Sequenom (SQNM) Q1 2012 Earnings Call May 3, 2012, 5:00 p.m. ET Executives Marcy Graham - Senior Director, IR Harry Hixson - Chairman and CEO Paul Maier – CFO Ron Lindsay - Director and EVP Bill Welch - SVP, Diagnostics Dirk van den Boom - SVP, R&D Analysts David Ferreiro – Oppenheimer & Co. Brian Weinstein - William Blair Nandita Koshal - Barclays Capital William Quirk – Piper Jaffray Kevin DeGeeter - Ladenburg Thalmann & Co. Elemer Piros - Rodman & Rodman & Renshaw Jon Wood (Brandon)– Jefferies & Co. Zarak Khurshid - Wedbush Securities Presentation Operator Good afternoon, and welcome to the Sequenom Inc. first quarter 2012 earnings conference call. (Operator Instructions). I would now like to turn this conference over to Marcy Graham, Senior Director of Investor Relations. Please go ahead. Marcy Graham
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Two weeks ago, Sequenom CMM announced total prenatal and retinal LDT volumes of more than 12,700 tests accessioned in the first quarter of 2012, including more than 4,900 MaterniT21 PLUS samples. This compares to a total volume of 21,000 for all Sequenom CMM tests performed during the entire previous year.As of the last week of March, the number of MaterniT21 PLUS tests accessioned equated to 30,000 tests on an annualized basis, up from our earlier announcement of a projected run rate of 20,000 tests per year. Based on this steadily increasing adoption rate, at that time we increased our internal 2012 corporate goal to 40,000 billed MaterniT21 PLUS tests. Today I’m pleased to announce that as of the last week of April, our 52-week sample accession run rate is now at more than 45,000 tests. This increase reflects the continued growth in volumes at the end of the first quarter and the initial impact of the recently expanded Sequenom CMM sales force. Last month, we announced our first significant reimbursement agreement. This contract with MultiPlan Incorporated provides coverage of the MaterniT21 PLUS LDT for more than 900,000 nationwide providers under contract, with more than 55 million lives in its network. We are working to achieve our corporate goal to become an in-network provider with at least two national payors before the end of 2012. In parallel, we continue to negotiate agreements with regional and local payor organizations, as well working towards providing testing services to medicate patients in both states. Acceptance of the MaterniT21 PLUS LDT in the prenatal diagnostic community has exceeded our expectations. The weekly test volumes and uptake of MaterniT21 PLUS LDT continues to increase steadily week-over-week. The response from patients and healthcare providers has been very positive. As is typical in the first year following the launch of a new testing service, diagnostic service revenue is primarily recognized when cash is received, but costs are recognized at the time services are performed. The delay in revenue recognition results in a decrease in gross margin, which is significantly magnified by increasing test volumes. Therefore, diagnostic revenue recognized in the current period does not relate directly to the costs incurred in the same period. This will continue until such time as the company converts to accrual accounting for diagnostic service revenue, which is expected when sufficient reimbursement history has been established.
We will continue to report test volumes at the end of each quarter as a method of providing clear visibility into our growth trajectory and the market acceptance of Sequenom CMM’s testing services in the near term. To manage the growing diagnostic services business, and to ensure that we can meet anticipated market demand, we continue to invest considerable resources to expand our operational capabilities and improve our process efficiency, which should reduce our cost of goods sold over time. For example, Sequenom CMM expects by mid-year to increase the level of sample multiplexing, which translates directly into higher sample throughput per sequencing instrument, and to introduce automation steps in sample preparation.Read the rest of this transcript for free on seekingalpha.com