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Form 8-K SEQUENOM INC For: Nov 04

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November 5, 2015 6:04 AM EST


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 Form 8-K
 
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 4, 2015
 
SEQUENOM, INC.
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
Delaware
 
000-29101
 
77-0365889
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer Identification No.)
3595 John Hopkins Court, San Diego, CA
 
92121
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (858) 202-9000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))






Item 2.02
Results of Operations and Financial Condition.
On November 4, 2015, we issued a press release announcing our financial results for the quarter ended September 30, 2015. A copy of the press release and accompanying information is attached as Exhibit 99.1 to this current report.
The information in this Item 2.02, and Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this current report shall not be incorporated by reference into any registration statement or other document filed with the Securities and Exchange Commission, whether filed before or after the date hereof regardless of any general incorporation language in any such filing, unless we expressly set forth in such filing that such information is to be considered “filed” or incorporated by reference therein.

Item 9.01
Financial Statements and Exhibits.
(d) Exhibits
 
99.1
Press Release dated November 4, 2015
 

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
  
 
SEQUENOM, INC.
 
 
 
Dated: November 4, 2015
  
By:
 
/s/ Jeffrey D. Linton
 
  
Name:
 
Jeffrey D. Linton
 
  
Title:
 
Senior Vice President, General Counsel



    
 
 
Exhibit 99.1

FOR IMMEDIATE RELEASE
 
 
 
 
 
Sequenom Contacts:
 
 
Paul Goodson
 
Rachel Kennedy
Senior Director, Investor Relations and Corporate Communications
 
Media Contact
Sequenom, Inc.
 
inVentiv Health PR Group
858-202-9427
 
858-449-9575
 

SEQUENOM, INC. REPORTS FINANCIAL RESULTS FOR THE THIRD QUARTER OF 2015

SAN DIEGO, Calif. - November 4, 2015 - Sequenom, Inc. (NASDAQ: SQNM), a life sciences company committed to enabling healthier lives through the development of innovative products and services, today reported total revenues of $29.9 million for the third quarter of 2015, a decrease of 21% compared to revenues of $37.9 million for the third quarter of 2014. The decrease is primarily the result of lower cash collections related to services performed in prior periods. Over the course of the past year, Sequenom has collected claims for services more quickly, resulting in a lower balance of unrecorded receivables to recognize on a cash basis when collected.

“We are excited by the launch of the MaterniT™ GENOME laboratory-developed test and the enthusiastic reception it has received from the maternal fetal medicine specialist community. With MaterniT GENOME, Sequenom Laboratories is once again introducing a new paradigm in prenatal testing, which has the potential to increase Sequenom’s revenue and market share,” said Dr. Dirk van den Boom, Interim President and Chief Executive Officer of Sequenom, Inc. “During the third quarter, we also announced several collaborations with key opinion leaders for the advancement of our circulating cell-free tumor DNA assays, opening new market opportunities for Sequenom in oncology. Finally, we initiated a focused review of the Company’s commercial operations, cost structure, and new product programs, and we plan to implement changes in these areas in the coming quarters that will improve revenues and reduce costs.”

Third Quarter 2015 Results

Total revenues for the third quarter of 2015 were $29.9 million, a decrease of 21% compared to revenues of $37.9 million for the third quarter of 2014. Revenues for the third quarter of 2014 included approximately $8.4 million more in collections for services performed in prior periods. The timeliness of collections has improved throughout 2015 with additional payor contracts and the use of the specific CPT code for fetal aneuploidy tests, resulting in fewer unrecorded receivables available to collect in the third quarter of 2015. The conversion of a referring laboratory partner to a patent pool licensee at the beginning of 2015 resulted in a reduction of diagnostic services revenue of

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approximately $2.6 million in the third quarter of 2015 compared to the third quarter of 2014, although this conversion did contribute to higher license revenue.

License revenue increased to $2.2 million for the third quarter of 2015, compared to $0.6 million for the third quarter of 2014, reflecting the increase in test fees received under the Pooled Patents Agreement that was entered into in December 2014.

Total patient samples accessioned decreased by 12.0% to 41,000 patient samples during the third quarter of 2015, compared to the prior year third quarter. Approximately 35,500 of those patient samples accessioned were for noninvasive prenatal tests (NIPT), including the MaterniT21® PLUS, VisibiliT™ and MaterniT GENOME laboratory-developed tests, which is a 7.8% decrease in testing volume compared to the third quarter of 2014. This decline is primarily due to the transition of referring laboratories to licensees under the Pooled Patents Agreement.

Total cost of revenues decreased to $15.1 million for the third quarter of 2015, compared to $21.0 million for the prior year period. Cost of revenues decreased primarily due to the continued cost improvements for Sequenom Laboratories’ existing tests as well as the decrease in test volumes.

Gross margin for the third quarter of 2015 was 50% as compared to gross margin of 45% for the third quarter of 2014. Higher license fee revenue and improved efficiencies in processing patient samples largely drove this increase.

Total operating expenses excluding cost of revenues for the third quarter of 2015 were $22.9 million, as compared to total operating expenses of $23.0 million for the third quarter of 2014. Total operating expenses for the third quarter of 2015 were down sequentially from total operating expenses of $23.2 million for the second quarter of 2015 which included $0.7 million in restructuring cost related to asset impairment and severance.

The operating loss for the third quarter of 2015 was $7.3 million, as compared to a loss of $6.0 million for the same period in 2014. A gain of $0.8 million related to the sale of the Grand Rapids laboratory assets was included in the operating loss for the third quarter of 2015. Net loss for the third quarter of 2015 was $9.4 million or $0.08 per share, as compared to a net loss of $6.1 million, or $0.05 per share, for the same period in 2014. An income tax benefit of $2.1 million was reflected in the net loss for the third quarter of 2014.

Cash burn for the third quarter of 2015 was $7.9 million, compared to $6.4 million in the same period of 2014 and $2.9 million in the second quarter of 2015. Cash burn in the third quarter includes semi-annual interest payments on the convertible debt.

Unrecorded accounts receivable for tests performed and recognized on a cash basis are estimated to be $19 to $21 million as of September 30, 2015.

As of September 30, 2015, total cash, cash equivalents, and marketable securities was $80.4 million.


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Operational Updates

In the first nine months of 2015, Sequenom Laboratories accessioned approximately 114,000 NIPT tests and more than 138,000 total test samples for all of its laboratory-developed tests, compared to 119,000 NIPT tests and 146,000 total tests for the first nine months of 2014.

Sequenom Laboratories now has coverage for over 200 million commercial lives and 46 million lives under Medicaid programs.

On August 31, 2015, Sequenom Laboratories launched MaterniT GENOME, the first and only NIPT to detect genome-wide deletions/duplications 7 megabase level and greater, plus the seven clinically relevant microdeletions reported by the MaterniT21 PLUS test. Sequenom Laboratories has recently completed a large clinical validation study on MaterniT GENOME confirming the high sensitivity and specificity established through previous analytical studies.

Non-GAAP Financial Measures

“GAAP” refers to financial information presented in accordance with generally accepted accounting principles in the United States. To supplement the condensed consolidated financial statements and discussion presented on a GAAP basis, this press release includes non-GAAP financial measures with respect to the quarter ended September 30, 2015. Management uses non-GAAP financial measures because it believes that a cash flow metric incorporating cash used by operations and certain other uses of cash are important to understand the cash requirements of the business. The Company reported cash burn as a non-GAAP financial measure. This non-GAAP financial measure is not in accordance with or an alternative to GAAP.

Management uses cash burn to evaluate performance compared to forecasts. Cash burn is calculated as the sum of net cash used by operating activities, purchases of property, equipment and leasehold improvements, payments on long-term obligations, and payment of convertible note transaction costs. The reconciliations of cash used by operating activities, the GAAP measure most directly comparable to cash burn, is provided on the attached schedule.

Conference Call Information

A conference call hosted by Dr. Dirk van den Boom, Interim President and CEO, and other members of senior management will take place today, November 4, at 5:00 p.m. ET (2:00 p.m. PT) and will be webcast live on the Sequenom website. To access the live teleconference call, dial 877-883-0383 in the U.S. and Canada, and 412-902-6506 for other international callers. Please use code 0455461. For interested parties unable to listen to the live conference call, a replay will be available through Friday, December 4, 2015. The replay will be accessible by dialing 877-344-7529 or 412-317-0088 internationally, and entering the conference number 10075290.


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The conference call webcast is also accessible through the "Invest" section of the Sequenom Website at www.sequenom.com/invest. An online replay will be available following the initial broadcast until Friday, December 4, 2015. 

About Sequenom

Sequenom, Inc. (NASDAQ: SQNM) is committed to enabling healthier lives through the development of innovative products and services.  The Company serves patients and physicians by providing early patient management information. To learn how Sequenom is interpreting the genome to improve your life, visit www.sequenom.com.

About Sequenom Laboratories

Sequenom Laboratories, a CAP-accredited and CLIA-certified molecular diagnostics laboratory, has developed a broad range of laboratory tests, with a focus principally on prenatal care. Branded under the names HerediT™, HerediT™ UNIVERSAL, MaterniT™ GENOME, MaterniT21® PLUS, NextView™, SensiGene® and VisibiliT™, these molecular genetic laboratory-developed tests provide early patient management information for obstetricians, geneticists, and maternal fetal medicine specialists. Sequenom Laboratories is changing the landscape in genetic diagnostics using proprietary cutting edge technologies. Visit www.laboratories.sequenom.com and follow @SequenomLabs.

SEQUENOM®, HerediT™, MaterniT™ GENOME, MaterniT21® PLUS, NextView™, SensiGene®, VisibiliT™ and Sequenom Laboratories are trademarks of Sequenom, Inc. All other trademarks and service marks are the property of their respective owners.


Forward-Looking Statements

The preliminary unaudited financial information for the three and nine months ended September 30, 2015 set forth in this press release is based on information available at the time of this press release and is subject to further review by our independent accountants and management prior to our filing of our Quarterly Report on Form 10-Q for the third quarter ended September 30, 2015. Furthermore, any results reported for any completed period should not be considered indications of our future performance.

Statements contained in this press release regarding matters that are not historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the development of innovative products and services, the potential of MaterniT GENOME to increase Sequenom’s revenue and market share, the potential of Sequenom Laboratories’ circulating cell-free tumor DNA assays to open new market opportunities for Sequenom in oncology and the ability of Sequenom to implement changes in the Company’s commercial operations, cost structure, and new product programs in the coming quarters to improve revenues and reduce costs, Sequenom’s ability to continue to improve the timeliness of collections of accounts receivable, and Sequenom Laboratories’ ability to change the landscape in genetic diagnostics using proprietary cutting edge technologies. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Risks are

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described more fully in the Company’s filings with the Securities and Exchange Commission, including without limitation the Company’s most recent Quarterly Report on Form 10-Q and other documents subsequently filed with or furnished to the Securities and Exchange Commission. All forward-looking statements contained in this press release speak only as of the date on which they were made. The Company undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made.











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SEQUENOM, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands, except per share information)
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Revenues:
 
 
 
 
 
 
 
Diagnostic services, net
$
27,688

 
$
37,376

 
$
94,283

 
$
113,475

License
2,213

 
561

 
6,190

 
1,305

Total revenues
29,901

 
37,937

 
100,473

 
114,780

Costs and expenses:
 
 
 
 
 
 
 
Cost of revenues
15,069

 
21,000

 
50,971

 
66,180

Selling and marketing
8,541

 
7,448

 
25,386

 
23,927

Research and development
5,892

 
6,073

 
17,413

 
19,949

General and administrative
8,431

 
9,457

 
25,617

 
36,527

Restructuring costs and other charges
—

 
—

 
656

 
1,885

Total costs and expenses
37,933

 
43,978

 
120,043

 
148,468

Gain on pooled patents agreement and sale of assets
750

 
—

 
21,750

 
—

Operating income (loss)
(7,282
)
 
(6,041
)
 
2,180

 
(33,688
)
Interest and other expense, net
(2,077
)
 
(2,144
)
 
(6,144
)
 
(6,334
)
Loss from continuing operations before income taxes
(9,359
)
 
(8,185
)
 
(3,964
)
 
(40,022
)
Income tax benefit (expense)
(84
)
 
2,107

 
(207
)
 
8,911

Loss from continuing operations
$
(9,443
)
 
$
(6,078
)
 
$
(4,171
)
 
$
(31,111
)
Discontinued operations:
 
 
 
 
 
 
 
Earnings from discontinued operations, net of tax
—

 
—

 
—

 
13,812

Net loss
$
(9,443
)
 
$
(6,078
)
 
$
(4,171
)
 
$
(17,299
)
 
 
 
 
 
 
 
 
Net loss per common share, basic
 
 
 
 
 
 
 
Continuing operations
$
(0.08
)
 
$
(0.05
)
 
$
(0.04
)
 
$
(0.27
)
Discontinued operations
$
—

 
$
—

 
$
—

 
$
0.12

Net loss
$
(0.08
)
 
$
(0.05
)
 
$
(0.04
)
 
$
(0.15
)
Shares used in computing loss per share
 
 
 
 
 
 
 
Basic
118,432

 
117,067

 
118,098

 
116,516





6

SEQUENOM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
 
 
 
 
 
September 30,
2015
 
December 31,
2014
Assets
 
 
 
Current assets:
 
 
 
Cash, cash equivalents and marketable securities
80,401

 
93,897

Accounts receivable, net
6,329

 
9,131

Inventories
4,562

 
6,516

Other current assets and prepaid expenses
5,345

 
12,112

           Total current assets
96,637

 
121,656

Property, equipment and leasehold improvements, net
11,209

 
15,348

Other assets
20,859

 
24,067

                Total assets
$
128,705

 
$
161,071

 
 
 
 
Liabilities and stockholders' deficit
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
6,423

 
$
6,089

Accrued expenses
13,498

 
22,155

Long-term debt and obligations, current portion
346

 
4,144

Other current liabilities
634

 
2,581

Deferred gain on pooled patents agreement
—

 
21,000

            Total current liabilities
20,901

 
55,969

Long-term liabilities
135,514

 
136,266

Total stockholders' deficit
(27,710
)
 
(31,164
)
                 Total liabilities and stockholders' deficit
$
128,705

 
$
161,071





















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SEQUENOM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
Nine Months Ended September 30,
 
2015
 
2014
Operating activities
 
 
 
Net loss
$
(4,171
)
 
$
(17,299
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Gain on pooled patents agreement and sale of assets
(21,723
)
 
—

Earnings from discontinued operations, net of tax
—

 
(13,812
)
Share-based compensation
5,465

 
9,091

Depreciation and amortization
8,049

 
9,247

Non-cash restructuring costs and other charges
386

 
1,885

Other non-cash items
925

 
143

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
2,801

 
(4,040
)
Inventories
1,954

 
5,608

Prepaid expenses and other assets
336

 
250

Accounts payable and accrued expenses
(8,546
)
 
(4,074
)
Deferred taxes (benefit)
494

 
(9,212
)
Other liabilities
(1,994
)
 
(129
)
Net cash used in operating activities of continuing operations
(16,024
)
 
(22,342
)
Investing activities
 
 
 
Purchases of property, equipment and leasehold improvements
(1,691
)
 
(1,007
)
Purchases of marketable securities
(20,150
)
 
(40,149
)
Maturities of marketable securities
20,000

 
19,169

Net cash received from sale of segment
—

 
29,291

Proceeds from pooled patents agreement
6,000

 
—

Proceeds from the sale of assets
750

 
—

Change in restricted cash
500

 
—

Net cash provided by investing activities of continuing operations
5,409

 
7,304

Financing activities
 
 
 
Payments on term loan and capital lease obligations
(4,042
)
 
(5,641
)
Proceeds from common stock issued under employee stock plans
1,046

 
1,777

Net cash used in financing activities of continuing operations
(2,996
)
 
(3,864
)
Discontinued operations
 
 
 
Net cash provided by operating activities of discontinued operations
—

 
2,816

Net cash used in investing activities of discontinued operations
—

 
(164
)
Net cash provided by discontinued operations
—

 
2,652

Effect of exchange rate changes on cash and cash equivalents
(33
)
 
—

Net decrease in cash and cash equivalents
(13,644
)
 
(16,250
)
Cash and cash equivalents at beginning of period
63,309

 
61,589

Cash and cash equivalents at end of period
$
49,665

 
$
45,339





8






SEQUENOM, INC.
RECONCILIATION OF CASH BURN
(Unaudited)
(In thousands)
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Cash Burn:
 
 
 
 
 
 
 
Net cash used in operating activities
$
7,677

 
$
4,156

 
16,024

 
22,342

Purchases of property, equipment and leasehold improvements
65

 
456

 
1,691

 
1,007

Payments on long-term obligations
108

 
1,827

 
4,042

 
5,641

Payment of convertible note exchange transaction costs
—

 
—

 
(1,605
)
 
—

Cash burn(1)
$
7,850

 
$
6,439

 
$
20,152

 
$
28,990

 
 
 
 
 
 
 
 
(1) See accompanying Non-GAAP Financial Measures section for description of adjustments.



















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