Flurry of concerns ahead for Sequenom

November 14, 2009
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Sequenom Inc. invested $400,000 in 2009 into the Grand Rapids laboratory that is the focal point of its nascent molecular diagnostics business, according to the company’s third quarter filing with the Securities and Exchange Commission.

The money was put into “higher rent, communications and general facilities” for the Sequenom Center for Molecular Medicine, the filing disclosed. Sequenom also attributed $800,000 of increased depreciation primarily to the SCMM.

The San Diego company said it plans to launch two new tests in early 2010 that also would be handled by its Grand Rapids laboratory. Like its test for Down syndrome, which has been delayed due to problems with clinical trial results, the new tests target fetal DNA and RNA circulating in the blood of pregnant mothers.

“We expect to launch the RhD and gender determination tests late in the first quarter or early in the second quarter in 2010,” Interim CEO Harry F. Hixson Jr. said during a quarterly earnings conference call last week.

Those would be processed at the Grand Rapids lab in addition to Sequenom’s SensiGene CF Carrier test, which identifies adults who have genetic markers for cystic fibrosis. The cystic fibrosis test hit the market in 18 states last month.

The laboratory is located in Grand Valley State University’s Cook-DeVos Center for Health Sciences in Grand Rapids, while administrative offices are in the Arena Station building. Sequenom purchased the lab a year ago from the Van Andel Institute and Spectrum Health.

But without an infusion of capital and cost-cutting measures, 2010 could be a difficult year for the San Diego public company, the filing states.

According to the filing, Sequenom expects to have about $39 million in cash, cash equivalents and marketable securities by Dec. 31, which isn’t enough to support the company’s current spending rate during 2010.

“Our business will require additional investments that we have not yet secured,” the filing states, and threatens the company’s ability to continue as “a going concern.”

Hixson that Sequenom may turn to debt or equity capital markets next year. Sequenom is reviewing its product development programs as it plans for 2010.

“We plan to identify those programs which will receive priority attention, those projects which will be shelved for the time being and those projects which might either be sold, out-licensed or partnered,” Hixson said.

Last week, Paul Meier took over as Sequenom’s interim CFO. Previously, Meier was CFO at Ligand Pharmaceuticals.

Sequenom purchased the Grand Rapids lab in November 2008. It paid the VAI and Spectrum Health with 187,794 shares of common stock, valued at the time at $3.6 million. The company also paid $400,000, which is to be held in an escrow account until May in case of indemnification claims. The company counted $2.9 million toward goodwill. As of last week, the stock value was less than $600,000.

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