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Sequenom shares fall on analyst downgrade

WASHINGTON (AP) — Shares of genomic testing company Sequenom slumped Monday after an analyst downgraded the company, saying it plans to ramp up spending as competition increases, delaying profitability.

THE SPARK: Piper Jaffray analyst William Quirk downgraded the San Diego company to "Neutral" from "Overweight," saying the company "is digging in for a long, expensive battle" against competitors.

THE BIG PICTURE: Sequenom makes MaterniT21, a blood test intended for women who are at high risk of carrying a fetus with Down syndrome. Sequenom says the test can detect the chromosomal anomaly that causes Down syndrome as early as 10 weeks into pregnancy. It is intended to be less invasive than other forms of testing.

The company has faced several challenges in recent months, including insurer Conventry Health Care Inc. dropping coverage of MaterniT21 in May. In July the company lost a court case designed to block competitor Ariosa from launching a similar test. Meanwhile Sequenom has continued to lose money, and in its latest quarter reported a wider loss and lower revenue than Wall Street analysts predicted.

THE ANALYSIS: Insurers won't widely cover the company's test for a while, Quirk said, while the company increases spending. He noted that Sequenom recently hired 25 additional sales representatives, expanded its test offering and sped up test development times. The analyst says this strategy is designed to put pressure on smaller companies who offer similar services.

He lowered his price target on the company to $5 from $6.50. The analyst expects Sequenom to report a loss of 95 cents per share this year and a loss of 18 cents per share in 2013.

In response to the analyst note, Sequenom Vice President Marcy Graham highlighted the company's competitive position in the diangnostic field.

"We have had a year where we have seen extreme growth in volume uptake and sales of our tests. Any spending we're doing is in preparation for the continued growth in that volume of sales," Graham said.

SHARE ACTION: Sequenom stock fell 24 cents, or 6.1 percent, to $3.70 Monday.

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