SAN DIEGO, Nov. 4, 2014 /PRNewswire/ -- Sequenom, Inc.
(NASDAQ: SQNM), a life sciences company providing innovative
genetic analysis solutions, today reported total revenues of
$37.9 million for the third quarter
of 2014, an increase of 14% compared to revenues of $33.3 million for the third quarter of 2013.
"We are encouraged by our progress towards the Company's goal to
improve operations and cash flow. Sequenom continues to focus
on obtaining profitable units while also achieving significant cost
reductions in our operations," said Bill
Welch, Chief Executive Officer of Sequenom, Inc. "In
addition to focusing on profitable samples, we believe testing
volumes were impacted by increased competitive activity, likely a
consequence of changes of NIPT service providers by the two
national reference laboratories. While early, testing volumes
in the fourth quarter have increased to record levels."
Logistics for the Quest test send out integration for the
MaterniT21® PLUS laboratory-developed test were
completed at the end of the third quarter. Testing volumes in
October have increased with the addition of Quest volumes and an
uptake in Sequenom Laboratories' core testing business. The
volumes of MaterniT21 PLUS and total laboratory test samples
received in October were 15,900 and 18,600 samples,
respectively.
Third Quarter Results
Revenues for the third quarter of 2014 were $37.9 million, compared to $33.3 million for the third quarter of
2013. Revenues are recorded primarily on a cash basis. In the
third quarter, Sequenom Laboratories continued using accrual
accounting for several third-party payors and added additional
payors on accrual accounting. This resulted in a net revenue
increase of $2.1 million, based upon
accrued revenue of $6.6 million for
those payors, compared to $4.5
million in cash received during the quarter from those
payors for tests performed during the quarter. International
revenue, accounted for on an accrual basis, contributed 11% of
diagnostic services revenues in the third quarter of 2014. In
total, over 29% of Sequenom's revenue in the third quarter is
accounted for on the accrual basis of accounting.
Total patient samples accessioned decreased by 3.5% to 46,600
patient samples during the third quarter of 2014, compared to the
prior year third quarter. Approximately 38,500 of those
patient samples accessioned were for the MaterniT21 PLUS test,
which is essentially the same testing volume as the third quarter
of 2013. Sequenom Laboratories' cystic fibrosis carrier
screen tests decreased by approximately 2,000 units compared to the
same quarter prior year, primarily due to the growing requests for
broader carrier screening tests. The volume of
MaterniT21 PLUS tests decreased by 2,300 tests compared to the
second quarter of 2014, due to competitive activities as previously
noted as well as potentially the impact of seasonal prenatal
testing rates. Prenatal testing rates are the lowest in the
summer months based on government monthly birthrate data
(CDC/National Center for Health Statistics, 2013).
Sequenom Laboratories continues to primarily allow for
MaterniT21 PLUS test usage for Medicaid patients where
reimbursement and coverage is provided. At the end of the
third quarter, 15 states' Medicaid plans provide reimbursement for
the MaterniT21 PLUS test. Sequenom Laboratories is
continuing to work with all other Medicaid programs that do not
currently cover the MaterniT21PLUS test or have not yet implemented
the molecular diagnostic codes following the coding changes which
were implemented at the beginning of 2013.
As of September 30, 2014, more
than 142 million commercial lives are covered for the MaterniT21
PLUS test as well as the additional Medicaid lives from the 15
states in which Sequenom Laboratories now has coverage. We
have agreements with three of the top five national payors,
including a master service agreement with the largest U.S.
insurance association.
Total cost of revenues decreased to $21.0
million for the third quarter of 2014, compared to
$23.2 million for the prior year
period. Cost of revenues decreased primarily due to the continued
cost improvements to Sequenom Laboratories' existing tests as well
as the change in test volumes.
Gross margin for the third quarter of 2014 was 45% as compared
to gross margin of 30% for the third 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
cost efficiencies in processing patient samples.
Total operating expenses for the third quarter of 2014 were
$23.0 million, as compared to total
operating expenses of $37.2 million
for the third quarter of 2013, which included $5.7 million of restructuring costs. Total
operating expenses for the third quarter of 2014 were down
sequentially from total operating expenses of $30.6 million for the second quarter of 2014 as a
result of the non-cash stock compensation expense related to the
retirement of the former chief executive officer and additional
restructuring costs in the second quarter which did not recur in
the third quarter. In the third quarter 2014 the Company also
recorded a $2.1 million reduction in
general and administrative costs related to the Isis legal fees
reimbursement which we waived as part of the consideration for the
Patent Purchase Agreement.
Loss from continuing operations for the third quarter of 2014
was $6.1 million which included the
income tax benefit of $2.1 million
for continuing operations which is related to the gain on the sale
of the Bioscience business segment earlier in the year, as compared
to $29.3 million for the same period
in 2013. Net loss for the third quarter of 2014 was
$6.1 million, or $0.05 per share, as compared to $28.1 million, or $0.24 per share for the same period in 2013.
Cash burn related to continuing operations for the third quarter
of 2014 was $6.7 million, compared to
$26.1 million in the same period of
2013 and $4.1 million in the second
quarter of 2014. The cash burn for the third quarter of 2014,
excluding semi-annual royalty payments of $3.0 million and semi-annual debt service
payments of $3.3 million which were
not incurred in the second quarter, was $0.5
million.
Unrecorded accounts receivable for tests performed are estimated
to be $33 to $36 million as of
September 30, 2014. This range has
declined from the prior quarter due to collections in the third
quarter and additional amounts recorded as accounts receivable
using accrual accounting. The Company continued the adoption
of accrual accounting for certain payors, resulting in recorded
receivables of approximately $2.1
million during the third quarter. Collections in the third
quarter of 2014 did not include any significant "catch up" payments
from payors as experienced in prior quarters.
"We saw a 72% improvement in our loss from continuing operations
before income taxes compared to the same quarter of the prior
year. We are particularly pleased with the significant
improvement in our cash burn compared to the third quarter of the
prior year, as we are working towards our goal of positive cash
flow," said Carolyn Beaver, Chief
Financial Officer of Sequenom.
As of September 30, 2014, total
cash, cash equivalents, and marketable securities were $71.0 million. Additionally, $5 million in investments with a 15 month
maturity are included in other assets.
Operational Updates
In the first nine months of 2014, Sequenom Laboratories
accessioned more than 119,000 MaterniT21 PLUS tests and more than
146,000 total test samples for all its laboratory-developed tests,
compared to 112,000 MaterniT21 PLUS tests and 140,000 total tests
for the first nine months of 2013. As a reminder, we
initiated a profitability program in the third quarter of 2013 to
focus on those tests with a good likelihood for reimbursement.
This program was centered primarily on government payors
where reimbursement was not established. While this program
has dampened some short term test volumes and associated test
revenues, it has improved the overall gross margin and cash flow
for the benefit of the Company. Sequenom believes programs to
improve collections, increase payor contracts and improve
government reimbursement will provide a path for future profitable
growth opportunities.
As announced in June 2014,
Sequenom signed an agreement with Quest Diagnostics (Quest) to
offer national access to Sequenom Laboratories' MaterniT21 PLUS
laboratory-developed test. The Company worked with Quest
during the third quarter to establish the logistics and information
services to enable patient samples from Quest. These
logistics were completed at the end of the third quarter and we
began to receive samples in early October.
Sequenom also signed a license agreement with Quest in
June 2014 for certain Sequenom
controlled NIPT patents and patent applications. Quest
intends to use our NIPT intellectual property for the purposes of
developing and validating its own laboratory-developed test. The
Company expects Quest may begin to offer its own NIPT
laboratory-developed test sometime in the first half of 2015.
In July 2014, Sequenom announced
the clinical data for the VisibiliT™ test, a laboratory-developed
test that provides a risk score for common fetal chromosomal
aneuploidies that are normally evaluated within conventional
prenatal serum screen tests. 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 their patients. The Company
initiated the logistics, laboratory procedures and training to
launch the VisibiliT test internationally. These launch activities
were completed by the end of the third quarter. The Company
anticipates receiving VisibiliT test samples from several
international markets in the fourth quarter.
Sequenom Laboratories launched the Enhanced Sequencing Series II
in August for its MaterniT21 PLUS test and began 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 valuable information for pregnancy management
and patient care.
On September 30, 2014, Sequenom
entered into a Patent Purchase Agreement with Isis Innovation
Limited ("Isis") to acquire its global noninvasive prenatal testing
intellectual property for $14.55
million, which includes $3.2
million as a final royalty payment due to Isis under our
prior license agreement and a waiver of reimbursement for
$2.1 million in paid legal fees that
Isis owed to Sequenom. There are additional downstream
payments contingent on revenues exceeding certain thresholds.
Sequenom believes the purchase of these patents strengthens our
intellectual property position worldwide and will reduce future
expenditures.
Dr. Harry Hixson announced his
retirement from the board of directors of Sequenom Inc., effective
March 31, 2015. Harry has
served as the chairman of the board of directors since 2003 and
served as chief executive officer from 2009 to 2014. The
board of directors intends to elect Dr. Dirk van den Boom, Chief Scientific and Strategy
Officer at Sequenom, to the board effective March 31, 2015.
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 September
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 Bill
Welch, CEO, and other members of senior management will take
place today, November 4, at
5:00 p.m. EST (2:00 p.m. PST) 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 0747050. For interested
parties unable to listen to the live conference call, a replay will
be available through Friday, December 5,
2014. The replay will be accessible by dialing 877-344-7529
or 412-317-0088 internationally, and entering the conference number
10054723.
The conference call webcast is also accessible through the
"Invest" section of the Sequenom Website at
www.sequenom.com/invest. An online replay will be available
following the initial broadcast until Friday, December 5, 2014.
About Sequenom
Sequenom, Inc. (NASDAQ: SQNM) is a life sciences company
committed to improving health care 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 nine months ended September 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 third
quarter ended September 30, 2014.
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' discussions with state Medicaid
programs and negotiations with the payor community, the Company's
ability to improve collections, increase payor contracts and
improve government reimbursement, the Company's ability to continue
its cost improvement initiatives to reduce its net operating loss
exposure and build value for its shareholders, Sequenom
Laboratories' anticipation of receiving additional samples from
Quest Laboratories in the fourth quarter and the expectation that
Quest may begin to offer its own NIPT laboratory-developed test
sometime in the first half of 2015, Sequenom Laboratories' and the
Company's expectations regarding the impact and benefits of the
VisibiliT test internationally and the anticipation of beginning to
receive VisilibiT test samples from international markets in the
fourth quarter, the expected impact and benefits of the Enhanced
Sequencing Series II for the MaterniT21 PLUS test on patient care,
the expected strengthening of our intellectual property position
worldwide and expected reduction in future expenditures as a result
of the purchase of the global noninvasive prenatal testing
intellectual property from Isis, and the Company's commitment to
improving healthcare through revolutionary genomic and genetic
analysis solutions, 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, 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
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Diagnostic services
revenue, net
|
$
|
37,937
|
|
$
|
33,268
|
|
$
|
114,780
|
|
$
|
86,877
|
Cost of diagnostic
services
|
21,000
|
|
23,242
|
|
66,180
|
|
64,955
|
Gross
margin
|
16,937
|
|
10,026
|
|
48,600
|
|
21,922
|
Operating
expenses:
|
|
|
|
|
|
|
|
Selling and
marketing
|
7,448
|
|
9,093
|
|
23,927
|
|
29,048
|
Research and
development
|
6,073
|
|
8,589
|
|
19,949
|
|
31,111
|
General and
administrative
|
9,457
|
|
13,788
|
|
36,527
|
|
39,230
|
Restructuring
costs
|
—
|
|
5,711
|
|
1,885
|
|
5,711
|
Total operating
expenses
|
22,978
|
|
37,181
|
|
82,288
|
|
105,100
|
Loss from
operations
|
(6,041)
|
|
(27,155)
|
|
(33,688)
|
|
(83,178)
|
Other expense,
net
|
(2,144)
|
|
(2,109)
|
|
(6,334)
|
|
(6,470)
|
Loss from continuing
operations before income taxes
|
(8,185)
|
|
(29,264)
|
|
(40,022)
|
|
(89,648)
|
Income tax benefit
(expense)
|
2,107
|
|
(80)
|
|
8,911
|
|
(197)
|
Loss from continuing
operations
|
(6,078)
|
|
(29,344)
|
|
(31,111)
|
|
(89,845)
|
Discontinued
Operations:
|
|
|
|
|
|
|
|
Earnings from
discontinued operations, net of tax
|
—
|
|
1,196
|
|
13,812
|
|
1,314
|
Gain from
discontinued operations
|
—
|
|
1,196
|
|
13,812
|
|
1,314
|
Net loss
|
$
|
(6,078)
|
|
$
|
(28,148)
|
|
$
|
(17,299)
|
|
$
|
(88,531)
|
Net earnings
(loss) per common share, basic and diluted
|
|
|
|
|
|
|
|
Continuing
operations
|
$
|
(0.05)
|
|
$
|
(0.25)
|
|
$
|
(0.27)
|
|
$
|
(0.78)
|
Discontinued
operations
|
$
|
—
|
|
$
|
0.01
|
|
$
|
0.12
|
|
$
|
0.01
|
Net loss per common
share, basic and diluted
|
$
|
(0.05)
|
|
$
|
(0.24)
|
|
$
|
(0.15)
|
|
$
|
(0.77)
|
Weighted average
number of shares outstanding, basic and diluted
|
117,067
|
|
115,592
|
|
116,516
|
|
115,255
|
|
|
|
|
|
|
|
|
|
|
|
SEQUENOM,
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Unaudited)
|
(In
thousands)
|
|
|
|
|
|
September
30, 2014
|
|
December
31, 2013
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash,
cash equivalents and marketable securities
|
$
|
70,983
|
|
$
|
71,257
|
Accounts
receivable, net
|
6,592
|
|
2,552
|
Inventories
|
5,990
|
|
11,598
|
Other
current assets and prepaid expenses
|
3,235
|
|
2,652
|
Current
assets of discontinued operations
|
—
|
|
13,475
|
Total current
assets
|
86,800
|
|
101,534
|
Property, equipment
and leasehold improvements, net
|
16,638
|
|
24,378
|
Other
assets
|
31,119
|
|
16,482
|
Noncurrent assets of
discontinued operations
|
—
|
|
2,308
|
Total assets
|
$
|
134,557
|
|
$
|
144,702
|
|
|
|
|
Liabilities and
stockholders' equity (deficit)
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
7,692
|
|
$
|
9,086
|
Accrued
expenses
|
22,504
|
|
24,554
|
Long-term debt and obligations, current portion
|
5,935
|
|
7,643
|
Other
current liabilities
|
12,748
|
|
2,151
|
Accrued
income taxes
|
1,385
|
|
—
|
Current
liabilities of discontinued operations
|
—
|
|
6,207
|
Total current
liabilities
|
50,264
|
|
49,641
|
Long-term
liabilities
|
136,189
|
|
140,618
|
Long-term liabilities
of discontinued operations
|
—
|
|
946
|
Cumulative
translation adjustment of discontinued operations
|
—
|
|
527
|
Total stockholders'
deficit
|
(51,896)
|
|
(47,030)
|
Total liabilities
and stockholders' deficit
|
$
|
134,557
|
|
$
|
144,702
|
|
|
|
|
SEQUENOM,
INC.
|
RECONCILIATION OF
CASH BURN
|
(Unaudited)
|
(In thousands,
except amounts per share)
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30,
|
|
Nine months
ended September
30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Cash
Burn:
|
|
|
|
|
|
|
|
Net cash used in
operating activities
|
$
|
3,827
|
|
$
|
21,948
|
|
$
|
22,013
|
|
$
|
77,117
|
Purchases of
property, equipment and leasehold improvements
|
456
|
|
2,383
|
|
1,007
|
|
11,431
|
Payments on long-term
obligations
|
2,440
|
|
1,766
|
|
6,254
|
|
5,527
|
Cash
burn(1)
|
$
|
6,723
|
|
$
|
26,097
|
|
$
|
29,274
|
|
$
|
94,075
|
|
|
|
|
|
|
|
|
|
(1) See accompanying
Non-GAAP Financial Measures section for description of Non-GAAP
adjustments
|
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SOURCE Sequenom, Inc.