Sequenom slumps as analyst cites test competition
NEW YORK (AP) — Shares of Sequenom Inc. declined Tuesday after a Credit Suisse analyst started coverage of the stock with an "Underperform" rating, saying the company's fetal Down syndrome test is facing tough competition from lower-priced tests.
THE SPARK: Analyst Vamil Divan praised Sequenom's MaterniT21 Plus test, but noted that it is significantly more expensive than some similar tests.
"We are concerned that the aggressive competitive dynamics we are already seeing (most notably with pricing) will limit the commercial potential of the test," he wrote in a note to investors. Divan believes that within five years, about 65 percent of women who are at high risk for carrying a fetus with Down syndrome will have a blood test like MaterniT21 or Ariosa Diagnostics' Harmony test.
Sequenom's tests do have some advantages over the competition, including faster results, he said. But based on commentary from physicians, Divan said they are either not noticing the differences in practice, or those differences are too small to be meaningful. And MaterniT21 Plus costs about $2,700, more than triple the price of a Harmony test.
Divan set a price target of $4 per share, saying Sequenom won't do as well as competing stocks.
THE BIG PICTURE: On Monday, an analyst for Piper Jaffray downgraded Sequenom shares to "Neutral" from "Overweight," saying Sequenom would increase its spending as competition grew. The company lost more than $54 million in the first six months of 2012, a 60 percent wider loss than the first half of 2011. The company reported $33.2 million in revenue through June 30, up 24 percent from the previous year.
William Quirk, the Piper Jaffray analyst, said it will take a while before insurers widely cover MaterniT21 and Sequenom was ramping up its spending as it hired new sales representatives, worked on new tests, and tried to speed up its development process.
SHARE ACTION: Sequenom stock fell 18 cents, or 4.7 percent, to $3.52 in afternoon trading. The decline came on top of a 6 percent drop in Monday's session. Volume both days was well above normal trading.
Shares of Sequenom have changed hands between $2.65 and $6.06 in the last 52 weeks.