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.
  • Sequenom: Post JPM14 Update 5 comments
    Jan 24, 2014 8:37 PM | about stocks: SQNM, CBMX

    I had an opportunity to chat with Paul Maier today to follow up on their recent press releases and their presentation at the JP Morgan Healthcare conference.

    • The newly issued EU patent solidifies Dr Lo's IP position. It will likely not have the effect of eliminating any tests currently being marketed, but they believe competitors will have to continue to send tests to the US for processing.
    • Japan market acceptance continues to be strong. The launch of NIFTY by BGI at a lower price point (with no genetic counseling), did not appear to have any impact as of yet. The company expects all competitors to try to find a way into this market, given it's importance.
    • The Mayo Clinic network agreement is an important validation of the science behind MaterniT21. Mayo evaluated all tests and decided that MaterniT21 was the best.
    • The 2,000 phlebotomy sites includes the Mayo Clinic network. LabCorp has 2,200. Quest has 2,800.
    • The Nicox agreement was largely forced because of the CMS coding and reimbursement changes in 2013, slowing dramatically to virtually nothing. Sequenom has now eliminated all sales reps focused on this market. Sequenom restructured the pricing on the test with Nicox. The COGS is quite low, which allowed the price point to be reduced. This is expected to facilitate more self-pay patients as well provide a more attainable reimbursement level for insurance providers. A new test was referenced at the conference. It is a line extension test, as opposed to an upgrade. Both tests will be sold and marketed by Nicox. This is not expected to be a material contributor to revenues this year, given the price points, accession levels and reimbursement climate. There will be some incremental cost savings representing activities transferred to Nicox. Sequenom will be minimally profitable on this test going forward.
    • NextView is now being offered to high risk patients who test positive. This is a Chromosomal Microarray Analysis (NYSE:CMA) of amniotic fluid done by CombiMatrix. CMA is recommended by ACOG and having a recommended test provider for the patient is being viewed positively. Sequenom receives a modest portion of the ASP, but does not expect this to be material this year.
    • HerediT "SMA, Fragile X and Ashkenazi Jewish Panel" carrier screens are now available by Quest and/or Mt Sinai. They are LDTs developed by these labs and are run on the massARRAY platform. Sequenom receives a small portion of the ASP, but does not expect this to be a material contributor to revenues.
    • The 510 premarket FDA notification for the IMPACT Dx platform with Factor II and Factor V was submitted last October. The FDA guidelines for C14 are: 75% of submissions to have a decision issued within 90 calendar days. This processing timeline excludes time waiting for responses to questions or requests for additional information. The company continues to state that they expect this to be completed in C14. Also worth noting is that this submission used Factor II and Factor V as reference tests only and the company does not expect to market these tests once approved. They are submitting this to the FDA so future tests can be developed on a platform that is already approved. These tests could be third party or internally developed.
    • The company referenced a low cost NIPT that they expect to be released later this year. There was a GenomeWeb article written that stated the company projected the price point of this test to be similar to Maternal Serum Screens, which are in the vicinity of $100-300. This is inaccurate. The company has not made any price determination. The reference to MSS is was that the price would have to be much lower than MaterniT21 for insurers to cover it both here and internationally. The MSS test reimbursement levels are an important benchmark that will be used in determining pricing.
    • This next NIPT will not be massively parallel sequencing, nor will it be as broad as MaterniT21. This will likely include only Trisomies 13,18 and 21, and will likely be a targeted approach to minimize COGS.
    • The company believes that the US low risk market is still 2-3 years away including the need for more clinical trials, thought leader opinions, policy determinations and reimbursement decisions. The launch of the new low cost test will benefit the company where self-pay low risk patients want to have a test to cover the primary risks that concern them (i.e. 13/18/21). Many international markets do not have coverage for high risk patients at appropriate price points.

    Personal conjecture: After hearing the rationale behind the FDA 510 submission for IMPACT Dx, it would appear plausible that the company decided to get this platform approved prior to their low cost NIPT launch (both "by the end of this year"). The company has previously sized the self-pay market at 8%. If we assume 3.5m US low risk births a year, that would represent 300k tests per year. If they price this test at $300, that would result in a TAM of $90m. As opposed to launching this as a LDT, submitting this test on the IMPACT Dx should be well received. Harmony is a targeted LDT priced around $795. Illumina has announced their intent to submit their HiSeq 2500 with NIPT to FDA for approval. This would appear to be a much more expensive solution as compared with this targeted NIPT on the IMPACT Dx platform. In this scenario, the company would likely benefit from increasing their platform footprint and sales of consumables to run the test.

    Disclosure: I am long SQNM, CBMX.

Back To Marty Chilberg's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (5)
Track new comments
  • small_farmer.
    , contributor
    Comments (5) | Send Message
     
    Good article. Thanks Marty
    26 Jan 2014, 07:41 AM Reply Like
  • paolo68
    , contributor
    Comments (10) | Send Message
     
    "NextView is now being offered to high risk patients who test positive. This is a Chromosomal Microarray Analysis (CMA) of amniotic fluid done by CombiMatrix. CMA is recommended by ACOG and having a recommended test provider for the patient is being viewed positively. Sequenom receives a modest portion of the ASP, but does not expect this to be material this year."

     

    Marty thanks for the article ,do you think Nextview will be material for a press release anytime soon?..
    26 Jan 2014, 08:21 AM Reply Like
  • Marty Chilberg
    , contributor
    Comments (415) | Send Message
     
    Author’s reply » Hard to say. They announced the relationship and established the trademark NextView. However the financial impact to Sequenom is minimal. Seems like providing this next step is important to prenatal care professionals who have a ready answer of what to do when a positive test result is received.

     

    We may have to wait to get information about impact from CombiMatrix in their quarterly reporting.
    26 Jan 2014, 09:55 AM Reply Like
  • paolo68
    , contributor
    Comments (10) | Send Message
     
    Thanks for the answer...The financial impact to cbmx could be important...It's difficult to find a reason for cbmx to not release a PR about this...Especially considering the low impact on the market for the news they normally release...What do you thonk about this...
    27 Jan 2014, 09:48 AM Reply Like
  • Marty Chilberg
    , contributor
    Comments (415) | Send Message
     
    Author’s reply » 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.
    27 Jan 2014, 09:58 AM Reply Like
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.