second quarter of 2014 were down from $10.9
million in the second quarter of 2013, which included the
completion of the validation of the laboratory site in North Carolina in June
2013.
General and administrative expenses for the second quarter of
2014 were $14.6 million, as compared
to $12.2 million for the second
quarter of 2013, primarily due to increased legal expenses
associated with patent litigation, and $1.4
million in non-cash charges primarily related to changes in
the terms of equity awards upon the retirement of the former chief
executive officer in the second quarter of 2014. General and
administrative expenses were up sequentially from $12.5 million from the first quarter of 2014 as a
result of the same factors. Total litigation expenses in the
second quarter of 2014 amounted to $5.3
million.
Loss from operations for the second quarter of 2014 was
$13.2 million, as compared to
$29.2 million, for the same period in
2013.
The Company received proceeds of $33.0
million upon the sale of the Biosciences business, including
the milestone payment of $2.0 million
which was received upon obtaining U.S. Food and Drug Administration
clearance for the IMPACT Dx™ Factor V Leiden and Factor II
Genotyping Test for use on the IMPACT Dx™ System. As a result of
the sale, the Company recorded a gain on the sale of discontinued
operations of $23.4 million, less tax
expense of $9.6 million, and a loss
from discontinued operations of $1.0
million during the second quarter of 2014. The loss from
continuing operations in the second quarter of 2014 reflects a tax
benefit of the loss as a result of the gain on the sale of the
Bioscience business which is reflected in discontinued
operations.
Net earnings for the second quarter was $4.5 million, or $0.04 per share, as a result of the sale of the
Bioscience business in the second quarter of 2014, compared to a
net loss of $31.0 million in the
second quarter of 2013, or $0.27 per
share. Excluding the impact of the discontinued operations on net
earnings, Sequenom experienced a net loss from continuing
operations for the second quarter of $0.07 per share, including a tax benefit of
$.06 per share, compared with a net
loss of $0.27 per share in the second
quarter of 2013.
Cash burn related to continuing operations for the second
quarter of 2014 was $4.1 million,
compared to $41.5 million in the same
period of 2013 and $18.4 million in
the first quarter of 2014. The cash burn related to continuing
operations for the first quarter of 2014, excluding annual royalty
payments of $4.8 million and
semi-annual debt service payments of $3.3
million, was $10.3
million. Cash burn does not reflect the operations or
net proceeds from the sale of the Bioscience business.
Unrecorded diagnostic accounts receivable are estimated to be
$36 to $40 million as of June 30, 2014. This range has decreased by
approximately $6 million as a result
of the adoption of accrual accounting for certain payors, resulting
in recorded receivables of approximately $1.9 million, and collections during the second
quarter.
"We are pleased with the steady improvements in reimbursements
and collections resulting in increased revenues," said Carolyn Beaver, chief financial officer of
Sequenom. "We will continue to evaluate our collection history with
the goal to move to accrual accounting for additional payors. We
also remain focused on our cost improvement initiatives as we look
to continue to build value for our shareholders."
First Half Results
For the first half of 2014, the Company reported revenues of
$76.8 million, an increase of 43%
from revenues of $53.6 million for
the first half of 2013. Revenues improved primarily due to
increased collections and higher test volumes.
Gross margin for the first half of 2014 was 41% of revenues as
compared to gross margin of 22% for the first half of 2013, a
difference primarily attributable to the improved collections for
tests performed in the current and prior quarters and the increased
test volumes for Sequenom Laboratories.
Total operating expenses for the first half of 2014 were
$59.3 million, as compared to total
expenses of $67.9 million for the
first half of 2013. This change reflects decreased selling and
marketing expenses resulting primarily from lower labor and related
costs following the August 2013
restructuring. Total stock-based compensation expense was
$6.5 million for the first half of
2014, up from $5.0 million as
compared to the first half of 2013, principally as the result of
the retirement of the former chief executive officer in the second
quarter of 2014.
During the first half, an additional restructuring charge of
$1.9 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.
Loss from operations for the first half of 2014 was $27.6 million, as compared to $56.0 million, for the same period in
2013.
Net loss for the first half of 2014 was $11.2 million, or $0.10 per share, as compared to net loss of
$60.4 million, or $0.52 per share for the same period in 2013,
reflecting the growth in revenue from the MaterniT21 PLUS test and
the sale of the Bioscience business segment in 2014, including the
related tax benefit for the loss on continuing operations for the
first half of 2014.
Net cash used in operating activities was $18.2 million for the first half of 2014,
compared to $55.2 million in the same
period in the prior year. The decrease in cash used in operating
activities for the first half of 2014 is the result of the increase
in revenue and the reduction in operating expenses. The
change was not impacted by the operations or proceeds from the sale
of the Bioscience business.
As of June 30, 2014, total cash,
cash equivalents, and marketable securities were $82.1 million.
Operational Updates
In the first half of 2014, Sequenom Laboratories accessioned
more than 80,000 MaterniT21 PLUS tests, and more than 100,000 total
test samples for all its LDTs, compared to 73,000 MaterniT21 PLUS
tests and 91,200 tests in total for the first half of
2013.
The Company recently announced a test send-out agreement and a
and licensing agreement with Quest Diagnostics for noninvasive
prenatal aneuploidy testing, gaining access to its broad physician
network in the United States and
certain other countries. Sequenom Laboratories anticipates
receiving its first samples from Quest Diagnostics sometime in the
third quarter.
Last week, Sequenom Laboratories announced that it has completed
the development of the VisibiliT™ laboratory-developed test, which
provides a risk score for common fetal chromosomal aneuploidies
that are normally evaluated within conventional prenatal serum
screen tests. The results of a clinical evaluation study of the
VisibiliT test were shared at the 18th International
Conference on Prenatal Diagnosis and Therapy (ISPD) in Brisbane, Australia, earlier this month.
Performance of the VisibiliT test was determined by a clinical
evaluation study of over 1,000 low and high risk samples, and
demonstrated greater than 99% sensitivity and 99.9% specificity for
trisomies 21 and 18. This performance has been maintained
over subsequent validation studies which in total now exceed more
than 100 trisomy 21 and 30 trisomy 18 samples.
Sequenom Laboratories is the first test service provider to
offer two distinct noninvasive prenatal testing options, enabling
greater testing access and flexibility for providers and patients.
Sequenom Laboratories plans to first launch the VisibiliT test
internationally in August 2014.
"The launch of the VisibiliT test is an important achievement
for the Company and another example of our continued leadership in
the NIPT field," said William Welch,
chief executive officer of Sequenom, Inc. "The VisibiliT test
allows us to meet the growing demands to provide additional choices
to better serve the broader prenatal testing community."
Sequenom Laboratories also recently announced plans to launch
the Enhanced Sequencing Series II for its MaterniT21 PLUS test. In
August, the MaterniT21 PLUS test will begin reporting additional
findings for the presence of additional subchromosomal
microdeletions, including 11q deletion (Jacobsen syndrome), 8q
deletion (Langer-Giedion syndrome), and 4p deletion
(Wolf-Hirschhorn syndrome). These microdeletions are associated
with various clinical conditions that can result in physical and
developmental issues. With the Enhanced Sequencing Series, the
MaterniT21 PLUS test is the most comprehensive noninvasive prenatal
test of-its-kind available on the market, providing detailed
information for use in patient care.
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 June 30,
2014. Management uses non-GAAP financial measures because it
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 cash burn as a non-GAAP financial measure. This non-GAAP
financial measure is not in accordance with or an alternative to
GAAP.
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. The
reconciliations of cash used by operating activities, the GAAP
measure most directly comparable to cash burn, is provided on the
attached schedule.
Conference Call Information
A conference call hosted by William
Welch, CEO, and other members of senior management will take
place today, July 29, at 5:00 p.m. EDT (2:00 p.m.
PDT) and will be webcast live on the Sequenom website. To
access the live teleconference call, dial 877-883-0383 in the U.S.
and Canada, and 412-902-6506 for
other international callers. Please use code 6771138. For
interested parties unable to listen to the live conference call, a
replay will be available through Friday,
August 29, 2014. The replay will be accessible by dialing
877-344-7529 or 412-317-0088 internationally, and entering the
conference number 10048854.
The conference call webcast is also 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, August 29, 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
molecular diagnostic markets. Web site: www.sequenom.com.
About Sequenom Laboratories
Sequenom Laboratories, a CAP accredited and CLIA-certified
molecular diagnostics laboratory, has developed a broad range of
laboratory tests, with a focus on prenatal and ophthalmological
diseases and conditions. Branded under the names HerediT™,
MaterniT21™ PLUS, RetnaGene™, SensiGene™ and VisibiliT™, these
molecular genetic laboratory-developed tests provide early patient
management information for obstetricians, geneticists, maternal
fetal medicine specialists and ophthalmologists. Sequenom
Laboratories is changing the landscape in genetic disorder
diagnostics using proprietary cutting edge technologies.
SEQUENOM®, HerediT™, MaterniT21™ PLUS, RetnaGene™, SensiGene™
and VisibiliT™, are trademarks of Sequenom, Inc. All other
trademarks and service marks are the property of their respective
owners.
Forward-Looking Statements
The preliminary unaudited financial information for the three
and six months ended June 30, 2014
set forth in this press release is based on information available
at the time of this press release and is subject to further review
by our independent accountants and management prior to our filing
of our Quarterly Report on Form 10-Q for the second quarter ended
June 30, 2014. Therefore, these
results for the period ended June 30,
2014 set forth in this press release could differ from the
final results reported in our Quarterly Report on Form 10-Q for the
same period. Furthermore, any results reported for any completed
period should not be considered indications of our future
performance.
Except for the historical information contained herein, the
matters set forth in this press release, including statements
regarding Sequenom Laboratories' negotiations with the payor
community, the Company's goal to move to accrual accounting for
additional payors and the Company's ability to continue its cost
improvement initiatives and build value for its shareholders,
Sequenom Laboratories' anticipation of receiving its first patient
samples from Quest Laboratories in the third quarter, Sequenom
Laboratories' and the Company's expectations regarding the impact
and benefits of the VisibiliT test on providers and patients and
Sequenom Laboratories' plans to first launch the VisibiliT test
internationally in August 2014,
growing demands for additional test choices by the broader prenatal
testing community, Sequenom Laboratories' plans for and the timing
of its launch of the Enhanced Sequencing Series II for its
MaterniT21 PLUS test and the expected impact and benefits of the
Enhanced Sequencing Series II for the MaterniT21 PLUS test on
patient care, the Company's commitment to improving healthcare
through revolutionary genomic and genetic analysis solutions, and
Sequenom Laboratories' changing the landscape in genetic disorder
diagnostics, 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 test, and the VisibiliT test, 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, 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 Quarterly Report on Form 10-Q, its
most recently filed reports on Form 8-K, and its most recently
filed Annual Report on Form 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.
[Financial tables follow]
SEQUENOM,
INC
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Unaudited)
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
December 31,
2013
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash, cash
equivalents and marketable securities
|
$
|
82,119
|
|
$
|
71,257
|
|
|
|
Accounts receivable,
net
|
5,539
|
|
2,552
|
|
|
|
Inventories
|
5,012
|
|
11,598
|
|
|
|
Other current assets
and prepaid expenses
|
3,552
|
|
2,652
|
|
|
|
Assets of
discontinued operations
|
—
|
|
13,475
|
|
|
|
Total current assets
|
96,222
|
|
101,534
|
|
|
|
Property, equipment
and leasehold improvements, net
|
18,837
|
|
24,378
|
|
|
|
Other
assets
|
16,543
|
|
16,482
|
|
|
|
Noncurrent assets of
discontinued operations
|
—
|
|
2,308
|
|
|
|
Total assets
|
$
|
131,602
|
|
$
|
144,702
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
stockholders' equity (deficit)
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
$
|
6,103
|
|
$
|
9,086
|
|
|
|
Accrued
expenses
|
23,902
|
|
24,554
|
|
|
|
Long-term debt and
obligations, current portion
|
7,718
|
|
7,643
|
|
|
|
Other current
liabilities
|
4,306
|
|
2,151
|
|
|
|
Accrued income
taxes
|
2,769
|
|
—
|
|
|
|
Liabilities of
discontinued operations
|
—
|
|
6,207
|
|
|
|
Total current liabilities
|
44,798
|
|
49,641
|
|
|
|
Long-term
liabilities
|
136,123
|
|
140,618
|
|
|
|
Long-term liabilities
of discontinued operations
|
—
|
|
946
|
|
|
|
Cumulative
translation adjustment of discontinued operations
|
—
|
|
527
|
|
|
|
Total stockholders'
equity (deficit)
|
(49,319)
|
|
(47,030)
|
|
|
|
Total liabilities and stockholders' equity (deficit)
|
$
|
131,602
|
|
$
|
144,702
|
|
|
|
|
|
|
|
|
|
|
SEQUENOM,
INC
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Unaudited)
|
(In thousands,
except per share information)
|
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
Diagnostic services
revenue, net
|
$
|
39,782
|
|
|
$
|
24,526
|
|
|
$
|
76,843
|
|
|
$
|
53,609
|
|
Cost of diagnostic
services
|
22,410
|
|
|
20,634
|
|
|
45,180
|
|
|
41,713
|
|
Gross
margin
|
17,372
|
|
|
3,892
|
|
|
31,663
|
|
|
11,896
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Selling and
marketing
|
7,920
|
|
|
9,978
|
|
|
16,479
|
|
|
19,955
|
|
Research and
development
|
7,087
|
|
|
10,910
|
|
|
13,876
|
|
|
22,522
|
|
General and
administrative
|
14,590
|
|
|
12,222
|
|
|
27,070
|
|
|
25,442
|
|
Restructuring
costs
|
975
|
|
|
—
|
|
|
1,885
|
|
|
—
|
|
Total operating
expenses
|
30,572
|
|
|
33,110
|
|
|
59,310
|
|
|
67,919
|
|
Loss from
operations
|
(13,200)
|
|
|
(29,218)
|
|
|
(27,647)
|
|
|
(56,023)
|
|
Other income
(expense), net
|
(2,092)
|
|
|
(2,185)
|
|
|
(4,190)
|
|
|
(4,361)
|
|
Loss from continuing
operations before income taxes
|
(15,292)
|
|
|
(31,403)
|
|
|
(31,837)
|
|
|
(60,384)
|
|
Income tax benefit
(expense)
|
6,928
|
|
|
(116)
|
|
|
6,804
|
|
|
(117)
|
|
Loss from continuing
operations
|
(8,364)
|
|
|
(31,519)
|
|
|
(25,033)
|
|
|
(60,501)
|
|
Discontinued
Operations:
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from
discontinued operations, net of tax
|
12,817
|
|
|
496
|
|
|
13,812
|
|
|
118
|
|
Gain from
discontinued operations
|
12,817
|
|
|
496
|
|
|
13,812
|
|
|
118
|
|
Net earnings
(loss)
|
$
|
4,453
|
|
|
$
|
(31,023)
|
|
|
$
|
(11,221)
|
|
|
$
|
(60,383)
|
|
Net earnings
(loss) per common share, basic and diluted
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
$
|
(0.07)
|
|
|
$
|
(0.27)
|
|
|
$
|
(0.22)
|
|
|
$
|
(0.52)
|
|
Discontinued
operations
|
$
|
0.11
|
|
|
$
|
—
|
|
|
$
|
0.12
|
|
|
$
|
—
|
|
Net earnings (loss)
per common share, basic and diluted
|
$
|
0.04
|
|
|
$
|
(0.27)
|
|
|
$
|
(0.10)
|
|
|
$
|
(0.52)
|
|
Weighted average
number of shares outstanding, basic and diluted
|
116,454
|
|
|
115,174
|
|
|
116,260
|
|
|
115,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEQUENOM,
INC
|
RECONCILIATION OF
GAAP OPERATING CASH FLOW TO CASH BURN
|
(Unaudited)
|
(In thousands,
except amounts per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
Cash
Burn:
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in
operating activities
|
$
|
2,090
|
|
|
$
|
34,368
|
|
|
$
|
18,186
|
|
|
$
|
55,169
|
|
Purchases of
property, equipment and leasehold improvements
|
146
|
|
|
5,192
|
|
|
551
|
|
|
9,048
|
|
Payments on long-term
obligations
|
1,909
|
|
|
1,896
|
|
|
3,814
|
|
|
3,761
|
|
Cash
burn(1)
|
$
|
4,145
|
|
|
$
|
41,456
|
|
|
$
|
22,551
|
|
|
$
|
67,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) See accompanying
Non-GAAP Financial Measures section for description of Non-GAAP
adjustments
|
|
|
|
SOURCE Sequenom, Inc.