Stock Alert for Sequenom Inc. (SQNM)
Sequenom Inc. (NASDAQ: SQNM)
Sequenom Inc. (SQNM) is a diagnostic testing and genetics analysis company. The Company is focused on providing products, services, diagnostic testing, applications and genetic analysis products that translate the results of genomic science into solutions for biomedical research, translational research, molecular medicine applications, and agricultural, livestock and other areas of research. Its development and commercialization efforts in various diagnostic areas include non-invasive women’s health-related and prenatal diagnostics, age-related macular degeneration diagnostics, oncology, infectious diseases, and other disorders and diseases. On February 27, 2009, the Company acquired certain assets of SensiGen LLC.
The Company was founded in 1994 and is headquartered in San Diego, California.
| Share Statistics (14-Jun-10) | FY
2007 |
FY
2008 |
%
Chg |
Q4 2008 | Q4 2009 | %
Chg |
||
| Symbol | SQNM | Revenue, $Mn | 41.00M | 47.15M | 15.0% | 12.16M | 10.79M | 11.3% |
| Current price | $6.52 | Gross marg. | 55.9% | 58.5% | 4.7% | n/a | 50.5% | n/a |
| 52wk Range: | $8.65-2.55 | Oper. margin | -55.1% | -90.4% | 64.1% | n/a | -162.9% | n/a |
| Avg Vol (3m): | 4,910,630 | Net margin | -353.6% | -93.6% | 74.6% | n/a | -170.5% | n/a |
| Market Cap. | 405.39M | |||||||
| Dil. Shares Outst. | 62.2M | EPS, $ | -0.57 | -0.83 | 45.6% | -0.25 | -0.30 | 20.0% |
Source: Reuters.com, SEC Filings.
Financial Summary
SQNM reported its financial results for the first quarter ended March 31, 2010.
First Quarter Results
- Total revenue for the first quarter of 2010 grew 22% to $10.6 million, compared with $8.7 million for the first quarter of 2009. The increase in revenue was due to higher systems and consumables sales over the same period last year.
- Net loss for the first quarter of 2010 was $16.9 million, or $0.27 per share, compared with $17.5 million, or $0.29 per share, for the first quarter of 2009.
- Net cash used in operating activities was $13.4 million for the first quarter of 2010.
Gross margin in the first quarter of 2010 was 50.5% compared with 60.6% for the first quarter of 2009, reflecting increased costs associated with the start-up of the diagnostics business and changes in the mix of products sold in the genetic analysis business. The overall gross margin included a 61% margin generated by the genetic analysis segment, which was offset by the negative margin generated from the Company’s molecular diagnostics segment.
Research and development (R&D) expenses were $11.2 million for the first quarter of 2010, compared with $8.8 million for the same period in the prior year. The increase was primarily related to clinical sample acquisition costs associated with the Company’s Trisomy 21 (T21) program and a licensing payment for certain intellectual property rights for age-related macular degeneration (AMD) related genetic variants.
Selling, general and administration expenses of $11.1 million for the first quarter of 2010 decreased from $14.3 million for the first quarter of 2009. The decrease was primarily due to decreased legal fees associated with litigation and lower share based compensation expense.
Total costs and expenses for the first quarter of 2010 were $27.5 million, compared with $26.5 million for the comparable quarter in 2009. For the three months ended March 31, 2010, and 2009, the Company recorded $2.4 million and $3.0 million, respectively, of stock-based compensation expense.
Cash, Cash Equivalents and Available for Sale Securities
As of March 31, 2010, SQNM had total cash and short- and long-term marketable securities of $29.2 million and $8.6 million in accounts receivable.
| Financial Strength (14-Jun-2010) | Company | Industry | Sector | S&P 500 |
| Quick Ratio (MRQ) | 2.70 | 1.51 | 2.10 | 0.81 |
| Current Ratio (MRQ) | 3.09 | 1.85 | 2.51 | 0.96 |
| Long-Term Debt to Equity (MRQ) | 3.15 | 161.67 | 18.63 | 133.21 |
| Total Debt to Equity (MRQ) | 5.57 | 195.22 | 23.96 | 198.72 |
Source: Reuters.com, SEC Filings.
Analyst Consensus
| Buy | Outperform | Hold | Underperform | Sell | No Opinion |
This is the consensus forecast amongst 10 polled investment analysts. Against the Sequenom Inc company.
| Analyst Detail | Buy | Outperform | Hold | Underperform | Sell | No Opinion |
| Latest | 3 | 2 | 2 | 2 | 1 | 0 |
| 4 weeks ago | 2 | 2 | 2 | 2 | 1 | 0 |
| 2 months ago | 2 | 1 | 3 | 1 | 1 | 0 |
| 3 months ago | 1 | 1 | 4 | 1 | 1 | 0 |
| Last year | 0 | 1 | 8 | 1 | 2 | 0 |
The six analysts offering 12 month price targets for SQNM have a median target of 9.50, with a high estimate of 13.00 and a low estimate of 6.00. The median estimate represents a 47.52% increase from the last price of 6.44.
Source: www.ft.com
Consensus Estimates Analysis
| # of Estimates | Mean | High | Low | 1 Year Ago | |
| SALES (in millions) | |||||
| Quarter Ending Jun-10 | 9 | 10.52 | 12.55 | 9.84 | 12.00 |
| Quarter Ending Sep-10 | 9 | 11.58 | 15.66 | 10.43 | 13.05 |
| Year Ending Dec-10 | 10 | 45.24 | 58.94 | 41.64 | 48.14 |
| Year Ending Dec-11 | 8 | 68.02 | 183.36 | 45.10 | 298.66 |
| EARNINGS (per share) | |||||
| Quarter Ending Jun-10 | 10 | -0.25 | -0.22 | -0.30 | -0.26 |
| Quarter Ending Sep-10 | 10 | -0.23 | -0.19 | -0.28 | -0.26 |
| Year Ending Dec-10 | 10 | -0.96 | -0.85 | -1.12 | -0.96 |
| Year Ending Dec-11 | 7 | -0.83 | -0.64 | -1.16 | 0.34 |
Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=SQNM.W
Investment Highlights
SQNM develops diagnostic products to improve the healthcare of women. The Company’s commercial objective is to make safe, non-invasive prenatal testing available to all women, independent of age and other factors that may contribute to pregnancy complications.
The Company’s research and development team, in collaboration with the world’s leading experts in prenatal genetic medicine, is working on technologies and methodologies that will provide accurate information to women, their physicians and genetic counselors. SQNM anticipates that these technologies and methodologies may be utilized early in pregnancy, reduce the need for amniocentesis and contribute to the care and prevention of birth defects.
SQNM’s SEQureDxTM technology is based on the work of Professor Dennis Lo, and isolates and analyzes circulating fetal nucleic acid from a maternal blood sample. The technology has particular promise for developing new, noninvasive tests for fetal gene and chromosome abnormalities such as RhD, fetal sex determination and Trisomy – including trisomy 21.
By applying its novel technology to frequently encountered diagnostic problems in pregnancy and reproduction, SQNM believes it can create a new standard of care to assist women, their families and its physicians with better tools to achieve the best pregnancy outcomes.
For years, doctors have used tests such as amniocentesis or chorionic villus to determine the health of a fetus.
The introduction of SQNM’s Fetal Nucleic Acid Technology has the potential to be the long-sought-after alternative to these common procedures. That’s because the SQNM technology is both noninvasive, thereby posing no risk to the baby, and has the possibility to be performed earlier in the pregnancy. Early diagnosis is important because it can help doctors to identify patients at risk sooner and provide treatment where possible.
According to Dr. Kenneth Moise, professor of obstetrics and gynecology and a specialist in Maternal-Fetal Medicine at Baylor College of Medicine in Houston, Texas, this is a major breakthrough in prenatal medicine.
Recent and Upcoming Business Highlights
T21 (Down syndrome) Update - The Company remains committed to the development, validation and launch of a noninvasive T21 test. Following extensive scientific experimentation, the Company has decided to proceed with a purely DNA based method for the detection of the T21 aneuploidy using massively parallel sequencing. Taken together the R&D and clinical sample collection costs required for a key T21 test validation study represent the single largest investment the Company will make in 2010.
The Company has established a number of program milestones to measure progress in the development of its noninvasive T21 test. Each milestone will be dependent upon the successful completion of preceding milestones:
- The Company anticipates optimization of a DNA sequencing-based test to be completed by the end of the third quarter of 2010.
- By the end of 2010, our third-party sample collection sites expect to have collected a sufficient number of blood samples from high-risk pregnancies in order to provide the requisite number of T21 and euploid samples that will enable the planned blinded clinical studies. These blinded studies represent the pivotal validation studies to support launch of a noninvasive T21 test.
- The Company anticipates that Sequenom CMM, its CLIA laboratory, will start accessioning and testing these T21 and euploid samples during the fourth quarter of 2010.
- To support the launch of a laboratory-developed test (LDT) by the end of the fourth quarter of 2011, the Company plans to complete testing of the validation samples during the second quarter of 2011.
- Data analysis for the blinded validation studies, manuscript preparation, journal submission by the academic clinical partners and peer-review are expected to be completed by the end of 2011.
- Following acceptance by a peer-reviewed journal, the company plans to launch its T21 test as a LDT before the end of 2011.
- The Company plans to complete the appropriate studies and documentation necessary to file for a premarket approval (PMA) for the T21 test by the end of 2012.
Expanding Diagnostic Opportunities – In order to meet anticipated demand for the LDTs the Company is developing, SQNM plans to open a second CLIA-certified laboratory in its San Diego facility. It is anticipated that this lab will be operational early in the fourth quarter of 2010.
In February 2010, the Company entered into a license agreement with Optherion, under which SQNM was granted an exclusive, worldwide, royalty-bearing license to know-how and a consolidated portfolio of issued and pending patent rights relating to age-related macular degeneration diagnostics. Optherion had assembled this portfolio from a number of prominent academic institutions. The licensed patent portfolio includes 17 issued or allowed U.S. and foreign patents, and 68 pending U.S. and foreign patent applications. The license agreement covers extensive intellectual property rights for significant AMD related genetic variants. The Company expects to launch an AMD LDT during the first half of 2011.
Commercial Launch - On April 19, 2010, the Company announced the availability of its next generation MassARRAY platform, the MassARRAY Analyzer 4. This new high performance nucleic acid analysis platform has been designed to meet customer demand for a bench top instrument with greater flexibility across multiple applications, improved reliability and faster performance. With the capability for quantitative gene expression analysis, epigenetic nucleic acid methylation analysis, as well as high-throughput genotyping and SNP fine mapping applications, the MassARRAY Analyzer 4 is designed to empower the basic and translational research community to advance findings from basic genetic and biomarker studies toward clinical utility in diagnosis, prognosis and monitoring of diseases. The MassARRAY Analyzer 4 system will be initially offered for research-use-only and, subject to FDA clearance, will be released to CLIA certified laboratories for the generation and implementation of LDTs. For more information on the MassARRAY Analyzer 4 see http://www.massarrayanalyzer.com.
The Company launched the SensiGene(TM) RHD Genotyping and the Fetal Sex Determination tests in February 2010. Both of these new tests detect and analyze circulating cell-free fetal (ccff) DNA. The SensiGene RHD Genotyping test examines multiple regions of the gene that is known to be the most common genetic basis of RhD negative phenotypes. In addition to quality control metrics to ensure accuracy, both tests utilize a fetal identifier control assay to verify the presence of fetal DNA, in particular for RhD negative, female fetuses.
Litigation Update – On May 3, 2010, the U.S. District Court for the Southern District of California entered an order approving the final approval of a stipulation of settlement reached in the class action securities lawsuits related to alleged violations of federal securities laws consolidated under the caption In re Sequenom Inc. Securities Litigation. Even though the settlement has received final approval from the court, the court’s approval may be subject to appeal and will not become effective until the time for appeals has lapsed without any appeal. If the settlement becomes effective, SQNM will issue approximately 6.8 million shares of its common stock in connection with the settlement.
On May 6, 2010, SQNM and the individual defendants entered into a stipulation of settlement that will resolve all of the pending derivative actions. The stipulation of settlement remains subject to approval by the U.S. District Court and the Superior Court of California. Subject to final approval of the stipulation of settlement, in exchange for a release of all claims by the plaintiffs and a dismissal of the derivative actions, SQNM has agreed (i) to adopt or continue certain corporate governance measures and (ii) to pay the plaintiffs’ attorneys a total of $2.5 million. A significant portion of the attorney’s fees is to be paid by its insurance carriers. SQNM has the right to elect to issue up to 200,000 shares of its common stock to pay its portion of the attorneys’ fees.
In October 2009, plaintiff Xenomics Inc. (now known as TrovaGene) filed a complaint in the Supreme Court of the State of New York naming SQNM as the defendant alleging that SQNM had breached the license agreement entered into by the parties on October 29, 2008, which provides SQNM with exclusively licensed patent rights for the use of fetal nucleic acids obtained from maternal urine, and that the plaintiff has suffered damages as a result. In December 2009, SQNM removed the case to the U.S. District Court for the Southern District of New York. On May 4, 2010, the district court granted the SQNM’s motion to dismiss the action because the license agreement specifically provides that if TrovaGene seeks to resolve a dispute arising under the agreement, it must do so by commencing an arbitration in San Diego. TrovaGene has not notified SQNM whether it would appeal the dismissal or commence arbitration proceedings in San Diego.
Source: http://www.sequenom.com/
Technical Analysis
Source: http://stockcharts.com
SQNM has been relatively stable recently. This is evidenced by the width of its Bollinger Bands, which are tighter than normal. Additionally, SQNM is trading near its upper Bollinger Band. This suggests that the stock price is high relative to its recent price action.
The MACD for SQNM currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above zero, which implies that the underlying moving averages are trending higher.
Comparative Analysis
| Company Name | Ticker | Price per | Mrkt. Cap. | P/E | P/S | ||
| Jun-14-2010 | symbol | Share, $ | $ Mn | 2010 | 2011 | 2010 | 2011 |
| Affymetrix Inc. | AFFX | 6.39 | 452.64M | n/a | n/a | 1.31 | n/a |
| Luminex Corp. | LMNX | 17.40 | 728.68M | 32.34 | n/a | 5.87 | n/a |
| Helicos BioSciences Corp. | HLCS | 0.45 | 32.83M | n/a | n/a | 36.12 | n/a |
| Medical Equipment Median | 404.71M | n/a | n/a | 14.43 | n/a | ||
| Sequenom Inc. | SQNM | 6.52 | 405.39M | n/a | n/a | 9.41 | n/a |
Source: Thomson Financial
Insider Trading Activity
| NET SHARES PURCHASE ACTIVITY
Inside Purchases – Last 6 Months |
||
| Shares | Transaction | |
| Purchases | n/a | 0 |
| Sales | n/a | 0 |
| Net Shares Purchased (Sold) | n/a | 0 |
| Total Insider Shares Held | 544.65K | n/a |
| % Net Shares Purchased (Sold) | 0.0% | n/a |
| Net Institutional Purchases — Prior Qtr to Latest Qtr | |
| Shares | |
| Net Shares Purchased (Sold) | (22,227,200) |
| % Change in Institutional Shares Held | (473.4%) |
Source: Yahoo Finance
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