Sequenom, Inc. Reports Financial Results For The Second Quarter Of 2014

   Sequenom, Inc. Reports Financial Results For The Second Quarter Of 2014

62% Revenue Growth as Reimbursement and Testing Volumes Improve

PR Newswire

SAN DIEGO, July 29, 2014

SAN DIEGO, July 29, 2014 /PRNewswire/ --Sequenom, Inc. (NASDAQ: SQNM), a life
sciences company providing innovative genetic analysis solutions, today
reported total revenues of $39.8 million for the second quarter of 2014, an
increase of 62% compared to revenues of $24.5 million for the second quarter
of 2013.

The Bioscience business segment, which was sold on May 30, 2014, has been
accounted for as a discontinued operation and consequently its results have
been excluded from continuing operations for all periods.

Revenues from the Sequenom Laboratories business are recorded primarily on a
cash basis. In the second quarter, Sequenom Laboratories began using accrual
accounting for several third-party payors. This accounting change during the
quarter resulted in a net revenue increase of $1.9 million, based upon accrued
revenue of $5.7 million for those payors, compared to $3.8 million in cash
received during the quarter from those payors for tests during the quarter.
International revenue, accounted for on an accrual basis, contributed 12.3% of
diagnostic services revenues in the second quarter of 2014. In total, over
26% of our revenue in the second quarter is accounted for on the accrual basis
of accounting.

Total patient samples accessioned increased over 7% to 50,100 patient samples
during the second quarter of 2014, compared to the prior year second quarter.
Approximately 40,800 of those patient samples accessioned were for the
MaterniT21™ PLUS laboratory-developed test (LDT), compared to approximately
38,000 in the second quarter of 2013, an increase of more than 7% compared to
the prior year quarter. On a sequential basis, the volume of MaterniT21 PLUS
tests increased by about 3% over the first quarter of 2014, while total tests
accessioned remained stable.

Sequenom Laboratories has continued to increase the volume of Medicaid tests
accessioned in 15 states that are now providing reimbursement for its tests
while limiting the Medicaid volume in states that are not yet reimbursing for
its tests. The volume of Medicaid tests was 18% of total tests accessioned in
the second quarter of 2014 compared with 16% in the first quarter of 2014 and
26% in the second quarter of 2013, when Sequenom's reimbursement policy for
Medicaid was implemented. Sequenom Laboratories is continuing to work with
other Medicaid programs that have not yet implemented the new molecular
diagnostic codes following the coding changes which were implemented at the
beginning of 2013.

Sequenom Laboratories continues its negotiations with the payor community. As
of June 30, 2014, more than 140 million lives are covered for the MaterniT21
PLUS test. We now have agreements with three of the top five national payors,
including a master service agreement with the largest US insurance
association.

Total cost of revenues increased to $22.4 million for the second quarter of
2014, compared to $20.6 million for the prior year period. Cost of revenues
increased primarily due to the increase in Sequenom Laboratories' test volumes
and costs to support increased testing capacity.

Gross margin for the second quarter of 2014 was 44% as compared to gross
margin of 16% for the second quarter of 2013. This improvement is attributable
primarily to the increase in collections for tests performed in the current
and prior quarters, the change to accrual accounting for certain payors and
improved efficiencies in processing patient samples.

Total operating expenses for the second quarter of 2014 were $30.6 million, as
compared to total operating expenses of $33.1 million for the second quarter
of 2013, primarily as a result of the completion of the validation of the
North Carolina laboratory site in the second quarter of 2013. Total operating
expenses for the second quarter of 2014 were up sequentially from total
operating expenses of $28.7 million for the first quarter of 2014 as a result
of the non-cash stock compensation expense related to the retirement of the
former chief executive officer and the additional restructuring costs related
to the exited facility which the Company has been unable to sublease.
Excluding these amounts, total operating expenses for the second quarter of
2014 were $28.4 million, in line with the first quarter of 2014.

Selling and marketing expenses decreased to $7.9 million for the second
quarter of 2014 from $10.0 million year-over-year, resulting primarily from
lower labor costs related to the restructuring completed in the third quarter
of 2013 and a reduction in the associated expenses. Research and development
expenses of $7.1 million for the second quarter of 2014 were down from $10.9
million in the second quarter of 2013, which included the completion of the
validation of the laboratory site in North Carolina in June 2013.

General and administrative expenses for the second quarter of 2014 were $14.6
million, as compared to $12.2 million for the second quarter of 2013,
primarily due to increased legal expenses associated with patent litigation,
and $1.4 million in non-cash charges primarily related to changes in the terms
of equity awards upon the retirement of the former chief executive officer in
the second quarter of 2014. General and administrative expenses were up
sequentially from $12.5 million from the first quarter of 2014 as a result of
the same factors. Total litigation expenses in the second quarter of 2014
amounted to $5.3 million.

Loss from operations for the second quarter of 2014 was $13.2 million, as
compared to $29.2 million, for the same period in 2013.

The Company received proceeds of $33.0 million upon the sale of the
Biosciences business, including the milestone payment of $2.0 million which
was received upon obtaining U.S. Food and Drug Administration clearance for
the IMPACT Dx™ Factor V Leiden and Factor II Genotyping Test for use on the
IMPACT Dx™ System. As a result of the sale, the Company recorded a gain on the
sale of discontinued operations of $23.4 million, less tax expense of $9.6
million, and a loss from discontinued operations of $1.0 million during the
second quarter of 2014. The loss from continuing operations in the second
quarter of 2014 reflects a tax benefit of the loss as a result of the gain on
the sale of the Bioscience business which is reflected in discontinued
operations.

Net earnings for the second quarter was $4.5 million, or $0.04 per share, as a
result of the sale of the Bioscience business in the second quarter of 2014,
compared to a net loss of $31.0 million in the second quarter of 2013, or
$0.27 per share. Excluding the impact of the discontinued operations on net
earnings, Sequenom experienced a net loss from continuing operations for the
second quarter of $0.07 per share, including a tax benefit of $.06 per share,
compared with a net loss of $0.27 per share in the second quarter of 2013.

Cash burn related to continuing operations for the second quarter of 2014 was
$4.1 million, compared to $41.5 million in the same period of 2013 and $18.4
million in the first quarter of 2014. The cash burn related to continuing
operations for the first quarter of 2014, excluding annual royalty payments of
$4.8 million and semi-annual debt service payments of $3.3 million, was $10.3
million. Cash burn does not reflect the operations or net proceeds from the
sale of the Bioscience business.

Unrecorded diagnostic accounts receivable are estimated to be $36 to $40
million as of June 30, 2014. This range has decreased by approximately $6
million as a result of the adoption of accrual accounting for certain payors,
resulting in recorded receivables of approximately $1.9 million, and
collections during the second quarter.

"We are pleased with the steady improvements in reimbursements and collections
resulting in increased revenues," said Carolyn Beaver, chief financial officer
of Sequenom. "We will continue to evaluate our collection history with the
goal to move to accrual accounting for additional payors. We also remain
focused on our cost improvement initiatives as we look to continue to build
value for our shareholders."

First Half Results

For the first half of 2014, the Company reported revenues of $76.8 million, an
increase of 43% from revenues of $53.6 million for the first half of 2013.
Revenues improved primarily due to increased collections and higher test
volumes.

Gross margin for the first half of 2014 was 41% of revenues as compared to
gross margin of 22% for the first half of 2013, a difference primarily
attributable to the improved collections for tests performed in the current
and prior quarters and the increased test volumes for Sequenom Laboratories.

Total operating expenses for the first half of 2014 were $59.3 million, as
compared to total expenses of $67.9 million for the first half of 2013. This
change reflects decreased selling and marketing expenses resulting primarily
from lower labor and related costs following the August 2013 restructuring.
Total stock-based compensation expense was $6.5 million for the first half of
2014, up from $5.0 million as compared to the first half of 2013, principally
as the result of the retirement of the former chief executive officer in the
second quarter of 2014.

During the first half, an additional restructuring charge of $1.9 million was
recorded in connection with changes in assumptions regarding the expected
sublease income to be received for a facility the Company exited in the third
quarter of 2013.

Loss from operations for the first half of 2014 was $27.6 million, as compared
to $56.0 million, for the same period in 2013.

Net loss for the first half of 2014 was $11.2 million, or $0.10 per share, as
compared to net loss of $60.4 million, or $0.52 per share for the same period
in 2013, reflecting the growth in revenue from the MaterniT21 PLUS test and
the sale of the Bioscience business segment in 2014, including the related tax
benefit for the loss on continuing operations for the first half of 2014.

Net cash used in operating activities was $18.2 million for the first half of
2014, compared to $55.2 million in the same period in the prior year. The
decrease in cash used in operating activities for the first half of 2014 is
the result of the increase in revenue and the reduction in operating
expenses. The change was not impacted by the operations or proceeds from the
sale of the Bioscience business.

As of June 30, 2014, total cash, cash equivalents, and marketable securities
were $82.1 million.

Operational Updates

In the first half of 2014, Sequenom Laboratories accessioned more than 80,000
MaterniT21 PLUS tests, and more than 100,000 total test samples for all its
LDTs, compared to 73,000 MaterniT21 PLUS tests and 91,200 tests in total for
the first half of 2013.

The Company recently announced a test send-out agreement and a and licensing
agreement with Quest Diagnostics for noninvasive prenatal aneuploidy testing,
gaining access to its broad physician network in the United States and certain
other countries. Sequenom Laboratories anticipates receiving its first
samples from Quest Diagnostics sometime in the third quarter.

Last week, Sequenom Laboratories announced that it has completed the
development of the VisibiliT™ laboratory-developed test, which provides a risk
score for common fetal chromosomal aneuploidies that are normally evaluated
within conventional prenatal serum screen tests. The results of a clinical
evaluation study of the VisibiliT test were shared at the 18^th International
Conference on Prenatal Diagnosis and Therapy (ISPD) in Brisbane, Australia,
earlier this month. Performance of the VisibiliT test was determined by a
clinical evaluation study of over 1,000 low and high risk samples, and
demonstrated greater than 99% sensitivity and 99.9% specificity for trisomies
21 and 18. This performance has been maintained over subsequent validation
studies which in total now exceed more than 100 trisomy 21 and 30 trisomy 18
samples.

Sequenom Laboratories is the first test service provider to offer two distinct
noninvasive prenatal testing options, enabling greater testing access and
flexibility for providers and patients. Sequenom Laboratories plans to first
launch the VisibiliT test internationally in August 2014.

"The launch of the VisibiliT test is an important achievement for the Company
and another example of our continued leadership in the NIPT field," said
William Welch, chief executive officer of Sequenom, Inc. "The VisibiliT test
allows us to meet the growing demands to provide additional choices to better
serve the broader prenatal testing community."

Sequenom Laboratories also recently announced plans to launch the Enhanced
Sequencing Series II for its MaterniT21 PLUS test. In August, the MaterniT21
PLUS test will begin reporting additional findings for the presence of
additional subchromosomal microdeletions, including 11q deletion (Jacobsen
syndrome), 8q deletion (Langer-Giedion syndrome), and 4p deletion
(Wolf-Hirschhorn syndrome). These microdeletions are associated with various
clinical conditions that can result in physical and developmental issues. With
the Enhanced Sequencing Series, the MaterniT21 PLUS test is the most
comprehensive noninvasive prenatal test of-its-kind available on the market,
providing detailed information for use in patient care. 

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 June 30, 2014. Management uses non-GAAP financial measures
because it believes that a cash flow metric incorporating cash used by
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.

Management uses cash burn to evaluate performance compared to forecasts. Cash
burn is calculated as the sum of net cash used by operating activities,
purchases of property, equipment and leasehold improvements, and payments on
long-term obligations. The reconciliations of cash used by operating
activities, the GAAP measure most directly comparable to cash burn, is
provided on the attached schedule.

Conference Call Information

A conference call hosted by William Welch, CEO, and other members of senior
management will take place today, July 29, at 5:00 p.m. EDT (2:00 p.m. PDT)
and will be webcast live on the Sequenom website. To access the live
teleconference call, dial 877-883-0383 in the U.S. and Canada, and
412-902-6506 for other international callers. Please use code 6771138. For
interested parties unable to listen to the live conference call, a replay will
be available through Friday, August 29, 2014. The replay will be accessible by
dialing 877-344-7529 or 412-317-0088 internationally, and entering the
conference number 10048854.

The conference call webcast is also accessible through the "Investors" section
of the Sequenom Website at www.sequenom.com/invest. An online replay will be
available following the initial broadcast until Friday, August 29, 2014.

About Sequenom

Sequenom, Inc. (NASDAQ: SQNM) is a life sciences company committed to
improving healthcare through revolutionary genomic and genetic analysis
solutions. Sequenom develops innovative technology, products and diagnostic
tests that target and serve molecular diagnostic markets. Web site:
www.sequenom.com.

About Sequenom Laboratories

Sequenom Laboratories, a CAP accredited and CLIA-certified molecular
diagnostics laboratory, has developed a broad range of laboratory tests, with
a focus on prenatal and ophthalmological diseases and conditions. Branded
under the names HerediT™, MaterniT21™ PLUS, RetnaGene™, SensiGene™ and
VisibiliT™, these molecular genetic laboratory-developed tests provide early
patient management information for obstetricians, geneticists, maternal fetal
medicine specialists and ophthalmologists. Sequenom Laboratories is changing
the landscape in genetic disorder diagnostics using proprietary cutting edge
technologies.

SEQUENOM®, HerediT™, MaterniT21™ PLUS, RetnaGene™, SensiGene™ and VisibiliT™,
are trademarks of Sequenom, Inc. All other trademarks and service marks are
the property of their respective owners.

Forward-Looking Statements

The preliminary unaudited financial information for the three and six months
ended June 30, 2014 set forth in this press release is based on information
available at the time of this press release and is subject to further review
by our independent accountants and management prior to our filing of our
Quarterly Report on Form 10-Q for the second quarter ended June 30, 2014.
Therefore, these results for the period ended June 30, 2014 set forth in this
press release could differ from the final results reported in our Quarterly
Report on Form 10-Q for the same period. Furthermore, any results reported for
any completed period should not be considered indications of our future
performance.

Except for the historical information contained herein, the matters set forth
in this press release, including statements regarding Sequenom Laboratories'
negotiations with the payor community, the Company's goal to move to accrual
accounting for additional payors and the Company's ability to continue its
cost improvement initiatives and build value for its shareholders, Sequenom
Laboratories' anticipation of receiving its first patient samples from Quest
Laboratories in the third quarter, Sequenom Laboratories' and the Company's
expectations regarding the impact and benefits of the VisibiliT test on
providers and patients and Sequenom Laboratories' plans to first launch the
VisibiliT test internationally in August 2014, growing demands for additional
test choices by the broader prenatal testing community, Sequenom Laboratories'
plans for and the timing of its launch of the Enhanced Sequencing Series II
for its MaterniT21 PLUS test and the expected impact and benefits of the
Enhanced Sequencing Series II for the MaterniT21 PLUS test on patient care,
the Company's commitment to improving healthcare through revolutionary genomic
and genetic analysis solutions, and Sequenom Laboratories' changing the
landscape in genetic disorder diagnostics, are forward-looking statements
within the meaning of the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are subject to
risks and uncertainties that may cause actual results to differ materially,
including the risks and uncertainties associated with market demand for and
acceptance and use of technology and tests such as the MaterniT21 PLUS test,
and the VisibiliT test, reliance upon the collaborative efforts of other
parties such as, without limitation, healthcare providers, international
distributors and licensees, the Company or third parties obtaining or
maintaining regulatory approvals that impact the Company's business,
government regulation particularly with respect to diagnostic products and
laboratory-developed tests, publication processes, the performance of designed
product enhancements, the Company's ability to develop and commercialize
technologies and products, particularly new technologies such as noninvasive
prenatal diagnostics, laboratory developed tests, the Company's financial
position, the timing and amount of reimbursement that Sequenom Laboratories
receives from payors for its laboratory-developed tests, the Company's ability
to manage its existing cash resources or raise additional cash resources,
competition, intellectual property protection and intellectual property rights
of others, litigation involving the Company, and other risks detailed from
time to time in the Company's most recently filed Quarterly Report on Form
10-Q, its most recently filed reports on Form 8-K, and its most recently filed
Annual Report on Form 10-K for the year ended December 31, 2013, and other
documents subsequently filed with or furnished to the Securities and Exchange
Commission. These forward-looking statements are based on current information
that may change and you are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this press
release. All forward-looking statements are qualified in their entirety by
this cautionary statement, and the Company undertakes no obligation to revise
or update any forward-looking statement to reflect events or circumstances
after the issuance of this press release.

[Financial tables follow]





SEQUENOM, INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
                                             June 30,     December 31,
                                             2014         2013
Assets
Current assets:
Cash, cash equivalents and marketable        $ 82,119     $   71,257
securities
Accounts receivable, net                     5,539        2,552
Inventories                                  5,012        11,598
Other current assets and prepaid expenses    3,552        2,652
Assets of discontinued operations            —            13,475
 Total current assets           96,222       101,534
Property, equipment and leasehold            18,837       24,378
improvements, net
Other assets                                 16,543       16,482
Noncurrent assets of discontinued operations —            2,308
 Total assets                 $ 131,602    $   144,702
Liabilities and stockholders' equity
(deficit)
Current liabilities:
Accounts payable                             $ 6,103      $   9,086
Accrued expenses                             23,902       24,554
Long-term debt and obligations, current      7,718        7,643
portion
Other current liabilities                    4,306        2,151
Accrued income taxes                         2,769        —
Liabilities of discontinued operations       —            6,207
 Total current liabilities     44,798       49,641
Long-term liabilities                        136,123      140,618
Long-term liabilities of discontinued        —            946
operations
Cumulative translation adjustment of         —            527
discontinued operations
Total stockholders' equity (deficit)         (49,319)     (47,030)
 Total liabilities and            $ 131,602    $   144,702
stockholders' equity (deficit)

SEQUENOM, INC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share information)
                            Three Months Ended        Six Months Ended

                            June 30,                  June 30,
                            2014        2013          2014         2013
Diagnostic services         $ 39,782    $ 24,526      $ 76,843     $ 53,609
revenue, net
Cost of diagnostic services 22,410      20,634        45,180       41,713
Gross margin                17,372      3,892         31,663       11,896
Operating expenses:
Selling and marketing       7,920       9,978         16,479       19,955
Research and development    7,087       10,910        13,876       22,522
General and administrative  14,590      12,222        27,070       25,442
Restructuring costs         975         —             1,885        —
Total operating expenses    30,572      33,110        59,310       67,919
Loss from operations        (13,200)    (29,218)      (27,647)     (56,023)
Other income (expense), net (2,092)     (2,185)       (4,190)      (4,361)
Loss from continuing
operations before income    (15,292)    (31,403)      (31,837)     (60,384)
taxes
 Income tax benefit     6,928       (116)         6,804        (117)
(expense)
Loss from continuing        (8,364)     (31,519)      (25,033)     (60,501)
operations
Discontinued Operations:
Earnings from discontinued  12,817      496           13,812       118
operations, net of tax
Gain from discontinued      12,817      496           13,812       118
operations
Net earnings (loss)         $ 4,453     $ (31,023)    $ (11,221)   $ (60,383)
Net earnings (loss) per
common share, basic and
diluted
Continuing operations       $ (0.07)    $ (0.27)      $ (0.22)     $ (0.52)
Discontinued operations    $ 0.11      $ —           $ 0.12       $ —
Net earnings (loss) per
common share, basic and     $ 0.04      $ (0.27)      $ (0.10)     $ (0.52)
diluted
Weighted average number of
shares outstanding, basic   116,454     115,174       116,260      115,107
and diluted



SEQUENOM, INC
RECONCILIATION OF GAAP OPERATING CASH FLOW TO CASH BURN
(Unaudited)
(In thousands, except amounts per share)
                        Three months ended June 30,  Six months ended June 30,
                        2014           2013          2014           2013
Cash Burn:
Net cash used in        $   2,090      $  34,368     $  18,186      $  55,169
operating activities
Purchases of property,
equipment and leasehold 146            5,192         551            9,048
improvements
Payments on long-term   1,909          1,896         3,814          3,761
obligations
Cash burn(1)            $   4,145      $  41,456     $  22,551      $  67,978
(1) See accompanying Non-GAAP Financial Measures section for
description of Non-GAAP adjustments



SOURCE Sequenom, Inc.

Website: http://www.sequenom.com
Contact: Carolyn Beaver, Chief Financial Officer, Sequenom, Inc.,
858-202-9028, or Rachel Kennedy Media, Chandler Chicco Agency, 858-449-9575,
investorrelations@sequenom.com rkennedy@chandlerchiccocompanies.com
 
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