Sequenom CEO Discusses Q3 2010 - Earnings Call Transcript

Sequenom

Q3 2010 Earnings Call

November 4, 2010 4:30 pm ET

Executives

Harry Hixon – Chief Executive Officer & Chairman of the Board

Paul Maier – Chief Financial Officer

Ron Lindsay – Executive Vice President of Research & Development

Ian Clements – Head of Investor Relations and Corporate Communications

Analysts

Elmer Piros – Rodman & Renshaw

Junaid Husain – Soleil Securities

Kevin Degeeter – Ladenburg Thalmann

Kelly

Presentation

Operator

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Good day, ladies and gentlemen, and welcome to the Q3 2010 Sequenom Earnings Conference Call. My name is Tony and I’ll be your coordinator for today. (Operator instructions.) As a reminder, this call is being recorded for replay purposes. I would now like to hand the call over to your host for today, Mr. Ian Clements, Head of Investor Relations and Corporate Communications. Please proceed, sir.

Ian Clements

Thanks, Tony, and good afternoon everybody. With me today are Dr. Harry Hixon, Chief Executive Officer and Chairman of the Board, and Mr. Paul Maier, Chief Financial Officer. We’ll be joined by Dr. Ron Lindsay, Executive Vice President of Research & Development for the Q&A section.

Earlier this afternoon, Sequenom issued a news release announcing the company’s results for the Q3 and first nine months of 2010. If you’ve not received this news release, or if you’d like to be added to the company’s distribution lists, please call investor relations at the company or you can sign up through the IR section of the company’s website: ir.sequenom.com. Copies of news releases and SEC filings can also be found in the IR section of our website.

Before we begin I’d like to inform you that this call will include a discussion of Sequenom’s current plans and intentions regarding product development and launches, expectations regarding Sequenom’s financial resources and other forward-looking statements. I’d like to emphasize that these remarks are based on the information available to Sequenom today and subject to various risks and uncertainties, including the risks described in the company’s SEC filings. The company’s actual results may differ materially from the statements made during today’s conference call, and the company undertakes no obligation to update any of these statements.

From an investor communications perspective, we will be presenting an overview of the company at two meetings in November. On November 16

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we will present at the Lazard Capital Markets Healthcare Conference, and on November 17

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we will present at the Stephens Fall Conference. Both of these events will take place in New York City. A webcast of these presentations will be accessible through the investor relations section of our website.

With that said I would now like to turn the call over to Harry Hixon. Harry?

Harry Hixon

Thanks, Ian, and my thanks to each of you for joining us today. During today’s call I’d like to spend some time discussing our recent achievements and to give you an overview of our business. Paul will then follow with an update on the quarter’s financial results that were released today. I will then conclude with some additional highlights from the quarter and then focus on key upcoming milestones and events.

The Q3 was once again a busy and productive period for Sequenom. Our core genetic analysis business continued to show steady growth, and the launch of our next generation MassARRAY Analyzer IV, which is intended for research use only, has been well received by our customers. During this quarter we placed a total of 11 instruments but which ten were MassARRAY Analyzer IV systems.

The Sequenom Center for Molecular Medicine, or Sequenom CMM laboratory, currently offers two laboratory-developed tests, or LDTs. Sales of the SensiGene Fetal RHD Genotyping Test, which is based on our proprietary SEQure DX technology, have been disappointing relative to our expectations. However, we continue to see good market acceptance of the SensiGene Cystic Fibrosis Carrier screening test. With the recent introduction of buckle swabs as an alternative collection method, we expect continued penetration in this market.

We made a decision at the end of the Q3 to make some changes in our Sequenom CMM diagnostic sales force. Due to the underperformance of some sales territories we decided to remove a layer of sales management and reduce the number of sales representatives. Additionally, in October we terminated our relationship with the contract sales organization that we had been using for part of our diagnostic sales force. We believe that the size and structure of our sales force is now better aligned with the opportunities for the testing services currently offered through Sequenom CMM. Furthermore, we plan on training these sales representatives on the age-related macular degeneration LDT or AMD product so they can assist with the AMD testing service launch anticipated in the first half of 2011.

I’m delighted to report that we completed our San Diego Sequenom CMM laboratory in September. The laboratory was inspected by the California Department of Public Health in October and was found to be in compliance with all applicable statutes and regulations for clinical laboratories. Subsequently a recommendation for license approval was made and we are awaiting issuance of a California clinical laboratory license. During the coming months, Sequenom CMM will be submitting the necessary application to the College of American Pathologists, or CAP, in order to attain CAP accreditation for the San Diego laboratory.

You may recall that we received a letter in July from the US Food & Drug Administration that referenced the marketing of tests using our SEQure DX technology. A group of senior Sequenom executives, including myself, met with the FDA in September. The meeting focused primarily on whether Sequenom was engaged in any direct to consumer or DTC marketing of LDTs. We told the FDA that all Sequenom CMM LDTs are developed, validated, and used solely by our CLEO-certified, CAP-accredited laboratory. Sequenom CMM tests are not sold directly to the general public but rather samples are ordered by a physician, collected, sent to the laboratory for testing, and the test reports are reported back to the physician. The FDA concluded the meeting, indicating that they had no further questions on the DTC issue. Sequenom and Sequenom CMM have used their best efforts to comply fully and in good faith with the FDA’s laboratory-developed test policy, and we will continue to work with the FDA to ensure compliance as the FDA’s LDT policy evolves.

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