Shares of Sequenom, Inc. (NASDAQ:SQNM) ended Friday session in red amid volatile trading. The shares closed down -0.03 points or -2.68% at $1.09 with 1.11 million shares getting traded. Post opening the session at $1.15, the shares hit an intraday low of $1.09 and an intraday high of $1.16 and the price vacillated in this range throughout the day. The company has a market cap of $107.81 million and the numbers of outstanding shares have been calculated to be 119.22 million shares.
Sequenom, Inc. (SQNM) reported total revenues of $27.6 million, total accessioned units of 46,400, and a net loss of $13.4 million, or $0.11 per basic and diluted share, for the first quarter of 2016.
First Quarter 2016 Results
First quarter 2016 revenues of $27.6 million declined 27% from $37.8 million in the first quarter of 2015. Revenues and unit volumes in the first quarter of 2016 were lower than the first quarter of 2015, primarily reflecting the conversion of certain laboratory customers to licensee status under the Pooled Patents Agreement, and a smaller amount available to collect during the first quarter of 2016 for testing services performed in prior periods. This latter factor reflects the improvement in the timeliness of Sequenom Laboratories collections as a result of additional payor contracts. These changes resulted in approximately $10 million in net revenue reduction for the first quarter of 2016 compared to the first quarter of 2015.
Total patient samples accessioned decreased by 12% to 46,400 patient samples during the first quarter of 2016, compared to the prior year’s first quarter. Approximately 41,200 of those patient samples accessioned were for NIPT, including the MaterniT® 21 PLUS, VisibiliT™ and MaterniT® GENOME laboratory-developed tests, which is a 9% decrease in testing volume compared to the first quarter of 2015. The decrease in tests accessioned was driven by the conversions of laboratory customers to licensee status, as described above, partially offset by the increase in tests accessioned for patients in the average-risk pregnancy market.
The total volume of tests from Sequenom’s core business increased by 7% over the first quarter of 2015, largely as a result of Sequenom Laboratories’ entry into the average-risk pregnancy market. In this press release, “core business” refers to Sequenom’s revenue and unit volume excluding the effect of the conversion of certain laboratory customers to licensee status in 2015. Notably, the volume of NIPT tests in Sequenom’s core business, which includes average-risk pregnancies, increased by 14% for the first quarter of 2016 over the first quarter of 2015.
License revenue was $2.2 million in the first quarter of 2016, compared to $2.1 million for the first quarter of 2015, and $2.3 million in the fourth quarter of 2015. Sequenom continues to expect a total of $10 million in license fee revenue for 2016.
Total cost of revenues decreased to $16.8 million for the first quarter of 2016, compared to $19.3 million for the prior year period. Cost of revenues decreased primarily due to the decrease in test volumes as a result of the conversion of certain laboratory customers to licensee status.
Gross margin for the first quarter of 2016 was 39% compared to gross margin of 49% for the first quarter of 2015. The effect of laboratory customers who converted to licensee status, costs associated with Sequenom Laboratories’ laboratory consolidation and restructuring, the impact of entering the average-risk pregnancy market and increased MaterniT GENOME volume largely drove the decrease. Incremental costs related to the laboratory consolidation reduced gross margin for the first quarter of 2016 by 3%. Sequenom continues to expect gross margin to increase for the remaining quarters of 2016.
Total operating expenses for the first quarter of 2016 were $22.1 million, compared to $23.0 million for the first quarter of 2015. Total operating expenses for the first quarter of 2016 were up only slightly from total operating expenses of $21.9 million for the fourth quarter of 2015, due to the costs associated with Sequenom Laboratories’ laboratory consolidation and other restructuring activities, which offset the benefit of reduced spending for research and development and general and administrative activities.
Operating loss for the first quarter of 2016 was $11.4 million, compared to operating income of $16.5 million for the same period in 2015. Operating and net income for the first quarter of 2015 included a $21.0 million gain on the Pooled Patents Agreement with Illumina. Net loss for the first quarter of 2016 was $13.4 million or $0.11 per basic and diluted share, as compared to net income of $14.3 million, or $0.11 per diluted share, and $0.12 per basic share for the same period in 2015.
Cash burn for the first quarter of 2016 was $10.4 million, compared to $9.4 million in the same period of 2015 and $4.7 million in the fourth quarter of 2015. Cash burn increased in the first quarter of 2016 primarily due to reduced revenue collected for testing services performed in prior periods and delays in collections related to the launch of tests into the average-risk pregnancy market. Cash burn in the first quarter also included semi-annual interest payments on Sequenom’s convertible debt.
Unrecorded accounts receivable for tests performed and recognized on a cash basis are estimated to be $16 million to $18 million as of March 31, 2016, the same as the estimate as of December 31, 2015.
As of March 31, 2016, cash, cash equivalents, and marketable securities totaled $66.1 million.
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 March 31, 2016. Management uses non-GAAP financial measures because it believes that a cash flow metric incorporating cash used in 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.
“During the quarter, we executed on a number of key initiatives designed to return Sequenom to sustainable growth, resulting in quarter over quarter growth in our unit volume,” said Dirk van den Boom, Ph.D., President and CEO of Sequenom. “Overall, we made meaningful progress toward achieving our goal of becoming financially self-sustaining while solidifying our position as a leader in reproductive health.”
Sequenom, Inc., a life sciences company, develops and commercializes molecular diagnostics testing services for the women’s health and oncology markets in the United States and internationally. The company provides molecular based laboratory developed tests (LDTs) comprising MaterniT21 PLUS LDT, a noninvasive prenatal test (NIPT) to detect fetal chromosomal abnormalities; and VisibiliT LDT, a NIPT to detect fetal chromosomal abnormalities by determining the relative amount of chromosomal material present in circulating cell-free DNA in a maternal blood sample. It also offers MaterniT21 GENOME test to detect genome-wide genomic deletions or duplications; HerediT cystic fibrosis (CF) LDT, a carrier screen test to identify individuals with CF or genetic mutations; and SensiGene fetal Rhesus D (RhD) LDT, a NIPT to determine the presence or absence of RhD factor by direct detection of the fetal RhD genotype in RhD negative mothers from a maternal blood sample. In addition, the company provides a microarray test that uses fetal samples obtained by amniocentesis or chorionic villus sampling under the NextView brand; and additional carrier screening tests for Ashkenazi Jewish disorders, spinal muscular atrophy, and fragile X syndrome under the HerediT brand. It serves physicians and client laboratories. The company has collaboration with the Recombine Inc. Sequenom, Inc. was founded in 1994 and is headquartered in San Diego, California.
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