Seeking Alpha

Marty Chilberg's  Instablog

Marty Chilberg
Send Message
I'm a retired CPA who spent the majority of his working career in technology companies. My work included management stints at Atari Inc, Daisy Systems Corp, Symantec Corp and Visio Corp. My last position at Visio (VSIO) was as CFO and VP Finance and Operations.
View Marty Chilberg's Instablogs on:
  • Insys Therapeutic INSY: Watching The Call Premium

    INSY is building a nice technical chart after retesting the low around $22.50. Stock is now above the 100 day MA. Volatility is up as is the call premium. Watch the Sep 20 $35 strike for a tell on sentiment. Currently this strike is 2.4% above yesterdays close. The last trade premium is $2.20 so the stock would have to move 9% in the next 30 days for holders of the call to be in the money. The bid/ask spread is $1.80/$ 2.30 as of close yesterday but if the stock reacts to the Ukraine news, I suspect the spread will increase fairly soon.

    Disclosure: I'm long and have sold this Sep $35 call against it.

    Tags: INSY
    Aug 22 9:15 AM | Link | Comment!
  • Infrequently Asked Questions: Sequenom

    In what I hope will become the first in a series of Infrequently Asked Questions, I was able to chat with Sequenom (NASDAQ:SQNM) Chief Financial Officer Carolyn Beaver yesterday. The following represents my recollection of the call. Readers should note that this conversation was not recorded and what follows is my interpretation of our chat (No quotes intended or requested). For further context behind the objectives of an Infrequently Asked Questions article, please view my blog here.

    Q: Hi Carolyn, thanks for allowing me this opportunity to chat. How has the transition for you and Bill gone since your respective appointments?

    A: It's been great. As can be seen from the number of recent announcements, there has been a lot going of late.

    Q: Considering the number of announcements over the past few months, should investors view this as a change of approach to investor relations?

    A: No-We just have had a lot of activities that have been progressing for some time, that have come to fruition.

    Let's focus first on Other Lab Developed Tests (LDT's)

    Q: Other LTD's volume has been pretty lumpy since Q2-13 with volume only up modestly. I know Cystic Fibrosis screening is a large market and you have a small share of it, but how much headroom is there for you realistically?
    A: It is a large market. We believe there is still room to grow but we recognize that this is a very competitive market with established competition.

    Q: The Quest agreement only covers NIPT and appears to be an opportunity to improve your MaterniT21 Plus presence in the OB/GYN community. That's great for NIPT but won't this preclude CF growth, given that Quest already has a competing product?
    A: We don't view this agreement as an impediment to CF revenues. The Quest relationship will bring MaterniT21 into new OB/GYN offices which wouldn't impact current volumes. These are largely offices where our penetration wouldn't have occurred in the immediate future, so it's not likely to impact our short term growth trajectory.

    Q: I noticed the 10Q didn't disclose MaterniT21 vs Other LDT revenues which makes determining pricing power impossible to gauge. Was there any material change in the ASP for CF in June?
    A: No

    Q: Given Sequenom's strong research base in numerous areas including Oncology, is it probable investors will see new LDT offerings in markets other than NIPT, Carrier Screening and Retinal Health in the next couple of years?
    A: We have discussed this quite a bit in terms of leveraging our research strengths and our field sales organization, especially as it pertains to Autoimmune diseases and Oncology. No comment however on whether this will lead to any new product announcements in the next couple of years.

    Moving on to NIPT
    Q: Have you seen any progress on the CPT code for NIPT including pricing levels?
    A: No changes seen on the website nor have we heard anything. We still expect this to be done this month.

    Q: What impact would slippage have, given the time frames needed for organizations to upload information into systems, etc?
    A: If it does slip, it would be concerning if it slipped all the way toward the end of the year.

    Q: If you were to stack rank the relative impact of this coding change on government testing, pricing and reimbursement, how would it look?
    A: The largest impact is definitely reimbursement acceleration. Next would be Medicaid. We don't expect pricing would be impacted.

    Q: It appears you are ramping the North Carolina lab now with 10 jobs open currently. Is this in anticipation of the VisibiliT launch?
    A: No. This is primarily in anticipation of the Quest launch. All initial processing of VisibiliT tests will be in San Diego to provide better oversight of initial test processing. Eventually tests will be directed to the location that makes the most sense, based upon country of origin.

    Q: Accession growth for MaterniT21 Plus has slowed dramatically since Mar-13. I understand the impact of the coding and Medicaid reimbursement issues, but government payer volume increased sequentially 18% in June-14, while commercial payers declined somewhat. Is this slowdown a sign that the high risk market is more penetrated that previously thought or do you anticipate this reaccelerating soon?
    A: The primary reason for slower growth is the company drive toward profitable testing rather than simple volume growth. Even in the commercial segment we have addressed certain payers that have a reimbursement history that is unacceptable. (My added comment: this should improve with the C15 CPT codes).

    Q: Illumina appears to be aggressively preparing for an IVD world. They have announced agreements with Biomnis, Genoma, and the Center for Human Genetics overseas. They have also signed Progenity and apparently LabCorp through the InformaSeq recent announcement. They also appear to be offering partner indemnity in certain of these agreements, indicating a presumption of victory or an acceptance of the cost of any IP legal outcome as a market acquisition cost. That leads to a broad range of questions. Where is Sequenom with respect to the 2013 10K statement disclosing an intent to file with the FDA for IVD status this year?
    A; We have two clinical studies registered on clinicaltrials.gov that are still enrolling patients. We anticipate finishing the recruitment process sometime this year or in early 2015. Next would come our analysis which could form the basis for an FDA submission. We are reviewing platforms and the new LDT draft FDA guidelines that will likely influence our regulatory strategies.

    Q: Why the slower approach? Do you plan on eventually filing with VisibiliT rather than MaterniT21?
    A: No comment

    Q: What do you know about InformaSeq? It appears to be from Illumina and a direct response to VisibiliT. They have been vague about the test but do state it is a risk assessment and that it tests for multiple chromosome and sex aneuploidies. Any more insight?
    A: This is something that we are looking at closely. It is very early so not much is known. It does appear to be a different test than Verifi, but based upon the same IP portfolio. They appear to be positioning it between MaterniT21 and VisibiliT both in breadth and, we expect, pricing. We are still working to gain further information.

    Q: Adding to my comment about IP litigation, the European intellectual property of Sequenom appears to be even stronger than in the US. What is your intention with respect to infringement? Are you planning to pursue enforcement? If you don't attempt to enforce, what impact does this have on your partner licensing relationships?
    A: We are looking hard at legal options but no decisions have been made.

    Q: Ariosa's ability to compete in the US with Harmony appears to have been significantly harmed by the recent moves of Quest, LabCorp, Progenity, etc. This likely will eliminate a public funding option any time soon. If so, it may be that they will be forced to sell their company to a larger company wanting to enter this space. Have you heard anything? How much would it hurt Sequenom if Ariosa were to be purchased by a large well-funded biopharma company?
    A: The LabCorp change will likely increase Ariosa's challenges in the US. They will likely continue to focus their efforts overseas.

    Q: Any word on Cellscape's attempt to sell their technology?
    A: We have not heard of any transaction.

    International Activities Noted:
    Q: The UK has been a beehive of activity of late. Premaitha started it rolling with their reverse merger and the planned launch of IONA, an IVD like product to clinical labs in the EU in 2015. Thoughts?
    A: The UK is a big market and the introduction of any additional test will help grow awareness and help all tests grow.

    Q: OK, but what about the test itself. Do you know where they got their IP? Did Sequenom license anything to them?
    A: Repeated that any new test would help grow the market and had no further comment about licensing activities unannounced.

    Q: Dr Nicolaides being quoted in a Sequenom press release was quite the surprise. Now I see that he is working with Dr Lo on a new research project. Can you comment on your relationship with him and how this may impact the market opportunity in the UK for Sequenom?
    A: Dr Nicolaides is a leader in prenatal testing. We are pleased with his interest in our approach for a low cost NIPT to address the needs of the general population.

    Q: That's a bit of a sidestep so let me try again. Is there anything in these announcements that foretells a change in Dr Nicolaides relationship with Ariosa or Sequenom?
    A: I wouldn't recommend you read any more into my comments.

    Q: Life Codexx appears to have some interesting activity of late. They have a sales and marketing subsidiary Prenalab that is working with a consultant, DB Diagnostics. This relationship also includes Charite Research Hospital in Berlin where reportedly a large government grant was sourced to help fund Prenalab development of a new miRNA profiling NIPT. Comments?
    A: It's not surprising to see major players develop their own tests in such a large market.

    Q: As a follow up: Is it a fair assumption that the reason you have yet to identify your additional undisclosed international licensees is that VisibiliT has yet to launch. Is this miRNA test one of the licensing agreements? If this is not a licensed effort, it would seem to be a competitive threat to the royalty revenue steam you have with Life Codexx.
    A: This again is a very large market opportunity and there will be lots of products competing for market share. We do not think this will negatively impact SQNM, but have no further comment on it or licensing arrangements.

    Closing question:
    Q: I see you are planning an investor road trip to NY and Boston in September. I understand that is a normal part of the job, but it's a little different to put out a press release about it. Any particular goal for the trip? Any expectation of adding analyst coverage?
    A: We do have a goal of broader coverage. This trip is all about increasing investor awareness. The trip was timed to follow the Morgan Stanley conference on September 8th.

    Disclosure: The author is long SQNM. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.

    Tags: SQNM, long-ideas
    Aug 21 2:45 PM | Link | 1 Comment
  • Infrequently Asked Questions #IAQ

    Infrequently Asked Questions #IAQ is a new project intended to provide a different kind of article on Seeking Alpha. My goal is to create informative articles which take the form of CFO interviews of public companies. What follows is an initial outline of what this project is.

    Objectives

    1. Publish substantive articles in the form of CFO interviews targeted to retail investors.
    2. Improve the retail investor's understanding of a target company.
    3. Utilize social media to solicit questions and create interest in the article in the planning stage.

    Approach

    1. Select a company that has a limited base of articles on Seeking Alpha, but has some compelling attribute(s).
    2. Research the company thoroughly to be able to articulate questions that serve to educate the audience stand alone.
    3. Contact the target company to schedule a conference call.
    4. Solicit questions from other retail investors using Twitter.
    5. Ask questions even if it's unlikely the CFO will respond, leaving plenty of room for a "no comment" response.
    6. Write up the conversation in the form of Q & A but clearly state that the content is my recollection of the conversation rather than a transcript of the meeting. This is not an attempt to get quotes but rather to educate the audience.
    7. Send the draft article to the CFO to provide an opportunity to clarify or redact any responses.
    8. Submit to Seeking Alpha for possible publication.

    Initial Target-Sequenom

    Making Sequenom my initial target was an obvious choice. My knowledge of the company is pretty deep and the CFO Carolyn Beaver has been gracious enough to allow me to call her on occasion. I solicited questions on Twitter over the past week, asking readers to go to an investor forum to leave their recommended questions. For a first effort, it went quite well. We had a couple hundred visits and about a dozen questions recommended. We'll see where it goes from here, but certainly seems like an idea worth pursuing.

    Aug 21 8:48 AM | Link | 1 Comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.