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Marty Chilberg

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  • Ariosa S-1 Review [View instapost]
    The point of this blog and of the "outdated stuff" that I posted is to point out some issues related to the pending IPO of Ariosa. Granted the referenced comments were related to research that is dated, but the paper was just published in Feb-14. That led to the statement in March-2014 from the Society of Maternal Fetal Medicine to confirm their view that more research is needed before they believe general population NIPT is appropriate. That statement is consistent with the view commonly expressed by Sequenom which is that low risk NIPT is still likely 2-3 years out in the US and their low cost test will be focused on international markets upon release.

    Ariosa is apparently ignoring the ACOG and SMFM guidelines as well as reimbursement policies from all major insurance carriers in the US.

    The tweets coming from the recent ACMG meeting are quite interesting but they appear to all be coming from live presentation statements. I'm still waiting to see some actual publications provide the data behind these comments.
    Mar 30 07:46 PM | 1 Like Like |Link to Comment
  • Ariosa S-1 Review [View instapost]
    Study finds NIPT detects more than 80 percent of chromosomal abnormalities
    Study finds noninvasive prenatal testing detects more than 80 percent of chromosomal abnormalities
    In a study to be presented on Feb. 6 at 9 a.m. CST, at the Society for Maternal-Fetal Medicine's annual meeting, The Pregnancy Meeting™, in New Orleans, researchers will report that noninvasive prenatal testing detected 83.2 percent of chromosomal abnormalities normally picked up by invasive diagnostic testing strategies, such as chorionic villus sampling (CVS) or amniocentesis. Noninvasive prenatal testing (NIPT) using cell free DNA provides accurate screening for the common trisomies, including trisomy 13 (Patau syndrome), 18 (Edwards syndrome), and 21 (Down syndrome).
    In this study, titled Rare Chromosome Abnormalities Detected by Current Prenatal Screening Compared to Expected Performance using Non-Invasive Prenatal Testing (NIPT), 68,990 of 1,324,607 women tested positive for trisomy 18 or 21 when they underwent prenatal screening as part of the California Prenatal Screening Program between March 2009 and December 2012. Invasive diagnostic testing with CVS or amniocentesis was performed on 26,059 women who tested positive, and 2993 were found to have abnormal results. Of those chromosomal abnormalities, 2489 (83.2 percent) were abnormalities that would be detectable with NIPT, while 16.8 percent were less common aneuploidies that would not be detected.
    One of the study's authors Mary Norton, M.D., said that more of the abnormal results were detectable in the women over 40, who are at higher risk for trisomy 13, 18 or 21. Conversely, fewer of the abnormalities in younger women would be detected by NIPT, as the risk for common trisomies is lower in this group, while the rare aneuploidies are not typically associated with maternal age.
    "While noninvasive prenatal testing with cell free DNA presents some real advantages in accuracy of screening for Down syndrome, as with everything there is a trade-off. Traditional aneuploidy screening with serum and ultrasound markers has higher false positive rates, but in these false positive cases are some fetuses with significant abnormalities that would not be found with NIPT. It is very important that patients and providers understand this trade-off," said Norton, professor and vice chair for Clinical and Translational Genetics, Department of Obstetrics, Gynecology and Reproductive Sciences at the University of California, San Francisco.
    "In prenatal genetic testing, patient preferences are really the most important driver," Norton continued. "With this test, the patient makes a tradeoff between NIPT, which is noninvasive and detects most, but not all chromosome abnormalities—and is somewhat better in older women—and amniocentesis or CVS, which detect more chromosome abnormalities [8 to 25 percent more, depending on age] but with a small risk of miscarriage due to the procedure.
    For an older woman, detecting 83 percent with the noninvasive test may be good enough, while for a 25-year-old, failing to detect 25 percent [which may include rare aneuploidies not usually associated with age] may be of concern."
    Mar 30 03:45 PM | 1 Like Like |Link to Comment
  • Ariosa S-1 Review [View instapost]
    SMFM Confirms Current Guidelines on Noninvasive Prenatal Testing
    Published on March 11, 2014
    http://bit.ly/1dHGL8g

    In a recent press release, the Society for Maternal-Fetal Medicine (SMFM) offered comments on the emerging use of noninvasive prenatal testing, concluding that recent research is not yet sufficient to change current practice recommendations from SMFM or the American Congress of Obstetricians and Gynecologists (ACOG).

    Bianchi
    Diana Bianchi, MD
    The review was triggered, in part, by media coverage surrounding publication of the study, “DNA Sequencing versus Standard Prenatal Aneuploidy Screening,” which appeared in the February 27 issue of the New England Journal of Medicine. The study examined the performance of the verifi prenatal test by Illumina, San Diego, a noninvasive blood test that analyzes DNA found in a pregnant woman’s blood to detect the most common fetal chromosome abnormalities. Lead author of the publication was Diana W. Bianchi, MD, executive director of the mother infant research institute at Tufts Medical Center.

    For the study, which involved a relatively small number of average-risk patients, the authors compared traditional screening for aneuploidy with noninvasive prenatal testing using serum analytes. According to the SMFM commentary, the study was too small to compare detection rates, but the authors reported that the false-positive rate of noninvasive prenatal testing was lower, and therefore concluded that the test “merits serious consideration as a primary screening method for fetal autosomal aneuploidy.”

    “While such a measured conclusion appears reasonable,” wrote SMFM, “the serious consideration that the authors propose requires further data, and the study by Bianchi et al. has to be viewed in the context of its many limitations.” Most importantly, said the society, the study is underpowered for the purpose of comparing detection rates, and it is generally not valid to compare false-positive rates in isolation.

    Noninvasive prenatal testing uses cell-free DNA from maternal serum to screen for common fetal aneuploidies with high sensitivity and specificity. It also uses next-generation sequencing to directly measure fetal DNA in the maternal circulation, and clinical tests are now available using this technique. While there are differences in the methodologies employed by commercial laboratories, overall the reported performance is similar, with detection rates for Down syndrome above 99% and false-positive rates that are less than 1%. Such performance makes screening via noninvasive prenatal testing “an attractive alternative to traditional serum screening for aneuploidy for patients,” wrote SMFM.

    SMFM currently recommends that noninvasive prenatal testing is most appropriate for high-risk patients. The five criteria used by the society to establish high-risk status include maternal age 35 years or older at delivery; sonographic findings indicating an increased risk of aneuploidy; history of a prior pregnancy with a trisomy; positive screening results for aneuploidy, including first trimester, sequential, integrated, or quadruple screen; or parental balanced Robertsonian translocation with increased risk for trisomy 13 or 21.

    According to SMFM, current recommendations have been based primarily on limited evidence regarding the utility of noninvasive prenatal testing in low- or average-risk pregnant women, and validation studies that have generally been limited to high-risk populations. “Understandably,” wrote SMFM, “there is a keen interest in performing the same type of validation studies in a low-risk population.”

    In its commentary, SMFM observed that the NEJM study compared only false-positive rates for trisomies 18 and 21, although all commercially available products also include testing for trisomy 13 and the sex chromosomes, which have higher false-positive rates. A high percentage of the samples for noninvasive prenatal testing were collected in the third trimester—at gestational ages when clinical aneuploidy screening is not performed and is not clinically relevant, yet when fetal DNA amounts are far higher and allow for better test performance. The authors compared noninvasive prenatal testing with standard prenatal screening with a variety of first- and second-trimester tests that have a broad range of performance characteristics. Fewer than 3% of patients had integrated screening, which is the prenatal screening method with the best performance, including the lowest false-positive rate. In addition, traditional screening can detect risk for a broad array of structural, chromosomal, and perinatal abnormalities.

    Berghella
    Vincenzo Berghella, MD
    “The importance of these in a low-risk population may be far greater than the impact of trisomy 18 and 21, which are relatively rare in a younger maternal cohort,” said Vincenzo Berghella, MD, president of SMFM. “It is important to note that this study included only five Down syndrome; five cases of trisomy 21 in the population of 1,909 patients represents a rate of 1 out of 381, which is substantially higher than the population risk of 1 out of 700 that would be expected in a truly ‘average’ or ‘low-risk’ cohort.

    “Finally and importantly, when considering population screening, some patients who choose noninvasive prenatal testing will fail to obtain a result,” said Berghella. “While that number was just under 1% in this study, rates as high as 12% have been published, especially in overweight and obese women.”

    Formalizing the society’s conclusion, the press announcement stated that “SMFM has reviewed the evidence, including this recent paper, and feels that while NIPT is a promising new technology, and this new report is important and excellent news, it is not enough to change current ACOG and SMFM recommendations. Given that just eight aneuploidies were present in the entire cohort of patients, the true test performance is difficult to determine.”

    “Further evidence comparing costs, false-positive rates for all included analyses, ability to obtain a result, and overall test performance for all detectable abnormalities in larger numbers of truly average-risk patients are required to justify changing recommendations regarding population-based prenatal screening from just high-risk pregnancies, to all pregnancies,” said Berghella. “We eagerly await the results of ongoing research studies which will address these issues.”
    Mar 30 03:45 PM | 1 Like Like |Link to Comment
  • Ariosa S-1 Review [View instapost]
    I don't disagree that eventually low risk population will adopt NIPT as a standard of care and that price will be a key driver of adoption. However, Ariosa is currently ignoring the recommendations that it is limited today to high risk pregnancies. And their test ramp and revenue recognized appears unsustainable after their lab partner discontinues their subsidy. In 1-3 years when the low risk market opens up, test provider will need to price their test to encourage adoption which will quite likely be in the range of $300-$600. I'll add a couple of additional comments from others for anyone interested.
    Mar 30 03:43 PM | 1 Like Like |Link to Comment
  • Microsoft: Positioned For Battle And Profits [View article]
    I enjoyed hearing Rick Sherlund's response to a question about cannibalizing Windows revenues. He response: yes they will sell fewer $50 windows operating systems every 5-7 years and in exchange will receive $100 annually for their 365 subscription.
    Mar 27 10:10 PM | 6 Likes Like |Link to Comment
  • Ariosa S-1 Review [View instapost]
    That wouldn't surprise me at all. The S-1 states that the US high risk market is about 500k and the general market is 4m. Harmony is focused on a market that is 8x larger in the US. That is disclosed in the S-1 and supported by the ASP in C13 of approximately $371. What is surprising is that they are now admitting that this is their approach despite medical and insurance advisory statements that NIPT is currently recommended only for high risk patients. It is similarly surprising that they are disclosing this so openly now. During the past year they Song stated that the vast majority of their tests were for high risk. See Goldman Sachs conference call in Feb-2013 for an example.
    IT will be interesting to see the market reaction.
    Mar 27 07:49 AM | 1 Like Like |Link to Comment
  • Ariosa S-1 Review [View instapost]
    That looks plausible based upon the disclosures in the S-1. The only way for Ariosa to recognize revenues was to have a contract with a fixed price point and a history of collections under it. The LabCorp agreement fulfilled those requirements. However, LabCorp stated many times that Molecular Diagnostics were not being reimbursed by end users due to CMS coding issues. Anyone who follows this space knows that low risk is not being covered yet which is confirmed by Ariosa in the S-1. And Ariosa states very early on that this is a "next generation" NIPT which is targeted at the low risk market where analysis depth done by MaterniT21 and Verifi is not needed.

    I don't think it will be a rude awakening to Ariosa as I'm sure they are well aware of the reimbursement history of LabCorp. What is surprising is that this is not more fully disclosed in the document as it appears likely the rude awakening is going to come from anyone investing in this IPO.
    Mar 26 08:23 AM | 2 Likes Like |Link to Comment
  • Ford Motor: This Ridiculous Valuation Can't Last Forever [View article]
    I'm also long Ford and think the current risk/reward is reasonable. I'm not sure how you calculate the Fwd PE which drives your statement that the stock valuation is ridiculous. The C-14 consensus is at $1.36 which puts the fwd PE at 11.1 rather than the 7.9x quoted in the summary paragraph. Considering F has guided down CY-14 estimates to flat for revenues and down for EPS Y/Y this seems far from ridiculous.

    I also don't get the perspective that cash should be excluded from the PE calculation. In reality, a better valuation metric for F is to use Enterprise Value which adds the debt and subtracts the cash from the market cap. The EV is about $150B or much higher than the current market cap. The Free Cash Flow in C13 was up 8% Y/Y to $3.847B which is pretty solid. The divi was 47% of that so definitely room for increases. On the whole it feels fairly valued with some room for improvement once earnings/revenues start growing again.
    Mar 16 03:29 PM | 1 Like Like |Link to Comment
  • Explaining The Worldwide PC Slump [View article]
    Spot on Michael. There is a large gulf between a productivity/computing device and a communication device. No doubt a large number of PC purchasers were historical buying for communications. Smartphones and Pads are better solutions for that need. However, until a reliable alternative interface exists for data input and manipulation, a keyboard and mouse represent a far more efficient medium for data input and manipulation.
    Mar 10 09:36 AM | 5 Likes Like |Link to Comment
  • Sequenom: Q4-13 Supplemental Info [View instapost]
    Thanks rthies99. I wasn't surprised by the lack of any market reaction to the news. Harry Hixon is 75 and Paul Maier is 66. Both execs were brought in following the test handling debacle several years ago and with those credibility issues long-removed, their retirement isn't particularly surprising.

    William Welch was promoted a little over a year ago to President and COO. He was viewed as the heir apparent to Mr Hixon

    Carolyn Beaver was hired as Chief Accounting Officer in 2012. Having 2 experienced senior executives in financial roles is somewhat unusual for such a small company. In retrospect, it seems reasonable to assume she was hired with a short term goal of firming up the accounting function with an eye toward replacing Paul.

    Combined with the promotion of Dirk to Chief Scientist, these moves will largely mean continuity. Getting younger is a positive. Whether this will enable any change in strategy is yet to be seen.
    Mar 7 10:27 AM | 1 Like Like |Link to Comment
  • Sequenom: Is The Bottom In The Rearview Mirror? [View article]
    $sqnm conference call and 10k provided some compelling info. Will add blog update soon
    Feb 28 10:05 AM | Likes Like |Link to Comment
  • Is Apple The Next Microsoft? [View article]
    The longstanding attempt to compare MSFT and APPL is natural yet wrongheaded IMO. MSFT focused on the enterprise which is far more stable. That led to an open architecture with an emphasis on security and some disdain for the "cool factor". It was also part of the mindset which enabled the lost focus on the consumer/mobile opportunity. This approach led to a better PE because the enterprise provided a much larger moat, yet the reliance on desktops has it's own set of issues.

    AAPL focused on the consumer and chose to focus on style, coolness, ease of use. That was done through a closed architecture so they could control the integration of the hardware and software. This led to explosive growth when devices became hot and part of the mobile image of consumers. The downside is that this is a much more fickle customer which means the PE is much lower as the moat is very narrow. As long as you keep rolling out the coolest, hippest, best designed stuff, you are on top. Once you slip a little, the consumer looks around and may decide to jump ship. No legacy investment in infrastructure, customization etc means that change is relatively painless.

    Reitzes has been an Apple bull for about 15 years. He knows that the "value" argument for buying the stock doesn't work since he's used it as part of his argument for the entire period. The reality is that consumer electronics companies that must continually stay ahead of competitors are afforded lower multiples. His reference to Microsoft was a mistake as Apple will not go into a similar period. Either they will continue to innovate and stay on top, or they will see declining acceptance and revenues from customers moving on to other products. They won't get the Softy long runway to find new growth.

    I'm betting on AAPL as I do believe there are new products that will cause excitement and led to another leg up in revenue growth. I'm also betting on MSFT as I believe they are growing enough with a large recurring revenue stream that will allow equity returns plus yield that are compelling. However, I don't think they are comparable investment decisions.
    Feb 21 12:04 PM | 2 Likes Like |Link to Comment
  • Sequenom: Is Piper Jaffray Downgrade A Contra Indicator? [View instapost]
    Definitely agree with part one. They are clearly motivated to control costs and it looks like they have a lot of flexibility here. They are moving tests to NCar where costs are lower. Reducing costs on AMD. R&D is lower though they do appear to be adding a little in bioscience. G&A should at least stay flat and now that the systems are implemented for billings, they might see some decrease. Big variable is legal. They are spent about $15m in first 3 qtrs. So the nut is $5m per quarter. How much they reduce is based upon court calendar for appeal.

    The revenue growth is clearly the wildcard. CNN money, Yahoo finance, MSN, Nasdaq.com are all feeds so they don't do any forecasting. They just report what they have feeds for from other agencies. That said, the 25% secular growth rate is what most analysts are using still for their next 5 yrs. That's driven by the overall opportunity in the NIPT space.

    My summary of forward growth is:
    Positive macro for NIPT
    neutral regulatory (ie deficits/cms issues, insurance covered lives increases). Lots of negatives already baked in so I think neutral is reasonable.
    Unknown pipeline of new tests

    SO the keys are 1) get more competitive with low cost nipt and get more tests to market.
    Jan 27 03:43 PM | 1 Like Like |Link to Comment
  • Sequenom: Post JPM14 Update [View instapost]
    I agree. This would appear to be a material impact to their test ramp. I guess we have to wait for the earnings cc but I can't figure out why they haven't put out a release.
    Jan 27 09:58 AM | 1 Like Like |Link to Comment
  • Sequenom Q4-13: Do You Feel Lucky? [View instapost]
    I'll wait to review the 10k and actual earnings release before I update my forecast. Reg FD makes any discussion of unreleased financial information impossible so I avoided those types of questions. There are a ton of trends that I need to look at including:
    - Opex for a full quarter after the staff reductions in Q3
    - IP legal costs given the court calendar
    - International tests from Japan, LifeCodexx and Lab Cerba
    - Major customer disclosures
    - Disclosures about CF revenue contribution
    - Description of new tests including NextView and the low cost NIPT development.
    - Any update on the bioscience segment including the FDA submission, new panels and the strategic review.
    Jan 26 10:12 AM | 1 Like Like |Link to Comment
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