Form 10-Q SEQUENOM INC For: Sep 30

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November 10, 2014 4:36 PM EST

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�

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________�

FORM 10-Q

�____________________�

(Mark One)


x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September�30, 2014


o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from �� to ��

Commission File Number: 000-29101

____________________�

SEQUENOM, INC.

(Exact name of registrant as specified in its charter)

____________________�



DELAWARE	77-0365889
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

�



3595 John Hopkins Court San Diego, California	92121
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (858)�202-9000

____________________��

Indicate by check mark whether the registrant (1)�has filed all reports required to be filed by Section�13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2)�has been subject to such filing requirements for the past 90 days.�� x ��Yes�� o ��No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (�232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).�� x ��Yes�� o ��No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



Large�accelerated�filer	o	Accelerated�filer	x
�	�	�	�
Non-accelerated filer	o��(Do not check if a smaller reporting company)	Smaller�reporting�company�filer	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).��Yes��o��No��x

As of October�31, 2014, there were 117,363,077 shares of the registrant's Common Stock outstanding.



�

�SEQUENOM, INC.

INDEX

�



�	�	Page�No.�
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	3
�	Condensed Consolidated Balance Sheets as of September 30, 2014 (Unaudited) and December 31, 2013	3
�	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2014 and 2013 (Unaudited)	4
�	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2014 and 2013 (Unaudited)	5
�	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
PART II - OTHER INFORMATION		�
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 3.	Defaults Upon Senior Securities	54
Item 4.	Mine Safety Disclosures	54
Item 5.	Other Information	54
Item 6.	Exhibits	55
SIGNATURES		56
�	�	�

�

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

SEQUENOM, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)



�	September�30, 2014			�	December�31, 2013
�	(Unaudited)			�	�
Assets	�			�	�
Current assets:	�			�	�
Cash and cash equivalents	$	45,339		�	$	61,589
Marketable securities	25,644			�	9,668
Accounts receivable, net	6,592			�	2,552
Inventories	5,990			�	11,598
Other current assets and prepaid expenses	3,235			�	2,652
Current assets of discontinued operations				�	13,475
Total current assets	86,800			�	101,534
Property, equipment and leasehold improvements, net	16,638			�	24,378
Goodwill	10,007			�	10,007
Other assets	21,112			�	6,475
Noncurrent assets of discontinued operations				�	2,308
Total assets	$	134,557		�	$	144,702
�	�			�	�
Liabilities and stockholders' equity (deficit)	�			�	�
Current liabilities:	�			�	�
Accounts payable	$	7,692		�	$	9,086
Accrued expenses	22,504			�	24,554
Long-term debt and obligations, current portion	5,935			�	7,643
Other current liabilities	12,748			�	2,151
Accrued income taxes	1,385			�
Current liabilities of discontinued operations				�	6,207
Total current liabilities	50,264			�	49,641
Long-term debt and obligations, less current portion	5,711			�	9,642
5.00% Convertible Senior Notes due 2017	130,000			�	130,000
Other long-term liabilities	478			�	976
Long term liabilities of discontinued operations				�	946
Commitments and contingencies				�
�	�			�	�
Stockholders' deficit:	�			�	�
Convertible preferred stock, par value $0.001; 5,000 shares authorized, no shares issued or outstanding at September 30, 2014 and December 31, 2013				�
Common stock, par value $0.001; 185,000 shares authorized, 117,357 and 115,796 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively	117			�	116
Additional paid-in capital	979,446			�	967,015
Accumulated other comprehensive income	149			�	148
Accumulated deficit	(1,031,608		)	�	(1,014,309		)
Cumulative translation adjustment of discontinued operations				�	527
Total stockholders' deficit	(51,896		)	�	(46,503		)
Total liabilities and stockholders' deficit	$	134,557		�	$	144,702

See accompanying notes to unaudited condensed consolidated financial statements.

SEQUENOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands, except per share information)



�	Three Months Ended							�	Nine Months Ended
�	September 30,							�	September 30,
�	2014			�	2013			�	2014			�	2013
Statements of Operations	�			�	�			�	�			�	�
Diagnostic services revenue, net	$	37,937			$	33,268		�	$	114,780		�	$	86,877
Cost of diagnostic services revenue	21,000			�	23,242			�	66,180			�	64,955
Gross margin	16,937			�	10,026			�	48,600			�	21,922
Operating expenses:	�			�	�			�	�			�	�
Selling and marketing	7,448			�	9,093			�	23,927			�	29,048
Research and development	6,073			�	8,589			�	19,949			�	31,111
General and administrative	9,457			�	13,788			�	36,527			�	39,230
Restructuring costs				�	5,711				1,885			�	5,711
Total operating expenses	22,978			�	37,181			�	82,288			�	105,100
Loss from operations	(6,041		)	�	(27,155		)	�	(33,688		)	�	(83,178		)
Interest expense, net	(2,029		)	�	(2,106		)	�	(6,161		)	�	(6,396		)
Other expense, net	(115		)	�	(3		)	�	(173		)	�	(74		)
Loss from continuing operations before income taxes	(8,185		)	�	(29,264		)	�	(40,022		)	�	(89,648		)
Income tax benefit (expense)	2,107			�	(80		)	�	8,911			�	(197		)
Loss from continuing operations	(6,078		)	�	(29,344		)	�	(31,111		)	�	(89,845		)
Discontinued operations:	�			�	�			�	�			�	�
Earnings from discontinued operations, net of applicable tax				�	1,196			�	13,812			�	1,314
Net loss	$	(6,078	)	�	$	(28,148	)	�	$	(17,299	)	�	$	(88,531	)
Net earnings (loss) per common share, basic and diluted	�			�	�			�	�			�	�
Continuing operations	$	(0.05	)	�	$	(0.25	)	�	$	(0.27	)	�	$	(0.78	)
Discontinued operations	$			�	$	0.01		�	$	0.12		�	$	0.01
Net loss per common share, basic and diluted	$	(0.05	)	�	$	(0.24	)	�	$	(0.15	)	�	$	(0.77	)
Weighted average number of shares outstanding, basic and diluted	117,067			�	115,592			�	116,516			�	115,255
�	�			�	�			�	�			�	�
Statements of Comprehensive Income (Loss)	�			�	�			�	�			�	�
Net loss	$	(6,078	)	�	$	(28,148	)	�	$	(17,299	)	�	$	(88,531	)
Other comprehensive income (loss):				�				�	�			�	�
Unrealized net gain (loss) on available-for-sale securities, net of taxes	17			�	41			�	1			�	73
Total other comprehensive income (loss)	17			�	41			�	1			�	73
Comprehensive loss	$	(6,061	)	�	$	(28,107	)	�	$	(17,298	)	�	$	(88,458	)

See accompanying notes to unaudited condensed consolidated financial statements.

SEQUENOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)



�	Nine Months Ended
�	September 30,
�	2014			�	2013
Operating activities	�			�	�
Net loss	$	(17,299	)	�	$	(88,531	)
Add: Earnings from discontinued operations	13,812			�	1,314
Loss from continuing operations	(31,111		)	�	(89,845		)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:	�			�	�
Stock-based compensation	9,091			�	6,960
Depreciation and amortization	9,247			�	10,700
Noncash restructuring costs	1,885			�	2,383
Other non-cash items	143			�	833
Changes in operating assets and liabilities:	�			�	�
Accounts receivable	(4,040		)	�	(1,864		)
Inventories	5,608			�	(9,592		)
Prepaid expenses and other assets	250			�	(2,085		)
Accounts payable and accrued expenses	(4,074		)	�	2,569
Deferred taxes	(9,212		)	�
Other liabilities	(129		)	�	1,821
Net cash used in operating activities of continuing operations	(22,342		)	�	(78,120		)
Investing activities	�			�	�
Purchases of property, equipment and leasehold improvements	(1,007		)	�	(11,431		)
Purchases of marketable securities	(40,149		)	�	(52,823		)
Maturities of marketable securities	19,169			�	59,076
Net cash received from sale of segment	29,291			�
Net cash paid for other assets				�	(483		)
Net cash provided by (used in) investing activities of continuing operations	7,304			�	(5,661		)
Financing activities	�			�	�
Payments on term loan and capital lease obligations	(5,641		)	�	(5,527		)
Net proceeds from exercise of stock options and ESPP purchases	1,777			�	1,372
Net cash used in financing activities of continuing operations	(3,864		)	�	(4,155		)
Discontinued Operations	�			�	�
Net cash provided by operating activities of discontinued operations	2,816			�	3,175
Net cash used in investing activities of discontinued operations	(164		)	�	(289		)
Net cash provided by discontinued operations	2,652			�	2,886
Net decrease in cash and cash equivalents	(16,250		)	�	(85,050		)
Cash and cash equivalents at beginning of period	61,589			�	123,802
Cash and cash equivalents at end of period	$	45,339		�	$	38,752
�	�			�	�

See accompanying notes to unaudited condensed consolidated financial statements.

SEQUENOM, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements of Sequenom, Inc., which include our wholly owned subsidiaries, should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K and 10-K/A for the year ended December�31, 2013, each as filed with the Securities and Exchange Commission.

The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, since they are interim statements, the accompanying financial statements do not include all of the information and notes required by GAAP for complete financial statements. The accompanying financial statements reflect all adjustments, consisting of normal recurring adjustments except for the sale of our Bioscience business described in footnote 3 and the restructuring costs described in footnote 7 to these condensed consolidated financial statements, that are, in the opinion of our management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year or any other period(s).

Discontinued Operations

On May 30, 2014, we sold our Biosciences business, including the assets used in what we previously reported as our Bioscience business segment. As a result of this sale our Bioscience segment has been excluded from continuing operations for all periods herein and reported as discontinued operations. See Note 3, Discontinued Operations, for additional information on the divestiture of our Bioscience segment.

Prior to the divestiture, we had derived our revenue from two business segments: Sequenom Center for Molecular Medicine LLC, doing business as Sequenom Laboratories and a wholly owned subsidiary of Sequenom Inc., and Sequenom Bioscience. Therefore, with the reported divestiture we now operate in a single business segment, Sequenom Laboratories and all prior period segment information herein has been recast to conform to this presentation.

Revenue Recognition

Our revenues are generated primarily from diagnostic services from providing laboratory-developed tests, or LDTs, primarily for the detection of specific fetal abnormalities or other genetic conditions as well as other amounts earned for royalties and license agreements.

We recognize revenues when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectability is reasonably assured. We assess whether the fee is fixed or determinable based on the nature of the fee charged for the services delivered, whether there are existing contractual arrangements, and historical payment patterns. When recording revenue we evaluate collectability and consider whether we have sufficient history to reliably estimate a payor's individual payment patterns. Revenues are deferred for fees received before earned. Royalty revenues are generally recorded on an accrual basis when earned.

Diagnostic services revenue is recognized upon cash collection until we can reliably estimate the amount that would be ultimately collected for Sequenom Laboratories' LDTs and the above criteria have been met, at which time we recognize revenues on an accrual basis. We generally bill third-party payors upon generation and delivery of a test result to the ordering physician following completion of a test. As such, we take assignment of benefits and risk of collection with the third-party payor. Patients have out-of-pocket costs for amounts not covered by their insurance carrier and Sequenom Laboratories bills the patient directly for these amounts in the form of co-pays and deductibles in accordance with their insurance carrier and health plans. Some payors may not cover Sequenom Laboratories' test as ordered by the physician under their reimbursement policies. Consequently, Sequenom Laboratories pursues reimbursement on a case-by-case basis. From time to time, we receive requests for refunds of payments made by third-party payors. Upon becoming aware of a refund request, we establish an accrued liability for tests covered by the refund request until we determine the amounts upon which a refund is due.

Revenue such as license arrangements may involve multiple elements and we evaluate the agreements to determine whether each deliverable represents a separate unit of accounting. A deliverable constitutes a separate unit of accounting when it has standalone value to the customer. Items are considered to have stand-alone value when they are sold separately by any vendor or when the customer could resell the item on a stand-alone basis. Consideration is allocated at the inception of the contract to all deliverables based on their relative selling price. The relative selling price for each deliverable is determined using vendor specific objective evidence (VSOE) of selling price or third-party evidence of selling price if VSOE does not

exist. If neither VSOE nor third-party evidence exists, the Company uses its best estimate of the selling price for the deliverable.

If the delivered element does not have standalone value without one of the undelivered elements in the arrangement, we combine such elements and account for them as a single unit of accounting. We allocate the consideration to each unit of accounting at the inception of the arrangement based on the relative selling price. Such amounts are recognized as revenue when each unit is delivered or if units are combined when the last deliverable of the combined units is delivered.

Income Taxes

Accounting Standards Codification (ASC) 740-20 requires total income tax expense or benefit to be allocated among continuing operations, discontinued operations, extraordinary items, other comprehensive income and items charged directly to shareholders equity. This allocation is referred to as intra-period tax allocation. Because the sale of Sequenoms bioscience business was a discrete event that occurred in the second quarter of 2014, ASC 740-270-30-12 requires us to record the total amount of our estimated income tax expense for discontinued operations in the second quarter of this year. Accordingly, we have recorded tax expense of $9.9 million in discontinued operations in the second quarter of 2014. Further, the allocation rules of ASC 740-270 require us to record a tax expense due to the gain on discontinued operations and a benefit in continuing operations to get the effective annual tax rate on a net basis to estimate the overall amount of the projected annual tax benefit we expect to record as part of our loss from continuing operations in 2014. We calculated this benefit by applying our estimated effective annual tax rate to our loss from continuing operations for the quarter. As a result, in the nine months ended September 30, 2014, we recorded an income tax benefit of $8.9 million in continuing operations.

At September 30, 2014, our balance sheet includes an income tax payable of $0.5 million pertaining to this transaction. In the remainder of the year, the payable will be reduced and a benefit from continuing operations will be recorded in the same amount, assuming we record losses throughout the remainder of 2014. We expect that the income tax benefit to be recorded by year end should reduce our overall annual income tax expense to $0.4 million.

Net Loss Per Share

We reported a loss from continuing operations and potential dilutive common shares were not included in the computation of diluted net loss per share because the inclusion of the potential dilutive common shares would have an antidilutive effect on the loss from continuing operations.

The table below presents the potentially dilutive securities that would have been included in the calculation of diluted net loss per share if they were not antidilutive for the periods presented (in thousands).



�	Three Months Ended			�	Nine Months Ended
�	September 30,			�	September 30,
�	2014	�	2013	�	2014		2013
Shares underlying Convertible Senior Notes	28,088	�	28,088	�	28,088	�	28,088
Options to purchase common stock	12,906	�	13,988	�	13,688	�	13,929
Restricted stock units not yet vested and released	1,877	�	1,534	�	2,146	�	1,586
Warrants to purchase common stock	250	�	250	�	250	�	250
��Total	43,121	�	43,860	�	44,172	�	43,853

New Accounting Standards Not Yet Adopted

In April 2014, the Financial Accounting Standards Board ("FASB") issued amendments to guidance for reporting discontinued operations and disposals of components of an entity. The amended guidance requires that a disposal representing a strategic shift that has (or will have) a major effect on an entitys financial results or a business activity classified as held for sale should be reported as discontinued operations. The amendments also expand the disclosure requirements for discontinued operations and add new disclosures for individually significant dispositions that do not qualify as discontinued operations. The amendments are effective prospectively for fiscal years, and interim reporting periods within those years, beginning after December 15, 2014 (early adoption is permitted only for disposals that have not been previously reported). We elected to use the non-amended guidance to evaluate the reported discontinued operations (see footnote 3) and will adopt the new guidance after its effective date.

In May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, which provides guidance for revenue recognition. The standards core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more

estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. This guidance will be effective for reporting periods after December 15, 2016. We have not yet evaluated the potential impact of adoption of this ASU on our consolidated financial statements.

2. Other Financial Information

Marketable Securities

Our marketable securities are comprised of the following (in thousands):



�	September�30, 2014
�	Amortized Cost		�	Gross Unrealized Gains			�	Gross Unrealized Losses	�	Estimated Fair�Value
U.S. treasury securities	$	30,148	�	$	(5	)	�	$	�	$	30,143
Certificates of deposit			�				�		�
Mutual funds	250		�	260			�		�	510
Total marketable securities	$	30,398	�	$	255		�	$	�	$	30,653

�



�	December�31, 2013
�	Amortized Cost		�	Gross Unrealized Gains		�	Gross Unrealized Losses			�	Estimated Fair�Value
U.S. treasury securities	$	4,999	�	$		�	$			�	$	4,999
Certificates of deposit	4,163		�			�	(2		)	�	4,161
Mutual funds	250		�	258		�				�	508
Total marketable securities	$	9,412	�	$	258	�	$	(2	)	�	$	9,668

As of September�30, 2014 and December�31, 2013, gross unrealized losses on marketable securities were insignificant. There were no impairments considered other-than-temporary for the periods presented, as it is management's intention and ability to hold the securities until maturity or a recovery of the cost basis or recovery of fair value.

There were no sales of marketable securities during all periods presented and, therefore, there were no gross realized gains or losses on sales of marketable securities during all periods presented. As of September�30, 2014, all except $5.0 million of our marketable securities were due within one year.�

Inventories

Inventories consist of the following (in thousands):



�	September�30, 2014		�	December�31, 2013
Raw materials	$	5,478	�	$	10,613
Work in process	512		�	985
Total	$	5,990	�	$	11,598

Accrued Expenses

Accrued expenses consist of the following significant items (in thousands):



�	September�30, 2014		�	December�31, 2013
Accrued royalties, licenses, and collaboration payments	$	8,797	�	$	11,119
Accrued compensation and related taxes	8,130		�	4,508
Accrued professional fees and consulting	3,530		�	4,383
Other	2,047		�	4,544
Total	$	22,504	�	$	24,554

Other Assets

Other assets consist of the following significant items (in thousands):



�	September 30, 2014		�	December 31, 2013
Intangible assets	12,035		�	2,382
Other	4,068		�	4,093
Long term investment	5,009		�
Total	$	21,112	�	$	6,475

Acquisition of Patent Rights

On September 30, 2014, we entered into a Patent Purchase Agreement with Isis Innovation Limited (Isis). The acquired patents and patent applications from Isis relate to noninvasive prenatal testing for use in the United States, Canada, Japan, Australia, Hong Kong and Europe. We received an irrevocable, perpetual, fully-paid, exclusive license (with the right to sublicense) to certain know-how and intellectual property related to noninvasive prenatal testing, subject to certain reserved rights retained by Isis. The purchase is an asset acquisition and the accounting guidance requires assets acquired to be measured at the cost of the consideration paid or the fair value of the asset acquired, whichever measure is more reliable. We previously held an exclusive license to the patents and patent applications under that certain Exclusive License of Technology Agreement, dated October 14, 2005, between Isis and us, as amended (the Exclusive License Agreement). Under the Patent Purchase Agreement, Isis and we have agreed to terminate the Exclusive License Agreement as of September 30, 2014.

The terms of the purchase requires an up-front payment of $9.25 million, plus we agreed to waive $2.1 million in paid legal fees that Isis owed to us. Under the terms of the agreement the $1.4 million that we would have owed Isis for the third quarter under the Exclusive License Agreement was waived. This amount was expensed in the third quarter 2014 and deducted in determining the cost of the acquired patents. As of September�30, 2014, the acquired patent value is $10.6 million, which includes the remaining intangible asset value from the Exclusive License Agreement. This asset is reported in Other Assets in the Condensed Consolidated Balance Sheet.

The Patent Purchase Agreement also requires that we pay $3.2 million which we had recorded as accrued expense for royalties due to Isis at June 30, 2014, which under the Exclusive License Agreement was due in the first quarter of 2015. The liability for the up-front payment is included in other current liabilities as of September�30, 2014, and the accrued royalties are included in accrued expenses as of September�30, 2014. The amounts payable under the agreement were paid in October 2014. The Patent Purchase Agreement also requires downstream payments contingent on future revenue exceeding certain targets.

3. Discontinued Operations

On May�30, 2014 we completed the sale of our Bioscience segment to BioSciences Acquisition Company (BioSciences) who purchased substantially all of the assets used in, and assumed the liabilities of, the business previously reported as the Bioscience business segment. With this divestiture, we now operate in a single business segment named Sequenom Laboratories.

As a result of the Bioscience segment sale, we have retrospectively revised the condensed consolidated statements of operations for the three and nine months periods ending September 30, 2013, the condensed consolidated statements of cash flows for the nine month period ended September 30, 2013, and the condensed consolidated balance sheet as of December 31, 2013 to reflect the financial results from the Bioscience business segment, and the related assets and liabilities, as discontinued operations.

Pursuant to our agreement with Biosciences they acquired the right, title and interest in and to specified intellectual property, equity interests of certain of our foreign subsidiaries, inventory, accounts receivable, manufacturing and other equipment, customer contracts and other related assets used in the Bioscience segment (collectively, the Transferred Assets), and BioSciences assumed our existing business contracts, including the leases for the related facilities, and trade and other payables. BioSciences also has offered employment to all employees of the Bioscience segment and assumed responsibility for any employee retention and severance obligations.

The agreement also provided us the right to receive a $2 million milestone payment if a specified regulatory clearance was obtained by September�30, 2014. We announced on June 16, 2014 that we had received clearance from the FDA regarding this milestone and have included this $2 million milestone payment in the gain on the sale of discontinued operations.

The gain on the sale of the Bioscience business segment, net of $9.9 million of related tax expense was $14.4 million, with an aggregate cash purchase price of $31.8 million plus $2 million milestone payment, less net book value of $6.2 million, adjustments for working capital of $0.8 million, and transaction costs of approximately $2.5 million which consist primarily of investment banking and legal fees.

We also could receive an additional $2 million milestone payment if recognized net revenue of the Bioscience business in 2014 equals or exceeds a specified revenue target. We cannot predict if this milestone will be reached therefore the gain on sale does not reflect this potential future milestone payment from BioSciences.

The sale proceeds included $1.5 million which was deposited in escrow to secure our indemnification obligations and any working capital adjustment. The escrow funds are presented in the continuing operations as other current assets and prepaid expenses of $0.5 million and in other assets of $1.0 million.

The results of operations from discontinued operations presented below include certain allocations that management believes fairly reflect the utilization of services provided to the Bioscience business segment. The allocations do not include amounts related to general corporate administrative expenses or interest expense. Therefore, the results of operations from the Bioscience business segment do not necessarily reflect what the results of operations would have been had the business operated as a stand-alone entity.

The following table summarizes the results of discontinued operations through May 30, 2014, the periods we owned and operated the Bioscience segment (in thousands):



�	January 1, through			�	Three Months Ended			�	Nine Months Ended
�	May 30,			�	September 30,			�	September 30,
�	2014			�	2013			�	2013
Discontinued Operations	�			�	�			�	�
Revenues:	�			�	�			�	�
Bioscience product sales and services	$	12,470		�	$	10,683		�	$	30,423
Cost of revenues:	�			�	�			�	�
Cost of bioscience product sales and services	4,235			�	3,800			�	10,958
Gross margin	8,235			�	6,883			�	19,465
Operating expenses:	�			�	�			�	�
Selling and marketing	6,237			�	3,307			�	10,461
Research and development	2,248			�	1,826			�	6,157
General and administrative	643			�	343			�	1,119
Restructuring costs	19			�	307			�	307
Total operating expenses	9,147			�	5,783			�	18,044
Earnings (loss) from discontinued operations	(912		)	�	1,100			�	1,421
Other income (expense), net	81			�	114			�	(60		)
Earnings (loss) from discontinued operations before income taxes	(831		)	�	1,214			�	1,361
Income tax benefit (expense)	248			�	(18		)	�	(47		)
Earnings (loss) from discontinued operations	$	(583	)	�	$	1,196		�	$	1,314
�	�			�	�			�	�

The following table summarizes the assets and liabilities of discontinued operations as of December 31, 2013 related to our Bioscience business segment (in thousands):



�	December 31, 2013
�	�
Assets	�
Current assets:	�
Accounts receivable, net	$	7,696
Inventories	5,370
Other current assets and prepaid expenses	409
Total current assets	13,475
Property, equipment and leasehold improvements, net	2,175
Other assets	133
Total noncurrent assets	2,308
Total assets of discontinued operations	$	15,783
�	�
Liabilities and stockholders' equity	�
Current liabilities:	�
Accounts payable	$	868
Accrued expenses	2,878
Other current liabilities	2,461
Total current liabilities of discontinued operations	6,207
Other long-term liabilities	946
Cumulative translation adjustment	527
Total liabilities and equity of discontinued operations	$	7,680

In connection with the sale of the Bioscience segment, the Company also entered into other agreements designed to facilitate the orderly transfer of business operations to BioSciences. The agreements include:


�	License Agreement, where BioSciences granted a worldwide, non-exclusive, royalty-free, fully-paid license, without the right to sublicense, which we use primarily in our carrier screening tests.

�

The Supply Agreement with BioSciences is effective for three years where we may purchase consumables and systems for our laboratory business and for the first twelve months of the agreement we have preferred pricing. In the laboratory business we purchased consumables and systems for the three and nine months ended September 30, 2014, in amounts equal to $311 thousand and $437 thousand, respectively, and during the three and nine months ended September 30, 2013, in amounts equal to $131 thousand and $780 thousand, respectively, at cost. The sales prior to May�30, 2014 have been eliminated from reported revenue because the transaction was intra-entity.


�	Transition Services Agreement, which the Company agreed to provide certain administrative services at no cost to BioSciences up to December�31, 2014, unless the Transition Services Agreement is terminated earlier.


�	Non-Competition and Non-Solicitation Agreement which restricts the Companys global activities in the Business for a period of five years. The Non-Competition Agreement and Non-Solicitation Agreement also restrict the Company from soliciting for employment or hiring any BioSciences officer or employee that works in BioSciences operations for a period of three years.

�

Of these agreements the only one with continuing cash flow between our current operations and discontinued operations is the supply agreement. These cash flows are indirect as future purchases will not to be material. Additionally, we will not have any significant continuing involvement in the operations of the disposed segment nor do any agreements provide or require our involvement in the disposed segment.

4. Commitments and Contingencies

Patent Litigation

In December 2011, we were named as a defendant in a complaint filed by plaintiff Aria Diagnostics, Inc., in the U.S. District Court for the Northern District of California, case no. 3:11-cv-06391-SI. Since the complaint was filed, Aria changed its name to Ariosa Diagnostics, Inc., or Ariosa. In the complaint, the plaintiff seeks a judicial declaration that no activities related to the plaintiff's noninvasive, prenatal test using cell-free DNA circulating in the blood of a pregnant woman do or will infringe any claim of U.S Patent No.�6,258,540 entitled Noninvasive Prenatal Diagnosis, or the '540 Patent, which was

exclusively in-licensed from Isis prior to September 30, 2014 when we purchased the patent from Isis. In March 2012, we filed an answer to the complaint and asserted counterclaims that Ariosa is infringing the '540 Patent and seeking unspecified damages and injunctive relief. Our counterclaims name Isis as a nominal counter-defendant for purposes of subject matter jurisdiction only. With the purchase of the '540 Patent, we will seek to dismiss Isis from the lawsuit as soon as practicable. In March 2012, Ariosa responded to our answer and counterclaims and asserted affirmative defenses including invalidity of the '540 Patent under U.S. patent laws. In March 2012, we filed a motion against Ariosa for preliminary injunctive relief. On July 5, 2012, the Court denied our motion for preliminary injunctive relief and on July 16, 2012 we filed a Notice of Appeal to the U.S. Court of Appeals for the Federal Circuit (CAFC) from the order denying the preliminary injunction motion. On August 9, 2013, the CAFC vacated and remanded the District Courts decision, ruling that the District Court incorrectly interpreted the claims of the 540 patent and improperly balanced factors regarding issuance of a preliminary injunction. On August 16, 2013, Ariosa filed a motion for summary judgment in favor of Ariosa on our counterclaim for patent infringement on the ground that the claims of the 540 Patent are invalid because they are not drawn to patent-eligible subject matter under the patent code, Title 35 U.S.C. � 101. On October 16, 2013 the District Court issued its order on the interpretation of the claims of the patent. On October 30, 2013 the District Court issued its order granting Ariosas motion for summary judgment, finding that the540 Patent is invalid under Title 35 U.S.C. �101. The Company disagrees with the Order and has appealed the decision to the U.S. Court of Appeals for the Federal Circuit. Oral argument in the appeal is scheduled for November 7, 2014. We intend to vigorously defend against the judicial declarations sought by Ariosa in its complaint and intend to vigorously pursue our claims against Ariosa for damages and injunctive relief. However, the Company cannot predict the outcome of this matter.

In addition, Ariosa has sought to invalidate the 540 Patent through a petition for inter parties review ("IPR") (Case IPR2012-00022 (MPT)) under 35 U.S.C. section 312 and 37 C.F.R. section 42.108, before the Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office (USPTO).� Trial of the IPR was held before the PTAB on January 24, 2014. The PTAB issued a Decision in the IPR on September 2, 2014 invalidating some claims but upholding the validity of other claims. Both we and Ariosa have requested reconsideration of the PTAB decision.

In January 2012, we were named as a defendant in a complaint filed by plaintiff Natera, a Delaware corporation, in the U.S. District Court for the Northern District of California, case no. 3:12-cv-00132-SI. In the complaint, the plaintiff seeks a judicial declaration that (i)�activities related to the plaintiff's noninvasive, prenatal paternity test do not directly or indirectly infringe any claim of the '540 Patent, and (ii)�one or more claims of the '540 Patent are invalid for failure to comply with the requirements of the patent laws of the U.S. In April 2012, we filed an answer to the complaint and asserted counterclaims that Natera and DNA Diagnostics Center, Inc., or DDC, are infringing the '540 Patent based on their activities relating to noninvasive prenatal paternity testing and noninvasive prenatal aneuploidy testing and seeking unspecified damages and injunctive relief. Our counterclaims named Isis as a nominal counter-defendant for purposes of subject matter jurisdiction only and we seek to dismiss Isis as soon as practicable now that we have purchased the '540 patent from Isis. On October 16, 2013 the District Court issued its order on the interpretation of the patent claims. Many of the 540 Patent claims asserted against Natera are the same claims that were invalidated by the same District Court on October 30, 2013 in the litigation involving Ariosa, set forth above, and we and Natera stipulated to final judgment on the '540 patent claims in this case and have appealed the patent invalidity determination to the U.S. Court of Appeals for the Federal Circuit, which has consolidated the Ariosa, Natera, and Verinata case appeals. We intend to vigorously defend against the judicial declarations sought by Natera in its complaint and intend to vigorously pursue our claims against Natera for damages and injunctive relief. However, we cannot predict the outcome of this matter.

In February 2012, we and Sequenom Center for Molecular Medicine, LLC, were named as defendants in a complaint filed by plaintiffs Verinata Health, Inc., or Verinata, and The Board of Trustees of the Leland Stanford Junior University, or Stanford, in the U.S. District Court for the Northern District of California, case no. 3:12-cv-00865-SI. Verinata was acquired by Illumina, Inc. in 2013. In the complaint (i)�Verinata seeks a judicial declaration that activities related to its noninvasive prenatal test using cell-free DNA circulating in the blood of a pregnant woman do not directly or indirectly infringe any claim of the '540 Patent, which at the time was exclusively in-licensed from Isis but has since been purchased from Isis, (ii)�Verinata seeks a judicial declaration that each claim of the '540 Patent is invalid for failure to comply with the requirements of the patent laws of the U.S., and (iii)�Verinata and Stanford allege that we and Sequenom Center for Molecular Medicine, by performing its noninvasive prenatal MaterniT21 test, have and continue to directly infringe U.S. Patent No.�8,008,018, or the '018 Patent, entitled Determination of Fetal Aneuploidies by Massively Parallel DNA Sequencing and U.S. Patent No.�7,888,017, or the '017 Patent, entitled Noninvasive Fetal Genetic Screening by Digital Analysis, each of which have been exclusively licensed to Verinata by Stanford and seek unspecified damages. In March 2012, we filed an answer to the complaint and asserted counterclaims that Verinata is infringing the '540 Patent and seeking unspecified damages and injunctive relief. Our counterclaims name Isis as a nominal counter-defendant for purposes of subject matter jurisdiction only. In June 2012, plaintiffs Verinata and Stanford amended their complaint and allege that we and Sequenom Center for Molecular Medicine, by performing its noninvasive prenatal MaterniT21 PLUS test, have and continue to directly infringe U.S. Patent No.�8,195,415, or the '415 Patent, entitled Noninvasive Diagnosis of Fetal Aneuploidy by Sequencing, which has been exclusively licensed to Verinata by Stanford and seek unspecified damages. In July 2012, we filed an answer to the complaint.

On October 16, 2013, the District Court issued its order on the interpretation of the 540 Patent, 018 Patent, 017 Patent, and 415 Patent claims. Many of the 540 Patent claims asserted against Verinata are the same claims that were invalidated by the same District Court on October 30, 2013 in the litigation involving Ariosa, set forth above, and we and Verinata stipulated to final judgment on the 540 patent claims in this case and have appealed the patent invalidity determination to the U.S. Court of Appeals for the Federal Circuit, which has consolidated the Ariosa, Natera, and Verinata case appeals. Oral argument in the consolidated appeal is scheduled for November 7, 2014. The District Court has set trial beginning February 23, 2015 on the 018, 017, and 415 Patents.

On March 12, 2013 the U.S. Patent and Trademark Office, or USPTO, declared a patent interference (Patent Interference No. 105,920 (DK)) between Verinata's '018 Patent, which Verinata has asserted against us in the litigation, and our in-licensed pending patent application no. 13/070,275 (publication no. US2011/0318734 entitled Diagnosing Fetal Chromosomal Aneuploidy Using Massively Parallel Genomic Sequencing). Two related patent interferences (Patent Interference Nos. 105,923 and 105,924 (DK)) were declared by the USPTO between patent applications related to the patent and application in the 920 Interference. On April 7, 2014, the USPTO concluded the interferences, ruling that Verinatas 018 Patent and related patent application lacked sufficient disclosure to meet the written description requirement for the patent claims, and entered judgment canceling all four of the 018 patent claims in the interference and the involved claims of the related patent application. We believe this ruling is also relevant to the interpretation of Verinatas 017 Patent as it is based upon the same disclosure as the Verinata 018 Patent. Verinata has appealed the USPTOs decision to the U.S. District Court for the Northern District of California. The District Court has set trial beginning February 23, 2015 on the appeal from the 920, 923 and 924 interferences.

On May 3, 2013, the USPTO declared a patent interference (Patent Interference No. 105,922 (DK)) between Verinata's '415 Patent, which Verinata has asserted against us in the litigation, and our in-licensed pending patent application no. 13/070,266 (publication no. US2012/0003637 entitled Diagnosing Fetal Chromosomal Aneuploidy Using Massively Parallel Genomic Sequencing). On April 7, 2014, the USPTO ruled that our pending patent application no. 13/070,266 has sufficient disclosure to meet the written description requirement for the patent claims and ordered the interference to proceed to the priority phase to determine which inventors were the first to invent the subject matter of the interference and entitled to a patent on that subject matter. We are also separately challenging the validity of Verinatas 415 Patent in an inter partes review proceeding currently pending before the USPTO (Case IPR 013-00390). The USPTO has not yet issued a decision in the 922 Interference or the 415 Patent IPR.

We intend to vigorously defend against the judicial declarations sought and allegations of infringement set forth by plaintiffs in their complaint and intend to vigorously pursue our claims against Verinata for damages and injunctive relief. However, we cannot predict the outcome of this matter. If we do not prevail against plaintiffs allegations of infringement, we may be subject to damages that may materially affect our financial position and we may be subject to injunctive relief that could impact our ability to continue to commercialize our MaterniT21 PLUS test in its current form.

On September 29, 2014 and October 1, 2014 two unknown third parties initiated Opposition Proceedings against European Patent EP2183693 B1, entitled Diagnosing Fetal Chromosomal Aneuploidy Using Genomic Sequencing, in the European Patent Office. We intend to vigorously defend this patent in the Opposition Proceedings. However, we cannot predict the outcome of this matter.

In addition, from time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business, including claims related to our products, tests, and services, including our test services. These other matters are, in the opinion of management, immaterial with respect to our consolidated financial position, liquidity, or results of operations.

Claim estimates that are probable and can be reasonably estimated are reflected as liabilities. Because of the uncertainties related to our pending litigation, investigations, inquiries or claims, management is currently unable to predict the ultimate outcome of any litigation, investigation, inquiry or claim, determine whether a liability has been incurred, or make an estimate regarding the possible loss or range of loss that could result from an unfavorable outcome. It is reasonably possible that some of the matters, which are pending or may be asserted, could be decided unfavorably to us. An adverse ruling or outcome in any lawsuit involving us could materially affect our business, liquidity, consolidated financial position or results of operations ability to sell one or more of our products or could result in additional competition. In view of the unpredictable nature of such matters, we cannot provide any assurances regarding the outcome of any litigation, investigation, inquiry or claim to which we are a party or the impact on us of an adverse ruling of such matters.

Lease Obligations

As of September 30, 2014, we entered into an amendment of the lease of our facility in San Diego, California to extend the lease term through September 30, 2025, with an option to terminate the lease in seven years upon payment of a termination fee and up to $1.2 million for tenant improvement funded by the landlord as incurred. As a result of the amendment to the lease, our rent expense will be reduced from $4.0 million to $2.8 million annually. Lease commitment (in thousands):



Lease commitment �	�	Total��	�	Less�Than 1 Year��	�	2-3�Years��	�	4-5�Years��	�	After 5 Years
Lease amendment obligations	�	$31,015	�	$2,961	�	$5,019	�	$5,299	�	$17,736

5. Stock Compensation Plans

Equity Incentive Plans

The following table summarizes our stock option activity during the nine months ended September 30, 2014 (shares in thousands):



�	Shares Subject to Options		�	Weighted-Average Exercise Price per Share
As of December 31, 2013	13,043		�	$5.66
Granted	4,504		�	$2.78
Exercised	(440	)	�	$2.71
Forfeitures and cancellations	(5,584	)	�	$5.70
Outstanding at September 30, 2014	11,523		�	$4.62
Options exercisable at September 30, 2014	7,597		�	$5.24
Options vested or expected to vest at September 30, 2014	10,872		�	$4.72

The following table summarizes activity related to our restricted stock awards and restricted stock units during the nine months ended September�30, 2014 (shares in thousands):



�	Number�of�Shares
Outstanding at December 31, 2013	2,133
Grants and awards	1,229
Vested and released	(1,080)
Forfeitures and cancellations	(606)
Outstanding at September 30, 2014	1,676

Issuances of Common Stock

In the nine months ended September 30, 2014, we issued a total of 646 thousand shares of our common stock under our employee stock purchase plan (ESPP) and 440 thousand shares from the exercising of stock option, resulting in proceeds to us of $2.4 million.

Stock-Based Compensation Expense

Following are the weighted-average underlying assumptions used to determine the fair value of stock option award grants and for stock purchase rights under the ESPP during nine months ended:



�	Nine Months Ended
�	September 30,
�	2014			�	2013
Stock option grants	�			�	�
Risk-free interest rate	2.0		%	�	1.2		%
Volatility	94.0		%	�	94.0		%
Dividend yield			%	�			%
Expected life (years)	7.1			�	6.9
Weighted-average grant date fair value	$	2.01		�	$	3.19



�	Nine Months Ended
�	September 30,
�	2014			�	2013
ESPP stock purchase rights	�			�	�
Risk-free interest rate	0.08		%	�	0.08		%
Volatility	62.0		%	�	60.4		%
Dividend yield			%	�			%
Expected life (years)	0.5			�	0.5
Weighted-average grant date fair value	$	0.85		�	$	1.09

The fair value of stock options awarded that include market-based performance conditions is estimated on the date of grant using a Monte Carlo simulation model, based on the market price of the underlying common stock, expected performance measurement period, expected stock price volatility and expected risk-free interest rate. We estimate forfeitures at the time of grant and revise our estimate in subsequent periods if actual forfeitures differ from those estimates. There were no market condition options granted for the nine months ended September�30, 2013. The only market condition grants made in 2014 was in the second quarter where 75,500 shares were granted with a market performance goal of a 25% premium to the exercise price of the option for 30 consecutive days, with a grant date fair value $2.45 per share, and 200,000 shares were granted with a market performance goal of closing stock price of $5.00 per share for 30 consecutive days with a grant date fair value $2.42 per share. We recognize these stock-based compensation costs over the 4 year vesting period. The grant date value is based on the following assumptions:



Market condition option grants	�
Risk-free interest rate	2.64		%
Volatility	89.0		%
Dividend yield			%
Expected life (years)	8.0
Weighted-average grant date fair value	$	2.43

Total non-cash stock-based compensation expense for all stock awards and purchase rights was recognized in continuing operations in our condensed consolidated statements of operations and comprehensive loss as follows (in thousands):



�	Three Months Ended				�	Nine Months Ended
�	September 30,				�	September 30,
�	2014		2013		�	2014		�	2013
Cost of revenues	$	271	$	211	�	$	882	�	$	693
Selling and marketing expense	543		483		�	1,729		�	1,627
Research and development expense	493		442		�	1,505		�	1,580
General and administrative expense	1,317		867		�	4,975		�	3,060
��Total	$	2,624	$	2,003	�	$	9,091	�	$	6,960

6. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables summarize our fair value hierarchy for assets and liabilities measured at fair value on a recurring basis (in thousands):



�	Fair Value Measurements at Reporting Date Using
Description�	Fair Value		�	Quoted Prices in Active Markets for Identical Assets (Level�1)		�	Significant Other Observable Inputs (Level�2)
As of September 30, 2014	�		�	�		�	�
Cash equivalents:	�		�	�		�	�
Money market funds	$	33,236	�	$	33,236	�	$
Total cash equivalents	33,236		�	33,236		�
Marketable securities:	�		�	�		�	�
U.S. treasury securities	25,134		�	25,134		�
Mutual funds	510		�	510		�
Total marketable securities	25,644		�	25,644		�
Securities in long term assets	�		�	�		�	�
U.S. treasury securities	5,009		�	5,009		�	�
Total long term securities	5,009		�	5,009		�	�
Total	$	63,889	�	$	63,889	�	$
�	�		�	�		�	�

�



�	Fair Value Measurements at Reporting Date Using
Description�	Fair Value		�	Quoted Prices in Active Markets for Identical Assets (Level�1)		�	Significant Other Observable Inputs (Level�2)
As of December 31, 2013	�		�	�		�	�
Cash equivalents:	�		�	�		�	�
Money market funds	$	41,260	�	$	41,260	�	$
Total cash equivalents	41,260		�	41,260		�
Marketable securities:	�		�	�		�	�
U.S. treasury securities	4,999		�	4,999		�
Certificates of deposit	4,161		�			�	4,161
Mutual funds	508		�	508		�
Total marketable securities	9,668		�	5,507		�	4,161
Total	$	50,928	�	$	46,767	�	$	4,161

There were no transfers in or out of Level 1, Level 2, or Level 3 investments during the nine months ended September�30, 2014.

For fair values determined by Level 1 inputs, which utilize quoted prices in active markets for identical assets, the level of judgment required to estimate fair value is relatively low. We value our investments in money market funds, U.S. treasury securities and mutual funds using Level 1 inputs. Fair values determined by Level 2 inputs, which utilize data points that are observable such as quoted prices, interest rates and yield curves and fair values determined by Level 3 inputs, which utilize unobservable data points supported by little or no market activities, require the exercise of judgment and use of estimates, that if changed, could significantly affect our statement of financial position and results of operations. We value our investments in certificates of deposit using Level 2 inputs.

Our Level 2 securities are initially valued at the transaction price and subsequently valued and reported utilizing fair values provided by our investment managers who estimate the fair value using inputs other than quoted prices that are observable either directly or indirectly, such as quotes from multiple third-party pricing vendors, fund or trust companies and quoted prices for securities with similar maturity and rating features. We perform additional procedures to corroborate the fair value of our securities, including the comparison of fair values provided by our investment managers to those obtained from other reliable sources.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain non-financial assets and liabilities are measured at fair value on a nonrecurring basis in accordance with authoritative guidance. These include items such as non-financial assets and liabilities initially measured at fair value in a business combination and non-financial long-lived asset. When facts and circumstances indicate there is an impairment we assess the recoverability of the carrying value and would recognize an impairment if fair value is lower than the carrying value.

The following table summarizes our assets and liabilities measured at fair value on a nonrecurring basis during the nine months ended September 30, 2014, the respective input levels based on the fair value hierarchy contained in fair value measurements and disclosures accounting guidance and the effect of the measurements on the statement of operations (in thousands):

�

Fair Value Measurements at

�

September�30, 2014

�

using:

�

Quoted Prices in

�

Active Markets

�

Significant

�

Losses for the

�

for Identical

�

Unobservable

�

Nine Months Ended

Description�

Fair Value

�

Liabilities (Level�1)

�

Inputs (Level�3)

�

September 30, 2014

Facility Exit Liabilities

1,620

�

1,620

�

1,885

Facility Exit Liabilities. In connection with our restructuring in August 2013 (see footnote 7), and the exit of our operating lease on a facility in San Diego which expires in July 2015, we determined the fair values of our remaining lease liability as of the cease-use date and management reassesses the remaining lease liability each reporting period. The fair value of the remaining lease liability was determined as the present value of the remaining payments due under the lease and ancillary costs, discounted using a credit-adjusted risk-free interest rate (Level 3 inputs). We based our estimated future payments on our future lease obligation and current costs to operate the facility.

The fair values are recorded as liabilities, with a corresponding expense recognized in restructuring costs in the condensed consolidated statement of operations. Based on management's reassessment of our ability to sublease the facility we recognized an additional facility exit cost of $1.9 million during the nine months ended September 30, 2014, which is reported in restructuring costs in the condensed consolidated statement of operations.

Fair Value of Other Financial Instruments

The carrying amounts of certain of our financial instruments, including cash and cash equivalents, accounts payable and accrued expenses, approximate fair value due to their short-term nature. Based on market conditions in convertible notes, management believes that the fair values of our convertible debt and the respective carrying values are as follows (in thousands):

�

September 30, 2014

�

December 31, 2013

�

Carrying Amount

�

Fair Value

�

Carrying Amount

�

Fair Value

Convertible Senior Notes

130,000

�

123,600

�

130,000

�

113,100

At September�30, 2014 and December�31, 2013, the fair values of our Convertible Senior Notes were based the underlying stock price and quoted prices of similar instruments (Level 1).

7. Restructuring Costs

As part of an overall cost reduction effort, in August 2013, we announced and completed a reduction in our workforce. The restructuring resulted in the decision to exit our lease of a facility in San Diego, which expires in July 2015, which we are seeking to sublease.

In connection with the restructuring, we recorded $2.4 million in facility exit costs, $1.7 million of impairment expense for tenant improvements associated with the vacated facility, $0.7 million of impairment expense for intangible assets and prepaid royalties related to our RetnaGene AMD test licensed technology, and $1.2 million in employee termination costs during the year ended December 31, 2013.

In the nine months ended September 30, 2014, based on the shortened period where we could sublease this facility and other consideration of new information management reassessed the remaining liabilities in connection with the restructuring and recorded an additional $1.9 million of restructuring expense related to our vacated facility.

The following table summarizes our restructuring activity during the nine months ended September 30, 2014 and remaining expected liabilities as of September�30, 2014 (in thousands):



�	Facility Exit Costs			�	Employee Termination Costs			�	Total
Balance as of December 31, 2013	$	1,281		�	$	106		�	$	1,387
Cash payments	(1,575		)	�	(77		)	�	(1,652		)
Change in previous estimates	1,914			�	(29		)	�	1,885
Balance as of September 30, 2014	$	1,620		�	$			�	$	1,620

Of the remaining liabilities at September�30, 2014, $1.6 million is payable within the next twelve months which is through the remainder of the lease for the facility we vacated, which expires in July 2015.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Introduction

All statements in this report that are not historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act. These forward-looking statements can generally be identified as such because the context of the statement will include words such as may, will, intend, plans, believes, anticipates, expects, estimates, predicts, potential, continue, opportunity, goals, or should, the negative of these words or words of similar import. Similarly, statements that describe our future plans, strategies, intentions, expectations, objectives, goals, or prospects are also forward-looking statements. These forward-looking statements are or will be, as applicable, based largely on our expectations and projections about future events and future trends affecting our business, and so are or will be, as applicable, subject to risks and uncertainties including but not limited to the risk factors discussed in this report, that could cause actual results to differ materially from those anticipated in the forward-looking statements. We caution investors that there can be no assurance that actual results or business conditions will not differ materially from those projected or suggested in such forward-looking statements. Our views and the events, conditions and circumstances on which these future forward looking statements are based, may change. All forward-looking statements are qualified in their entirety by this cautionary statement and we undertake no obligation to revise or update any such statements to reflect events or circumstances after the date hereof.

SEQUENOM�, Sequenom Center for Molecular Medicine�, MaterniT21�, MaterniT21� PLUS and SensiGene� are registered trademarks and RetnaGene", VisibiliT" and Heredi-T" are trademarks of Sequenom, Inc. This report may also refer to trade names and trademarks of other organizations.

Sequenom, Inc. was incorporated in 1994 under the laws of the State of Delaware. As used in this report, the words we, us, our, the Company, and Sequenom refer to Sequenom, Inc. and its wholly-owned subsidiaries on a consolidated basis, unless explicitly noted otherwise.

This following discussion and analysis of financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and accompanying notes included in this report and our Annual Report on Forms 10-K and 10-K/A for the fiscal year ended December 31, 2013. This discussion and analysis may contain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, such as those set forth under the heading Risk Factors, and elsewhere in this report.

Overview

We are a life sciences company committed to improving healthcare by providing genomic and genetic analysis solutions for the molecular diagnostic market. We develop and commercialize innovative molecular diagnostics testing services that target and serve molecular diagnostics markets. We offer our services in the U.S. and globally with international emphasis in countries in the European and Asia-Pacific regions. We conduct our business in one operating segment, Sequenom Laboratories.

Sequenom Laboratories provides molecular based laboratory developed tests, with a focus principally on prenatal diseases and conditions and ophthalmological diseases and conditions. Sequenom Laboratories is a CAP (College of American Pathologists) accredited and CLIA (Clinical Laboratory Improvements Amendment of 1988, as amended) certified molecular diagnostics laboratory that develops, validates and exclusively offers tests branded under the names MaterniT21� PLUS, HerediT", SensiGene�, RetnaGene", and VisibiliT". These genetic tests, offered as a testing service to physicians for the benefit of their patients, provide early patient management information for obstetricians, geneticists, maternal fetal medicine specialists, and ophthalmologists and eye care specialists. Sequenom Laboratories tests are:

MaterniT21 PLUS : a noninvasive prenatal test, or NIPT, to detect fetal chromosomal abnormalities by determining the relative amount of chromosomal material present in circulating cell-free DNA in a maternal blood sample. The test is intended and offered for use in pregnant women at increased risk for fetal chromosomal abnormalities, including abnormalities associated with trisomies 21, 18, and 13. Originally launched in October 2011, the test has been expanded and now includes detection of increased representation of chromosomes 21, 18 and 13 material (associated with trisomy 21, 18 and 13, respectively) and the presence of the Y chromosome, and if observed, chromosomal abnormalities associated with chromosomes 16, 22, sex chromosomes X and Y, and select chromosomal microdeletions.

HerediT CF: part of the prenatal menu, a carrier screen test to help identify individuals who may have an increased risk of having certain cystic fibrosis, or CF, genetic mutations. This test has been expanded to include screening for a broad set of phenotypically relevant genetic mutations selected from the leading Johns Hopkins CFTR2 database.

SensiGene RHD: a NIPT to determine the presence or absence of fetal Rhesus D factor, or RHD by direct detection of the fetal RHD genotype in RHD negative mothers from a maternal blood sample.

RetnaGene AMD: a genetic test to predict the risk of a patient with dry or early stage age-related macular degeneration, or AMD, progressing to wet or advanced choroidal neovascular disease within 2, 5, and 10 years.

VisibiliT: a NIPT to detect fetal chromosomal abnormalities by determining the relative amount of chromosomal material present in circulating cell-free DNA in a maternal blood sample. This test is a risk score assay for the detection of increased representation of chromosomes 21 and 18 with a greater degree of accuracy than standard serum screening. This test began to be introduced in international markets in the third quarter of 2014.

We depend upon third-party payors to provide reimbursement for our tests. Accordingly, we continue to focus substantial resources on obtaining reimbursement coverage from third-party payors. In December 2012, the American Congress of Obstetricians and Gynecologists, or ACOG, and the Society for Maternal Fetal Medicine Specialists, or SMFM, issued a joint committee opinion on NIPT for fetal aneuploidy, which supported the use of circulating cell-free fetal DNA as a basis for NIPT in pregnant women at high risk of carrying a fetus with fetal aneuploidy. We believe these guidelines will drive further adoption of Sequenom Laboratories' MaterniT21 PLUS test and strengthen our efforts to obtain insurance reimbursement. Following the issuance of these guidelines, many third-party payors have adopted positive coverage policies for reimbursement of NIPT for high-risk pregnancies.

In the United States, the American Medical Association (AMA) generally assigns specific billing codes for laboratory tests under a coding system known as Current Procedure Terminology, or CPT, codes, which are necessary for us to bill and receive reimbursement for our diagnostic tests. Once the CPT code is established, the Centers for Medicare and Medicaid Services, or CMS, in turn establishes payment levels and coverage rules under Medicare, and private payors establish rates and coverage rules independently. Additionally, payors have initiated efforts to develop a more specific set of billing codes for laboratory tests so that the particular laboratory test is more precisely identified. CMS implemented new codes beginning January 1, 2013 that did not include a specific code relevant to most of Sequenom Laboratories' tests. This coding change adopted by CMS and most third party payors has resulted in delayed payments and, in some cases, reduced payments from payors for services performed after January 1, 2013. Additionally, following the coding change, many state Medicaid programs have not included an appropriate test code in their fee schedule and, in some cases, are considering whether molecular diagnostic tests such as ours should be a covered benefit. We are continuing to work with many state Medicaid programs to request coverage for our tests and adoption of appropriate billing codes to reimburse for our tests. CMS has established a new molecular diagnostic code for next generation sequencing tests specific for fetal aneuploidy, code 81420, which will be implemented on January 1, 2015.� This new code will enable commercial and government payors to identify the unique nature of our MaterniT21 PLUS test, as rates are established for this new code with third-party payors it should help facilitate the reimbursement process and reduce the time required for us to process claims. When CMS recommends new codes typically the gap fill process is used in establishing a new code rate.

Sequenom Laboratories bills insurance companies and other third party payors for performance of the tests and bills patients for deductibles and copayment amounts. Sequenom Laboratories' diagnostic testing services revenues are primarily recognized on a cash basis. In the second quarter of 2014 we began to transition to accrual accounting on a payor-specific and test-specific basis where we can reliably estimate the amount that will ultimately be collected for our tests. For the three and nine months ended September 30, 2014 we recognized $6.6 million and $12.3 million, respectively, on an accrual basis for these certain payors, and of that revenue we collected $4.5 million and $9.4 million, respectively, as of September�30, 2014. Sequenom Laboratories continues to obtain contracts with additional payors and continues to work with other third-party payors, including state Medicaid programs, to adopt positive coverage policies for its tests. In some cases, such coverage decisions enable retroactive payment, however, in other cases, prior services may not be collectible. Due to the payment practices of many of the payors, we expect revenues will fluctuate until these factors are resolved.

Sequenom Laboratories performs its tests at three locations, San Diego, California, and Raleigh-Durham, North Carolina, for its MaterniT21 PLUS test, and Grand Rapids, Michigan, for its other tests. Sequenom Laboratories will continue efforts to ensure that office and laboratory space is adequate to accommodate the necessary capacity requirements to meet Sequenom Laboratories' current and future business needs.

We have a history of recurring losses from operations and we expect to incur additional operating losses in 2014 as we continue to seek to improve reimbursement for our tests, work to develop additional products and tests, and incur legal fees to defend our patent position. The timing of becoming profitable is dependent upon a number of factors, including the timing of reimbursement payments from third-party payors; the timing and costs related to research and development projects; selling and marketing efforts; and administrative expenses to support our operations. Our capital requirements to sustain operations have been and will continue to be significant. As of September�30, 2014, we had available cash and cash equivalents and current marketable securities totaling $71.0 million and working capital of $36.5 million. We also have a long-term investment of $5.0 million in other assets as of September�30, 2014.

On May�30, 2014 we completed the sale of our Bioscience business to BioSciences Acquisition Company (BioSciences) which purchased substantially all of the assets used in what the Company previously reported as its Bioscience business segment. With this divestiture, we now operate in a single business segment, Sequenom Laboratories.

Our strategic focus centers on efforts to improve profitability and reduce our cash burn as we work to our goal to achieve break even and positive cash flow while expanding the market adoption of our NIPT menu including our recently launched low cost fetal chromosomal abnormality test. Our ability to achieve these objectives is dependent on a number of factors, including the risks as summarized in our risk factors. We continue to focus on growing profitable test volume through increased market penetration, payor contracts, cash collections and growing revenues for a sustainable, profitable business model while investing in research and development programs to develop additional or enhanced products and tests.

Third Quarter of 2014


"	Total revenues during the three months ended September�30, 2014 increased $4.7 million, or 14%, to $37.9 million when compared to $33.3 million during the three months ended September�30, 2013.


"	Total accessions for all Sequenom Laboratories tests during the three months ended September�30, 2014 decreased by 1,700, or 3.5%, to 46,600 when compared to 48,300 during the three months ended September�30, 2013.


"	Net cash used in operating activities was $22.3 million for the nine months ended September�30, 2014, compared to $78.1 million in the same period in the prior year.


"	Total revenues during the nine months ended September�30, 2014 increased $27.9 million, or 32%, to $114.8 million when compared to $86.9 million during the nine months ended September�30, 2013.


"	Total accessions for all Sequenom Laboratories tests during the nine months ended September�30, 2014 increased 7,100, or 5%, to 146,600 when compared to 139,500 during the nine months ended September�30, 2013.


"	The volume of the MaterniT21 PLUS tests performed in the third quarter was level with the prior year. The 3.5% reduction in total test accessions in the third quarter of 2014 was primarily due to the reduction in the volume of other tests, principally the cystic fibrosis carrier screen tests as a result of competitor activity.


"	At the end of the third quarter we began to perform MaterniT21 PLUS tests for Quest Diagnostics who offers national access to our test. We expect that in 2015 Quest will develop a test utilizing our technology under a licensing agreement.

In the second quarter we began to recognize revenue on the accrual basis for tests billed to certain third-party payors. In the third quarter we recognized net revenue of $6.6 million from payors on an accrual basis, compared to cash collected of $4.5 million during the quarter from those payors, for incremental revenue of $2.1 million compared to the amount we would have recognized as revenue on a cash basis. For the nine months ended September�30, 2014 we recognized net revenue of $12.3 million from those payors, compared to cash collected of $9.4 million, for year to date incremental revenue of $2.9 million compared to the amount we would have recognized as revenue on a cash basis.


"	During the nine months ended September�30, 2014 we used $1.0 million for capital investments compared to $11.4 million for the same period in 2013. We also used $5.6 million for debt repayments during the nine months ended September�30, 2014 compared to $5.5 million for the same period in 2013.


"	As of September�30, 2014, total cash, cash equivalents, and marketable securities were $71.0 million with an additional $5.0 million of investments included in other assets.


"	In July at the 18th International Conference on Prenatal Diagnosis and Therapy we announced the development of VisibiliT, a risk score noninvasive prenatal test (NIPT) for the general pregnancy population.� The VisibiliT test is a lower-cost test that we expect will facilitate international access and ultimately be available to the population of women at low-risk of fetal aneuploidy.�


"	In July we entered into a license agreement with the Mayo Medical Laboratories for noninvasive prenatal testing patents and applications, expanding patient access to our technology.

In September we purchased the noninvasive prenatal testing intellectual property from Isis, for a net asset of $10.6 million, with additional downstream payments contingent on revenues exceeding certain thresholds. Previously, we had the exclusive rights for Isis global intellectual property for noninvasive prenatal genetic diagnostic testing on paternally inherited fetal nucleic acids derived from maternal plasma or serum; under the terms of the agreement we now own the intellectual property rights. �

Results of Operations

Revenues

We derive our revenues primarily from diagnostic services. We operate our business in one segment, Sequenom Laboratories, which provides laboratory testing services.

Our revenues and accessions for the three and nine months ended September 30, 2014 and 2013 were as follows:

�

Three Months Ended

�

Nine Months Ended

�

September 30,

�

Change

�

September 30,

�

Change

(dollars in thousands)

2014

�

2013

�

$ / #

�

2014

�

2013

�

$ / #

�

Diagnostic services revenue

37,937

�

33,268

�

4,669

�

14%

�

114,780

�

86,877

�

27,903

�

32%

Total accessions (for all Sequenom Laboratories tests)

46,600

�

48,300

�

(1,700

)

�

(3.5)%

�

146,600

�

139,500

�

7,100

�

Each test performed relates to a patient specimen collected by a health care professional, and received by the laboratory. Such specimen encounter is commonly referred to as an accession in the laboratory sector. Although accessions are not billed until the test is complete and results are reported to the ordering physician, we believe that the number of accessions received is useful to understand the volume of Sequenom Laboratories' business. These tests are typically completed within approximately five business days from the date of accession. Revenues for diagnostic services are generated primarily from customers located within the U.S. Our international customers collect and ship patient specimens to the laboratory, and Sequenom Laboratories processes the specimens in its laboratory in the United States. We also have royalty agreements with international customers to whom we have licensed our technology in certain countries.

Diagnostic services revenues are derived from providing testing services for Sequenom Laboratories' tests and are primarily recognized on a cash basis as payments are received. We will continue to account for revenues on a cash basis until we have a history of collections from a third-party payor and we are able to demonstrate that we can make a reasonable estimate of collectible amounts before moving to the accrual method of revenue recognition for such payor and test. In the second quarter of 2014, we adopted accrual accounting for select payors. For the payors recorded on an accrual basis in the third quarter we recognized revenue of $6.6 million, and of that revenue we collected $4.5 million as of September�30, 2014. The accrual basis revenue in the third quarter includes an adjustment to reduce revenue of $0.3 million related to revenue recorded in the second quarter as amounts collected differed from our initial estimate. The revenue recorded on a cash basis for the third quarter totaled $26.1 million. Revenues for international samples and royalties are recorded on an accrual basis and amounted to $4.6 million for the three months ended September 30, 2014.

The $4.7 million, or 14% increase, and $27.9 million, or 32% increases in diagnostic services revenues during the three and nine months ended September 30, 2014 respectively, when compared to the same periods in the prior year, are primarily attributable to the greater collections for accessions performed in prior periods and some payor revenue being recognized on an accrual basis.

Collections for diagnostic services performed in prior quarters increased in the third quarter 2014 compared to the second quarter 2014 by 5%, or $1.0 million. Revenue recorded as cash basis for services in the quarter declined $2.3 million because we adopted accrual basis revenue for select payors, while the combined cash basis and accrual revenue recorded for services performed in the same quarter decreased 7%, or $1.3 million, compared to the second quarter 2014. The following is a summary of accessions and diagnostic services revenues for the first three quarters in 2014 and the four quarters of 2013:



�	�		�	2014					�	2013
(collections in millions, accessions in thousands)	Q3		�	Q2		�	Q1		�	Q4		�	Q3		�	Q2		�	Q1
Accessions by quarter	46.6		�	50.1		�	49.9		�	46.0		�	48.3		�	46.7		�	44.5
�	�		�	�		�	�		�	�		�	�		�	�		�	�
Revenue recorded on accrual basis	$	11.6	�	$	10.6	�	$	4.6	�	$	4.1	�	$	3.8	�	$	2.9	�	$	0.8
Cash basis revenue for diagnostic services performed in the quarter	6.2		�	8.5		�	11.2		�	12.1		�	11.2		�	9.1		�	9.4
Cash basis revenue for diagnostic services performed in prior quarters	20.1		�	19.1		�	21.2		�	16.5		�	18.3		�	12.5		�	18.9
Diagnostic services revenues	$	37.9	�	$	38.2	�	$	37.1	�	$	32.7	�	$	33.3	�	$	24.5	�	$	29.1

The accessions performed for Medicaid payors decreased our total number of accessions for all payors by 4.5% during the three months ended September 30, 2014 when compared to the same period in 2013. For the nine months ended September�30, 2014, when compared to the same period in 2013 the number of accessions increased 5% which is primarily attributable to market adoption domestically and internationally of the MaterniT21 PLUS test. Revenue from international customers

accounted for $14.1 million and $7.5 million of diagnostic services revenues during the nine months ended September 30, 2014 and 2013, respectively.

Collections for services have been volatile, and we expect collections to continue to fluctuate depending upon the results of our efforts to collect payment from third party payors. As of September�30, 2014, amounts outstanding for tests delivered, net of estimated write-downs and adjustments, which were not recognized as revenue upon delivery of the test result because accrual revenue recognition criteria was not met and the amounts had not been collected, range from approximately $33 million to $36 million, depending upon the ultimate reimbursement received for outstanding claims. We cannot provide any assurance as to when, if ever, and to what extent these amounts will be collected.

During the three months ended September 30, 2014, one commercial payor accounted for $3.0 million, or 8.0%, of diagnostic service revenue compared to $5.2 million, or 15.7%, for the same period in 2013. For the nine months ended September 30, 2014 one commercial payor accounted for $12.3 million, or 10.8%, of diagnostic services revenue compared to $20.1 million, or 23.1%, for the same period in 2013.

We believe that our diagnostic services revenues will continue to be affected by our current revenue recognition policy, the overall acceptance and demand for our new and existing commercial products and services, the adoption rates of Sequenom Laboratories' existing tests and any future tests we may develop, and payment patterns of third-party payors and patients. Following the coding change on January 1, 2013 many state Medicaid programs have not included the appropriate test code in their fee schedule and, in many cases, are considering whether molecular diagnostic tests such as ours should be a covered benefit. Due to the lack of payment in many states, we reduced the volume of Medicaid tests which have decreased to approximately 20% from 26% of accessions during the nine months ended September 30, 2014 and 2013, respectively. However, in 2014 more Medicaid programs began to reimburse for our tests. This has increased revenues from government payors 151%, from $4.8 million during the nine months ended September�30, 2013 to $12.1 million during the nine months ended September�30, 2014. Diagnostic services revenues collected from government payors to date in 2014 were 10.6% of our diagnostic services revenues.

Cost of Revenues and Gross Margins

Cost of revenues consists of material, direct labor of our laboratory personnel, outside laboratory costs, royalties and overhead. Gross margin consists of our revenues less cost of revenues.

Our costs of revenues and gross margins were as follows:

�

Three Months Ended

�

Nine Months Ended

�

September 30,

�

Change

�

September 30,

�

Change

(dollars in thousands)

2014

�

2013

�

2014

�

2013

�

Cost of Revenues

�

Diagnostic services

21,000

�

23,242

�

(2,242

)

�

(10)%

�

66,180

�

64,955

�

1,225

�

Gross Margin

�

Diagnostic services

16,937

�

10,026

�

6,911

�

69%

�

48,600

�

21,922

�

26,678

�

122%

Gross Margin as a % of Revenues

�

Diagnostic services

�

42%

�

25%

�

Cost of diagnostic services revenues consists of cost of materials and direct labor costs, equipment and infrastructure expenses associated with accessioning patient specimens (including quality control analyses and shipping charges to transport patient specimens), royalties, and license fees. Infrastructure expenses include allocated facility occupancy and information technology costs. Costs associated with performing tests are recorded as tests are completed. Costs recorded for patient specimen processing represent the cost of all the tests processed during the period regardless of whether revenues were recognized with respect to that test. Royalties for licensed technology calculated as a percentage of revenues are recorded as license fees in cost of revenues at the time revenues are recognized or in accordance with other contractual obligations. While license fees are generally calculated as a percentage of revenues, the percentage increase in license fees does not correlate exactly to the percentage increase in revenues because certain agreements contain provisions for fixed annual payments and other agreements have tiered rates and payments that may be capped at annual minimum or maximum amounts. License fees represent a significant component of our cost of revenues and are expected to remain so for the foreseeable future.

The reduction in cost of diagnostic services revenues during the three months ended September 30, 2014 when compared to the same period in 2013 is primarily attributable to a reduction in the cost of materials we utilize in processing our tests. The increase in cost of diagnostic services revenues during the nine months ended September�30, 2014 when compared to the same period in 2013 is primarily attributable to increased labor, royalties associated with increased test volumes, and increased costs for the additional site location in North Carolina which became commercially operational in June 2013.

Gross margin as a percentage of diagnostic services revenues is also affected by generally recognizing revenues upon cash collection, which may result in costs being incurred in one period that relate to revenues recognized in a later period. The increase in gross margin during the three and nine months ended September 30, 2014 compared to the same period in 2013 is primarily attributable to the increased number of accessions completed, collections for accessions performed in prior quarters, cost cutting initiatives and increased of sales to international customers.

We expect that gross margin for our diagnostic services will continue to fluctuate and be affected by the adoption rates of Sequenom Laboratories' diagnostic tests, our revenue recognition policy, the levels of reimbursement, cost improvement initiatives, and payor and other contracts we may enter into for our tests.

Operating Expenses

Our operating expenses were as follows:



�	Three Months Ended					�	�			�	�	�	Nine Months Ended					�	�			�	�
�	September 30,						Change					�	September 30,					�	Change
(dollars in thousands)	2014			2013			$				%	�	2014		�	2013		�	$			�	%
Selling and marketing	$	7,448		$	9,093		$	(1,645	)		(18)%	�	$	23,927	�	$	29,048	�	$	(5,121	)	�	(18)%
Research and development	6,073			8,589			(2,516		)		(29)%	�	19,949		�	31,111		�	(11,162		)	�	(36)%
General and administrative	9,457			13,788			(4,331		)		(31)%	�	36,527		�	39,230		�	(2,703		)	�	(7)%
Restructuring costs			�	5,711		�	(5,711		)	�	100%	�	1,885		�	5,711		�	(3,826		)	�	(67)%

Selling and Marketing Expenses

Selling and marketing expenses consist primarily of compensation and related departmental expenses for sales and marketing, customer support, and business development personnel.

The $1.6 million, or 18%, decrease in selling and marketing expenses during the three months ended September�30, 2014, when compared to the three months ended September�30, 2013, resulted primarily from $1.1 million in lower labor costs for our sales force, $0.4 million in lower travel costs and $0.2 million in lower marketing expense.

The $5.1 million, or 18%, decrease in selling and marketing expenses during the nine months ended September�30, 2014, when compared to the nine months ended September�30, 2013, resulted primarily from $2.3 million in lower labor costs for our sales force, $1.5 million in lower travel expenses, $1.0 million in lower marketing expense, and $0.3 million in lower consulting expenses as the prior year period included expenses for a project that concluded in 2013.

We expect our selling and marketing expenses to increase in future periods.

Research and Development Expenses

Research and development expenses consist primarily of compensation and related personnel expenses, product development costs, quality and regulatory costs, clinical expense, and expenses relating to licensing costs and work performed under research and development contracts.

Of the $2.5 million, or 29%, decrease in research and development expenses during the three months ended September�30, 2014, when compared to the three months ended September�30, 2013, $1.0 million is due to a decrease in operating supplies due to timing of purchases related to project activity, $1.1 million is due to lower labor costs and $0.3 million is due to lower depreciation expense in the third quarter of 2014 as compared to the same period in 2013.

Of the $11.2 million, or 36%, decrease in research and development expenses during the nine months ended September�30, 2014, when compared to the nine months ended September�30, 2013, $5.9 million is due to lower clinical laboratory pre-commercialization, collaboration and other business expenses resulting from the commercialization of our laboratory location in North Carolina during 2013, which is now used for commercial tests and included in cost of revenues; $3.0 million is due to lower labor and related labor expenses and $2.0 million is due to lower clinical sample costs, supplies and other expenses due to fewer clinical trials in process in the first three quarters of 2014 as compared to the same period in 2013.

We expect our research and development expenses to remain relatively consistent in future periods.

General and Administrative Expenses

General and administrative expenses consist primarily of compensation and related departmental expenses for executive, legal, finance, non-allocated information technology and human resource personnel and outside professional fees.

The $4.3 million, or 31%, decrease in general and administrative expenses during the three months ended September�30, 2014, when compared to the three months ended September�30, 2013, is related to the reduction for $2.1 million in legal fees which were previously incurred by us on behalf of Isis and which is included as part of the Isis patent asset acquisition. We

recorded that amount as a reduction in legal fees for the quarter. The legal fees were incurred in prior quarters, with only $16 thousand incurred in to the quarter ended September�30, 2014. Additionally, we incurred $2.3 million lower litigation costs in the quarter compared to the prior year period.

The $2.7 million, or 7%, decrease in general and administrative expenses during the nine months ended September�30, 2014, when compared to the nine months ended September�30, 2013, is primarily related to $2.1 million in legal fees noted above of which $0.7 million was incurred in the nine months ended September�30, 2014; $2.2 million lower litigation costs, and $1.3 million related to lower labor related costs. These reductions were partly offset by $2.3 million primarily related to an increase in stock based compensation related to modifications in the second quarter of equity grants for retiring executives and $0.4 million in increased billing expenses to support the increase in collections activity.

We expect our general and administrative expenses to fluctuate in future periods depending primarily upon our litigation expenses.

Restructuring Costs

As part of an overall cost reduction effort, in August 2013, we reduced our workforce by 57 employees. We also estimated a reduction of future cash flows to be generated by our AMD test which resulted in an impairment of our licensed technology asset, and the subsequent decision to exit our lease of a facility in San Diego, which expires in July 2015. In connection with the restructuring, we reassessed the costs that have been previously recorded for facility exit costs and during the nine months ended September 30, 2014 we recorded an additional $1.9 million.

Other Income and Expense, and Income Tax Expense



�	Three Months Ended							�	�			�	Nine Months Ended							�	�
�	September 30,							�	�			�	September 30,							�	�
(dollars in thousands)	2014			�	2013			�	$ Change			�	2014			�	2013			�	$ Change
Interest expense, net	$	(2,029	)	�	$	(2,106	)	�	$	77		�	$	(6,161	)	�	$	(6,396	)	�	$	235
Other income (expense), net	(115		)	�	(3		)	�	(112		)	�	(173		)	�	(74		)	�	(99		)
Income tax benefit (expense)	$	2,107		�	$	(80	)	�	$	2,187		�	8,911			�	(197		)	�	9,108

Interest Expense, net

Interest expense, net, during the three and nine months ended September 30, 2014 did not significantly change from the same periods in 2013 which is attributable to our outstanding debt balance being consistent during both periods. The majority of our interest expense is recorded for our Convertible Senior Notes that were issued in September 2012.

Other Income (Expense), net

Other income (expense), net, primarily relates to payments made in foreign currency and the net foreign currency transaction gains and losses and fixed assets disposed that are recognized during the periods presented. We expect this to continue to fluctuate in future periods.

Income Tax Benefit (Expense)

Our income tax expense during all periods is primarily due to statutory tax liabilities resulting from our state and foreign operations.

As a result of income from discontinued operations of $24.3 million, we recorded an income tax expense from discontinued operations of $9.9 million. We also recognized a tax benefit of $8.9 million in continuing operations during the nine months ended September 30, 2014. This benefit is a result of the required accounting for discontinued operations which requires a separate tax presentation for discontinued and continuing operations. We are required to record a tax benefit related to our current operations to get an overall rate equal to our estimated effective rate for the year.

At September�30, 2014, our balance sheet includes accrued income taxes of $0.4 million pertaining to this transaction. In the fourth quarter the payable will be reduced and a benefit from continuing operations will be recorded in the same amount, assuming we record losses throughout the remainder of 2014. We expect that the income tax benefit to be recorded by year end should reduce our overall annual income tax expense to $0.4 million.

Discontinued Operations

On May�30, 2014, we completed the sale of our Bioscience business to BioSciences Acquisition Company (BioSciences) who purchased substantially all of the assets used in, and assumed the liabilities of, the business previously reported as the Bioscience business segment.

The sale, with an aggregate cash purchase price of $31.8 million plus a $2.0 million milestone payment earned provides us with working capital. We may also receive another $2.0 million milestone payment if recognized net revenue of the Bioscience business in 2014 equals or exceeds a specified revenue target, but we cannot anticipate whether the milestone will be achieved. As part of the sale, we were required to deposit in escrow $1.5 million to secure our indemnification obligations and any working capital adjustment to the purchase price. The escrow funds are restricted but we expect to receive access to $0.5 million within one year and the remaining $1.0 million within the following six months.

As part of the sale, we entered into several agreements with BioSciences. A supply agreement is effective for three years under which we may purchase consumables and systems for our laboratory business. We expect to purchase an immaterial amount of such products under the supply agreement in the next twelve months. Also, we agreed to provide certain administrative services to BioSciences from the time of the sale until December�31, 2014, unless the Transition Services Agreement is terminated earlier. All leases associated with the Bioscience business segment were assumed by BioSciences, however, we sublease back a portion of a building in San Diego for office space where some of our administrative employees are located. The associated rent expense is immaterial.

As a result of the Bioscience segment sale our condensed consolidated statements of operations, cash flows and the condensed consolidated balance sheets have been retrospectively revised to reflect the financial results from the Bioscience business segment as discontinued operations.

Liquidity and Capital Resources

We have a history of recurring losses from operations and an accumulated deficit. Our capital requirements to sustain operations, including commercialization of Sequenom Laboratories' tests, research and development projects, and litigation have been and will continue to be significant. As of September�30, 2014 and December�31, 2013, we had working capital of $36.5 million and $51.9 million, respectively.

We consider the material drivers of our cash flow to be testing volumes and collections of billed tests for our diagnostic testing services, working capital, inventory management, and operating expenses. Our principal sources of liquidity are derived from cash, cash equivalents, and marketable securities, and collections for our commercialized tests. We have also financed our operating and capital requirements during the last four years with proceeds from the recent sale of our Bioscience business segment, the issuance of our Convertible Senior Notes and the public offering of our common stock during 2012, and the public and private offerings of our common stock which occurred in 2010.

We have expanded the operations of Sequenom Laboratories following commercialization of the MaterniT21 PLUS test, including research and development activities related to improvements to current tests and expansion of Sequenom Laboratories' diagnostic testing menu. Sequenom Laboratories may further expand its marketing and sales capabilities in order to increase demand for the MaterniT21 PLUS test and other tests, to expand geographically, and to successfully commercialize any other tests it may develop, however in the near term we are focused on improving cash collections and productivity.

As of September�30, 2014, cash, cash equivalents, and marketable securities totaled $71.0 million with an additional $5.0 million of investments included in other assets, compared to $71.3 million at December�31, 2013. The $0.3 million increase is due primarily to the proceeds of $31.5 million from the sale of our bioscience segment, offset by our net loss of $17.3 million and $22.3 million cash used in operating activities. Our cash equivalents and marketable securities are held in a variety of securities that include U.S. government treasuries, certificates of deposits, and money market funds that have ratings of AA+/AA1, or are fully guaranteed by the U.S. government, and mutual funds.

We expect that our September�30, 2014 balances of cash, cash equivalents and marketable securities are sufficient to provide for our operating needs through at least the next twelve months.

Operating Activities

Cash used in operations during the nine months ended September�30, 2014, was $22.3 million, compared to $78.1 million for the nine months ended September�30, 2013. Our use of cash was primarily a result of an adjusted loss from continuing operations of $31.1 million this was derived by our reported net loss of $17.3 million and adjusted for the gain on discontinued operations before taxes of $13.8 million.

Changes in operating assets and liabilities during the nine months ended September�30, 2014 provided $11.6 million in net cash which was derived from a $5.6 million decrease in inventories and offset by a $7.9 million increased accounts receivable, accounts payable and prepaid and other assets. Non-cash expenses for depreciation and stock based compensation totaled $18.3 million for the nine months ended September�30, 2014. In addition we incurred a non-cash restructuring charge of $1.9 million related to our vacated facility.

Investing Activities

Net cash provided by investing activities of $7.3 million during the nine months ended September�30, 2014, primarily reflects the $29.3 million cash received from the sale of our Bioscience business segment and cash provided from marketable securities maturing of $21.0 million, net of purchases.

Financing Activities

Net cash used by financing activities during the nine months ended September�30, 2014 was $3.9 million, compared to $4.2 million during the nine months ended September�30, 2013. Financing activities during the nine months ended September�30, 2014 include payments on debt obligations of $5.6 million partially offset by $1.8 million in cash proceeds from net proceeds from exercise of stock options and ESPP purchases.

Discontinued Operations

The results of our discontinued Bioscience segment provided net cash of $2.7 million during the nine months ended September�30, 2014.

Off-Balance Sheet Arrangements

We have no significant contractual obligations not fully recorded on our consolidated balance sheets or fully disclosed in the notes to our consolidated financial statements or in our Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

In preparing our financial statements, we make estimates, assumptions and judgments that can have a significant impact on amounts reported in the accompanying consolidated financial statements and related notes. Other than beginning to recognize revenues on an accrual basis for some third party payors and management's reassessment of the remaining liabilities in connection with the facility exit costs as described in Note 7 there has been no material change in the Companys "Critical Accounting Policies and Estimates" since its presentation set forth in Item 7, in the Annual Report on Form 10-K for the fiscal year ended December�31, 2013.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There has been no material change in the Companys assessment of its sensitivity to market risk since its presentation set forth in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in the Annual Report on Form 10-K for the fiscal year ended December�31, 2013.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, our management, including our Chief Executive Officer and our Chief Financial Officer, has concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of September�30, 2014 to provide reasonable assurance that (a) the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and (b) such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September�30, 2014 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and our Chief Financial Officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in

decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

PART II - OTHER INFORMATION

Item�1.��Legal Proceedings

For a description of our pending legal proceedings, please refer to Note 4 Commitments and Contingencies of the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item�1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.


Item 1A.	Risk Factors

Before deciding to invest in our company or deciding to maintain or increase your investment, you should carefully consider the risks described below, in addition to the other information contained in this report and in our other filings with the SEC. The risks and uncertainties described below and in our other filings are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business. If any of these known or unknown risks or uncertainties actually occurs, our business, financial condition and results of operations could be seriously harmed. In that event, the market price for our common stock could decline and you may lose your investment.

The risk factors in this report have been revised to incorporate changes to our risk factors from those included in our annual report on Form 10-K for the year ended December 31, 2013. The risk factors set forth below with an asterisk (*) next to the title are new risk factors or risk factors containing changes, including any material changes, from the risk factors previously disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the SEC.

*We may not be able to continue to generate significant revenues from any of the tests we have commercialized including Sequenom Laboratories' MaterniT21 PLUS test or any test that we may develop in the future.

Our business is substantially dependent on our ability to develop and launch and obtain reimbursement for our diagnostic tests, including the MaterniT21 PLUS test. Sequenom Laboratories has committed significant research and development resources for the development and validation of tests and we have likewise invested significant research and development resources for its potential future diagnostic products. There is no guarantee that Sequenom Laboratories will successfully maintain its current revenues or generate additional revenues or significant revenues from any of its testing services, including its MaterniT21 PLUS test, or any other testing services that it plans to launch in the future. Sequenom Laboratories has launched testing services for prenatal fetal chromosomal abnormalities, CF carrier screening, noninvasive prenatal Rhesus D genotyping, and risk assessment of a patient with dry or early stage AMD progressing to wet or advanced choroidal neovascular disease within 2, 5, and 10 years. Sequenom Laboratories MaterniT21 PLUS test, which was originally launched in October 2011, detects fetal chromosomal abnormalities. If we and Sequenom Laboratories, or our partners, are not able to continue to successfully market or sell noninvasive prenatal diagnostic tests or successfully market or sell other tests we may develop for any reason, including the failure to obtain significant reimbursement from payors, or failure to obtain or maintain any required regulatory approvals, we will not generate or maintain significant revenues from the sale of such tests or Sequenom Laboratories' testing services. A number of factors could impact our and Sequenom Laboratories' ability to continue to sell noninvasive prenatal diagnostic tests or other tests we have developed or may develop in the future or generate significant revenues from the sale of such tests or testing services, including the following:

the availability of alternative and competing tests or products, such as those using targeted sequencing based or single nucleotide polymorphism (SNP) based approaches for NIPT to detect fetal chromosomal aneuploidies, or other approaches that may have a lower cost of goods and/or be less expensive to perform compared to Sequenom Laboratories MaterniT21 PLUS test or its other tests, and which in turn may result in lower prices offered by competitors;


"	technological innovations or other advances in medicine that cause our technologies to be less competitive;


"	pricing pressures, lower prices offered by competitors, or changes in third-party payor, government payor or private insurer reimbursement policies including potential delays or refusals to pay and uncertainty related to changes in CPT codes and uncertainty regarding payor adoption of and reimbursement rates for new gene sequencing related CPT codes that are planned to take effect in 2015;


"	payors may not pay for services;


"	payors may seek to reduce the use of our services by ordering physicians;

our ability to establish and maintain sufficient intellectual property rights in our products, including our ability to overturn the U.S. District Court for the Northern District of Californias order ruling our in-licensed 540 Patent to be invalid, and our ability to ultimately enforce the 540 Patent in the future against competitors and obtain injunctive relief and/or monetary damages from competitors;


"	our freedom to operate and intellectual property rights held by others, including U.S. Patent No.�7,888,017 titled Noninvasive Fetal Genetic Screening by Digital Analysis and No.�8,8008,018 titled Determination of Fetal

Aneuploidies By Massive Parallel DNA Sequencing and No.�8,195,415 titled Noninvasive Diagnosis of Fetal Aneuploidy by Sequencing assigned to Stanford and licensed to Verinata;


"	parties infringing our intellectual property rights or operating outside our intellectual property rights;


"	the ability to implement and maintain controls and risk management measures as appropriate;


"	reliance on Sequenom Laboratories, which is subject to routine governmental oversight and inspections for continued operation pursuant to CLIA to process tests ordered by physicians;

Sequenom Laboratories' ability to establish and maintain adequate infrastructure to support the continued commercialization of the MaterniT21 PLUS test and its testing services, including establishing adequate laboratory space, information technology infrastructure, sample collection and tracking systems including the laboratory information management system, or LIMS, electronic ordering and reporting systems and other infrastructure and hiring adequate laboratory and other personnel;


"	compliance with federal, state and foreign regulations governing laboratory testing on human specimens;


"	the marketing and sale of research use only or other tests;


"	the accuracy rates of such tests, including rates of false negatives and/or false positives;


"	concerns regarding the safety and effectiveness or clinical validity of noninvasive prenatal or other tests;


"	changes in the regulatory environment affecting health care and health care providers, including changes in laws regulating laboratory testing and any laws regulating prenatal testing;


"	the extent and success of Sequenom Laboratories' sales and marketing efforts and ability to drive continued adoption of its testing services, including the MaterniT21 PLUS test;


"	the extent to which payors and health care providers may limit or deny the addition of new laboratory-developed test service providers to their programs;


"	general changes or developments in the market for women's and/or prenatal health diagnostics, or diagnostics in general;


"	ethical and legal issues concerning the appropriate use of the information resulting from noninvasive prenatal diagnostic tests or other tests;


"	the refusal by women to undergo such tests for moral, religious or other reasons, or based on perceptions about the safety or reliability of such tests;


"	our ability to provide effective customer support; and


"	our ability to license and protect our patented technologies and our other technologies.

*Sequenom Laboratories may not be able to collect all or any of the estimated range of $33 million to $36 million of amounts outstanding for tests completed which have not been recognized as revenue upon delivery of the test results.

Sequenom Laboratories business is substantially dependent on its ability to obtain reimbursement for its tests, including the MaterniT21 PLUS test. Collections for services performed have been volatile, and we expect collections to continue to fluctuate depending upon the results of our efforts to collect payment from third party payors. As of September�30, 2014, amounts outstanding for tests completed, net of estimated write-downs and adjustments, which were not recognized as revenue upon delivery of the test result because our accrual revenue recognition criteria were not met and the amounts had not been collected, range from approximately $33 million to $36 million, depending upon the ultimate reimbursement received for these outstanding claims. A number of factors could impact Sequenom Laboratories ability to collect payment on these outstanding claims and impact the amount and timing of any payments, and we cannot provide any assurance as to when, if ever, and to what extent these amounts may be collected. If Sequenom Laboratories is unsuccessful in collecting such outstanding amounts, it will adversely affect our financial position.

*Claims by other companies that we infringe their intellectual property rights could adversely affect our business.

From time to time, companies (for example, Verinata, a wholly-owned subsidiary of Illumina, Inc.), have asserted, and may again assert, patent, copyright and other intellectual proprietary rights against our tests or tests using our technologies, and/or against our customers (licensees and commercial partners). These claims have resulted and may in the future result in lawsuits being brought against us and/or our customers, and could negatively affect demand for our tests, particularly Sequenom Laboratories MaterniT21 PLUS test, and our ability to maintain existing or enter into new agreements with customers. We may not prevail in any lawsuits alleging patent infringement given the complex technical issues and inherent uncertainties in intellectual property litigation. If any of our tests, technologies or activities, in particular Sequenom Laboratories' tests (including the MaterniT21 PLUS test) from which we derive and expect to continue to derive almost all of our revenues, were found to infringe on another company's intellectual property rights, we could be subject to an injunction that would force the removal of such test from the market or we could be required to redesign such test, which could be costly. We could also be ordered to pay damages or other compensation, including punitive damages and attorneys' fees to such other company. A negative outcome in any such litigation could also severely disrupt the use of our technologies by our customers and licensees or their customers, which in turn could harm our relationships with our customers, our market share and our revenues. Even if

we are ultimately successful in defending any intellectual property litigation, such litigation is expensive and time consuming to address, will divert our management's attention from our business and may harm our reputation.

Our ability to compete in the market may decline if we lose some of our intellectual property rights, if patent rights that we rely on are invalidated, or if we are unable to obtain other intellectual property rights.

Our success will depend on our ability to obtain, protect, and maintain the validity of patents on our technology, to protect our trade secrets, and to maintain our rights to licensed intellectual property or technologies. Such patent rights include the 540 Patent, currently ruled invalid by the U.S. District Court for the Northern District of California and appealed to the U.S. Court of Appeals for the Federal Circuit, and foreign equivalents, which we have purchased from Isis for noninvasive prenatal diagnostics and noninvasive prenatal gender determination testing for social and lifestyle purposes, and also include U.S. Patent Application Nos. 12/178,181, 13/417,119, 13/070,266, and 13/070,275 (published, respectively, as U.S. Publication Nos. US2009/0029377, US2012/0208708, US2012/0003637, and US2011/0318734), each titled Diagnosing Fetal Chromosomal Aneuploidy Using Massively Parallel Genomic Sequencing, and related pending U.S. patent applications, and their foreign equivalents, including issued patent EP2183693 B1, entitled Diagnosing Fetal Chromosomal Aneuploidy Using Genomic Sequencing, and pending U.S. patent application no. 12/614,350 (publication no. US2010/0112590) entitled Diagnosing Fetal Chromosomal Aneuploidy Using Genomic Sequencing With Enrichment and its foreign equivalents, which we have exclusively in-licensed from the Chinese University of Hong Kong, or CUHK, and which include allowed claims covering noninvasive prenatal diagnostics for aneuploidy testing using massively parallel sequencing.

Our patent applications or those of our licensors may not result in the issuance of patents in the U.S. or other countries. Our patents or those of our licensors may not afford meaningful protection for our technology and products. While we do not believe that the District Courts order ruling that the 540 Patent is invalid will impact the competitive landscape (as Sequenom Laboratories has been competing in the marketplace without the benefit of the patent being recognized by competitors), if we are unable to overturn that ruling, it will impact our potential ability in the future to obtain injunctive relief against competitors and/or money damages from competitors. Others may challenge our patents or those of our licensors by proceedings such as interference, oppositions, inter partes review, and reexaminations or in litigation seeking to establish the invalidity of our patents. On March 12, 2013 the USPTO declared a patent interference (Patent Interference No. 105,920 (DK)) between our in-licensed pending application no. 13/070,275 (publication no. US2011/0318734) and U.S. patent no. 8,008,018, licensed to Verinata. On April 7, 2014, the USPTO concluded the interferences, ruling that Verinatas 018 Patent lacked sufficient disclosure to meet the written description requirement for the patent claims, and entered judgment ending the interferences and canceling all four of the 018 patent claims in the interference. The ruling has been appealed to the U.S. District Court for the Northern District of California. On May 3, 2013, the USPTO declared a second patent interference (Patent Interference No. 105,922 (DK)) between our in-licensed pending patent application no. 13/070,266 (publication no. US2012/0003637 entitled Diagnosing Fetal Chromosomal Aneuploidy Using Massively Parallel Genomic Sequencing) and U.S. patent no. 8,195,415, licensed to Verinata. On April 7, 2014, the USPTO ruled that our pending patent application no. 13/070,266 has sufficient disclosure to meet the written description requirement for the patent claims and ordered the interference to proceed to the priority phase to determine which inventors were the first to invent the subject matter of the interference and should be entitled to a patent on that subject matter. On May 3, 2013, the USPTO declared a third patent interference (Patent Interference No. 105,923 (DK)) between our in-licensed pending patent application no. 12/178,181 (publication no. US2009/0029377 entitled Diagnosing Fetal Chromosomal Aneuploidy Using Massively Parallel Genomic Sequencing) and pending patent application no. 12/393,833, titled Non-invasive Fetal Screening By Digital Analysis licensed to Verinata. On May 3, 2013, the USPTO declared a fourth patent interference (Patent Interference No. 105,924 (DK)) between our in-licensed pending patent application no. 13/417,119 (publication no. US2012/0208708 entitled Diagnosing Fetal Chromosomal Aneuploidy Using Massively Parallel Genomic Sequencing) and pending patent application no. 12/393,833, titled Non-invasive Fetal Screening By Digital Analysis licensed to Verinata. On April 7, 2014, the USPTO concluded the third and fourth interferences, ruling that Verinatas pending patent application no. 12/393,833 lacked sufficient disclosure to meet the written description requirement for the patent claims, and entered judgment ending both interferences and determining that Verinata is not entitled to patents on the subject matter of the interferences. The rulings on the third and fourth patent interferences have been appealed to the U.S. District Court for the Northern District of California. As a result of these positive interference rulings, we believe that one or more of our in-licensed or owned patent applications that are the subject of the interferences should issue as patents, however we cannot predict the final outcome of these matters. The USPTO may declare additional patent interferences including other pending patent applications or patents owned or controlled by us and Verinata. We cannot assure that we will prevail in the current or any future interference proceedings, or on appeal, involving our patent rights. In the event that one or more of our patents are challenged, the USPTO or a court may invalidate the patent(s) or determine that the patent(s) is not enforceable, which could harm our competitive position. If one or more of our patents are invalidated or found to be unenforceable, or if the scope of the claims in any of these patents is limited by the USPTO or a court decision, we could lose certain market exclusivity afforded by patents owned or in-licensed by us and potential competitors could more easily bring tests or products to the market that directly compete with our own, including Sequenom Laboratories' MaterniT21 PLUS test. Such adverse decisions may negatively impact our revenues. For example, we were named as a defendant in separate complaints filed by Aria Diagnostics,

Inc. (now Ariosa Diagnostics, Inc., or Ariosa), Natera, and Verinata, pursuant to which a judicial declaration has been sought that certain of the plaintiffs' activities do not infringe any claim of U.S. Patent No.�6,258,540. These parties have also sought a judicial declaration that one or more claims of U.S. Patent No.�6,258,540 are invalid for failure to comply with the requirements of the patent laws of the U.S. On October 30, 2013, Ariosa prevailed and the District Court issued its order granting Ariosas motion for summary judgment, finding that the540 Patent is invalid because the patent claims asserted against Ariosa only add well-understood, routine and conventional methods to a natural phenomenon. Many of the 540 Patent claims asserted against Natera and Verinata are the same claims that were invalidated by the same District Court on October 30, 2013 in the litigation against Ariosa. As a result, the patent claims asserted in those cases have been deemed invalid and the 540 Patent claim validity issues in all three cases have been appealed to the U.S. Court of Appeals for the Federal Circuit. In addition, Ariosa has sought to invalidate U.S. Patent No. 6,258,540 through a petition for inter partes review (Case IPR2012-00022 (MPT)) under 35 U.S.C. section 312 and 37 C.F.R. section 42.108, before The Patent Trial and Appeal Board (PTAB) of the USPTO. The PTAB on September 2, 2014 issued a decision invalidating some claims but upholding the validity of other claims of the 540 patent. Both parties are expected to appeal that decision. In addition, on September 29, 2014 and October 1, 2014 two unknown third parties initiated Opposition Proceedings against European Patent EP2183693 B1, entitled Diagnosing Fetal Chromosomal Aneuploidy Using Genomic Sequencing, in the European Patent Office. We intend to vigorously defend this patent in the Opposition Proceedings. However, we cannot predict the outcome of this matter. As a result, our patents or patents that we in-license may be narrowed, invalidated or become unenforceable or lose priority to other patents, which could adversely affect our ability to successfully commercialize any of our tests that are dependent upon such patents.

We are also the licensee of patent applications, including the patent applications mentioned above in-licensed from CUHK, that contain allowed claims regarding the use of sequencing in prenatal diagnostics. We are also aware of other patents and patent applications that are owned or licensed by Verinata that contain the same and/or similar claims and the USPTO has declared four separate patent interference proceedings and ruled on three of them, as mentioned above with respect to certain patent rights that we in-license from CUHK and patent rights claimed by Verinata related to the use of sequencing in prenatal diagnostics. The rulings have been appealed to the U.S. District Court for the Northern District of California. Interference proceedings are expensive, a lengthy process, and there can be no assurance that we will prevail in the remaining proceeding or upon appeal for the other three proceedings. If we do not prevail in the remaining proceeding or upon appeal for the other proceedings, the prevailing party may obtain superior rights to our claimed inventions and technology, which could adversely affect our ability to successfully market and commercialize the MaterniT21 PLUS test.

Also, in the Verinata complaint, Verinata and co-plaintiff Stanford have alleged our infringement of U.S. Patent Nos.�7,888,017 titled Noninvasive Fetal Genetic Screening by Digital Analysis and 8,008,018 titled Determination of Fetal Aneuploidies by Massively Parallel DNA Sequencing and 8,195,415 titled Noninvasive Diagnosis of Fetal Aneuploidy by Sequencing that include patent claims purportedly covering methods for the noninvasive detection of fetal aneuploidy. In addition to the interference proceeding noted above, we are also separately challenging the validity of Verinatas 415 Patent in an inter partes review proceeding currently pending before the USPTO (Case IPR 013-00390). Challenging the validity of these patents and defending against claims of infringement of these patents, or if we are forced to defend against any other asserted intellectual property right, is costly and diverts management's attention and resources. As a result of this lawsuit, we may have to develop costly alternative technology or enter into licensing agreements. These agreements, if necessary, may be unavailable on terms acceptable to us, which could seriously harm our business and financial condition.

Competitors may develop products or tests similar to ours that do not conflict with our patents or patent rights. Others may develop products, technologies or methods, including noninvasive prenatal tests or other diagnostic tests in violation of our patents or those of our licensors, or by operating around our patents or license agreements, which could reduce or remove our noninvasive prenatal and other diagnostic commercialization opportunities. To protect or enforce our patent rights, we have initiated interference and inter partes review proceedings, and we may initiate oppositions, reexaminations, or litigation against others. However, these activities are expensive, take significant time and divert management's attention from other business concerns. We may not prevail in these activities. If we are not successful in these activities, the prevailing party may obtain superior rights to our claimed inventions and technology, which could adversely affect our ability to successfully market and commercialize any of our tests that are dependent upon such technologies, including the MaterniT21 PLUS test. The patent position of biotechnology companies generally is highly uncertain and involves complex legal and factual questions that are often the subject of litigation. No consistent policy has emerged from the USPTO, the offices of foreign countries or the courts regarding the breadth of claims allowed or the degree of protection afforded under biotechnology patents. There is a substantial backlog of biotechnology patent applications at the USPTO and of the equivalent offices around the world and the approval or rejection of patent applications may take several years.

If we breach any of the terms of our license or supply agreements, or these agreements are otherwise terminated or modified, the termination or modification of such agreements could result in our loss of access to critical components and could delay or suspend our commercialization efforts, and we may compete with our suppliers which may adversely affect our business.

We have sourced or licensed components of our technology from other parties. Our failure to maintain continued supply of such components, particularly in the case of sole suppliers, or the right to use these components would seriously harm our business, financial condition, and results of operations. In the event of any adverse developments with these vendors, Sequenom Laboratories testing services may be interrupted, which would have an adverse impact on our business. Changes to or termination of our agreements or inability to renew our agreements with these parties or enter into new agreements with other suppliers could result in the loss of access to these aspects of our technology or other intellectual property rights or technologies that we may acquire from time to time and could impair, delay, or suspend our commercialization efforts, including efforts to market and commercialize the MaterniT21 PLUS test. While we negotiate for agreement periods or notice of termination periods that provide us reasonable periods of time to secure alternative supplies, and require that such agreements may not be terminated without advance notice arbitrarily or without good reason, such as uncured breach or insolvency, these negotiations are often unsuccessful or such provisions may not provide us with adequate time to secure alternative supplies, provide us with access to alternative technologies on commercially acceptable terms, or otherwise provide us with adequate protection.

For example, Illumina, Inc., or Illumina, is the sole supplier of sequencers and certain consumables for Sequenom Laboratories' MaterniT21 PLUS test. The supply of sequencers and consumables to Sequenom Laboratories is provided under our supply agreement (and amendments thereto) with Illumina which expires in July 2016. In early 2013, Illumina completed its acquisition of Verinata, a provider of noninvasive tests for the identification of fetal chromosomal abnormalities, a party adverse to us in patent litigation, and a direct competitor of Sequenom Laboratories and its MaterniT21 PLUS test. We understand Illumina supplies the same or similar sequencers and consumables to Verinata. In view of Illumina's acquisition of Verinata, we face risk and uncertainty regarding continuity of a successful working relationship with Illumina under the current supply agreement, we face risk and uncertainty regarding the impact of the acquisition on Sequenom Laboratories' ability to compete with Verinata in the marketplace based on test price and in view of economic advantages enjoyed by Verinata associated with cost of goods for its competing test, and we face risk and uncertainty regarding our ability to renew the supply agreement or to enter into a new supply agreement with Illumina, if at all, and on financial terms that are attractive or acceptable to us. Our failure to maintain continued supply of such sequencers and consumables would seriously harm our business, financial condition, and results of operations. While we are continuing to evaluate alternative platforms for our MaterniT21 PLUS test, we may not be successful in selecting and implementing an alternative platform that is satisfactory for our needs.

*Sequenom Laboratories depends on third-party products and services and limited sources of supply to develop and perform its tests.

Sequenom Laboratories relies on outside vendors to supply certain products, components and materials used in its test services. Illumina is the sole supplier of sequencers and certain consumables for Sequenom Laboratories' MaterniT21 PLUS test and those products have lead times of several months. Among other risks, using a platform provided by another party presents potential manufacturing supply and reliability, quality compliance, and intellectual property infringement risks. For example, we have no control over the manufacture of the Illumina sequencers and consumables that Sequenom Laboratories is using for its MaterniT21 PLUS test, including whether such sequencers will meet their quality control requirements to ensure quality and reliability for the sequencers and consumables, and can give no assurance that they will be able to obtain a reliable supply of the sequencers and consumables that we need for its test. In the event that demand for Sequenom Laboratories tests declines or does not meet our forecasts, we could have excess inventory or increased expenses or our margins could decrease which could have an adverse impact on our financial condition and business.

Many other products, components and materials, including blood collection tubes for Sequenom Laboratories' MaterniT21 PLUS test and components of the MassARRAY System that is currently used for Sequenom Laboratories' CF carrier screen, fetal Rhesus D genotyping test and RetnaGene AMD test, are obtained from a single supplier or a limited group of suppliers and some also have lead-times of several months.

These suppliers may be subject to regulation by the FDA and would therefore need to comply with federal regulations related to the manufacture and distribution of regulated products. Because we cannot ensure the actual production or manufacture of such critical equipment and materials, or the ability of our suppliers to comply with applicable legal and regulatory requirements, we may be subject to significant delays caused by interruption in production or manufacturing.

In the event of any adverse developments with these suppliers or vendors, our test supply may be interrupted and obtaining substitute components could be difficult or require us to re-design our tests which would have an adverse impact on our

business. Our reliance on outside vendors generally, and a sole or a limited group of suppliers in particular, involves several risks, including:


"	the inability to obtain an adequate supply of properly functioning, required products, components, and materials due to capacity constraints, product defects, a discontinuance of a product by a supplier, or other supply constraints;


"	reduced control over quality and pricing of products, components, and materials;


"	delays and long lead times in receiving products, components, or materials from vendors; or


"	Sequenom Laboratories' inability to provide tests, including the MaterniT21 PLUS test, or to maintain or increase its capacity to do so.

*Certain of Sequenom Laboratories' LDTs, including the MaterniT21 PLUS test, may not be eligible for reimbursement by payors or may become ineligible for reimbursement, or reimbursement may be significantly delayed, due to changes in CPT codes, or otherwise, which may limit the demand for these tests by physicians and their patients.

Certain of Sequenom Laboratories' current laboratory-developed tests, or future tests which it intends to launch as a testing service, may not be deemed medically necessary or may otherwise not be subject to reimbursement by payors, which could affect demand for such tests by physicians.

CMS, a federal agency within the Department of Health and Human Services (HHS), establishes reimbursement payment levels and coverage rules for Medicare. State Medicaid plans and third-party payors establish rates and coverage rules independently. As a result, the coverage determination process is often a time-consuming and costly process that requires us to provide scientific and clinical validity for the use of our tests to each payor separately, with no assurance that approval will be obtained. If CMS or other third-party payors decide not to cover our tests, place significant restrictions on the use of our tests, or offer inadequate payment amounts, our ability to generate revenues from our tests could be limited.

Even a payor that covers our tests may reduce utilization or stop or lower reimbursement at any time, which could reduce our revenues. We are currently considered a non-contracting provider by many third-party payors because we have not entered into a specific contract to provide our specialized testing services to their insured patients at specified rates of reimbursement. Without such contracts, we may not be able to obtain reimbursement for our tests at acceptable rates, which could also reduce our revenues. In cases where we have contracts in place, some payors continue to challenge the medical necessity of certain of our tests or have other objections that result in delay or non-payment to us.

Reimbursement for diagnostic tests furnished to Medicare beneficiaries generally is made based on a fee schedule set by CMS using a statutory formula. In recent years, payments under these fee schedules have decreased and may decrease more. In addition, Medicare fee schedules are impacted by the billing codes selected for reporting services, and changes to certain laboratory billing codes for diagnostic tests are being considered which may affect payment levels. We cannot predict whether or when additional third-party payors will cover our tests or offer adequate reimbursement to make them commercially attractive or whether existing payors will reduce utilization or stop or lower reimbursement. Clinicians or patients may decide not to order our tests if third-party reimbursement is inadequate, especially if ordering the test could result in financial liability for the patient, and reduced or discontinued purchases of our products would cause our revenues to decline.

Under the statutory formula for Medicare clinical laboratory fee schedule amounts, increases are made annually based on the Consumer Price Index for All Urban Consumers, or CPI-U, as of June 30 for the previous 12-month period. In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, collectively referred to as the PPACA, which, among other things, imposed additional cuts to the Medicare reimbursement for clinical laboratories. The PPACA replaced the 0.5% cut enacted by the Medicare Improvements for Patients and Providers Act of 2008, or MIPPA, with a productivity adjustment that will reduce the CPI-U update in payments for clinical laboratory tests. For 2012, the productivity adjustment was -1.2%. In addition, the PPACA includes a separate 1.75% reduction in the CPI-U update for clinical laboratories for the years 2011 through 2015. On February 22, 2012, President Obama signed the Middle Class Tax Relief and Job Creation Act of 2012, which mandated an additional change in reimbursement for clinical laboratory services payments. This legislation requires CMS to reduce the Medicare clinical laboratory fee schedule by 2% in 2013, which in turn will serve as a base for 2014 and subsequent years. Levels of reimbursement may continue to decrease in the future, and future legislation, regulation or reimbursement policies of third-party payors may harm the demand for and reimbursement available for our products, which in turn, could harm pricing and sales. The payment amounts under the Medicare clinical laboratory fee schedule are important not only for our reimbursement under Medicare, but also because the schedule often establishes the payment amounts set by other third-party payors. For example, state Medicaid programs are prohibited from paying more than the Medicare fee schedule limit for clinical laboratory services furnished to Medicaid recipients. As a result, in light of reductions in the clinical laboratory fee schedule, certain third-party payors may also reduce reimbursement amounts.

In the U.S. the AMA generally assigns specific billing codes for laboratory tests under a coding system known as Current Procedure Terminology, or CPT, codes, which are necessary for us and our customers to bill and receive reimbursement for our diagnostic tests. Once the CPT code is established, CMS in turn establishes payment levels and coverage rules under Medicare, and private payors establish rates and coverage rules independently. We cannot guarantee that any of our tests are or will be covered by the CPT codes that we believe may be applied to them or that any of our tests or other products will be approved for coverage or reimbursement by Medicare, Medicaid or any third-party payor. Our tests and the CPT codes we use may not qualify for Medicaid reimbursement in any or all of the 50 states.

In addition, payors have initiated efforts to develop a more specific set of billing codes for laboratory tests so that the particular laboratory test is more precisely identified. The 2013 physician fee schedule explains CMS' plans for new CPT codes applicable to molecular diagnostic tests. In 2011, the AMA adopted over 100 analyte-specific codes for molecular diagnostic testing, which will replace the prior, more general methodology codes, which were billed on a stacked basis, meaning that reimbursement amounts for all relevant codes were added together. CMS delayed implementing the new codes in 2012, but did implement them beginning January 1, 2013, although without a fee schedule for the particular codes relevant to Sequenom Laboratories' tests. CMS has established a new molecular diagnostic code for next generation sequencing tests specific for fetal aneuploidy, code 81420, which will be implemented on January 1, 2015.� We cannot guarantee that this new code will help facilitate the reimbursement process or reduce the time required for third-party payors to process claims. When CMS recommends new codes typically the gap fill process is used in establishing a new code rate; however we cannot guarantee that such process will be used. These coding changes and lack of a CMS fee schedule have negatively affected and may continue to negatively affect our product pricing and the amount of and timing of payor reimbursement. We cannot guarantee that the issuance of the new code will improve our product pricing or the amount of and timing of payor reimbursement.

Sequenom Laboratories' failure to establish enrollment in and obtain favorable payment policies from state Medicaid programs could result in a substantial portion of our services being unreimbursed and adversely affect our results of operations and financial condition.

Sequenom Laboratories has established enrollment in many state Medicaid programs. However, even though Sequenom Laboratories is enrolled in many state Medicaid programs, we are not receiving reimbursement or are receiving lower than expected reimbursement in most of those states. In mid-2013 it became apparent that most states still did not have appropriate procedure codes incorporated into their payment system for reimbursement for molecular tests, and we initiated efforts to reduce the volume of Medicaid tests from those states. At the same time, we increased our efforts to put reimbursement pathways in place with each state, and work with the AMA to get a specific CPT code for the MaterniT21 PLUS test. CMS has established a new molecular diagnostic code for next generation sequencing tests specific for fetal aneuploidy, code 81420, which will be implemented on January 1, 2015, however it is not exclusive to the MaterniT21 PLUS test. In those states where we are not enrolled in the Medicaid system, we do not receive reimbursement for our tests. If we are unable to receive reimbursement, or adequate reimbursements under state Medicaid programs, our opportunity for future revenues would be reduced, which would adversely affect our results of operations and financial condition.

Billing complexities associated with obtaining payment or reimbursement for our tests may negatively affect our revenues, cash flow and profitability. We may incur additional financial risk related to collections and reimbursement in connection with the commercialization of our molecular diagnostic tests.

Billing for clinical laboratory testing services is complex. Sequenom Laboratories generally bills third-party payors for its testing services and pursues case-by-case reimbursement where policies are not in place for a particular test. It has limited experience in billing and pursuing reimbursement and payment for molecular diagnostic tests. As a result of this lack of experience and uncertainty with respect to reimbursement, Sequenom Laboratories may also face an increased risk in its collection efforts, including potential write-offs of doubtful accounts and long collection cycles for accounts receivable related to its testing service, which could adversely affect our business, results of operations and financial condition. Sequenom Laboratories began internal billing operations on May 1, 2013. Sequenom Laboratories has limited experience performing billing internally and working with its software vendor, and this may further increase risk in Sequenom Laboratories' collection efforts. Among the factors complicating our billing of third-party payors are:


"	disputes among payors as to which party is responsible for payment;


"	disparity in coverage among various payors;


"	disparity in information and billing requirements among payors; and


"	incorrect or missing billing information, which is required to be provided by the prescribing physician.

These billing complexities, and the related uncertainty in obtaining payment for our tests, could negatively affect our revenues, cash flow and profitability.

Our failure to comply with governmental payor regulations could result in our being excluded from participation in Medicare, Medicaid or other governmental payor programs, which would decrease our revenues and adversely affect our results of operations and financial condition.

The Medicare program is administered by CMS, which, like the states that administer their respective state Medicaid programs, imposes extensive and detailed requirements on diagnostic services providers, including, but not limited to, rules that govern how we structure our relationships with physicians, how and when we submit reimbursement claims and how we provide our specialized diagnostic services. Our failure to comply with applicable Medicare, Medicaid and other governmental payor rules could result in our inability to participate in a governmental payor program, our returning funds already paid to us, civil monetary penalties, criminal penalties and/or limitations on the operational function of our laboratory. If we were unable to receive reimbursement under a governmental payor program, a substantial portion of our revenues would be lost, which would adversely affect our results of operations and financial condition.

The U.S. health care reform law could adversely affect our business, profitability and stock price and prevent the commercial success of the MaterniT21 PLUS test.

In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, or PPACA, which may have far-reaching consequences for most health care companies, including diagnostic companies like us. As a result of this new legislation, substantial changes could be made to the current system for paying for health care in the U.S. including changes made in order to extend medical benefits to those who currently lack insurance coverage. On June 28, 2012, the U.S. Supreme Court upheld the constitutionality of PPACA, excepting certain provisions that would have required states to expand their Medicaid programs or risk losing all of the state's Medicaid funding. At this time, it remains unclear whether there will be any further changes made to PPACA, whether in part or in its entirety.

Although we cannot fully predict the many ways that health care reform might affect our business, the PPACA, as discussed above, includes two separate reductions in the reimbursement of clinical laboratory services under the clinical laboratory fee schedule. First, it includes a productivity adjustment (which was -1.2% for 2011 and 2012). Second, it includes an additional 1.75% reduction, the first of a series of such annual reductions effective from 2011 to 2015, which would reduce the annual Consumer Price Index-based update that would otherwise determine our reimbursement for clinical laboratory services. In addition, the Middle Class Tax Relief and Job Creation Act of 2012 requires CMS to reduce the Medicare clinical laboratory fee schedule by 2% in 2013, which in turn will serve as a base for 2014 and subsequent years. These reimbursement cuts could adversely affect our business.

The PPACA includes expansions of health care fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance. As discussed below, enforcement of any of these laws against our company could harm our business.

It is unclear whether and to what extent, if at all, other anticipated developments resulting from health care reform, such as an increase in the number of people with health insurance and an increased focus on preventive medicine, may provide us additional revenue. Extending coverage to a large population could substantially change the structure of the health insurance system and the methodology for reimbursing medical services, drugs and devices. These structural changes could entail modifications to the existing system of third-party payors and government programs, such as Medicare and Medicaid, the creation of additional government-sponsored health care insurance sources, or some combination of both, as well as other changes. Restructuring the coverage of medical care in the U.S. could impact the reimbursement for diagnostic tests like ours, including Sequenom Laboratories' MaterniT21 PLUS test. If reimbursement for our diagnostic tests is substantially less than we or our clinical laboratory customers expect, or rebate obligations associated with them are substantially increased, our business could be materially and adversely impacted.

Any health care reform measures adopted by the U.S. government and other governments could cause significant pressure on the pricing of health care products and services, including the MaterniT21 PLUS test, in the U.S. and internationally, as well as the amount of reimbursement available from governmental agencies or other third-party payors. The continuing efforts of the U.S. and foreign governments, insurance companies, managed care organizations and other payors to contain or reduce health care costs may compromise Sequenom Laboratories' ability to set prices at commercially attractive levels for its tests, including the MaterniT21 PLUS test, and other diagnostic tests that we or Sequenom Laboratories may develop. Changes in health care policy, such as the creation of broad limits for diagnostic products, could substantially diminish the sale of or inhibit the utilization of future diagnostic tests, increase costs, divert management's attention and adversely affect our ability to generate revenues and achieve profitability.

New laws, regulations and judicial decisions, or new interpretations of existing laws, regulations and decisions, relating to health care availability, methods of delivery or payment for diagnostic products and services, or sales, marketing or pricing, may also limit our potential revenues, and we may need to revise our research and development or commercialization programs. The pricing and reimbursement environment may change in the future and become more challenging for a number of

reasons, including policies advanced by the U.S. government, new health care legislation or fiscal challenges faced by government health administration authorities. Specifically, in both the U.S. and some foreign jurisdictions, there have been a number of legislative and regulatory proposals and initiatives to change the health care system in ways that could affect our and Sequenom Laboratories' ability to sell our diagnostic tests, including the MaterniT21 PLUS test, profitably. Some of these proposed and implemented reforms could result in reduced utilization or reimbursement rates for our diagnostic products.

*�If our laboratory facilities are damaged, our business would be seriously harmed.

Sequenom Laboratories has laboratory facilities in San Diego, California, Grand Rapids, Michigan, and Raleigh-Durham, North Carolina. Damage to our facilities due to war, fire, natural disaster, earthquake, power loss, communications failure, terrorism, unauthorized entry, or other events could prevent us from conducting our business for an indefinite period, could result in a loss of important data or cause us to cease development and processing of our test services. We cannot be certain that our limited insurance to protect against business interruption would be adequate or would continue to be available to us on commercially reasonable terms, or at all.

*Our wholly-owned subsidiary, Sequenom Laboratories, must comply with stringent CLIA requirements to operate, and has limited capacity and infrastructure. Its ability to successfully develop and commercialize tests and to generate revenues will depend on its ability to successfully operate its CLIA-certified laboratory, establish and maintain necessary capacity, and maintain required regulatory licensures.

Sequenom Laboratories, a CLIA-certified and CAP-accredited laboratory, has developed, validated and commercialized five laboratory-developed tests to date. Sequenom Laboratories launched its first test in 2009. For future tests, if Sequenom Laboratories is unable to successfully develop and validate any new tests that it intends to commercialize it may not be able to successfully commercialize such tests on the anticipated timelines or at all. Although we have invested substantially in Sequenom Laboratories' infrastructure, and believe that we have sufficient infrastructure and capacity for near-term demand, it is possible that it may not have adequate infrastructure and capacity in place to meet longer term future demand for its currently launched testing services or for the demand of future tests that it develops. Sequenom Laboratories' ability to successfully develop and validate tests will depend on its ability to successfully operate and maintain required regulatory licensure and we cannot provide assurances that Sequenom Laboratories will have sufficient resources to continue its operations and maintain its licenses. Sequenom Laboratories currently performs its MaterniT21 PLUS test in its San Diego, California, and Raleigh-Durham, North Carolina, facilities. Sequenom Laboratories faces risk in relying upon two laboratory locations to meet demand for, perform, and generate revenues from the MaterniT21 PLUS test. Reliance upon two facilities presents risk to Sequenom Laboratories' operations in the event that one or both facilities' capacity is exceeded, or one or both facilities experiences production problems or delays.

CLIA requirements are designed to ensure the quality and reliability of clinical laboratories by mandating specific standards in the areas of personnel qualifications, administration and participation in proficiency testing, patient test management, quality control, quality assurance and inspections. Potential sanctions for failure to comply with CLIA requirements may be suspension, revocation or limitation of a laboratory's CLIA certificate, which is necessary to conduct business, as well as significant fines and/or criminal penalties. Laboratories must undergo on-site surveys at least every two years, which may be conducted by the Federal CLIA program or by a private CMS approved accrediting agency, such as CAP, among others. Sequenom Laboratories is also subject to regulation of laboratory operations under state clinical laboratory laws as will be any new CLIA-certified laboratory that we establish or acquire. State clinical laboratory laws may require that laboratories and/or laboratory personnel meet certain qualifications, specify certain quality controls or require maintenance of certain records. Certain states, such as California, Florida, Maryland, New York, Pennsylvania and Rhode Island, require that laboratories obtain licenses to test specimens from patients residing in those states and additional states may require similar licenses in the future. If Sequenom Laboratories is unable to obtain and maintain licenses from states where required, it will not be able to process any samples from patients located in those states. Only Washington and New York States are exempt under CLIA, as these states have established laboratory quality standards at least as stringent as the CLIA requirement's. Potential sanctions for violation of these statutes and regulations include significant fines and the suspension or loss of various licenses, certificates and authorizations, which could adversely affect our business and results of operations.

If Sequenom Laboratories fails to maintain compliance with the CLIA requirements, CMS or state agencies could require Sequenom Laboratories to cease its testing services, including the MaterniT21 PLUS test. Even if it were possible for Sequenom Laboratories to bring its laboratory back into compliance after failure to comply with such requirements, Sequenom Laboratories could incur significant expenses and potentially lose revenues in doing so.

*Failure to establish, and perform to, appropriate quality standards to assure that the highest level of quality is observed in the performance of Sequenom Laboratories' testing services could adversely affect the results of our operations and adversely impact our reputation.

The provision of clinical testing services, including the MaterniT21 PLUS test, and related services, and the marketing of those services involve certain inherent risks. The services that Sequenom Laboratories provides and markets are intended to provide information for health care providers in providing patient care. Therefore, users of such services may have a greater sensitivity to errors than the users of services that are intended for other purposes, such as research.

Performance defects, incomplete process controls, unexpected failure modes, unanticipated use of Sequenom Laboratories' services, or inadequate disclosure of information (including associated risks or limitations) relating to the use of the services can lead to injury or other adverse events, including laboratory operation disruptions, delays, or incorrect clinical testing results. These events could lead to safety alerts relating to Sequenom Laboratories' services (either voluntary or required by governmental authorities) and could result, in certain cases, in the removal of services from the market. Any removal of services could result in significant costs as well as negative publicity that could reduce demand for Sequenom Laboratories' test services. Personal injuries relating to the use of Sequenom Laboratories' services can also result in product liability claims being brought against us.

*We have limited experience and rely on technology provided by third parties for commercialization of Sequenom Laboratories test services.

Sequenom Laboratories' noninvasive prenatal and other molecular diagnostic tests are relatively new in the marketplace. We have limited experience developing and commercializing sequencing-based technology and rely on collaborative partners and sequencing technology provided by others in order to commercialize any test utilizing sequencing, including the MaterniT21 PLUS test.

You should evaluate us in the context of the uncertainties and complexities affecting an early stage molecular diagnostics company developing and commercializing laboratory developed test services and experiencing the challenges associated with entering into new markets that are highly competitive. Based on our limited experience in developing new products and applications, we and Sequenom Laboratories may not:


"	effectively execute on or focus our research and development efforts;


"	properly model new opportunities to ensure appropriate resource allocation;


"	create new tests that are appropriately developed to meet customer needs;


"	perform adequate and timely validation testing of such test applications;


"	effectively assess and meet regulatory requirements in the U.S. and other countries;


"	ensure appropriate communication between different departments responsible for commercialization activities;


"	implement effective test launch, sales, or reimbursement strategies;


"	effectively design and develop tests that achieve commercial success; or


"	take other actions that ultimately lead to commercial success of any new products or applications that we develop.

Despite its ability to commercialize the MaterniT21 PLUS test, Sequenom Laboratories may face setbacks in the development and validation of other noninvasive prenatal and molecular diagnostic tests.

We need to make significant investments to ensure our diagnostic test services perform properly and are cost-effective. We or our partners may need to apply for and obtain certain regulatory approvals to sell our current test services or test services under development, and it is uncertain whether such approvals will be granted.

Even if we develop new test services or other products for commercial use and obtain all necessary regulatory approvals, we may not be able to develop test services or other products that are accepted or satisfy customers in the diagnostic or other markets or the emerging field of molecular medicine and that can be commercialized successfully.

Sequenom Laboratories will need to expand its marketing and sales capabilities in order to increase demand for the MaterniT21 PLUS test, to expand geographically, and to successfully commercialize any other diagnostic tests it may develop.

Sequenom Laboratories' current sales and marketing operations may not be sufficient to achieve the level of market awareness and sales required to attain significant commercial success for the MaterniT21 PLUS test, to expand its geographic presence, and to successfully commercialize any other diagnostic tests it may develop. In order to increase sales of the MaterniT21 PLUS test, Sequenom Laboratories may need to:


"	expand its sales force by recruiting additional sales representatives in selected markets;


"	enter into collaborative relationships with third parties to expand sales and marketing reach and frequency;


"	educate clinicians, other health care professionals, clinical diagnostic laboratories, health care thought leaders, network providers, and third-party payors regarding the clinical benefits and cost-effectiveness of the MaterniT21 PLUS test;


"	expand the number of clinical diagnostic laboratory and hospital laboratory customers; and


"	establish, expand, and manage sales and reimbursement arrangements with third parties, such as insurance companies and network providers.

Sequenom Laboratories has limited experience in selling and marketing the MaterniT21 PLUS test. Sequenom Laboratories may need to hire additional sales and marketing personnel with experience in the diagnostic, medical device or pharmaceutical industries. Sequenom Laboratories faces competition from other companies in these industries, some of whom are much larger than it and who can pay significantly greater compensation and benefits than Sequenom Laboratories can, in seeking to attract and retain qualified sales and marketing employees. If Sequenom Laboratories is unable to hire and retain qualified sales and marketing personnel, our business will suffer. If Sequenom Laboratories is not able to successfully implement its marketing, sales, reimbursement, and commercialization strategies, Sequenom Laboratories may not be able to expand geographically, increase sales of the MaterniT21 PLUS test, obtain adequate levels of reimbursement, or successfully commercialize any future tests that it may develop.

*Our operating results may fluctuate significantly.

Our revenues and results of operations may fluctuate significantly, depending on a variety of factors, including the following:


"	Sequenom Laboratories' success in developing, marketing, and selling, and changes in demand for its diagnostic testing services, including the MaterniT21 PLUS test, and the level of reimbursement and collection obtained for these tests;


"	the pricing of Sequenom Laboratories diagnostic testing services, and the timing and pricing of new diagnostic testing service offerings, and those of our competitors;


"	our ability to manage costs and expenses and effectively implement our business strategy;


"	our ability, if necessary, to raise additional capital;


"	the amount of royalties that we are required to pay to third parties in connection with the sale of certain of Sequenom Laboratories' testing services;


"	our success in collecting payments from third-party payors, customers, and collaborative partners, variations in the timing of these payments and the recognition of these payments as revenues;


"	our success in responding to customer complaints effectively and managing relationships with our customers;


"	our ability to identify and develop in a cost-efficient manner new services, such as noninvasive prenatal and other diagnostic technologies, our ability to improve current services to increase demand for such services and the success of such products and improvements;


"	our ability to establish and maintain sufficient intellectual property rights including our ability to overturn the U.S. District Court for the Northern District of Californias order ruling the 540 Patent to be invalid, and our ability to ultimately enforce the 540 Patent in the future against competitors and obtain injunctive relief and/or monetary damages from competitors;


"	the potential need to acquire licenses to new technology, including genetic markers that may be useful in diagnostic applications, or to use our technology in new markets, which could require us to pay unanticipated license fees and royalties in connection with licenses we may need to acquire;


"	our research and development progress, including Sequenom Laboratories' ability to develop and validate improved or new tests, and how rapidly we are able to achieve technical milestones;


"	the cost, quality and availability of the hardware platforms and consumables, including reagents and related components and technologies, used by Sequenom Laboratories to perform its tests;


"	material developments in our customer and supplier relationships, including our ability to successfully transition to new technologies and/or alternative suppliers; and


"	the amount of any legal expenses, settlement payments, fines or damages arising from patent litigation or any future litigation.

Further, our revenues and operating results are difficult to predict because we do not have sufficient history to forecast revenues reliably for Sequenom Laboratories' tests, including the MaterniT21 PLUS test. The absence of or delay in reimbursement for Sequenom Laboratories' testing services and generating revenues has had, and will continue to have, a significant adverse effect on our operating results from period to period and will result in increased operating losses unless and until such reimbursement is established, at sufficient levels to cover our costs. Our internationally derived revenues and operating results are also difficult to predict because they depend upon the activities of our licensees in numerous countries.

We believe that period-to-period comparisons of our financial results will not necessarily be meaningful. You should not rely on these comparisons as an indication of our future performance. If our operating results in any future period fall below the expectations of securities analysts and investors, our stock price may decline.

*Our increased leverage as a result of our issuance of the 5.00% Convertible Senior Notes due 2017 may harm our financial condition and results of operations.

Our total consolidated long-term debt and obligations as of September�30, 2014, which includes the 5.00% Convertible Senior Notes due 2017, or Convertible Senior Notes, was $141.6 million and represented approximately 158% of our total capitalization as of that date.

Our level of indebtedness could have important consequences on our future operations, including:��


"	making it more difficult for us to meet our payment and other obligations under the Convertible Senior Notes and our other outstanding debt;


"	resulting in an event of default if we fail to comply with the financial and other restrictive covenants contained in our debt agreements, which could result in all of our indebtedness becoming immediately due and payable;


"	reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes;


"	limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industries in which we operate and the general economy;


"	placing us at a competitive disadvantage compared to our competitors that have less debt or are less leveraged and that, therefore, may be able to take advantage of opportunities that our debt levels or leverage prevent us from exploiting; and


"	limiting our ability to obtain additional financing.

Each of these factors may have a material and adverse effect on our business, financial condition and results of operations and our ability to meet our payment obligations under the Convertible Senior Notes and our other indebtedness.

We may not be able to generate enough cash flow from our operations to service our indebtedness.

We have a significant amount of indebtedness. In September 2012, we completed the sale of $130.0 million of our Convertible Senior Notes. Our ability to make payments on, and to refinance, our indebtedness, including the Convertible Senior Notes, and to fund planned commercialization efforts, research and development efforts, working capital and other general corporate purposes depends on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors, some of which are beyond our control. Historically, our business has generated losses and we may never become profitable. If we are unable to generate the necessary cash flow, we may be required to adopt one or more alternatives, such as selling assets, refinancing or restructuring indebtedness or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. If we raise additional debt, it will increase our interest expense, our leverage and our operating and financial costs. In addition, the terms of the indenture governing the Convertible Senior Notes restricts our ability to incur additional debt, and the agreements governing our other existing or future indebtedness may restrict us from adopting any of these alternatives. We may not be able to execute any of these actions on commercially reasonable terms or at all.

The Convertible Senior Notes also include a provision whereby upon a fundamental change, which is defined in the indenture related to the Convertible Senior Notes, holders of the Convertible Senior Notes may require us to repurchase, for cash, all or a portion of their Convertible Senior Notes. We may not have sufficient funds to pay the interest or repurchase price when due. In addition, the terms of any borrowing agreements which we may enter into from time to time may require early repayment of borrowings under circumstances similar to those constituting a fundamental change. These agreements may also make our repurchase of Convertible Senior Notes an event of default under the agreements.

If we fail to make any required payments under our indebtedness, or otherwise breach the terms of our indebtedness, including the Convertible Senior Notes, all or a substantial portion of our indebtedness could be subject to acceleration. In such a situation, it is unlikely we would be able to repay the accelerated debt, which would have a material adverse impact on our business, results of operations and financial condition.

*If we fail to generate enough cash flow from our operations or otherwise obtain the capital necessary to fund our operations, our financial results, financial condition and our ability to continue as a going concern will be adversely affected and we will have to cease or reduce further commercialization efforts or delay or terminate some or all of our diagnostic testing services or other product development programs.

We expect to continue to incur losses and may have to raise additional cash to fund our planned operations.

Our cash, cash equivalents, and marketable securities were $71 million as of September�30, 2014. Based on our current plans, we believe our cash, cash equivalents and current marketable securities and collections from our commercialized testing services and income from license agreements will be sufficient to fund our operating expenses and capital requirements through the next twelve months. Sequenom Laboratories is continuing to expand its operations following commercialization of the

MaterniT21 PLUS test and its research and development activities related to improvements to current tests and expansion of its test menu may require raising additional funds. In addition, there can be no assurances that these commercialization or research and development activities will be successful. We cannot be certain that our efforts to obtain reimbursement for our tests will be successful. Sequenom Laboratories' current sales and marketing operations may not be sufficient to maintain or increase the level of market awareness and sales required for it to retain significant commercial success for the MaterniT21 PLUS test. If we or Sequenom Laboratories are not able to successfully implement our marketing, sales commercialization, and reimbursement strategies, we and Sequenom Laboratories may not be able to expand geographically, increase sales of the MaterniT21 PLUS test or successfully commercialize any future tests or products that we may develop and therefore may not be able to generate revenues sufficient to fund operations. If we are not able to generate revenues sufficient to fund operations, we may need to raise additional funds through financing or other means. The actual amount of funds that we will need and the timing of any such investment will be determined by many factors, some of which are beyond our control.

We may need to raise additional funds in the future to support expanding commercialization of the MaterniT21 PLUS test and continued development and commercialization of our proprietary technology. We may need to sell equity or debt securities to raise significant additional funds. However, it may be difficult for us to raise additional capital through the sale of equity or debt securities.

The amount of additional funds we may need depends on many factors, including:


"	the degree to which our costs and expenses exceed our revenues;


"	Sequenom Laboratories' success selling, marketing and generating revenues from the MaterniT21 PLUS test and the level of reimbursement and collections from third-party payors;


"	Sequenom Laboratories' success in selling, marketing and generating revenues from its testing services for CF carrier screening, fetal Rhesus D genotyping, and AMD, and the level of reimbursement and collections from third-party payors for these and future tests;


"	the level of our selling, general, and administrative expenses;


"	our obligation to pay royalties to third parties in connection with the sale of our tests;


"	our success and the extent of our investment in the research, development and commercialization of diagnostic technology, including molecular diagnostics and noninvasive prenatal diagnostic technology and the acquisition and/or licensing of third-party intellectual property rights;


"	our success in obtaining sufficient quantities and quality of patient samples;


"	our success in obtaining regulatory clearance or approval, if applicable, to market any of our testing services in various countries, including the U.S.;


"	Sequenom Laboratories' success in validating additional laboratory-developed tests and the levels of clinical performance achieved;


"	Sequenom Laboratories' success either alone or in collaboration with our partners in launching and selling additional diagnostic testing services;


"	the extent to which we enter into, maintain, and derive revenues from licensing agreements, including agreements to out-license our noninvasive prenatal analysis technology, research and other collaborations, joint ventures and other business arrangements;


"	the level of our legal expenses and any damages or settlement payments arising from ongoing or new patent related litigation;


"	the amount of any legal expenses, settlement payments, fines or damages arising from any future litigation or demand and the extent to which any of the foregoing is not covered by insurance;


"	the dilution from any issuance of securities, whether in connection with future capital-raising or merger or acquisition transactions, the settlement of litigation, or otherwise;


"	the extent to which we acquire, and our success in integrating, technologies or companies;


"	compliance with corporate governance and regulatory developments or initiatives;


"	regulatory changes by the FDA, CMS and other worldwide regulatory authorities; and


"	technological developments in our markets.

Additional financing may not be available in amounts or on terms satisfactory to us or at all. General market conditions, the market price of our common stock, our financial condition, uncertainty about the successful commercialization and development of diagnostic tests, regulatory developments, the uncertainty regarding the results of ongoing litigation matters, the status and scope of our patent rights or other factors may not support capital raising transactions. In addition, our ability to raise additional capital may depend upon obtaining stockholder approval. There can be no assurance that we will be able to obtain stockholder approval if it is necessary. If we are unable to obtain sufficient additional funds on a timely basis or on terms favorable to us, we may be required to cease or reduce further commercialization of our testing services, to cease or reduce certain research and development projects, to sell, license or otherwise dispose of some or all of our technology or assets, to merge all or a portion of our business with another entity or we may not be able to continue as a going concern. If we raise

additional funds by selling shares of our capital stock (or otherwise issue shares of our capital stock or rights to acquire share of our capital stock), the ownership interest of our current stockholders will be diluted.

The development of new, more cost-effective tests that can be performed by our customers or by patients, or the internalization of testing by hospitals or physicians, could negatively impact our testing volume and revenues.

Advances in technology may lead to the development of more cost-effective tests that can be performed outside of a commercial clinical laboratory such as point-of-care tests that can be performed by physicians in their offices, esoteric tests that can be performed by hospitals in their own laboratories or home testing that can be performed by patients in their homes. Although CLIA compliance makes it cost prohibitive for many physicians to operate clinical laboratories in their offices, manufacturers of laboratory equipment and test kits could seek to increase their sales by marketing point-of-care test equipment to physicians. Diagnostic tests cleared or approved by the FDA for home use are automatically deemed to be exempt under CLIA and may also be performed in physician office laboratories with minimal regulatory oversight under CLIA. Test kit manufacturers could seek to increase sales to both physicians and patients of test kits cleared or approved by the FDA for point-of-care testing or home use. Development of such technology and its use by our customers could reduce the demand for Sequenom Laboratories' testing services and negatively impact our revenues. Our future success will depend on our ability to keep pace with the evolving needs of our customers on a timely and cost-effective basis and to pursue new market opportunities that develop as a result of technological and scientific advances.

*Quarterly revenues from our Sequenom Laboratories segment may be difficult to predict.

Sequenom Laboratories started commercializing the MaterniT21 PLUS test in the fourth quarter of 2011. We may be unable to accurately predict quarterly revenues relating to the MaterniT21 PLUS test due to relatively recent changes in billing codes and adoption and implementation of billing codes by payors, uncertainties related to the Affordable Care Act, and our and Sequenom Laboratories' limited experience in marketing and commercializing and obtaining reimbursement for laboratory testing services. If our quarterly or year-end revenues fall below the expectations of securities analysts and investors, our stock price may decline.

Uncertainty regarding the development of new tests and diagnostic tests could materially adversely affect our and Sequenom Laboratories' business, financial condition, and results of operations.

We and Sequenom Laboratories are continuing to focus research and development efforts on tests, in addition to improvements and additions to current tests, including the MaterniT21 PLUS test. The launch of any other diagnostic test will require the completion of certain clinical development and commercialization activities, and may include the efforts of collaborative partners on which we sometimes rely, and the expenditure of additional cash resources. We can give no assurance that we will be able to successfully complete the clinical development of any other test or diagnostic test or that we will be able to establish or maintain the collaborative relationships (if any collaborators are involved) that are essential to our clinical development and commercialization efforts. We also can give no assurance that we will be able to reduce our expenditures sufficiently or otherwise mitigate the risks associated with our business to raise enough capital to complete clinical development or commercialization activities. Clinical development requires large numbers of patient specimens and we may not be able to use prior collected specimens or collect a sufficient number of appropriate specimens in a timely manner in the future to complete clinical development for any planned test. Patient specimens for clinical development for noninvasive prenatal tests may be unavailable or available only in limited quantities due to an increased number of competitive parties seeking such specimens. Also, as noninvasive testing increases in demand and invasive testing (such as amniocentesis) potentially declines over time, less patient specimens for clinical development become available that include confirmatory data from an invasive procedure such as amniocentesis. Failure to possess or to collect a sufficient number of appropriate specimens in a timely manner could prevent or significantly delay our ability to research, develop, complete clinical development and validation, obtain FDA clearance or approval as may be necessary, or launch any of our planned tests. Any failure to complete on-going clinical studies for our planned tests could have material adverse effects on our business, operating results or financial condition.

*We may not successfully obtain, or maintain, regulatory approval of any noninvasive prenatal or other product which we or our licensing or collaborative partners develop.

Products that we or our collaborators develop in the noninvasive prenatal diagnostic or other markets depending on their intended use, may be regulated as medical devices by the FDA and other worldwide regulatory authorities. In the U.S., our tests may require either a Premarket 510(k) Notification or a Premarket Approval Application to be submitted to the U.S. FDA prior to marketing in interstate commerce. The Premarket 510(k) Notification process usually takes from three to nine months from submission to clearance, but can take significantly longer. The PMA approval process is much more costly, lengthy, uncertain and generally takes from nine to eighteen months or longer from submission to approval. In addition, commercialization of any diagnostic or other product that we or our licensees or collaborators develop would depend upon successful completion of non-clinical (bench) testing and clinical studies. Non-clinical bench testing and clinical studies can be long, expensive, and

uncertain processes and we do not know whether we, our licensees, or any of our collaborators, would be permitted or able to undertake clinical studies of any potential products. It may take us or our licensees or collaborators many years to complete any such testing, and failure could occur at any stage. Results from preliminary studies do not necessarily predict final results, and acceptable results in early studies may not be repeated in later studies. A number of companies in the diagnostics industry, including biotechnology companies, have suffered significant setbacks in clinical studies, even after promising results in earlier studies. Delays or rejections of potential products may be encountered based on changes in regulatory policy for product approval during the period of product development and regulatory agency review. If our projects reach clinical studies, we or our licensees or collaborators could decide to discontinue development of any or all of these projects at any time for commercial, scientific, or other reasons.

The FDA currently regulates IVD devices under the authority of Section�201(h) of the Federal Food, Drug, and Cosmetic Act. To date, the FDA has exercised its regulatory enforcement discretion to not regulate laboratory-developed tests (LDTs) as a medical device and exempted from regulation LDTs created and used within a single laboratory. However, at a July 2010 FDA public meeting on oversight of tests, the FDA stated that it was reconsidering its enforcement discretion policy. The FDA commented that regulation of LDTs may be warranted because of the growth in the volume and complexity of testing services utilizing LDTs. On July 31, 2014 the FDA notified the U.S. Congress of it's intent to issue draft guidance on regulation of LDTs based on risk to patients rather than whether they were made by a conventional manufacturer or a single laboratory. This draft guidance includes pre-market review for higher-risk LDTs, like those used to guide treatment decisions, including companion diagnostics that have entered the market as LDTs. In addition, under the draft guidance, the FDA would continue to exercise enforcement discretion for LDTs used solely for forensic purposes and LDTs used in CLIA-certified high complexity histocompatibaility labs for transplantation, among others. The final regulation would be phased in over many years. On September 30, 2014, the FDA posted on its website draft guidance on regulation of LDTs, maintaining a risk-based approach outlined in its notice to U.S. Congress on July 31, 2014.� The published draft guidance is identical to the congressional notification.� On October 3, 2014, the FDA published notices in the Federal Register formally announcing the release of the draft guidance and the beginning of a 120-day public comment period, with final guidance potentially issued in the March-April 2015 timeframes. Our revenues from Sequenom Laboratories' testing services utilizing its LDTs comprise almost 100% of our total revenues.

In addition to the potential regulation of LDTs by FDA as mentioned above, certification of the laboratory is required under CLIA to ensure the accuracy and reliability of all laboratory testing, except research, on human specimens through a quality assurance program, which includes standards in the areas of personnel qualifications, administration and participation in proficiency testing, patient test management and quality control procedures. In addition, state laboratory licensing and inspection requirements may also apply.

We cannot predict the extent of the FDA's final guidance on regulation of LDTs in general or with respect to our LDTs in particular. If Sequenom Laboratories is unable to comply with the FDA's final guidance on regulation of LDTs, it may have to cease its testing services which could have a material adverse effect on our business, results of operations, financial condition and cash flows. Additionally, if Sequenom Laboratories is unable to successfully launch any additional LDTs or if it is otherwise required to obtain FDA premarket clearance or approval prior to commercializing any of its products or is not able to comply with any other regulatory requirements that the FDA may impose on LDTs, its ability to generate revenues from providing such products may be delayed and it may never be able to generate significant revenues from providing diagnostic products.

The results of preclinical and clinical studies are not necessarily predictive of future results, and our current diagnostic tests and product candidates may not have favorable results in later studies.

We intend to publish results of certain of our studies, and have published studies of Sequenom Laboratories' tests, and there can be no assurance that such results when published will be viewed favorably by clinicians, patients or investors. In addition, Sequenom Laboratories' scientific collaborators and other third parties may also publish results relating to their own studies. There can be no assurance that the results of their studies when published will be viewed favorably. If such results are not viewed favorably after publication, it could have a negative impact on the perception of Sequenom Laboratories' technology and its tests.

Performance achieved in published studies may not be repeated in later studies that may be required to obtain either FDA premarket clearance or approval. Limited results from earlier-stage verification studies may not predict results from studies in larger numbers of subjects drawn from more diverse populations over a longer period of time. Unfavorable results from ongoing preclinical and clinical studies could result in delays, modifications or abandonment of ongoing or future clinical studies, or abandonment of a product development program or may delay, limit or prevent regulatory approvals or commercialization.

*We and our licensees and collaborators may not be successful in developing or commercializing diagnostic products or tests, including noninvasive prenatal diagnostic products or tests, or other products or tests using technologies, services, or discoveries.

Development of products or tests by Sequenom Laboratories, our licensees, or our collaborators are subject to risks of failure inherent in the development and commercial viability of any such product or test, such as demand for such product or test. These risks further include the possibility that such product or test would:


"	be found to be ineffective, unreliable, inadequate or otherwise fail to receive regulatory clearance or approval or be subject to new or additional regulatory requirements;


"	be difficult or impossible to manufacture or perform on a commercial scale;


"	be uneconomical to market or otherwise not be effectively marketed;


"	fail to be successfully commercialized if adequate reimbursement from government health administration authorities, private health insurers, and other organizations for the costs of such product is unavailable;


"	be impossible to commercialize because such product or test infringes on the proprietary rights of others or competes with products marketed by others that are superior;


"	fail to be commercialized prior to the successful marketing of similar products or tests by competitors; or


"	be subject to competitive price erosion that makes it uneconomical to market effectively.

If a licensee discovers or develops diagnostic or other products or tests or we or Sequenom Laboratories or a collaborator, discover or develop diagnostic or other products or tests using our technology, products, services, or discoveries, we may rely on that licensee or collaborator, referred to as partner, for product or test development, regulatory approval, manufacturing, and marketing of those products or tests before we can realize revenues and some or all of the milestone payments, royalties, or other payments we may be entitled to under the terms of the licensing or collaboration agreement. If we or our partners fail to develop successful products or tests, we will not earn the revenues contemplated and we could lose license rights to intellectual property that are required to commercialize such products or tests. Our agreements may allow our partners significant discretion in electing whether to pursue any of these activities. We cannot control the amount and timing of resources our partners may devote to our programs or potential products or tests. As a result, we cannot be certain that our partners will choose to develop or commercialize any products or tests or will be successful in doing so. In addition, if a partner is involved in a business combination, such as a merger or acquisition, or changes its business focus, its performance under its agreement with us may suffer and, as a result, we may not generate any revenues or only limited revenues from the royalty, milestone, and similar payment provisions contained in our agreement with that partner.

*We may not be able to form and maintain the collaborative relationships or the rights to third-party intellectual property and technologies that our business strategy requires and such relationships may lead to disputes over technology rights or product revenue, royalties, or other payments.

We form research collaborations and licensing arrangements with collaborators to operate our business successfully. To succeed, we will have to maintain our existing relationships and establish additional collaborations and licensing arrangements. Our current strategy includes pursuing partnering opportunities with companies interested in or involved in the development of pharmaceutical and diagnostic products and tests. Our strategy also includes obtaining ownership of, or licenses to third-party intellectual property rights and technologies, such as our rights to noninvasive prenatal analysis rights that we acquired from Isis (U.S. Patent No.�6,258,540 entitled Noninvasive Prenatal Diagnosis and foreign equivalents), from CUHK (U.S. Patent Application Nos. 12/178,181 and 13/417,119, 13/070,266, and 13/070,275 (published, respectively, as U.S. Publication Nos. US2009/0029377, US2012/0208708, US2012/0003637, and US2011/0318734, and each titled Diagnosing Fetal Chromosomal Aneuploidy Using Massively Parallel Genomic Sequencing) and foreign equivalents including issued European Patent EP2183693 B1, and exclusive rights we have acquired related to our development and commercialization of Sequenom Laboratories' test to predict the risk of a patient with dry or early stage AMD progressing to wet or advanced choroidal neovascular disease within 2, 5, and 10 years, and other rights we have acquired to potentially expand our product and testing portfolio and generate additional sources of revenue. Disputes may arise in connection with these collaborations and licensing arrangements, which may result in liability to us or may result in the loss of acquired technology that may adversely affect our business.

We cannot be sure that we will be able to establish any additional research collaborations, licensing arrangements, or other partnerships necessary to develop and commercialize products or that we can do so on terms favorable to us. If we are unable to establish these collaborations or licensing arrangements, we may not be able to successfully generate any milestone, royalty, or other revenues from sales of these products or applications. If our collaborations or licensing arrangements are not successful or we are not able to manage multiple collaborations successfully, our programs will suffer and we may never generate any revenues or only generate limited revenues from sales of products based on licensed rights or technologies or under these collaborative or licensing arrangements. If we increase the number of collaborations or licensing agreements, it will become more difficult to manage the various relationships successfully and the potential for conflicts among the collaborators and licensees or licensors will increase. Conflicts with our collaborators, licensees or licensors, or other factors may lead to disputes

over technology or intellectual property rights or product revenue, royalties, or other payments, which may adversely affect our business, including our ability to generate revenues from the MaterniT21 PLUS test.

In addition, our government grants provide the government certain license rights to inventions resulting from funded work. Our business could be harmed if the government exercises those rights.

The agreements and rights we rely upon to protect the intellectual property underlying our tests and technology may not be adequate, which could enable others to use our technology and reduce our ability to compete with them.

We require our employees, consultants, advisors, and collaborators to execute confidentiality agreements and in certain cases, assignment or license agreements. We cannot guarantee that these agreements will provide us with adequate intellectual property ownership or protection against improper or unauthorized use or disclosure of confidential information or inventions. In some situations, these agreements may conflict with or be subject to the rights of others with whom our employees, consultants, advisors, or collaborators have prior employment or consulting relationships. In some situations these types of agreements or relationships are subject to foreign law, which provides us with less favorable rights or treatment than under U.S. law. Others may gain access to our inventions, trade secrets or independently develop substantially equivalent proprietary materials, products, information, and techniques.

Our business and industry are subject to complex and costly regulation and if government regulations are interpreted or enforced in a manner adverse to us, we may be subject to enforcement actions, penalties, exclusion, and other material limitations on our operations.

We are subject to various federal, state and local laws targeting fraud and abuse in the health care industry, including anti-kickback and false claims laws. The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under a federal health care program, such as Medicare or Medicaid. The definition of remuneration has been broadly interpreted to include anything of value, including, for example, gifts, discounts, the furnishing of free supplies, equipment or services, credit arrangements, payments of cash and waivers of payment. Several courts have interpreted the statute's intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the statute has been violated. The PPACA, among other things, amends the intent requirement of the federal Anti-Kickback Statute and certain criminal health care fraud statutes to provide that a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. In addition, the PPACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act or the civil monetary penalties statute, which imposes penalties against any person who is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.

The Anti-Kickback Statute is broad and prohibits many arrangements and practices that are lawful in businesses outside of the health care industry. Recognizing that the Anti-Kickback Statute is broad and may technically prohibit many innocuous or beneficial arrangements, Congress authorized the HHS Office of Inspector General, or OIG, to issue a series of regulations, known as safe harbors. These safe harbors set forth requirements that, if met in their entirety, will assure health care providers and other parties that they most likely will not be prosecuted under the Anti-Kickback Statute. The failure of a transaction or arrangement to fit precisely within one or more safe harbors does not necessarily mean that it is illegal, or that prosecution will be pursued. However, conduct and business arrangements that do not fully satisfy each applicable safe harbor may result in increased scrutiny by government enforcement authorities, such as the OIG. Penalties for violations of the federal Anti-Kickback Statute include criminal penalties and civil sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other healthcare programs. Many states have adopted laws similar to the Anti-Kickback Statute. Some of these state prohibitions apply to referral of patients for health care items or services reimbursed by any payor, not only the Medicare and Medicaid programs, and do not contain identical safe harbors. Government officials have brought cases against numerous companies and certain sales and marketing personnel for allegedly offering unlawful inducements to potential or existing customers in an attempt to procure their business.

In addition to the Anti-Kickback Statute, we are also subject to the physician self-referral laws, commonly referred to as the Stark law, which generally prohibits physicians from referring Medicare patients to providers of designated health services, including clinical laboratories, with whom the physician or the physician's immediate family member has an ownership interest or compensation arrangement, unless an applicable exception applies.�The Stark law is a strict liability statute, meaning that a violation may occur regardless of the parties' intent. Moreover, many states have adopted or are considering adopting similar laws, some of which extend beyond the scope of the Stark law to prohibit the payment or receipt of remuneration for the prohibited referral of patients for designated health care services and physician self-referrals, regardless of the source of the payment for the patient's care. Penalties for violations of the Stark law include denial of payment, refund of payment, imposition of up to $15,000 in civil monetary penalties for each claim submitted in violation of the law, up to

$100,000 in civil monetary penalties for each arrangement or scheme that violates the law, a civil monetary penalty of three times the amount claimed, and exclusion from participation in the Medicare program and/or other government health programs. If it is determined that certain of our practices or operations violate the Stark law or similar statutes, the imposition of any such penalties could harm our business.

Another development affecting the health care industry is the increased use of the federal civil False Claims Act and, in particular, actions brought pursuant to the False Claims Act's whistleblower or qui tam provisions. The False Claims Act imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal health care program. The qui tam provisions of the False Claims Act allow a private individual to bring actions on behalf of the federal government alleging that the defendant has submitted a false claim to the federal government, and to share in any monetary recovery. In recent years, the number of suits brought by private individuals has increased dramatically. In addition, various states have enacted false claim laws analogous to the False Claims Act. Many of these state laws apply where a claim is submitted to any third-party payor and not merely a federal health care program. When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties of $5,500 to $11,000 for each separate false claim. There are many potential bases for liability under the False Claims Act. Liability arises, primarily, when an entity knowingly submits, or causes another to submit, a false claim for reimbursement to the federal government. The False Claims Act has been used to assert liability on the basis of, among other things, inadequate care, kickbacks and other improper referrals, improper use of Medicare numbers when detailing the provider of services, and allegations as to misrepresentations with respect to the services rendered. Our activities relating to the sale and marketing of our products may be subject to scrutiny under these laws. Also, the Health Insurance Portability and Accountability Act of 1996, or HIPAA, created several new federal crimes, including health care fraud and false statements relating to health care matters. The health care fraud statute prohibits knowingly and willfully executing a scheme to defraud any health care benefit program, including private third-party payors. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for health care benefits, items or services. We are unable to predict whether we would be subject to actions under the False Claims Act or a similar state law, or under the federal crimes created by HIPAA, or the impact of such actions. However, the costs of defending such claims, as well as any sanctions imposed, could significantly adversely affect our financial performance.

Federal law prohibits any entity from offering or transferring to a Medicare or Medicaid beneficiary any remuneration that the entity knows or should know is likely to influence the beneficiary's selection of a particular provider, practitioner or supplier of Medicare or Medicaid payable items or services, including waivers of copayments and deductible amounts (or any part thereof) and transfers of items or services for free or for other than fair market value. Entities found in violation may be liable for civil monetary penalties of up to $10,000 for each wrongful act. Although we believe that our sales and marketing practices are in material compliance with all applicable federal and state laws and regulations, relevant regulatory authorities may disagree, and violation of these laws or our exclusion from such programs as Medicaid and other governmental programs as a result of a violation of such laws could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Ethical, privacy, or other concerns about the use of genetic information could reduce demand for our products and services.

Genetic testing has raised ethical issues regarding privacy and the appropriate uses of the resulting information. For these reasons, governmental authorities may limit or otherwise regulate the use of genetic testing, including the MaterniT21 PLUS test, or prohibit testing for genetic predisposition to certain conditions, particularly for those that have no known cure. Such concerns may lead individuals to refuse to use genetics tests even if permitted and may lead to negative public relations. Any of these scenarios could reduce the potential markets for our products and services, which would seriously harm our business, financial condition, and results of operations.

If the validity of an informed consent from a subject was to be challenged, we could be forced to stop using some of our resources, which would hinder our diagnostic product development efforts.

We have measures in place to ensure that all clinical data and genetic and other biological samples that we receive from our clinical collaborators have been collected from subjects who have provided appropriate informed consent for the data and samples provided for purposes which extend to include commercial diagnostic product and test development activities. We have measures in place to ensure that data and samples that have been collected by our clinical collaborators are provided to us on a subject de-identified manner. We also have measures in place to ensure that the subjects from whom our data and samples are collected do not retain or have conferred on them any proprietary or commercial rights to the data or any discoveries derived from them. Our clinical collaborators are based in a number of different countries, and, to a large extent, we rely upon our clinical collaborators for appropriate compliance with the subject's informed consent provided and with local law and international regulation. That our data and samples come from and are collected by entities based in different countries results

in complex legal questions regarding the adequacy of informed consent and the status of genetic material under a large number of different legal systems. The subject's informed consent obtained in any particular country could be challenged in the future, and those informed consents could prove invalid, unlawful or otherwise inadequate for our purposes. Any findings against us, or our clinical collaborators, could deny us access to or force us to stop using some of our clinical samples, which would hinder our diagnostic product and test development efforts. We could become involved in legal challenges, which could consume our management and financial resources.

If we cannot obtain licenses to patented genetic markers and genes relevant to our diagnostic areas of interest, we could be prevented from obtaining significant revenues or becoming profitable.

The USPTO has issued patents claiming single SNP and gene discoveries and their related associations and functions. The law is evolving and the validity of those types of patents has been and continues to be unclear. If certain SNPs and genes are patented, the validity of such patents is unclear and it is uncertain whether we may need to obtain rights to those SNPs and genes to develop, use, and sell related assays and other types of products or services utilizing such SNPs and genes. Required licenses may not be available on commercially acceptable terms. If we were to fail to obtain licenses to certain patented SNPs and genes claimed under valid patents, we might never achieve significant revenues from our diagnostic product development.

*We may not be able to successfully adapt or maintain our products for commercial applications.

A number of potential applications of our technology and potential products and tests, including diagnostic applications for noninvasive prenatal and other molecular testing, may require significant enhancements in our core technology or the in-licensing of intellectual property rights or technologies. In connection with developing new products and applications, we may not effectively deploy our research and development efforts in a cost-efficient manner or otherwise in a manner that leads to the successful commercialization and scale-up of such products and applications. If we are not successful enhancing our technology or the in-licensing of technology our products or tests may not achieve or maintain a significant level of market acceptance, and our business, financial condition and results of operations could be seriously harmed.

*We may not be able to successfully compete in the diagnostic industry.

The diagnostic industry is highly competitive. We expect to compete with a broad range of companies in the U.S. and other countries that are engaged in the development and production of products, tests, applications, services, and strategies to develop and commercialize diagnostic, noninvasive prenatal diagnostic, and other products and tests for customers in the molecular medicine fields as well as diagnostic service laboratories and customers in other markets. They include:


"	biotechnology, diagnostic, and other life science companies;


"	academic and scientific institutions;


"	governmental agencies; and


"	public and private research organizations.

Some of our competitors and/or potential competitors have greater financial, technical, research, marketing, sales, distribution, operations, service, and other resources than we do. Our competitors may offer broader product lines and services and have greater name recognition than we do. Several companies are currently offering, making, or developing products and tests that compete with our tests. Our competitors may develop or market technologies, tests or products that are more effective or commercially attractive than our current or future tests or products that may render our technologies or products or tests obsolete or that have superior intellectual property rights.

If we do not effectively manage our business as it grows and evolves, it could affect our internal operations as well as our ability to pursue opportunities and expand our business.

As our development and commercialization plans and strategies develop, we expect to expand our employee base for managerial, operational, sales, marketing, financial and other resources. Future growth would impose significant added responsibilities on members of management, including the need to identify, recruit, maintain, motivate and integrate additional employees. Also, our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure and may impact our ability to maintain effective internal controls for financial reporting. In addition, evolution in our business, particularly our transition to developing and commercializing molecular diagnostic tests, has placed and may continue to place a significant strain on our personnel, facilities, management systems, information technology infrastructure, disclosure controls, internal controls and resources. If we fail to effectively manage the evolution of our business and the transition to also being a provider of diagnostic products and tests, or fail to take other necessary action to maintain close coordination among our various departments, our ability to execute on our business plan, maintain our credibility, pursue business opportunities, maintain and expand our business, and sell our products and tests in new markets may be adversely affected.

*We may not successfully complete the sale, or acquisition of, or merger, or joint venture with businesses that we desire to acquire, merge, or partner with.

We may acquire additional businesses or technologies, merge or form joint ventures with other businesses, or enter into other strategic transactions. Managing and completing future acquisitions, mergers, joint ventures, sales, or other strategic transactions entails numerous operational and financial risks, including:


"	the inability to retain key employees of any acquired or merged businesses or hire enough qualified personnel to staff any new or expanded operations;


"	the impairment of relationships with key customers of acquired or merged businesses due to changes in management and ownership of the acquired or merged businesses;


"	the inability to sublease on financially acceptable terms excess leased space or terminate lease obligations of acquired or merged businesses that are not necessary or useful for the operation of our business;


"	the exposure to federal, state, local and foreign tax liabilities in connection with any acquisition or merger or the integration of any acquired or merged businesses;


"	the exposure to unknown liabilities or disputes with the former stakeholders or management or employees of acquired or merged businesses;


"	higher than expected acquisition or merger and integration expenses that would cause our quarterly and annual operating results to fluctuate;


"	increased amortization expenses if an acquisition or merger results in significant intangible assets;


"	combining the operations and personnel of acquired businesses with our own, which would be difficult and costly;


"	disputes over rights to acquired or accessed technologies or with licensors or licensees of those technologies; and


"	integrating or completing the development and application of any acquired or accessed technologies, which would disrupt our business and divert management's time and attention.

We may also attempt to acquire businesses or technologies, merge businesses or form joint ventures, or attempt to enter into strategic transactions that we are unable to complete. If we are unable to complete such transactions, we may expend substantial resources and ultimately not successfully complete the transaction. Such transactions may also distract management and result in other adverse effects on our business and operations. These transactions may also involve the issuance of shares of our capital stock, which may result in dilution to our stockholders.

*We may potentially compete with our customers or licensees, which may adversely affect our business.

We have entered into diagnostic test services agreements and license agreements, for the MaterniT21 PLUS test, substantially similar tests, and other test services. Some of these contractual partners send patient samples to Sequenom Laboratories for test services and other partners perform the testing in their own laboratory or plan to do so in the future. Although there are many potential business opportunities, our customers and licensees may seek diagnostic testing service business from clients or potential clients that we already have as clients or have chosen to pursue. In such cases we will likely compete against our customers or licensees. Competition from our customers or licensees may adversely affect our business or our ability to successfully commercialize our diagnostic testing services.

If we cannot attract and retain highly-skilled personnel, our growth might not proceed as rapidly as we intend and our business may be adversely affected.

The success of our business will depend on our ability to identify, attract, hire, train, retain, maintain, and motivate highly skilled personnel, particularly sales, scientific, medical, laboratory, CLIA laboratory, and technical personnel, for our future success. Competition for highly skilled personnel is intense, in particular for licensed laboratory technicians in the state of California, and we might not succeed in attracting and retaining these employees. If we cannot attract and retain the personnel we require, we would not be able to expand our business as rapidly as we intend. When we seek to hire personnel to fill open positions, we may be unable to hire qualified replacements for the positions that we need to fill, and there may be significant costs associated with the recruiting, hiring and retention of officers and employees for the open positions. The market price of our common stock has decreased over time which has reduced the retention value of many of our prior equity awards made to our employees and officers. If we lose key employees, officers, scientists, physician collaborators or if our management team is not able to effectively manage us through these events, our business, financial condition, and results of operations may be adversely affected. We do not carry key person insurance covering any of our officers or other employees.

*The implementation of our executive succession planning, the promotion of several individuals to key management positions and the departure and replacement of key management positions could adversely impact our business.

A number of personnel adjustments were made affecting our executive officers.� For example, effective June 10, 2014, Harry F. Hixson, Ph.D., our former Chief Executive Officer, and Paul V. Maier, our former Chief Financial Officer, retired, and they were succeeded by William Welch, our former President and Chief Operating Officer, and Carolyn D. Beaver, our former Vice President and Chief Accounting Officer, respectively.� Additionally, at the end of 2013, two of our executive officers,

Ronald M. Lindsay, Ph.D., then our Executive Vice President, Strategic Planning, and Charles R. Cantor, Ph.D., then our Chief Scientific Officer, retired from service, and Dirk van den Boom, Ph.D., our former Executive Vice President, Research and Development and Chief Scientific Officer, was appointed as their successor, and effective June 10, 2014, became our Chief Scientific & Strategy Officer. Also, William Bowen, then our Senior Vice President, General Counsel and Secretary resigned and Jeffrey D. Linton, the former Senior Vice President and General Counsel of Beckman Coulter, Inc. was appointed to the position effective September 10, 2014. Because our business and operations are substantially dependent on the performance of our executive officers and key employees, any adjustment to our executive management team could adversely impact our results of operations and financial condition.� Furthermore, we cannot guarantee that we selected the appropriate individuals to succeed former members of our executive management team, or that the process of promoting certain individuals will not interfere with our ability to achieve our business objectives. �Moreover, the implementation of our succession planning may cause concerns from current and potential customers, suppliers and other third parties with whom we do business, may increase the likelihood of turnover of other key employees, and may have an adverse impact on our business. In addition, the implementation of our executive succession planning may result in the diversion of efforts of our executive management team and other key employees, which could adversely affect our business.

Our success is dependent on the performance of our executive officers and key employees, and any accident or disability suffered by an executive officer or key employee could adversely impact our business.

Our business and operations are substantially dependent on the performance of our executive officers and key employees. If an executive officer is incapacitated or disabled by accident, sickness or otherwise so as to render such individual mentally or physically incapable of performing the services and duties required to be performed by such individual, it may adversely impact our results of operations and financial condition.

We incur significant costs as a result of operating as a public company and our management expects to continue to devote substantial time to public company compliance programs.

As a public company, we incur significant legal, accounting and other expenses due to our compliance with regulations and disclosure obligations applicable to us, including compliance with the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, as well as rules implemented by the SEC and The NASDAQ Stock Market. The SEC and other regulators have continued to adopt new rules and regulations and make additional changes to existing regulations that require our compliance. In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that have required the SEC to adopt additional rules and regulations in these areas. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact (in ways we cannot currently anticipate) the manner in which we operate our business. Our management and other personnel devote a substantial amount of time to these compliance programs and monitoring of public company reporting obligations and, as a result of the new corporate governance and executive compensation related rules, regulations and guidelines prompted by the Dodd-Frank Act and further regulations and disclosure obligations expected in the future, we will likely need to devote additional time and costs to comply with such compliance programs and rules. These rules and regulations will continue to cause us to incur significant legal and financial compliance costs and will make some activities more time-consuming and costly.

*We are subject to risks associated with our foreign business.

We expect that a portion of our sales will continue to be made outside the U.S. Sequenom Laboratories' revenues from its international licensees increased during the nine months ended September 30, 2014. A successful international effort will require us to develop relationships with international customers and collaborators, including licensees and distributors. We may not be able to identify, attract, retain, or maintain suitable international customers or collaborators. Expansion into international markets will require us to hire additional personnel to develop relationships with foreign customers and collaborators, licenses or distributors and maintain good relations with our foreign customers and collaborators, licensees or distributors. International operations include many of the same risks to our business that affect our domestic operations, but also involve a number of risks not typically present in domestic operations, including:


"	currency fluctuation risks;


"	changes in regulatory requirements;


"	licenses, tariffs, and other trade barriers;


"	political and economic instability and possible country-based boycotts;


"	difficulties in staffing;


"	potentially adverse tax consequences;


"	compliance with the Foreign Corrupt Practices Act and other countries anti-corruption laws;


"	the burden of complying with a wide variety of complex foreign laws and treaties; and


"	different rules, regulations, and policies governing intellectual property protection and enforcement.

Our international business is subject to additional laws and regulations that could result in increased operational costs and risk. For example, the European Union, or EU, is currently in the midst of reviewing updates to the EU Privacy Directive that would result in additional requirements and costs if passed, such as the appointment of a dedicated privacy officer and increased civil and criminal penalties in the event of any loss or unauthorized disclosure of private information related to any resident of the EU.

We must be in compliance with state and federal security and privacy regulations, which may increase our operational costs.

The privacy and security regulations under HIPAA establish comprehensive federal standards with respect to the uses and disclosures of protected heath information, or PHI, by health plans and health care providers, in addition to setting standards to protect the confidentiality, integrity and availability of electronic PHI. The regulations establish a complex regulatory framework on a variety of subjects, including, without limitation:


"	the circumstances under which uses and disclosures of PHI are permitted or required without a specific authorization by the patient, including but not limited to treatment purposes, to obtain payments for services and health care operations activities;


"	a patient's rights to access, amend and receive an accounting of certain disclosures of PHI;


"	the content of notices of privacy practices for PHI; and


"	administrative, technical and physical safeguards required of entities that use or receive PHI electronically.

The Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, which became effective on February 17, 2010, makes HIPAA's privacy and security standards directly applicable to business associates-independent contractors or agents of covered entities that have access to protected health information in connection with providing a service on behalf of a covered entity. We are a covered entity and also a business associate of our covered entity customers. Among other things, HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney's fees and costs associated with pursuing federal civil actions.

As Sequenom Laboratories expands its business it must continue to implement policies and procedures related to compliance with the HIPAA privacy and security regulations, as required by law, which may increase its operational costs. Furthermore, the privacy and security regulations provide for significant fines and other penalties for wrongful use or disclosure of PHI, including potential civil and criminal fines and penalties. Sequenom Laboratories has evaluated the security of its computer networks and determined that appropriate measures are in place to safeguard PHI contained on such networks. However, no security system is invulnerable to breach, and unauthorized persons may in the future be able to exploit weaknesses in the security systems of Sequenom Laboratories' computer networks and gain access to such PHI. Additionally, Sequenom Laboratories shares PHI with third-party contractors who are contractually obligated to safeguard and maintain the confidentiality of PHI. Unauthorized persons may be able to gain access to PHI stored in such third-party contractors' computer networks. Any wrongful use or disclosure of PHI by Sequenom Laboratories or its third-party contractors, including disclosure due to data theft or unauthorized access to Sequenom Laboratories' or its third-party contractors' computer networks, could subject us and Sequenom Laboratories to fines or penalties that could adversely affect our business and results of operations. Although the HIPAA statute and regulations do not expressly provide for a private right of damages, Sequenom Laboratories also could incur damages under state laws to private parties for the wrongful use or disclosure of confidential health information or other private personal information by Sequenom Laboratories or its third-party contractors.

In addition, different states and foreign nations, such as the EU, also impose certain requirements on the collection of all types of personal information. For example, the European Union Privacy Directive requires that we adhere to certain safe harbor requirements with respect to any personal information of a European resident or customer while various states in the U.S. have implemented equally restrictive requirements, such as 201 CMR 17.00, which requires that any company that obtains personal information of any resident of the Commonwealth of Massachusetts implement and maintain a security program that adequately protects such information from unauthorized use or disclosure. As a business that operates both internationally and across all fifty states, any wrongful use or disclosure of personally identifiable information, even if it does not constitute PHI, by Sequenom Laboratories or its third-party contractors, including disclosure due to data theft or unauthorized access to Sequenom Laboratories' or its third-party contractors' computer networks, could subject us and Sequenom Laboratories to fines or penalties that could adversely affect our business and results of operations, including the cost of providing credit monitoring and identity theft prevention services to affected consumers and loss of EU Safe harbor certification.

Security threats to our IT infrastructure and/or our physical buildings could expose us to liability, and damage our reputation and business.

It is essential to our business strategy that our technology and network infrastructure and our physical buildings remain secure and are perceived by our customers and corporate partners to be secure. Despite security measures, however, any

network infrastructure may be vulnerable to cyber-attacks by hackers and other security threats. As a leader in the field of molecular diagnostic testing and genetics analysis, we may face cyber-attacks that attempt to penetrate our network security, including our data centers, to sabotage or otherwise disable our research, products and services, misappropriate our or our customers' and partners' proprietary information, which may include personally identifiable information, or cause interruptions of our internal systems and services. Despite security measures, we also cannot guarantee security of our physical buildings. If successful, physical building penetration or any cyber-attacks could negatively affect our reputation, damage our network infrastructure and our ability to deploy our products and services, and harm our relationship with customers and partners that are affected, and expose us to financial liability. We maintain cyber security risk insurance coverage, however any uncovered claim or a claim in excess of our insurance coverage would have to be paid out of our cash reserves, which could have a detrimental effect on our financial condition. It is difficult to determine whether we have sufficient insurance coverage to cover potential claims. Also, we may not be able to procure or maintain insurance policies with desirable levels of coverage on commercially acceptable terms, or at all. We can provide no assurance that we will be able to avoid significant claims, which could hurt our reputation and our financial condition.

*We may not have adequate insurance if we become subject to product liability or other claims.

Our business exposes us to potential product liability and other types of claims and our exposure will increase as we and Sequenom Laboratories and our partners and collaborators expand commercialization of Sequenom Laboratories' tests including the MaterniT21 PLUS test. We have product and general liability insurance that covers us against specific product liability and other claims up to an annual aggregate limit of $30.0 million and $2.0 million, respectively. Any claim in excess of our insurance coverage would have to be paid out of our cash reserves, which would have a detrimental effect on our financial condition. It is difficult to determine whether we have obtained sufficient insurance to cover potential claims. Also, we cannot assure you that we can or will maintain our insurance policies on commercially acceptable terms, or at all. We can provide no assurance that we will be able to avoid significant product liability claims, which could hurt our reputation and our financial condition.

Responding to claims relating to improper handling, storage or disposal of hazardous chemicals, and radioactive and biological materials that we use could be time consuming and costly.

We use controlled hazardous and radioactive materials in the conduct of our business, as well as biological materials that have the potential to transmit disease. The risk of accidental contamination or injury from these materials cannot be completely eliminated. If an accident with these substances occurs, we could be liable for any damages that result, which could seriously harm our business. Additionally, an accident could damage our research and manufacturing facilities and operations, resulting in delays and increased costs. Such damage and any expense resulting from delays, disruptions, or any claims may not be covered by our insurance policies.

Hostile takeover bids and unsolicited offers could adversely impact our value and cause the trading price of our common stock to fall.

The current economic environment may encourage potential acquirers to make unsolicited and under-priced offers to acquire our business. If we are the target of a hostile takeover bid or unsolicited offer that undervalues our company, such hostile takeover bid or unsolicited offer may adversely impact public perception of the value of our company, which could cause the trading price of our common stock to fall. In addition, such hostile takeover bids or unsolicited offers may distract management and result in other adverse effects on our business and operations.

Our stock price has been and may continue to be volatile, and your investment could suffer a decline in value.

The trading price of our common stock has been volatile and could be subject to wide fluctuations in price in response to various factors, many of which are beyond our control, including but not limited to:


"	our ability to generate cash flow and continue as a going concern;


"	actual or anticipated variations in quarterly and annual operating results;


"	announcements regarding technological innovations, intellectual property rights, the outcome of patent litigation, research and development progress or setbacks, or product launches by us or our competitors;


"	our success in entering into, and the success in performing under, licensing and product and test development and commercialization agreements with others;


"	the success of validation studies for Sequenom Laboratories' tests under development and its ability to continue to publish study results in peer-reviewed journals;


"	our success in and the expenses associated with researching, developing, commercializing, and obtaining reimbursement for diagnostic products and tests, alone or in collaboration with our partners and obtaining any required regulatory approval for those products and tests;


"	the status of litigation against us; and


"	securities analysts' earnings projections or recommendations, third-party research recommendations, or general market conditions.

The stock market in general, The NASDAQ Global Select Market, and the market for life sciences companies in particular, have experienced extreme price and volume fluctuations that may have been unrelated or disproportionate to the operating performance of the listed companies. These price fluctuations may be rapid and severe and may leave investors little time to react. Broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance, and may expose us to potential securities class-action litigation.

We have in the past identified material weaknesses in our internal control over financial reporting which could, if not effectively remediated, result in additional material misstatements in our financial statements.

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. As disclosed in Item 9A of our 2012 Annual Report on Form 10-K, management identified material weaknesses in our internal control over financial reporting. A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As a result of these material weaknesses in conjunction with the 2012 Annual Report, our management concluded at that time that our internal control over financial reporting was not effective based on criteria set forth by the Committee of Sponsoring Organization of the Treadway Commission in Internal Control-An Integrated Framework. We have implemented a remediation plan designed to address these material weaknesses. If our remedial measures are insufficient to address the material weaknesses, or if additional material weaknesses or significant deficiencies in our internal control are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results, which could lead to substantial additional costs for accounting and legal fees.

Item 2.��Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4.��Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

�

Item 6.��Exhibits



Exhibit Number	�	Description of Document�
�	�	�
��3.1⁽¹⁾	�	Restated Certificate of Incorporation of the Registrant.
�	�	�
��3.2⁽²⁾	�	Restated bylaws of Registrant, as amended.
�	�	�
��3.3⁽³⁾	�	Registrant's Certificate of Designation of Series A Junior Participating Preferred Stock.
�	�	�
��4.1⁽¹⁾	�	Specimen common stock certificate.
�	�	�
��4.2⁽³⁾	�	Rights Agreement dated as of March 3, 2009, between the Registrant and American Stock Transfer and Trust Company, LLC.
�	�	�
��4.3⁽³⁾	�	Form of Right Certificate.
�	�	�
��4.4⁽⁴⁾	�	Warrant dated May 3, 2011, issued to the Chinese University of Hong Kong Foundation Limited.
�	�	�
��4.5⁽⁵⁾	�	Indenture dated as of September 17, 2012 by and between the Registrant and Wells Fargo Bank, National Association, as trustee.
�	�	�
��4.6	�	Form of 5.00% Convertible Senior Notes due 2017 (included in Exhibit 4.5).
�	�	�
��10.1^(*)	�	Patent Purchase Agreement dated September 30, 2014 between the Registrant and Isis Innovation Limited.
�	�	�
��10.2	�	Second Amendment to Lease dated as of September 25, 2014 by and between Registrant and TPSC IV LLC, a Delaware limited liability company.
�	�	�
��10.3⁽⁶⁾	�	First Amendment to Agreement for Services dated July 15, 2014 between Sequenom Center for Molecular Medicine, LLC and Quest Diagnostics, Incorporated.
�	�	�
31.1	�	Certification of Principal Executive Officer pursuant to Rule13a-14(a) and Rule 15d-14(a) of the Securities and Exchange Act, as amended.
�	�	�
31.2	�	Certification of Principal Financial Officer pursuant to Rule13a-14(a) and Rule 15d-14(a) of the Securities and Exchange Act, as amended.
�	�	�
32.1	�	Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
�	�	�
32.2	�	Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
�	�	�
101.INS	�	XBRL Instance Document.
�	�	�
101.SCH	�	XBRL Taxonomy Extension Schema Document.
�	�	�
101.CAL	�	XBRL Taxonomy Extension Calculation Linkbase Document.
�	�	�
101.DEF	�	XBRL Taxonomy Extension Definition Linkbase Document.
�	�	�
101.LAB	�	XBRL Taxonomy Extension Label Linkbase Document.
�	�	�
101.PRE	�	XBRL Taxonomy Extension Presentation Linkbase Database.


(*)	Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.


(1)	Incorporated by reference to the Registrant's Current Report on Form 8-K (No. 000-29101) filed June�6, 2006.


(2)	Incorporated by reference to the Registrant's Current Report on Form 8-K (No. 000-29101) filed January�15, 2010.


(3)	Incorporated by reference to the Registrant's Current Report on Form 8-K (No. 000-29101) filed March�4, 2009.


(4)	Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q (No. 000-29101) for the quarter ended June�30, 2011.


(5)	Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q (No. 000-29101) for the quarter ended September 30, 2012.


(6)	Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q (No. 000-29101) for the quarter ended June 30, 2014.

SIGNATURES

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 thereunto duly authorized.

Date: November 10, 2014

�



SEQUENOM, INC.
�	�
By:	/S/��CAROLYN D. BEAVER
�	Carolyn D. Beaver Chief Financial Officer	�

��

***Text Omitted and Filed Separately with the Securities and Exchange Commission.

Confidential Treatment Requested Under

17�C.F.R. Sections 200.80(b)(4) and 240.24b-2

PATENT PURCHASE AGREEMENT

THIS PATENT PURCHASE AGREEMENT (this Agreement) dated as of September�30, 2014 (the Effective Date), is entered into between ISIS INNOVATION LIMITED (Company No.�2199542) (Isis), with a place of business at Ewert House, Ewert Place, Oxford OX2 7SG, England, and SEQUENOM, INC., a Delaware corporation (Sequenom), with a place of business at 3595 John Hopkins Court, San Diego, California 92121-1331, USA.

WHEREAS, Isis is the owner of all right, title and interest in and to the Assigned Patent Rights (as defined below);

WHEREAS, Isis desires to sell, assign and transfer to Sequenom all right, title and interest in and to the Assigned Patent Rights, subject to the Reserved Rights (as defined below); and

WHEREAS, Sequenom desires to purchase all right, title and interest in and to the Assigned Patent Rights, subject to the Reserved Rights.

NOW, THEREFORE, in consideration of the representations, covenants and other terms and conditions contained herein, the parties hereto agree as follows:

1.Definitions. For the purposes of this Agreement, the following terms shall have the respective meanings set forth below and grammatical variations of such terms shall have corresponding meanings:

1.Additional Payments shall mean, collectively, any of the First Additional Payment, Second Additional Payment and Third Additional Payment (each as specified and referred to in clause 3.6.2) as are due in accordance with the terms of clause 3.6.2.

2.Affiliate shall mean, with respect to any Person, any other Person which directly or indirectly controls, is controlled by, or is under common control with, such Person. A Person shall be regarded as in control of another Person if it owns, or directly or indirectly controls, more than fifty percent�(50%) of the voting stock or other ownership interest of the other Person, or if it directly or indirectly possesses the power to direct or cause the direction of the management and policies of the other Person by any means whatsoever. For the avoidance of doubt, Oxford University is an Affiliate of Isis.

3.Assigned Patent Rights shall mean, collectively: (a)�the patents and patent application(s) listed on Exhibit�A; (b)�all divisionals, continuations, continuations-in-part, substitutes and provisional applications of any of the foregoing described patent applications; (c)�all patents that have issued

***Confidential Treatment Requested

or in the future issue from any of the foregoing described patent applications, including utility, model and design patents and certificates of invention; and (d)�all extensions, supplemental protection certificates, registrations, confirmations, reissues, reexaminations, inter partes reviews, post-grant reviews, restorations and renewals of or to any of the foregoing described patents.

4.Contract shall mean any indenture, lease, contract, covenant, arrangement, agreement, instrument, commitment, purchase order or license.

5.Documents shall have the meaning set forth in the Isis/Sequenom Licence Agreement.

6.Encumbrance shall mean any encumbrance, lien, charge, hypothecation, pledge, mortgage, adverse claim, option, preemptive right, or other security interest of any nature, or any Contract to create any of the foregoing entered into by Isis on or before the Effective Date.

7.Europe shall mean, collectively, Austria, Belgium, Denmark, Finland, France, Germany, Great Britain, Greece, Ireland, Italy, Luxembourg, Monaco, the Netherlands, Portugal, Spain, Sweden and Switzerland.

8.Field shall mean all fields and uses except: (a)�Rhesus D blood typing using real time PCR in Europe; and (b)�the supply of products or services using the Licensed Technology and/or the Assigned Patent Rights for the purpose of gender determination for social or lifestyle purposes in Hong Kong.

9.Isis Improvements shall have the meaning set forth in the definition of Licensors Improvements in the Isis/Sequenom License Agreement.

10.Isis/Sequenom License Agreement shall mean the Exclusive License of Technology Agreement, dated October 14, 2005, between Isis and Sequenom (as amended by (i)�an amendment agreement dated 19 October 2006; (ii)�a second amendment agreement dated 05 November 2007; (iii)�a third amendment agreement dated 03 November 2009; (iv)�a fourth amendment agreement dated 29 November 2012; and (v)�the Letter Amendment).

11.Know-how shall have the meaning set forth in the Isis/Sequenom License Agreement.

12.Letter Amendment means the letter amendment between the parties dated 26 October 2012.

13.Licensed Product A shall mean any product, service or composition covered by a Valid Patent Claim on a country-by-country basis.

14.Licensed Product B shall mean any product, service or composition in the field of NIPT, including (without limitation) MaterniT21 PLUS, VisibiliT, and SensiGene Fetal RHD Genotyping, for as long as there exists a Valid Patent Claim (regardless of whether the product, service or composition is covered by a Valid Patent Claim) on a country-by-country basis.

15.Licensed Product shall mean collectively Licensed Product A and Licensed Product B.

***Confidential Treatment Requested

16.Licensed Technology shall mean all of Isiss intellectual property rights in: (a)�the Know-how; (b)�the Documents; and (c)�Isis Improvements.

17.Market shall mean offering to sell, lease, license or otherwise commercially exploit the Licensed Product or the sale, lease, licence or other commercial exploitation of the Licensed Product.

18.Net Revenue shall mean the sum of:

1.the gross sales price of (x) Licensed Product in the form Marketed by Sequenom or its Affiliates after 1 July 2014; and (y) Licensed Product A in the form Marketed by licensees or sub-licensees (including through multiple tiers) and/or marketing partners of Sequenom, its Affiliates or their respective licensees or sub-licensees (including through multiple tiers) after 1 July 2014 under any agreement between them where Marketing by such persons is subject to a Selling Price Revenue Structure (whether such agreement exists or was agreed on, before or after 01 July 2014), in each case to end user customers less (i)�cash, quantity and trade discounts, rebates and other price reductions (including retroactive price reductions) actually given to end user customers under price reduction programs, (ii)�sales, use, value-added and other taxes paid in respect of sales (excluding personal and corporate income taxes), and (iii)�an allowance for contractual adjustments and for uncollectible or bad debts determined in accordance with generally accepted accounting principles; and

2.any up-front, milestone or other cash consideration (or cash equivalent of non-cash consideration) (but excluding any consideration described in clause 1.18.1) received by Sequenom or its Affiliates specifically in consideration for any license or sub-license or other contract granted to a Third Party to Market a Licensed Product and/or otherwise use the Assigned Patent Rights and/or the Licensed Technology,

in each case, excluding amounts received to reimburse Sequenoms or its Affiliates cost to perform research, development or similar services connected with technology transfer or technical assistance in connection with the Licensed Product. In respect of Licensed Product which is a product, service or composition covered by a Valid Patent Claim on a country-by-country basis, for purposes of calculating Net Revenue, if a claim in a granted or issued patent within any of the Assigned Patent Rights (except [&***&] ***Confidential Treatment Requested) is invalidated in a decision rendered by a court or administrative body of competent jurisdiction, such claim shall not be a Valid Patent Claim from and as of the date of the first determination of invalidity by a court or administrative body of competent jurisdiction, unless and until overturned on appeal, if any appeal is taken provided that if, in such circumstances, an appellate court subsequently overturns that invalidity decision, such claim shall be retrospectively treated as a Valid Patent Claim with effect from the date of the initial ruling of invalidity such that all sales of such Licensed Product during the period between the date of the initial ruling of invalidity and the successful appeal shall be included in the calculation of Net Revenues under this Agreement.

***Confidential Treatment Requested

19.NIPT means in vitro cell-free nucleic acid-based non-invasive prenatal diagnostic of a biological sample (including, but not limited to, plasma, serum, whole blood, and urine) obtained from a pregnant woman.

20.Non-Commercial Use shall mean academic and research purposes and the purposes of non-commercial clinical patient care, including the right for Oxford University to use the Licensed Technology, Assigned Patent Rights and Sequenoms Improvements as enabling technology in other research projects.

21.Oxford University shall mean the Chancellor, Masters and Scholars of the University of Oxford whose administrative offices are at the University Offices, Wellington Square, Oxford OX1 2JD.

22.Person shall mean any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity, as well as any syndicate or group of any of the foregoing.

23.Pre-Existing License shall mean�the license granted by Isis prior to the Effective Date to a Third Party licensee in connection with use of the Licensed Technology and Assigned Patent Rights outside the Field.

24.Proceedings shall mean those proceedings set out in Exhibit B hereto.

25.Reserved Rights shall mean the rights reserved under Exhibit C of this Agreement.

26.Selling Price Revenue Structure shall mean a structure under which Sequenoms or its Affiliates remuneration under an agreement with a Third Party is based on a percentage or other derivation of the price at which that Third Party Markets a Licensed Product to end user customers.

27.Sequenoms Improvements shall have the meaning set forth in the definition of Licensees Improvements in the Isis/Sequenom License Agreement.

28.Taxes shall mean any federal, state, local, municipal or other governmental taxes, duties, levies, fees, excises or tariffs.

29.Territory shall mean, collectively, the United States of America, Canada, Japan, Australia, Hong Kong and Europe.

30.Third Party shall mean any Person other than Sequenom, Isis or their respective Affiliates.

31.Valid Patent Claim shall mean a claim in a granted or issued patent within the Assigned Patent Rights that has not been invalidated in a final decision rendered by a court or administrative body of competent jurisdiction and from which no further appeal may be taken.

Any words following the terms including, include, in particular, for example or any similar expression shall be construed as illustrative and shall not limit the sense of the words, description, definition, phrase or term preceding those terms.

2.Representations and Warranties.

1.By Each Party. Each party represents and warrants to the other party as follows:

***Confidential Treatment Requested

1.Organization. Such party is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized.

2.Authorization and Enforcement of Obligations. Such party (a)�has the requisite power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder; and (b)�has taken all requisite action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered on behalf of such party, and constitutes a legal, valid, binding obligation, enforceable against such party in accordance with its terms.

3.Consents. All necessary consents, approvals and authorizations of all governmental authorities and other persons or entities required to be obtained by such party in connection with this Agreement have been obtained.

4.No Conflict. The execution and delivery of this Agreement and the performance of such partys obligations hereunder (a)�do not conflict with or violate any requirement of applicable laws, regulations or orders of governmental bodies; and (b)�do not conflict with, or constitute a default under, any contractual obligation of such party.

2.Regarding Assigned Patent Rights. Isis further represents and warrants to Sequenom that as at the Effective Date, as far as Isis is aware (without having made any further or special enquiries):

1.Assigned Patent Rights. All Assigned Patent Rights as of the Effective Date are listed on Exhibit�A.

2.Title. Isis is the sole owner of all right, title and interest in and to the Assigned Patent Rights. Isis has the unrestricted right to sell, assign and transfer all right, title and interest in the Assigned Patent Rights to Sequenom free and clear of any Encumbrances (other than the Pre-Existing License and the Reserved Rights). Except for the Pre-Existing License, Isis has not transferred ownership of, or granted any license of or right to use, or authorized the retention of any rights to use, to any Person any Assigned Patent Rights. After giving effect to the sale, assignment and transfer of the Assigned Patent Rights, except for the Pre-Existing License and Reserved Rights, all Assigned Patent Rights shall be fully transferable, alienable or licensable by Sequenom without restriction and without payment of any kind to any Third Party. [&***&] ***Confidential Treatment Requested��[&***&] ***Confidential Treatment Requested

3.No Challenge. To the extent that any Assigned Patent Rights were originally owned or created by or for any Person other than Isis, (a)�Isis has obtained or shall procure the complete, unencumbered and unrestricted right to effect the transfer of the Assigned Patent Rights (excluding the Pre-Existing License and Reserved Rights) from Isis to Sequenom; and (b)�subject to the Pre-Existing License and Reserved Rights, no Third Parties have retained or otherwise have any rights or licenses with respect to the Assigned Patent Rights; and (c)�no valid basis exists for any such Person to challenge or contest this Agreement or the transactions contemplated herein.

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4.Validity and Enforceability. Except for the Proceedings, (a)�none of the patents within the Assigned Patent Rights has been held invalid or unenforceable for any reason in any administrative, arbitral, judicial or other proceeding; and (b)�Isis has not received any written challenge or opposition to any patent within the Assigned Patent Rights suggesting that any patent within the Assigned Patent Rights may be invalid, unenforceable or misused or that a claim to such effect may be brought by any Person.

5.Maintenance. All necessary registration, maintenance and renewal fees in connection with the Assigned Patent Rights have been paid and all necessary documents and certificates in connection with the Assigned Patent Rights have been filed.

6.No Infringement. Except for the Proceedings, Isis has not issued written proceedings in respect of any infringement or misappropriation by a Third Party of the Assigned Patent Rights.

7.No Conflict. Except for the Proceedings, the Assigned Patent Rights are not subject to any decree, order, judgment, office action or settlement agreement or stipulation that restricts in any manner the use, transfer or licensing thereof by Isis or that may affect the validity, use or enforceability of any patents that may issue from the Assigned Patent Rights.

8.No Other Warranty. Except as otherwise provided herein, to the fullest extent permissible by law, Isis does not make warranties of any kind including, without limitation, warranties with respect to:

(a)the quality of the Licensed Technology or Assigned Patent Rights;

(b)the suitability of the Licensed Technology or Assigned Patent Rights for any particular use; and

(c)whether any applications which may be comprised in the Assigned Patent Rights will be granted.

3.Purchase and Sale of the Assigned Patent Rights.

1.Assigned Patent Rights. Subject to the terms and conditions of this Agreement and the Reserved Rights, effective as of the Effective Date, Isis hereby agrees to, and hereby does, sell, assign and transfer to Sequenom, and Sequenom hereby agrees to, and hereby does, purchase from Isis, all right, title and interest in and to the Assigned Patent Rights in the Territory, including, without limitation (but subject always to the Reserved Rights), all rights to causes of action and remedies related thereto, including, without limitation, all rights (a)�to initiate, prosecute, control and settle any and all proceedings (including, without limitation, the Proceedings) related to past, present or future infringement, misappropriation or violation of the Assigned Patent Rights, (b)�to retain all recoveries from any and all such proceedings, and (c)�to prosecute, maintain and defend the Assigned Patent Rights (including to respond to and defend any and all interferences, oppositions, reexaminations, inter partes reviews, post grant reviews, and other challenges of any type or nature whatsoever).

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2.License to Sequenom.

1.Subject to the terms and conditions of this Agreement and the Reserved Rights, Isis hereby grants to Sequenom an irrevocable, perpetual, fully-paid, royalty-free, exclusive licence (with the right to grant sublicences through multiple tiers) under the Licensed Technology in the Territory for use in the Field. Sequenom acknowledges and agrees that, as between the parties, Isis is and will remain the owner of the Licensed Technology.

2.This Agreement shall not prevent or hinder Oxford University and every employee, student and appointee of Oxford University from using and (subject to clause�6.5) publishing the Licensed Technology solely for Non-Commercial Use.

3.Reserved Rights and Pre-Existing License.

1.Sequenom acknowledges that prior to the transfer of the Assigned Patent Rights pursuant to this Agreement, Isis has granted the Pre-Existing License. Accordingly, Isis and Sequenom expressly agree and acknowledge that the assignment and transfer of the Assigned Patent Rights pursuant to this Agreement is subject to the Reserved Rights.

4.License to Isis. Sequenom further grants Isis the right to grant a non-transferable, perpetual, royalty-free sublicense to Oxford University and every employee, student and appointee of Oxford University to use Sequenoms Improvements solely for Non-Commercial Use. The sublicense granted pursuant to this clause�3.4 shall survive termination of this Agreement. Isis shall remain solely and fully responsible for acts or omissions by Oxford University or any employee, student and appointee thereof in connection with their sublicense rights granted pursuant to this clause�3.4.

5.Transfer Documents.

1.File History. Isis shall provide Sequenom with the prosecution files (including original applications, office actions, responses to office actions and correspondence relating to the Assigned Patent Rights) related to the Assigned Patent Rights which are in its possession at the Effective Date.

2.Further Assistance. Promptly following the Effective Date and in any event within no more than six (6) weeks after it, Isis shall duly execute and deliver to Sequenom all such patent assignments in the form agreed between the parties (collectively, the Patent Assignments) evidencing the sale, conveyance, transfer and assignment of the Assigned Patent Rights from Isis to Sequenom in accordance with this Agreement. Thereafter, at such time as reasonably requested by Sequenom, Isis shall (at Sequenoms cost) provide all cooperation reasonably requested by Sequenom in connection with any effort by Sequenom which is reasonably required in order to evidence or register the assignment of the Assigned Patent Rights. Without limiting the generality of anything set forth in this Agreement, such cooperation shall include, without limitation, executing confirmatory assignments, transfers and consents.

6.Financial Terms.

1.Initial Payment. Immediately upon the Effective Date, Sequenom hereby waives the Two Million One Hundred Thousand U.S.�� Dollars�(US$2,100,000) in paid legal fees that Isis owes Sequenom. Within ten�(10) days after the Effective Date, Sequenom shall pay to Isis the amount

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(the Initial Payment) of Twelve Million Four Hundred and Fifty Thousand U.S. Dollars (US$12,450,000) (which equals the sum of the Nine Million Two Hundred and Fifty Thousand U.S. Dollar�(US$9,250,000) up-front payment, plus Three Million Two Hundred Thousand U.S. Dollars�(US$3,200,000) as the final royalty payment under the Isis/Sequenom License Agreement), by wire transfer of immediately available funds as directed in advance in writing by Isis.

2.Additional Payments. If Net Revenues:

(a)exceed [&***&] ***Confidential Treatment Requested but are less than [&***&], then Sequenom additionally shall pay to Isis an amount equal to [&***&] percent�([&***&]%) of Net Revenues accrued under clause 1.18.1 and [&***&] percent�([&***&]%) of Net Revenues accrued under clause 1.18.2 between [&***&] and [&***&] (the First Additional Payment);

(b)equal or exceed [&***&] but are less than [&***&], then Sequenom additionally shall pay to Isis an amount equal to [&***&] percent�([&***&]%) of Net Revenues accrued under clause 1.18.1 and [&***&] percent�([&***&]%) of Net Revenues accrued under clause 1.18.2 between [&***&] and [&***&] (the Second Additional Payment); and

(c)equal or exceed [&***&], then Sequenom additionally shall pay to Isis an amount equal to [&***&] percent�([&***&]%) of Net Revenues accrued under clause 1.18.1 and [&***&] percent�([&***&]%) of Net Revenues accrued under clause 1.18.2 in excess of [&***&] (the Third Additional Payment).

3.Net Revenue Calculation. Net Revenues shall be calculated on a cumulative basis with effect from and including 1 July 2014 until the expiration of the last to expire of the Assigned Patent Rights. Additionally, Net Revenues shall also include any damages (including, without limitation, punitive damages) and/or any other monetary amount awarded to Sequenom, and/or any other payment made to Sequenom in settlement, at any time in relation to or as a result of any enforcement or infringement action taken by Sequenom in relation to the Assigned Patent Rights, including in connection with the Proceedings, provided that Sequenom shall be entitled to deduct therefrom all costs and expenses (including legal costs) incurred in defending or enforcing the Assigned Patent Rights or in the enforcement or infringement action which leads to such award of damages, other monetary award and/or settlement payment (but excluding any such costs incurred prior to 01 July 2014 and any costs recovered from other parties to the Proceedings).

4.Quarterly Report. (i) Within [&***&] ***Confidential Treatment Requested days after the end of each calendar year up to and including the calendar year in which Net Revenues first exceed [&***&], and (ii) within [&***&] days after the end of the calendar quarter ending after the date on which Net Revenues first exceed [&***&] until the expiration of the last to expire of the Assigned Patent Rights, and (iii) within [&***&] days after the receipt by Sequenom or its Affiliates of any monetary amount referred to in clause 3.6.3 after the expiration of the last to expire of the Assigned Patent Rights, Sequenom (a)�shall prepare and provide Isis with a written report showing in reasonably specific detail the calculation of Net Revenues and the Additional Payments, if any, owing for such calendar quarter or other period as applicable

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(including, without limitation, a breakdown of the Net Revenues referred to in clause 1.18.1, those referred to in clause 1.18.2 and those referred to in clause 3.6.3), and (b)�shall pay to Isis the Additional Payments, if any, owing for such calendar quarter or other period as applicable. With respect to amounts invoiced or received in a currency other than United States dollars, all such amounts shall be expressed both in the currency in which the amount is invoiced or received and the United States dollar equivalent.

5.Audit Right. Sequenom must keep complete and accurate accounts of all Licensed Product Marketed by Sequenom and revenues it receives from licensees, sub-licensees or marketing partners) in each year for at least [&***&] years. Isis may, through an independent certified accountant, audit all such accounts on at least [&***&] days written notice no more than once each year for the purpose of determining accrued Net Revenues, the accuracy of the written reports in clause�3.6.4 and the payments made pursuant to that clause. Such independent certified accountant shall be reasonably acceptable to Sequenom and shall be subject to obligations of confidentiality at least as restrictive as those set forth herein. The cost of conducting such audit shall be borne by Isis unless such audit identifies a discrepancy in the calculation of Net Revenues and/or the Additional Payments of [&***&] per cent ([&***&]%) or more, in which case Sequenom shall promptly reimburse Isis for the costs of conducting such audit. In the event that any discrepancy is identified, Sequenom shall pay Isis any sums owed to it pursuant to clause 3.6.3 as a result of the corrected calculation within thirty (30) days of the date on which Sequenom is notified of such discrepancy.

6.Withholding Taxes.

(a)All sums payable under this Agreement by Sequenom shall be made free and clear of all withholding and deductions save as may be required by law in which event the amount payable by Sequenom shall be increased to the extent necessary to ensure that, after the making of any deduction or withholding, Isis receives a sum equal to the sum it would have received had no deduction or withholding been made.

(b)If, as a result of an assignment of this Agreement by Sequenom pursuant to clause 8.4 or a change in the tax residence of Sequenom, a withholding or deduction is required in respect of any of the Additional Payments which would not otherwise have arisen, the obligation to pay an additional amount referred to in clause 3.6.6(a) shall be limited to any increase in the obligation to withhold which arises solely as a result of such assignment or change in tax residence.

(c)Where Sequenom has made a payment to Isis in accordance with clause 3.6.6(a) and Isis (or any of its Affiliates) is or becomes entitled to receive a repayment, refund, credit or relief in respect of such withholding or deduction, Isis shall (at Sequenoms cost) use reasonable efforts to recover such repayment refund, credit or relief and shall on the receipt of such payment or on the utilization of credit or relief, pay Sequenom an amount equal to the amount received or an amount equal to the tax saved as a result of the utilization of the credit or relief.

7.VAT. In the event that the Initial Payment and/or the Additional Payment is or becomes subject to value added, sales, use, excise or other similar taxes or duties (Turnover Tax), Isis

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shall as soon as reasonably practicable notify Sequenom of the requirement to pay such Turnover Tax and, upon the delivery by Isis of a value added tax invoice (or any other relevant document in respect of such Turnover Tax), Sequenom shall promptly pay to Isis the Turnover Tax due and payable.

4.Preservation of Privileges. As of the Effective Date, Sequenom shall control all attorney-client privileges, attorney work product doctrine and any other professional privileges or rights held by Isis that arose from the prosecution, defense or enforcement of the patents and patent applications within the Assigned Patent Rights before the Effective Date (collectively, the Protected Communications). Isis shall not assert that the Protected Communications are not, as against any Third Party, protected by the attorney-client privilege, attorney work product doctrine or other professional privileges unless and only to the extent that such privilege or immunity is withdrawn by Sequenom or is determined by a final judgment of a court of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, to be invalid. Isis shall (at Sequenoms cost) follow Sequenoms direction with respect to Protected Communications and otherwise cooperate with Sequenom to preserve and protect all privileges and immunities with respect to Protected Communications to the greatest extent available under applicable law. To the extent that Isis retains control of any privilege or immunity with respect to communications or work product relating to the prosecution, defense or enforcement of the patents and patent applications before the Effective Date, Isis shall not waive or withdraw such privilege or immunity or engage in any act or omission that might result in a waiver or withdrawal without the prior written consent of Sequenom. Should any effort be made by subpoena or otherwise to gain access to Protected Communications, whether by judicial action or by other means, Isis shall promptly notify Sequenom of the same.

5.Indemnification and Liability.

1.Indemnification of Sequenom. Subject to the provisions of this Section�5, Isis shall indemnify, defend and hold harmless Sequenom, its Affiliates and its and their respective officers, directors and employees (collectively, the Sequenom Indemnitees), from and against any and all damage, loss, liability and expense (including without limitation reasonable expenses of investigation and reasonable attorneys fees and expenses in connection with any action, suit or proceeding or settlement of any of the foregoing) (collectively, Losses) incurred or suffered by a Sequenom Indemnitee arising out of:

1.Any breach of the representations and warranties of Isis set forth in this Agreement;

2.Any breach of any covenant or agreement of Isis set forth in this Agreement or in any certificate, instrument, or other document delivered pursuant to this Agreement.

2.Indemnification of Isis. Subject to the provisions of this Section�5, Sequenom shall indemnify, defend and hold harmless Isis, its Affiliates and its and their respective officers, directors, academics, students, appointees, agents and employees (collectively, the Isis Indemnitees), from and against any and all Losses incurred or suffered by a Isis Indemnitee arising out of:

1.Any breach of the representations and warranties of Sequenom set forth in this Agreement;

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2.Any breach of any covenant or agreement of Sequenom set forth in this Agreement or in any certificate, instrument, or other document delivered pursuant to this Agreement;

3.The ownership or exploitation of the Assigned Patent Rights and/or Licensed Technology after the Effective Date; and

4.Any assertion by Third Parties (including claims for negligence) which arise directly or indirectly from the use of the Licensed Technology and/or Assigned Patent Rights or the Marketing of the Licensed Product by Sequenom and/or its licensees or sub-licensees whether such assertions arise in relation to such use or Marketing before, on or after the Effective Date.

3.Procedure. If a party (an Indemnitee) intends to claim indemnification under this Section�5, it shall promptly notify the other party (the Indemnitor) in writing of any claim, demand, action or other proceeding for which the Indemnitee intends to claim such indemnification, and the Indemnitor shall have the right to participate in, and, to the extent the Indemnitor so desires, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an Indemnitee shall have the right to retain its own counsel, with the fees and expenses to be paid by Indemnitor, if representation of such Indemnitee by the counsel retained by the Indemnitor would be inappropriate due to actual or potential differing interests between such Indemnitee and any other party represented by such counsel in such proceeding. The obligations of this Section�5 shall not apply to amounts paid in settlement of any claim, demand, action or other proceeding if such settlement is effected without the consent of the Indemnitor, which consent shall not be unreasonably withheld or delayed. The Indemnitee shall:

1.reasonably cooperate with the Indemnitor and its legal representatives in the investigation of any claim, demand, action or other proceeding covered by this Section�5; and

2.not settle or compromise or make any admission in relation to any such claim without the Indemnitors prior written consent (such consent not to be unreasonably withheld or delayed).

4.Claims against employee, student, agent or appointee of Isis or Oxford University. Sequenom undertakes to make no claim against any employee, student, agent, or appointee of Isis or Oxford University, being a claim which seeks to enforce against any of them any liability whatsoever in connection with this Agreement or its subject matter.

5.Limitation of Liability

1.Subject to clause�5.5.2, neither party shall be liable for, whether under contract, negligence, tort, statute or otherwise, for any special, indirect or consequential loss.

2.Nothing in this Agreement shall limit or exclude liability of the parties for death or personal injury due to negligence, for fraud or willful misconduct.

3.The maximum total liability of Isis to Sequenom under or otherwise in connection with this Agreement or its subject-matter will not exceed [&***&] ***Confidential Treatment Requested.

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6.Confidentiality and Publication.

1.Confidential Information. For a period of five�(5) years from the Effective Date, except as otherwise provided in this Section�6, the parties shall maintain in confidence all non-public data and information related to the Assigned Patent Rights and/or the business of the other party or its Affiliates which is in its possession as at the Effective Date (the Confidential Information), and shall not use, disclose or grant the use of the Confidential Information except on a need-to-know basis to those directors, officers and employees, to the extent such disclosure is reasonably necessary in connection with performing its obligations or exercising its rights under this Agreement. To the extent that disclosure is authorized by this Agreement, prior to disclosure, the party wishing to disclose Confidential Information shall obtain agreement of any such receiving Person to hold in confidence and not make use of the Confidential Information for any purpose other than those permitted by this Agreement. Each party shall notify the other promptly upon discovery of any unauthorized use or disclosure of the other partys Confidential Information.

2.Terms of this Agreement. Neither party shall disclose any terms or conditions of this Agreement to any Third Party without the prior consent of the other party; provided, however, that a party may disclose the terms or conditions of this Agreement, (a)�on a need-to-know basis to its legal and financial advisors to the extent such disclosure is reasonably necessary, and (b)�to a Third Party in connection with (i)�an equity investment in such party, (ii)�a merger, consolidation or similar transaction by such party, or (iii)�the sale of all or substantially all of the assets of such party. Notwithstanding the foregoing, prior to execution of this Agreement, the parties have agreed upon the substance of information that can be used to describe the terms and conditions of this transaction, and each party may disclose such information, as modified by mutual written agreement of the parties, without the consent of the other party.

3.Permitted Disclosures. The confidentiality obligations under this Section�6 shall not apply to the extent that:

1.a party is required to disclose information by applicable law, regulation, court or administrative order or rules of a stock exchange or automated quotation system (in each case as determined by such partys legal counsel); provided, however, that such party shall provide advanced written notice thereof to the other party, consult with the other party with respect to such disclosure and provide the other party sufficient opportunity to object to any such disclosure or to request confidential treatment thereof (if applicable);

2.the Confidential Information is or becomes generally available to the public (other than as a result of its disclosure by the receiving party or any Person in breach of this clause�6);

3.the Confidential Information was, is or becomes, available to Isis on a non-confidential basis from a person who, to Isiss knowledge, is not bound by a confidentiality agreement with Sequenom or otherwise prohibited from disclosing the information to Isis.

4.Injunctive Relief. Each party acknowledges that it may be impossible to measure in money the damage to the other party if such party fails to comply with the obligations imposed by this Section�6, and that, in the event of any such failure, the other party may not have an adequate remedy at

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law or in damages. Accordingly, each party agrees that injunctive relief or other equitable remedy, in addition to remedies at law or damages, may be an appropriate remedy for any such failure.

5.Publication. Isis will request Oxford University to give to Sequenom in advance a written outline of any materials related to the Assigned Patent Rights, Licensed Technology or relating to the results of the use of the Assigned Patent Rights, Licensed Technology or Sequenoms Improvements intended for publication. Sequenom may request that publication be delayed:

(a)for a period of no longer than three (3) months from the date of notification in respect of the Assigned Patent Rights or Licensed Technology if such delay is necessary in order to protect the Assigned Patent Rights or Licensed Technology; or

(b)for any reasonable period that may be longer than three months given the circumstances in respect of the results of the use of any of Sequenoms Improvements if such delay is necessary in order to protect Sequenoms Improvement.

If no request for delay is received within 30 days of the date of the written notification, Oxford University will be free to assume that Sequenom has no objection to the proposed publication.

6.Thesis. This Agreement shall not prevent or hinder registered students of Oxford University from submitting for degrees of Oxford University theses based on the Licensed Technology or Assigned Patent Rights; or from following Oxford Universitys procedures for examinations and for admission to postgraduate degree status.

7.Without Prejudice. This Agreement, although marked without prejudice, will upon signature by all parties be treated as an open (although confidential) document evidencing an agreement binding upon the parties.

7.Termination of Isis/Sequenom License Agreement.

1.Termination. Effective as of the Effective Date, all license rights of Sequenom in and to the Assigned Patent Rights in the Territory under the Isis/Sequenom License Agreement shall have merged with and into all right, title and interest in and to the Assigned Patent Rights in the Territory sold, assigned and transferred to Sequenom hereunder. Therefore, effective as of the Effective Date, the parties hereby terminate the Isis/Sequenom License Agreement fully and in its entirety by mutual agreement.

2.Release. From the Effective Date, the parties hereby release each other from all their contractual and other obligations arising out of or in connection with the Isis/Sequenom License Agreement. The parties hereby agree to waive, surrender and not seek to enforce any and all claims, allegations, causes or rights of action (whether in contract, tort, statutory duty or otherwise), whether or not known at the date of this Agreement, that they may have against the other (or Oxford University) arising out of or in connection with the termination of the Isis/Sequenom License Agreement or which (save as provided in clause�5.2.4) may have otherwise accrued prior to the Effective Date in connection with the Isis/Sequenom License Agreement (including, without limitation, in respect of any costs payable in connection with the

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Proceedings). For the avoidance of doubt, Sequenom shall have exclusive liability and responsibility for any costs incurred in connection with the Proceedings on and from 01 July 2014.

8.Miscellaneous.

1.Press release. The parties may make a public announcement regarding the execution of this Agreement in the form of a mutually agreed press release. Sequenom may also make further announcements to the extent required by applicable law, regulation or judicial order or process, or for compliance with the requirements of the U.S. Securities and Exchange Commission or any securities exchange. For the avoidance of doubt, no other form of announcement by either party in respect of this Agreement is permitted.

2.Governing Law; Exclusive Jurisdiction. This Agreement and any dispute or claim arising out of or in connection with it or its subject matter or formation (including non-contractual disputes or claims) shall be governed by and construed in accordance with the law of England and Wales, without regard to the conflicts of law principles thereof. Each of the parties hereto irrevocably consents to the exclusive jurisdiction and venue of the courts of England and Wales, in connection with any dispute or claim arising out of or in connection with this Agreement or its subject matter or formation (including non-contractual disputes or claims) and waives and covenants not to assert or plead any objection which they might otherwise have to such jurisdiction, venue and such process.

3.Waiver. No waiver by a party hereto of any breach or default of any of the covenants or agreements herein set forth shall be deemed a waiver as to any subsequent and/or similar breach or default.

4.Assignment. Neither this Agreement nor any right or obligation hereunder may be assigned or delegated, in whole or part, by either party without the prior express written consent of the other. Any permitted assignee shall assume all obligations of its assignor under this Agreement. Notwithstanding the foregoing, either party may, without the written consent of the other, assign this Agreement and its rights and delegate its obligations hereunder in connection with the transfer or sale of all or substantially all of its business, or in the event of its merger, consolidation, change in control or similar transaction in each case to effect an acquisition of the business, provided that: (i) any such assignee is of equivalent or better Financial Standing than the assigning party at the time of the assignment; and (ii) such permitted assignee enters into a direct undertaking with the remaining party to perform all the obligations of the assigning party under this Agreement. Any purported assignment in violation of this clause�8.4 shall be void. For the purposes of this clause 8.4, Financial Standing means the total assets, liabilities and equity held by the assignee.

5.Notices. All requests and notices required or permitted to be given to the parties hereto shall be given in writing, shall expressly reference the section(s) of this Agreement to which they pertain, and shall be delivered to the other party, effective on receipt, at the appropriate address as set forth below or to such other addresses as may be designated in writing by the parties from time to time during the term of this Agreement.

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If to Isis:��Isis Innovation Limited

Ewert House, Ewert Place

Oxford OX2 7SG

England

Attention: Managing Director

If to Sequenom:��Sequenom, Inc.

3595 John Hopkins Court

San Diego, California 92121-1331

USA

Attention: Chief Executive Officer

6.Variation. Any variation of this Agreement must be in writing and signed by authorized signatories for both parties. For the avoidance of doubt, the parties to this Agreement may rescind or vary this Agreement without consent of any party that has the benefit of clauses�3.2.2, 3.4, 5.4, 6.6 and paragraph 1(b) of Exhibit C.

7.Rights of Third Parties. Nothing in this Agreement shall be deemed to grant any rights or benefits to any person other than the parties, their respective successors in title or assignees (a Third Party), or entitle any Third Party to enforce any provision hereof and the parties do not intend that any term of this Agreement should be enforceable by a Third Party by virtue of the Contracts (Rights of Third Parties) Act�1999. Notwithstanding the foregoing, the parties intend that Oxford University and the people referred to in clauses 3.2.2, 3.4, 5.4, 6.6 and paragraph 1(b) of Exhibit C will be able to enforce the terms of those provisions as if they were a party to this Agreement by virtue of the Contracts (Rights of Third Parties) Act 1999.

8.Complete Agreement. This Agreement constitutes the entire agreement between the parties regarding the subject matter hereof, and, in the absence of fraud, all prior representations, understandings and agreements regarding the subject matter hereof, either written or oral, expressed or implied, are superseded and shall be and of no effect. This clause�8.8 does not exclude liability of either party for fraudulent misrepresentation.

9.Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

10.Headings. The captions to the several sections hereof are not a part of this Agreement, but are included merely for convenience of reference only and shall not affect its meaning or interpretation.

[Remainder of Page Intentionally Left Blank]

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[Signature Page to Patent Purchase Agreement]

IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be executed by their duly-authorized representatives as of the Effective Date.

ISIS INNOVATION LIMITED

By:��/s/ Mr. T Hockaday��

Name:��Mr. T. Hockaday��

Title:��Managing Director��Isis Innovation Ltd��

SEQUENOM, INC.

By:��/s/ Bill Welch��

Name:��Bill Welch��

Title:��CEO��

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A-1

EXHIBIT�A

PATENTS AND PATENT APPLICATIONS

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EXHIBIT�B

PROCEEDINGS

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EXHIBIT C

RESERVED RIGHTS


1.	Isis reserves all of its right, title and interest in and to the Assigned Patent Rights in respect of:


a.	the right to develop, make, have made, use, have used and Market outside the Field any product, service or composition which is entirely or partially produced by means of or with the use of the Licensed Technology and/or Assigned Patent Rights .


b.	the right for Oxford University and every employee, student and appointee of Oxford University to use and (subject to clause�6.5) to publish the Assigned Patent Rights solely for Non-Commercial Use.


2.	Sequenom will, in consultation with Isis, maintain and renew the Assigned Patent Rights in Europe and Sequenom shall not abandon any of the Assigned Patent Rights in Europe.


3.	Each party will notify the other in writing of any misappropriation or infringement of any of the Assigned Patent Rights or Licensed Technology in Europe outside the Field of which the party becomes aware.

Isis (and its licensees or sub-licensees) has the first right (but is not obliged) to take legal action at its own cost against any misappropriation or infringement of any rights included in the Assigned Patent Rights and Licensed Technology in Europe outside the Field. Isis shall discuss any proposed legal action in respect of the same with Sequenom prior to legal action being commenced. For the avoidance of doubt, any damages (including, without limitation, punitive damages) and/or any other monetary amount awarded to Isis and/or its licensees or sub-licensees, and/or any other payment made to Isis and/or its licensees or sub-licensees in settlement, in relation to such legal action shall be for the benefit of, and retained by, Isis and/or its licensees or sub-licensees only.

If Isis (or its licensees or sub-licensees) takes legal action under paragraph 4 above, Isis will keep Sequenom regularly informed (subject to (i) any obligation of confidentiality owed by Isis or Oxford University to any Third Party; and/or (ii) any requirement in order to preserve Isis, Oxford Universitys or any other Third Partys privilege) of the progress of the legal action, including, without limitation, any claims affecting the scope of the Licensed Technology or Assigned Patent Rights.


6.	If Isis has notified Sequenom in writing that it or its licensees or sub-licensees do not intend to take any action in relation to the misappropriation or infringement or Isis or its licensees or sub-licensees have not taken any such action within 21 days of the notification under paragraph 3, Sequenom may take such legal action at its own cost subject to Isis prior written consent.

***Confidential Treatment Requested

SECOND AMENDMENT TO LEASE

This SECOND AMENDMENT TO LEASE ("Second Amendment") is made and entered into as of the 25th day of September, 2014, by and between TPSC IV LLC, a Delaware limited liability company ("Landlord"), and SEQUENOM, INC., a Delaware corporation ("Tenant").

RECITALS:

A. Landlord and Tenant entered into that certain Lease dated March 29, 2000 (the

"Original Lease"), as amended by that certain Amendment Number One to Lease dated March

29, 2000 dated September 9, 2005 (the "First Amendment") (the Original Lease and the First

Amendment shall be collectively referred to herein as the "Lease"), whereby Landlord leases to Tenant and Tenant leases from Landlord the Property (as that term is defined in the Original Lease), which Property includes that certain building (the "Building") comprised 82,500 gross square feet of Building Area and located at 3595 John Hopkins Court, San Diego, California

92121.

B. The parties desire to extend the Term of the Lease and to otherwise amend the

Lease on the terms and conditions set forth in this Second Amendment.

AGREEMENT:

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1. Terms. All capitalized terms when used herein shall have the same respective meanings as are given such terms in the Lease unless expressly provided otherwise in this Second Amendment.

2. Extended Term. The Term is currently scheduled to expire on September 30,

2015 (the "Current Expiration Date"). Landlord and Tenant hereby agree to extend the Term

through and including September 30, 2025, on the terms and conditions set forth in this Second Amendment, unless sooner terminated as provided in the Lease, as amended. For purposes of this Second Amendment, the ten (10) year and nine (9) month period commencing on January 1,

2015 (notwithstanding that such date occurs prior to the Current Expiration Date, the "Extended Term Commencement Date") and ending on September 30, 2025 shall be referred to herein as the "Extended Term."

3. Basic Rent. Prior to the Extended Term Commencement Date, Tenant shall continue to pay Basic Rent for the Property in accordance with the terms of Article 3 of the Original Lease. Notwithstanding any provision to the contrary contained in the Lease,

commencing on the Extended Term Commencement Date, and continuing throughout the remainder of the Extended Term, Tenant shall pay, in accordance with the terms of Article 3 of the Original Lease, Basic Rent for the Property as follows:

Approximate Monthly



Period During	Annual		Monthly Installment	Per Square Foot of
Extended Term	Basic Rent		of Basic Rent	�
January 1,2015 - December 31, 2015	$2,425,500.00		$202,125.00	$2.45
January 1,2016 - December 31, 2016	$2,492,201.28		$207.683.44	$2.52
January 1,2017 - December 31, 2017	$	2,560,736.76	$213,394.73	$2.59
January 1,2018 -�December 31, 2018	$2,631,157.08		$219,263.09	$2.66
January 1,2019 - December 31, 2019	$2,703,513.84		$225,292.82	$2.73
January 1, 2020 - December 31, 2020	$2,777,860.44		$231,488.37	$2.81
January 1,2021 - December 31, 2021	$2,854,251.60		$237,854.30	$2.88
January 1, 2022 - December 31, 2022	$2,932,743.48		$244,395.29	$2.96
January 1, 2023 - December 31, 2023	$3,013,393.92		$251,116.16	$3.04
January 1, 2024 - December 31, 2024	$3,096,262.20		$258,021.85	$3.13
January 1,2025 - September 30, 2025	N/A		$265,117.45	$3.21

4. Additional Rent. Tenant shall continue to be obligated to pay Additional Rent during the Extended Term.

5. Termination Right.

5.1 Exercise of Termination Right. Tenant shall have the one-time right to terminate and cancel the Lease, as amended, effective as of September 30, 2022 (the "Termination Date"), provided that, not later than September 30, 2021, Landlord receives (i) written notice from Tenant (the "Termination Notice") that Tenant intends to terminate the Lease, as amended, pursuant to the terms of this Section 5, and (ii) payment in the amount of One Million One Hundred Fifty Thousand and 00/100 Dollars ($1,150,000.00) (the "Termination Fee") as consideration for such early termination.

5.2 Termination of Lease. Provided that Tenant timely elects to terminate the Lease, as amended, in accordance with Section 5.1, above, the Lease, as amended, shall automatically terminate

and be of no further force or effect, and Landlord and Tenant shall be relieved of their respective obligations under the Lease, as amended, as of the Termination Date, except with respect to those obligations set forth in the Lease, as amended, which specifically survive the expiration or earlier termination of the Lease, as amended, including, without limitation, the payment by Tenant of all amounts owed by Tenant under the Lease, as amended, as of and up to the Termination Date. The termination right contained in this Section 5 shall be personal to the tenant originally named herein (the "Original Tenant") and any Affiliate of the Original Tenant to whom the Lease, as amended, is assigned pursuant to Article 12 below (an "Affiliate Assignee"), and may only be exercised by Original Tenant or its Affiliate Assignee (and not by any other assignee, sublessee or other Transferee of Tenant's interest in this Lease).

5.3 No Tenant Default. Notwithstanding anything to the contrary contained in this Section 5, Tenant shall have no right to exercise the termination right set forth in this Section 5 if Tenant is in economic or material non-economic default under the Lease, as amended (beyond any applicable notice and cure periods), as of the date of Tenant's delivery to Landlord of the Termination Notice. If Tenant is in economic or material non-economic default under the Lease, as amended (beyond any applicable notice and cure periods), following Tenant's delivery to Landlord of the Termination Notice but prior to the Termination Date, then, at Landlord's option, the Termination Notice shall be null and void and of no further force or effect unless Tenant cures such default prior to the earlier of (i) the date Landlord terminates this Lease as a result of such default be Tenant, and (ii) the Termination Date.

6. Landlord Exculpation. The liability of Landlord, its partners, subpartners and their respective officers, agents, servants, employees, lenders, any property manager and independent contractors (collectively, the "Landlord Parties") to Tenant for any default by Landlord under the Lease, as amended, or arising in connection herewith or with Landlord's operation, management, leasing, repair, renovation, alteration or any other matter relating to the Property or the Building shall be limited solely and exclusively to an amount which is equal to the interest of Landlord in the Property. Neither Landlord, nor any of the Landlord Parties shall have any personal liability therefor, and Tenant hereby expressly waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Tenant. The limitations of liability contained in this Section 6 shall inure to the benefit of Landlord's and the Landlord Parties' present and future partners, beneficiaries, officers, directors, trustees, shareholders, agents and employees, and their respective partners, heirs, successors and assigns. Under no circumstances shall any present or future partner of Landlord (if Landlord is a partnership), or trustee or beneficiary (if Landlord or any partner of Landlord is a trust), have any liability for the performance of Landlords obligations under the Lease, as amended.

Notwithstanding any contrary provision herein, neither Landlord nor the Landlord Parties shall be liable under any circumstances for consequential damages, injury or damage to, or interference with, Tenant's business, including but not limited to, loss of profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use, in each case, however occurring, or loss to inventory, scientific research, scientific experiments, laboratory animals, products, specimens, samples, and/or scientific, business, accounting and other records of every kind and description kept at the Property and any and all income derived or derivable therefrom.��Further, neither Tenant nor its partners, subpartners and their respective officers, agents, servants, employees, lenders, any property manager and independent contractors, shall be liable under any circumstances for consequential damages, injury or damage to, or interference with, Landlord's business, including but not limited to, loss of profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use, in each case, however occurring, except in connection with a holding over for more than thirty (30) days by Tenant pursuant to Section 2.5 of the Original Lease (and Section 2.5 is hereby amended to provide that Tenant shall not be liable to Landlord for consequential damages, including but not limited to any claims made by a succeeding tenant by reason of such delay, unless Tenant holds over for more than thirty (30) days).

7. Code Waiver. Notwithstanding any provision to the contrary contained in the Lease, as amended hereby, as of the date of this Second Amendment, for purposes of clarifying the parties intentions and obligations under the terms of Section 3.5 of the Original Lease, Tenant hereby irrevocably waives and relinquishes any and all rights, benefits, or protections, if any, Tenant now has, or in the future may have, under Section 1950.7 of the California Civil Code, and any successor statute.

8. Broker. Landlord and Tenant hereby warrant to each other that they have had no dealings with any real estate broker or agent in connection with the negotiation of this Second Amendment other than Hughes Marino, Inc. (the "Broker"), and that they know of no other real estate broker or agent who is entitled to a commission in connection with this Second Amendment. Landlord shall pay a commission to the Broker in connection with this Second Amendment pursuant to a separate agreement between Landlord and the Broker. Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, costs and expenses (including without limitation reasonable attorneys' fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of any dealings with any real estate broker or agent, other than the Broker occurring by, through, or under the indemnifying party. The

terms of this Section 8 shall survive the expiration or earlier termination of the term of the Lease, as amended.

9. Condition of Property. Tenant hereby acknowledges that Tenant is currently in possession of the Property, and that, except as set forth in this Second Amendment, neither Landlord nor any agent of Landlord has made any representation or warranty regarding the condition of the Property or the Building, or with respect to the suitability of the foregoing for the conduct of Tenant's business; provided that the foregoing acknowledgment shall not be deemed to void or to otherwise limit Landlord's ongoing repair and maintenance obligations expressly set forth in the Lease. Except as specifically set forth herein or in the Tenant Work Letter attached hereto as Exhibit A (the Tenant Work Letter"), Landlord shall not be obligated to provide or pay for any improvement work or services related to the improvement of the Property or the Building, and Tenant shall continue to accept the Property and the Building in its "as is" condition as of the date of this Second Amendment. For purposes of Section 1938 of the California Civil Code, Landlord hereby discloses to Tenant, and Tenant hereby acknowledges, that the Building has not undergone inspection by a Certified Access Specialist (CASp).

10. Option to Extend. Tenant hereby agrees and acknowledges that in consideration of the extension of the Term of the Lease as provided under this Second Amendment, and the granting of a new option to extend as set forth below, the extension option set forth in Section 2.6 of the Original Lease shall be deemed null and void and without further force and effect, and, accordingly, effective as of the date of this Second Amendment, Section 2.6 of the Original Lease, and all references in the Original Lease to "the Extension Term" are hereby deleted in their entirety and of no further force or effect.

10.1 Option Right. Landlord hereby grants to the Original Tenant and its Affiliate Assignee one (1) option (the "Option") to extend the Term for a period of five (5) years (the "Option Term"), with respect to the entire Premises, which option shall be exercisable only by written notice delivered by Tenant to Landlord as provided below, provided that, as of the date of delivery of such notice, Tenant is not in default under this Lease, and has not previously been in default under the Lease, as amended, more than once. Upon the proper exercise of such option to extend, and provided that, at Landlord's option, as of the end of the Term, Tenant is not in default under this Lease, and, at Landlord's option, Tenant has not previously been in default under this Lease more than once, the Term, as it applies to the Premises, shall be extended for a period of five (5) years. The rights contained in this Section 10 shall be personal to the Original Tenant and its Affiliate Assignee and may be exercised by the Original Tenant or its Affiliate Assignee only (and not by any other assignee, sublessee or transferee of Tenant's interest in this Lease).

10.2 Exercise of Option. If Tenant wishes to exercise the Option, then Tenant shall deliver written notice (the "Extension Notice") to Landlord not more than fifteen (15) months nor less than twelve (12) months prior to the expiration of the Term, stating that Tenant thereby exercises the Option. In the event that Tenant so exercises the Option, this Lease shall continue in full force and effect for the duration of the Option Term.

10.3 Rental During Option Term. The annual Rent payable by Tenant during the Option Term (the "Option Rent") shall be equal to the "Fair Rental Value," as that term is defined below, for the Property as of the commencement date of the Option Term. The "Fair Rental Value," as used in this Lease, shall be equal to the annual rent per rentable square foot (including additional rent and considering any "base year" or "expense stop" applicable thereto), including all escalations, at which tenants (pursuant to leases consummated within the twelve (12) month period preceding the first day of the Option Term), are leasing non-sublease, non� encumbered, non-equity space which is not significantly greater or smaller in size than the subject space, for a comparable lease term, in an arm's length transaction, which comparable space is located in the "Comparable Buildings," as that term is defined in this Section 10.3, below (transactions satisfying the foregoing criteria shall be known as the "Comparable Transactions"), taking into consideration the following concessions (the "Concessions"): (a) rental abatement concessions, if any, being granted such tenants in connection with such comparable space; (b) tenant improvements or allowances provided or to be provided for such comparable space, and taking into account the value, if any, of the existing improvements in the subject space; and (c) other reasonable monetary concessions being granted such tenants in connection with such comparable space; provided, however, that in calculating the Fair Rental Value, no consideration shall be given to (i) the fact that Landlord is or is not required to pay a real estate brokerage commission in connection with Tenant's exercise of its right to extend the Term, or the fact that landlords are or are not paying real estate brokerage commissions in connection with such comparable space, and (ii) any period of rental abatement, if any, granted to tenants in comparable transactions in connection with the design, permitting and construction of tenant improvements in such comparable spaces. The Fair Rental Value shall additionally include a determination as to whether, and if so to what extent, Tenant must provide Landlord with an increased Security Deposit (which may be in the form of a letter of credit), for Tenant's Rent obligations in connection with Tenant's lease of the Property during the Option Term. Such determination shall be made by reviewing the extent of financial security then generally being imposed in Comparable Transactions from tenants of comparable

financial condition and credit history to the then existing financial condition and credit history of Tenant (with appropriate adjustments to account for differences in the then-existing financial condition of Tenant and such other tenants). The Concessions (A) shall be reflected in the effective rental rate (which effective rental rate shall take into consideration the total dollar value of such Concessions as amortized on a straight-line basis over the applicable term of the Comparable Transaction (in which case such Concessions evidenced in the effective rental rate shall not be granted to Tenant)) payable by Tenant, or (B) at Landlord's election, all such Concessions shall be granted to Tenant in kind. The term "Comparable Buildings" shall mean the Building and those other first-class institutionally-owned mid- and high-rise office buildings located in the Torrey Pines area of San Diego, California.

10.4 Determination of Option Rent. In the event Tenant timely and appropriately exercises an option to extend the Term, Landlord shall notify Tenant of Landlord's determination of the Option Rent on or before the date which occurs six (6) months prior to the expiration of the Extended Term. If Tenant, on or before the date which is thirty (30) days following the date upon which Tenant receives Landlord's determination of the Option Rent, in good faith objects to Landlord's determination of the Option Rent, then Landlord and Tenant shall attempt to agree upon the Option Rent using their best good-faith efforts. If Landlord and Tenant fail to reach agreement within thirty (30) days following Tenant's objection.to the Option Rent (the "Outside Agreement Date"), then each party shall make a separate determination of the Option Rent, as the case may be, within five (5) days, and such determinations shall be submitted to arbitration in accordance with Sections 10.4.1 through 10.4.7, below. If Tenant fails to object to Landlord's determination of the Option Rent within the time period set forth herein, then Tenant shall be deemed to have accepted Landlord's determination of Option Rent.

10.4.1 Landlord and Tenant shall each appoint one arbitrator who shall be, at the option of the appointing party, a real estate broker, appraiser or attorney who shall have been active over the five (5) year period ending on the date of such appointment in the leasing or appraisal, as the case may be, of commercial office properties in North San Diego, California. The determination of the arbitrators shall be limited solely to the issue of whether Landlord's or Tenant's submitted Option Rent is the closest to the actual Option Rent, taking into account the requirements of Section 10.3 of this Second Amendment, as determined by the arbitrators. Each such arbitrator shall be appointed within fifteen (15) days after the Outside Agreement Date. Landlord and Tenant may consult with their selected arbitrators prior to appointment and may select an arbitrator who is favorable to their respective positions. The arbitrators so selected by Landlord and Tenant shall be deemed "Advocate Arbitrators."

10.4.2 The two (2) Advocate Arbitrators so appointed shall be specifically required pursuant to an engagement letter within ten (10) days of the date of the appointment of the last appointed Advocate Arbitrator to agree upon and appoint a third arbitrator ("Neutral Arbitrator") who shall be qualified under the same criteria set forth herein above for qualification of the two Advocate Arbitrators, except that neither the Landlord or Tenant or either parties' Advocate Arbitrator may, directly or indirectly, consult with the Neutral Arbitrator prior or subsequent to his or her appearance. The Neutral Arbitrator shall be retained via an engagement letter jointly prepared by Landlord's counsel and Tenant's counsel.

10.4.3 The three arbitrators shall, within thirty (30) days of the appointment of the Neutral Arbitrator, reach a decision as to whether the parties shall use Landlord's or Tenant's submitted Option Rent, and shall notify Landlord and Tenant thereof.

10.4.4 The decision of the majority of the three arbitrators shall be binding upon Landlord and Tenant.

10.4.5 If either Landlord or Tenant fails to appoint an Advocate Arbitrator within fifteen (15) days after the Outside Agreement Date, then either party may petition the presiding judge of the Superior Court of San Diego County to appoint such Advocate Arbitrator subject to the criteria in Section 10.4.1 of this Lease, or if he or she refuses to act, either party may petition any judge having jurisdiction over the parties to appoint such Advocate Arbitrator.

10.4.6 If the two (2) Advocate Arbitrators fail to agree upon and appoint the Neutral Arbitrator, then either party may petition the presiding judge of the Superior Court of San Diego County to appoint the Neutral Arbitrator, subject to criteria in Section 10.4.2 of this Lease, or if he or she refuses to act, either party may petition any judge having jurisdiction over the parties to appoint such arbitrator.

10.4.7 The cost of the arbitration shall be paid by Landlord and Tenant equally.

10.5 In the event that the Option Rent shall not have been determined pursuant to the terms hereof prior to the commencement of the Option Term, Tenant shall be required to pay the Option Rent initially provided by Landlord to Tenant, and upon the final determination of the Option Rent, the payments made by Tenant shall be reconciled with the actual amounts of Option Rent due, and the appropriate party shall make any corresponding payment to the other party.

10.6 Termination of Option Right. The option right granted herein shall terminate upon the failure by Tenant to exercise its option right in accordance with this Section 10.

11. Damage or Destruction. Notwithstanding any provision to the contrary contained in the Lease, effective as of the date of this Second Amendment, the following provision shall be added to the end of Section 14.1(a) of the Original Lease:

"Notwithstanding the terms of Article 14 of this Lease, in the event more than

$500,000.00 of the cost to repair such damage or destruction is not covered by

Landlord's insurance policies, Landlord may elect not to rebuild and/or restore the

Property and/or the Building, and instead terminate this Lease, by notifying Tenant in writing of such termination within thirty (30) days after the date of discovery of the damage, such notice to include a termination date giving Tenant sixty (60) days to vacate the Property."

12. Compliance with Laws. Notwithstanding any provision to the contrary contained in the Lease, as amended hereby, Landlord shall, at Landlord's sole cost and expense (and not as part of Operating Expenses), comply with all Requirements relating to the structural portions of the Building and all portions of the Property outside the Building (for example, compliance with the Americans With Disabilities Act in parking lot and other building code requirements), but only to the extent (i) such obligations are not triggered by either (A) alterations, additions or improvements (including, without limitation, the Second Amendment Tenant Improvements) which have been made by Tenant to the Property, to the extent such alterations, additions or improvements are not normal and customary improvements for the uses permitted in accordance with the Scientific Research Zoning Ordinance of the City of San Diego and the Torrey Pines Science Center Planned Industrial Development, or (B) Tenant's use of the Property for any use which is not a permitted use in accordance with the Scientific Research Zoning Ordinance of the City of San Diego and the Torrey Pines Science Center Planned Industrial Development, and (ii) Landlord's failure to comply therewith would prohibit Tenant from obtaining or maintaining a certificate of occupancy for the Building, or would unreasonably and materially affect the safety of Tenant's employees or create a significant health hazard for Tenant's employees, or would otherwise materially and adversely affect Tenant's use of or access to the Property.

13. Notices. Notwithstanding any provision contained in the Lease to the contrary, effective as of the date of this Second Amendment, any notices to Landlord and Tenant shall be sent, transmitted,

or delivered, as the case may be, in accordance with the terms of Section 18.1 of the Original Lease to the following addresses:

If to Landlord: TPSCIVLLC

c/o HCP, Inc.

400 Oyster Point Blvd., Suite 409

South San Francisco, CA 94080

Attn: Jon Bergschneider

Fax: (650) 875-1003

with a copy to:

TPSCIV LLC

c/o RCP, Inc.

3760 Kilroy Airport Way, Suite 300

Long Beach, CA 90806-2473

Attn: Legal Department

Fax: (562) 733-5219

And

Allen Matkins Leek Gamble Mallory & Natsis LLP

190 1 Avenue of the Stars, Suite 1800

Los Angeles, California 90067


Attention:	Anton N. Natsis, Esq. Fax: (310) 788-2410

If to Tenant:

At the Building

Attention: Jeff Linton, Senior Vice President and General Counsel

14. Energy Performance Disclosure Information. Tenant hereby acknowledges that Landlord may be required to disclose certain information concerning the energy performance of the Building pursuant to California Public Resources Code Section 25402.10 and the regulations adopted pursuant thereto (collectively the "Energy Disclosure Requirements").

Tenant hereby acknowledges prior receipt of the Data Verification Checklist, as defined in the Energy Disclosure Requirements (the "Energy Disclosure Information"), and agrees that Landlord has timely complied in full with Landlord's obligations under the Energy Disclosure Requirements. Tenant acknowledges and agrees that (i) Landlord makes no representation or warranty regarding the energy performance of the Building or the accuracy or completeness of the Energy Disclosure Information, (ii) the Energy Disclosure Information is for the current occupancy and use of the Building and that the energy performance of the Building may vary depending on future occupancy and/or use of the Building, and (iii) Landlord shall have no liability to Tenant for any errors or omissions in the Energy Disclosure Information. If and to the extent not prohibited by applicable laws, Tenant hereby waives any right Tenant may have to receive the Energy Disclosure Information, including, without limitation, any right Tenant may have to terminate the Lease, as amended, as a result of Landlord's failure to disclose such information. Further, Tenant hereby releases Landlord from any and all losses, costs, damages, expenses and/or liabilities relating to, arising out of and/or resulting from the Energy Disclosure Requirements, including, without limitation, any liabilities arising as a result of Landlord's failure to disclose the Energy Disclosure Information to Tenant prior to the execution of this Second Amendment. Tenant's acknowledgment of the AS-IS condition of the Property (except as specifically set forth in this Second Amendment and the Tenant Work Letter) pursuant to the terms of this Lease shall be deemed to include the energy performance of the Building. Tenant further acknowledges that pursuant to the Energy Disclosure Requirements, Landlord may be required in the future to disclose information concerning Tenant's energy usage to certain third parties, including, without limitation, prospective purchasers, lenders and tenants of the Building (the "Tenant Energy Use Disclosure"). Tenant hereby (A) consents to all such Tenant Energy Use Disclosures, and (B) acknowledges that Landlord shall not be required to notify Tenant of any Tenant Energy Use Disclosure. Further, Tenant hereby releases Landlord from any and all losses, costs, damages, expenses and liabilities relating to, arising out of and/or resulting from any Tenant Energy Use Disclosure. The terms of this Section 14 shall survive the expiration or earlier termination of this Lease.

15. Modification to Operating Expenses. Notwithstanding any provision to the contrary contained in the Lease, as amended hereby, effective as of the Extended Term Commencement Date, the following shall apply:

15.1 Item (v) of Section 6.2 of the Original Lease shall be amended and restated in its entirety as follows:

"the cost of capital improvements or other costs incurred in connection with the Property that are required under any governmental law or regulation, specifically excluding any costs which are Landlord's responsibility under Section 12 of the Second Amendment; provided, however, that any capital expenditure shall be amortized (including interest on the amortized cost) over its useful life (as reasonably determined by Landlord);"

15.2 The reference to "(to the extent such items do not constitute capital improvements) unless such costs are amortized over the useful life of the item" in Item (1) of Section 6.2 of the Original Lease shall be amended and restated in its entirety as follows: ", except as specifically set forth in Item (v) above;"

15.3 The following provisions shall be added to Section 6.2 of the Original

Lease immediately following Item (1) of Section 6.2 of the Original Lease:

"(m) costs incurred in connection with any expansion or renovation of the Building or Property, except as specifically set forth in Item (v) above; (n) costs incurred to comply with any governmental law or regulation relating to the removal, remediation, treatment or containment of any "hazardous substance" (as that term is defined in Section 10.6(a) of this Lease), the terms of which shall be governed by Section 10.6 of this Lease and Section 12 of the Second Amendment; and (n) costs relating to the landscaping of the Property to the extent that Tenant contracts, and directly pays, for such landscaping."

16. Hazardous Substances. Notwithstanding anything contained in Section 10.6 of the Lease, Tenant will not be liable to Landlord for any hazardous substances which were not brought onto the Property by Tenant, its employees, contractors, agents or third parties under the control of Tenant.

17. No Further Modification. Except as specifically set forth in this Second Amendment, all of the terms and provisions of the Lease shall remain unmodified and in full force and effect.

[signature page to follow]

IN WITNESS WHEREOF, this Second Amendment has been executed as of the day and year first above written.

"LANDLORD"

TPSCIV LLC,

A Delaware limited Liability Company

By:

Name: ------------------------

"TENANT"

SEQUENOM, INC.,

a Delaware corporation

By:

Name: --------------------------

WORK LETTER

EXHIBIT A

This Tenant Work Letter shall set forth the terms and conditions relating to the construction of the tenant improvements in the Building. This Tenant Work Letter is essentially organized chronologically and addresses the issues of the construction of the tenant improvements in the Building, in sequence, as such issues will arise during the actual construction of the tenant improvements in the Building. All references in this Tenant Work Letter to Articles or Sections of "this Second Amendment" shall mean the relevant portion of the Second Amendment to which this Tenant Work Letter is attached as Exhibit A and of which this Tenant Work Letter forms a part, and all references in this Tenant Work Letter to Sections of "this Tenant Work Letter" shall mean the relevant portion of Sections 1 through 5 of this Tenant Work Letter. All references in this Tenant Work Letter to the "Lease" shall mean the relevant portions of the Lease as defined in the Second Amendment. Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Second Amendment.

SECTION 1

CONDITION OF PROPERTY

Except as expressly set forth in this Tenant Work Letter and the Second Amendment, Tenant shall continue to accept the Property from Landlord in its presently existing, "as-is" condition.

SECTION 2

SECOND AMENDMENT TENANT IMPROVEMENTS

2.1 Second Amendment Tenant Improvement Allowance. Tenant shall be entitled to a one-time tenant improvement allowance (the "Second Amendment Tenant Improvement Allowance") in the amount of One Million Two Hundred Thirty-Seven Thousand Five Hundred and 00/100 Dollars ($1,237,500.00, i.e., $15.00 per gross square foot of Building Area of the Building), for the costs relating to the initial design and construction of Tenant's improvements, which are permanently affixed to the Building (the "Second Amendment Tenant Improvements"). In no event shall Landlord be obligated to make disbursements pursuant to this Tenant Work Letter in a total amount which exceeds the Second Amendment Tenant Improvement Allowance. Further, notwithstanding the foregoing or any provision to the contrary contained herein, in no event shall Landlord be

obligated to make any disbursements pursuant to this Tenant Work Letter in a total amount which exceeds Three Hundred Thousand and 00/100 Dollars ($300,000.00) for any costs incurred in connection with any "Second Amendment Tenant Improvement Allowance Items," as that term is defined in Section 2.2.1 below, which costs arise or accrue on or before December 31, 2014. In the event that the Second Amendment Tenant Improvement Allowance is not fully utilized by Tenant on or before December 31, 2016, then such unused amounts shall revert to Landlord, and Tenant shall have no further rights with respect thereto. All Second Amendment Tenant Improvements for which the Second Amendment Tenant Improvement Allowance has been made available shall be deemed Landlord's property under the terms of the Lease; provided, however, Landlord may, by written notice to Tenant at the time of Landlord's approval of the "Approved Working Drawings," as that term is defined in Section 3.4, below, require Tenant, at Tenant's expense, to remove any Second Amendment Tenant Improvements and to repair any damage to the Property and Building caused by such removal and return the affected portion of the Property and/or Building to their condition existing prior to the installment of such Second Amendment Tenant Improvements. Tenant may elect to construct the Second Amendment Tenant Improvements in phases, in which case each phase will be subject to the terms of this Tenant Work Letter.

2.2 Disbursement of the Second Amendment Tenant Improvement Allowance.

2.2.1 Second Amendment Tenant Improvement Allowance Items. Except as otherwise set forth in this Tenant Work Letter, the Second Amendment Tenant Improvement Allowance shall be disbursed by Landlord only for the following items and costs (collectively the "Second Amendment Tenant Improvement Allowance Items"):

2.2.l.1 Payment of the fees of the "Architect" and the "Engineers," as those terms are defined in Section 3.1 of this Tenant Work Letter, which fees shall, notwithstanding anything to the contrary contained in this Tenant Work Letter, not exceed an aggregate amount equal to $3.50 per rentable square foot of the Building, and payment of the fees incurred by, and the cost of documents and materials supplied by, Landlord and Landlord's consultants in connection with the preparation and review of the "Construction Drawings," as that term is defined in Section 3.1 of this Tenant Work Letter;

2.2.1.2 The payment of plan check, permit and license fees relating to construction of the Second Amendment Tenant Improvements;

2.2.1.3 The cost of construction of the Second Amendment Tenant Improvements, including, without limitation, testing and inspection costs, hoisting and trash removal costs, and contractors' fees and general conditions;

2.2.1.4 The cost of any changes in the structural portions of the Building and/or the Building systems when such changes are required by the Construction Drawings (including if such changes are due to the fact that such work is prepared on an unoccupied basis), such cost to include all direct architectural and/or engineering fees and expenses incurred in connection therewith;

2.2.1.5 The cost of any changes to the Construction Drawings or Second

Amendment Tenant Improvements required by all applicable building codes (the "Code");

2.2.1.6 Sales and use taxes and Title 24 fees; and

2.2.l.7 All other costs reasonably expended by Landlord in connection with the construction of the Second Amendment Tenant Improvements (specifically excluding any logistical coordination fee and any amounts payable by Landlord to PMA (as that term is defined in Section 5.2, below) in connection with Tenant's construction of the Tenant Improvements. There will be no charge for freight elevator usage or parking during construction of the Second Amendment Tenant Improvements.

2.2.2 Disbursement of Second Amendment Tenant Improvement Allowance. During the construction of the Second Amendment Tenant Improvements, Landlord shall make monthly disbursements of the Second Amendment Tenant Improvement Allowance for Second Amendment Tenant Improvement Allowance Items for the benefit of Tenant and shall authorize the release of monies for the benefit of Tenant as follows.

2.2.2.1 Monthly Disbursements. On or before a day of each calendar month to be specified by Landlord, during the construction of the Second Amendment Tenant Improvements, Tenant shall deliver to Landlord: (i) a request for payment of the "Contractor," as that term is defined in Section 4.1 of this Tenant Work Letter, approved by Tenant, in a form to be provided by Landlord, showing the schedule, by trade, of percentage of completion of the Second Amendment Tenant Improvements in the Building, detailing the portion of the work completed and the portion not completed; (ii) invoices from all of "Tenant's Agents," as that term is defined in Section 4.1.2 of this Tenant Work Letter, for labor rendered and materials delivered to the Property; (iii) executed mechanic's

lien releases from all of Tenant's Agents which shall comply with the appropriate provisions, as reasonably determined by Landlord, of California Civil Code Sections 8132, 8134, 8136 and 8138; and (iv) all other information reasonably requested by Landlord. Tenant's request for payment shall be deemed Tenant's acceptance and approval of the work furnished and/or the materials supplied as set forth in Tenant's payment request. Thereafter, Landlord shall deliver a check to Tenant made jointly payable to Contractor and Tenant in payment of the lesser of: (A) the amounts so requested by Tenant, as set forth in this Section 2.2.2.1, above, less a ten percent (10%) retention (the aggregate amount of such retentions to be known as the "Final Retention"), and (B) the balance of any remaining available portion of the Second Amendment Tenant Improvement Allowance (not including the Final

Retention), provided that Landlord does not dispute any request for payment based on non� compliance of any work with the "Approved Working Drawings," as that term is defined in Section 3.4 below, or due to any substandard work, or for any other reasonable basis. Landlord's payment of such amounts shall not be deemed Landlord's approval or acceptance of the work furnished or materials supplied as set forth in Tenant's payment request.

2.2.2.2 Final Retention. Subject to the provisions of this Tenant Work Letter, a check for the Final Retention payable jointly to Tenant and Contractor shall be delivered by Landlord to Tenant following the completion of construction of the Second Amendment Tenant Improvements, provided that (i) Tenant delivers to Landlord properly executed mechanics lien releases in compliance with both California Civil Code Section 8134 and either 8136 or Section 8138, (ii) Landlord has determined that no substandard work exists which adversely affects the mechanical, electrical, plumbing, heating, ventilating and air conditioning, life-safety or other systems of the Building, the curtain wall of the Building, or the structure or exterior appearance of the Building, and (iii) Architect delivers to Landlord a certificate, in a form reasonably acceptable to Landlord, certifying that the construction of the Second Amendment Tenant Improvements in the Property has been substantially completed.

2.2.2.3 Other Terms. Landlord shall only be obligated to make disbursements from the Second Amendment Tenant Improvement Allowance to the extent costs are incurred by Tenant for Second Amendment Tenant Improvement Allowance Items. All Second Amendment Tenant Improvement Allowance Items for which the Second Amendment Tenant Improvement Allowance has been made available shall be deemed Landlord's property under the terms of the Lease.

2.3 Standard Second Amendment Tenant Improvement Package. Landlord has established specifications (the "Specifications") for the Property standard components to be used in the construction of the Second Amendment Tenant Improvements in the Property (collectively, the "Standard Improvement Package"), which Specifications shall be supplied to Tenant by Landlord. The quality of Second Amendment Tenant Improvements shall be equal to or of greater quality than the quality of the Specifications, provided that the Second Amendment Tenant Improvements shall comply with certain Specifications as designated by Landlord and provided that the parties agree that the existing finishes and materials in the Premises meet the building standards. Landlord may make changes to the Specifications for the Standard Improvement Package from time to time.

SECTION 3

CONSTRUCTION DRAWINGS

3.1 Selection of Architect/Construction Drawings. Tenant shall retain the architect/space planner designated by Tenant and reasonably approved by Landlord (the "Architect") to prepare the "Construction Drawings," as that term is defined in this Section 3.1; provided that Landlord hereby approves Kimberly Krenek. Tenant shall retain the engineering consultants designated by Landlord (the Engineers") to prepare all plans and engineering working drawings relating to the structural, mechanical, electrical, plumbing, HVAC, lifesafety, and sprinkler work in the Building. Landlord hereby approves Helix Mechanical, Inc. for all mechanical, HVAC and plumbing related work, Ickler Electrical Corp. for electrical work and Bryant Construction to act as the general contractor. The plans and drawings to be prepared by Architect and the Engineers hereunder shall be known collectively as the "Construction Drawings." All Construction Drawings shall comply with the drawing format and specifications determined by Landlord, and shall be subject to Landlord's reasonable approval, which approval will be given or denied (with a written statement of reasons for denial and proposed changes necessary to obtain Landlord's consent) within ten (10) business days after submittal to Landlord. Tenant and Architect shall verify, in the field, the dimensions and conditions as shown on the relevant portions of the base building plans, and Tenant and Architect shall be solely responsible for the same, and Landlord shall have no responsibility in connection therewith. Landlord's review of the Construction Drawings as set forth in this Section 3, shall be for its sole purpose and shall not imply Landlord's review of the same, or obligate Landlord to review the same, for quality, design, Code compliance or other like matters. Accordingly, notwithstanding that any Construction Drawings are reviewed by Landlord or its space planner, architect, engineers and

consultants, and notwithstanding any advice or assistance which may be rendered to Tenant by Landlord or Landlord's space planner, architect, engineers, and consultants, Landlord shall have no liability whatsoever in connection therewith and shall not be responsible for any omissions or errors contained in the Construction Drawings, and Tenant's waiver and indemnity set forth in the Lease shall specifically apply to the Construction Drawings.

3.2 Final Space Plan. Tenant shall supply Landlord with four (4) copies signed by Tenant of its final space plan for the Second Amendment Tenant Improvements before any architectural working drawings or engineering drawings have been commenced. The final space plan (the "Final Space Plan") shall include a layout and designation of all offices, rooms and other partitioning, their intended use, and equipment to be contained therein. Landlord may request clarification or more specific drawings for special use items not included in the Final Space Plan. Landlord shall advise Tenant within five (5) business days after Landlord's receipt of the Final Space Plan for the Second Amendment Tenant Improvements if the same is unsatisfactory or incomplete in any respect (together with a written statement of any changes necessary to address Landlord's concerns). If Tenant is so advised, Tenant shall promptly cause the Final Space Plan to be revised to correct any deficiencies or other matters Landlord may reasonably require.

3.3 Final Working Drawings. After the Final Space Plan has been approved by Landlord, which approval shall not be unreasonably withheld, Tenant shall supply the Engineers with a complete listing of standard and non-standard equipment and specifications, including, without limitation, B.T.U. calculations, electrical requirements and special electrical receptacle requirements for the Property, to the extent necessary to enable the Engineers and the Architect to complete the "Final Working Drawings" (as that term is defined below) in the manner as set forth below. Upon the approval of the Final Space Plan by Landlord and Tenant, Tenant shall promptly cause the Architect and the Engineers to complete the architectural and engineering drawings for the Second Amendment Tenant Improvements, and Architect shall compile a fully coordinated set of architectural, structural, mechanical, electrical and plumbing working drawings in a form which is complete to allow subcontractors to bid on the work and to obtain all applicable permits (collectively, the "Final Working Drawings") and shall submit the same to Landlord for Landlord's approval. Tenant shall supply Landlord with four (4) copies signed by Tenant of such Final Working Drawings. Landlord shall advise Tenant within five (5) business days after Landlord's receipt of the Final Working Drawings for the Premises if the same is unsatisfactory or incomplete in any respect (together with a written statement of any changes necessary to address Landlords concerns). If Tenant is so advised, Tenant shall immediately revise the Final Working Drawings in accordance with such review and any disapproval of Landlord in connection therewith.

3.4 Approved Working Drawings. The Final Working Drawings shall be approved by Landlord (the "Approved Working Drawings"), which approval shall not be unreasonably withheld, prior to the commencement of construction of the Second Amendment Tenant Improvements by Tenant. After approval by Landlord of the Final Working Drawings, Tenant may submit the same to the appropriate municipal authorities for all applicable building permits (the "Permits"). Tenant hereby agrees that neither Landlord nor Landlord's consultants shall be responsible for obtaining any building permit or certificate of occupancy for the Property and that obtaining the same shall be Tenant's responsibility; provided, however, that Landlord shall cooperate with Tenant in executing permit applications and performing other ministerial acts reasonably necessary to enable Tenant to obtain any such permit or certificate of occupancy. No changes, modifications or alterations in the Approved Working Drawings may be made without the prior written consent of Landlord, which consent may not be unreasonably withheld, conditioned or delayed.

SECTION 4

CONSTRUCTION OF THE SECOND AMENDMENT TENANT IMPROVEMENTS

4.1 Tenants Selection of Contractors.

4.1.1 The Contractor. A general contractor shall be retained by Tenant to construct the Second Amendment Tenant Improvements. Such general contractor ("Contractor") shall be selected by Tenant and reasonably approved by Landlord; provided Bryant Construction is hereby approved.

4.1.2 Tenant's Agents. All subcontractors, laborers, materialmen, and suppliers used by Tenant (such subcontractors, laborers, materialmen, and suppliers, and the Contractor to be known collectively as "Tenants Agents") shall be subject to Landlord's reasonable approval; provided Helix Mechanical. Inc. and IckIer Electrical Corp. are hereby approved.

4.2 Construction of Second Amendment Tenant Improvements by Tenants Agents.

4.2.1 Construction Contract; Cost Budget. Prior to Tenant's execution of the construction contract and general conditions with Contractor (the "Contract"), Tenant shall submit the Contract to Landlord for its approval, which approval shall not be unreasonably withheld or delayed; provided that Landlord's approval of the Contract shall not be required in the event that (i) the Contract contains commercially standard indemnity provisions, (ii) complies with the insurance provisions of Section 4.2.2.4 below, and (iii) complies with the warranty and guarantee provisions of Section 4.2.2.3 below. Prior to the

commencement of the construction of the Second Amendment Tenant Improvements, and after Tenant has accepted all bids for the Second Amendment Tenant Improvements, Tenant shall provide Landlord with a detailed breakdown, by trade, of the final costs to be incurred or which have been incurred, as set forth more particularly in Sections 2.2.1.1 through 2.2.1.7, above, in connection with the design and construction of the Second Amendment Tenant Improvements to be performed by or at the direction of Tenant or the Contractor, which costs form a basis for the amount of the Contract (the "Final Costs"). Prior to the commencement of construction of the Second Amendment Tenant Improvements, Tenant shall supply Landlord with cash in an amount (the "Over� Allowance Amount") equal to the difference between the amount of the Final Costs and the amount of the Second Amendment Tenant Improvement Allowance (less any portion thereof already disbursed by Landlord, or in the process of being disbursed by Landlord, on or before the commencement of construction of the Second Amendment Tenant Improvements). The Over� Allowance Amount shall be disbursed by Landlord prior to the disbursement of any of the then remaining portion of the Second Amendment Tenant Improvement Allowance, and such disbursement shall be pursuant to the same procedure as the Second Amendment Tenant Improvement Allowance. In the event that, after the Final Costs have been delivered by Tenant to Landlord, the costs relating to the design and construction of the Second Amendment Tenant Improvements shall change, any additional costs necessary to such design and construction in excess of the Final Costs, shall be paid by Tenant to Landlord immediately as an addition to the Over-Allowance Amount or at Landlord's option, Tenant shall make payments for such additional costs out of its own funds, but Tenant shall continue to provide Landlord with the documents described in Sections 2.2.2.1(i), (ii), (iii) and (iv) of this Tenant Work Letter, above, for Landlord's approval, prior to Tenant paying such costs. Notwithstanding anything set forth in this Tenant Work Letter to the contrary, construction of the Second Amendment Tenant Improvements shall not commence until (a) Landlord has approved the Contract, and (b) Tenant has procured and delivered to Landlord a copy of all Permits.

4.2.2 Tenant's Agents.

4.2.2.1 Landlord's General Conditions for Tenant's Agents and Second Amendment Tenant Improvement Work. Tenant's and Tenant's Agent's construction of the Second Amendment Tenant Improvements shall comply with the following: (i) the Second Amendment Tenant Improvements shall be constructed in strict accordance with the Approved Working Drawings; (ii) Landlord's reasonable rules and regulations for the construction of improvements in the Building; and (iii) Tenant shall abide by all rules made by Landlord's Building manager with respect to the use of freight, loading dock and service elevators, storage of materials, and any other matter in connection with this Tenant Work Letter, including, without limitation, the construction of the Second Amendment Tenant Improvements. In the event of a conflict between the Approved Working Drawings and Landlord's construction rules and regulations, Landlord, in its sole and absolute discretion, shall determine which shall prevail.

4.2.2.2 Indemnity. Tenant's indemnity of Landlord as set forth in the Lease shall also apply with respect to any and all costs, losses, damages, injuries and liabilities related in any way to

any act or omission of Tenant or Tenant's Agents, or anyone directly or indirectly employed by any of them, or in connection with Tenant's non-payment of any amount arising out of the Second Amendment Tenant Improvements and/or Tenant's disapproval of all or any portion of any request for payment. Except to the extent arising from Landlord's negligence or willful misconduct, such indemnity by Tenant, as set forth in the Lease, shall also apply with respect to any and all costs, losses, damages, injuries and liabilities related in any way to Landlord's performance of any ministerial acts reasonably necessary (i) to permit Tenant to complete the Second Amendment Tenant Improvements, and (ii) to enable Tenant to obtain any building permit or certificate of occupancy for the Property.

4.2.2.3 Requirements of Tenant's Agents. Each of Tenant's Agents shall guarantee to Tenant and for the benefit of Landlord that the portion of the Second Amendment Tenant Improvements for which it is responsible shall be free from any defects in workmanship and materials for a period of not less than one (1) year from the date of completion thereof. Each of Tenant's Agents shall be responsible for the replacement or repair, without additional charge, of all work done or furnished in accordance with its contract that shall become defective within one (1) year after the completion of the work performed by such contractor or subcontractors. The correction of such work shall include, without additional charge, all additional expenses and damages incurred in connection with such removal or replacement of all or any part of the Second Amendment Tenant Improvements, and/or the Building and/or common areas that may be damaged or disturbed thereby. All such warranties or guarantees as to materials or workmanship of or with respect to the Second Amendment Tenant Improvements shall be contained in the Contract or subcontract and shall be written such that such guarantees or warranties shall inure to the benefit of both Landlord and Tenant, as their respective interests may appear, and can be directly enforced by either. Tenant covenants to give to Landlord any assignment or other assurances which may be necessary to effect such right of direct enforcement.

4.2.2.4 Insurance Requirements.

4.2.2.4.1 General Coverages. All of Tenant's Agents shall carry worker's compensation insurance covering all of their respective employees, and shall also carry public liability insurance, including property damage, with limits reasonably approved by Landlord, in form and with companies as are required to be carried by Tenant as set forth in the Lease.

4.2.2.4.2 Special Coverages. Tenant shall carry or cause the Contractor to carry "Builder's All Risk" insurance in an amount reasonably approved by Landlord covering

the construction of the Second Amendment Tenant Improvements, and such other insurance as Landlord may reasonably require, it being understood and agreed that the Second Amendment Tenant Improvements shall be insured by Tenant pursuant to the Lease immediately upon completion thereof. Such insurance shall be in amounts and shall include such extended coverage endorsements as may be reasonably required by Landlord including, but not limited to, the requirement that all of Tenant's Agents shall carry excess liability and Products and Completed Operation Coverage insurance, each in amounts not less than $500,000 per incident, $1,000,000 in aggregate, and in form and with companies as are required to be carried by Tenant as set forth in the Lease.

4.2.2.4.3 General Terms. Certificates for all insurance carried pursuant to this Section 4.2.2.4 shall be delivered to Landlord before the commencement of construction of the Second Amendment Tenant Improvements and before the Contractor's equipment is moved onto the site. All such policies of insurance must contain a provision that the company writing said policy or the insured will give Landlord thirty (30) days prior written notice of any cancellation or lapse of the effective date or any reduction in the amounts of such insurance. In the event that the Second Amendment Tenant Improvements are damaged by any cause during the course of the construction thereof, Tenant shall repair the same. Tenant's Agents shall maintain all of the foregoing insurance coverage in force until the Second Amendment Tenant Improvements are fully completed and accepted by Landlord, except for any Products and Completed Operation Coverage insurance required by Landlord, which is to be maintained for ten (10) years following completion of the work and acceptance by Landlord and Tenant. All policies carried under this Section 4.2.2.4 shall insure Landlord and Tenant, as their interests may appear, as well as Contractor and Tenant's Agents. All insurance, except Workers' Compensation, maintained by Tenant's Agents shall preclude subrogation claims by the insurer against anyone insured thereunder. Such insurance shall provide that it is primary insurance as respects the owner and that any other insurance maintained by owner is excess and noncontributing with the insurance required hereunder. The requirements for the foregoing insurance shall not derogate from the provisions for indemnification of Landlord by Tenant under Section 4.2.2.2 of this Tenant Work Letter. In connection with any Second Amendment Tenant Improvements which cost in excess of $1,000,000.00 in the aggregate, Landlord may, in its discretion, require Tenant to obtain a lien and completion bond or some alternate form of security satisfactory to Landlord in an amount sufficient to ensure the lien-free completion of the Second Amendment Tenant Improvements and naming Landlord as a co-obligee.

4.2.3 Governmental Compliance. The Second Amendment Tenant Improvements shall comply in all respects with the following: (i) the Code and other state,

federal, city or quasi-governmental laws, codes, ordinances and regulations, as each may apply according to the rulings of the controlling public official, agent or other person; (ii) applicable standards of the American Insurance Association (formerly, the National Board of Fire Underwriters) and the National Electrical Code; and (iii) building material manufacturer's specifications.

4.2.4 Inspection by Landlord. Landlord shall have the right to inspect the Second Amendment Tenant Improvements at all times, provided however, that Landlord's failure to inspect the Second Amendment Tenant Improvements shall in no event constitute a waiver of any of Landlord's rights hereunder nor shall Landlord's inspection of the Second Amendment Tenant Improvements constitute Landlord's approval of the same. Should Landlord disapprove any portion of the Second Amendment Tenant Improvements, Landlord shall notify Tenant in writing of such disapproval and shall specify the items disapproved. Any defects or deviations in, and/or disapproval by Landlord of, the Second Amendment Tenant Improvements shall be rectified by Tenant at no expense to Landlord (but such cost may be charged against the Second Amendment Tenant Improvement Allowance), provided however, that in the event Landlord determines that a defect or deviation exists or disapproves of any matter in connection with any portion of the Second Amendment Tenant Improvements and such defect, deviation or matter might adversely affect the mechanical, electrical, plumbing, heating, ventilating and air conditioning or life-safety systems of the Building, the structure or exterior appearance of the Building, Landlord may, take such action as Landlord deems necessary, at Tenant's expense and without incurring any liability on Landlord's part, to correct any such defect, deviation and/or matter, including, without limitation, causing the cessation of performance of the construction of the Second Amendment Tenant Improvements until such time as the defect, deviation and/or matter is corrected to Landlord's satisfaction.

4.2.5 Meetings. Commencing upon the execution of the Lease, Tenant shall hold weekly meetings at a reasonable time, with the Architect and the Contractor regarding the progress of the preparation of Construction Drawings and the construction of the Second Amendment Tenant Improvements, which meetings shall be held at either the Building or a location mutually agreed upon by both Landlord and Tenant, and Landlord and/or its agents shall receive prior notice of, and shall have the right to attend, all such meetings, and, upon Landlord's reasonable request, certain of Tenant's Agents shall attend such meetings. In addition, minutes shall be taken at all such meetings, a copy of which minutes shall be promptly delivered to

Landlord. One such meeting each month shall include the review of Contractor's current request for payment. Notwithstanding the foregoing, Tenant's obligation to hold any meetings with the Architect and the Contractor pursuant to this Section 4.2.5 above shall only apply to the extent that (i) any Permits are required by an applicable governmental authority in connection with such Second Amendment Tenant Improvements, and (ii) such practice is normal and customary in the industry for construction projects of similar scope and nature to the applicable Second Amendment Tenant Improvements; provided that Tenant's obligation to notify Landlord in connection with any such meetings, and Landlord's right to attend such meetings, as set forth in this Section 4.2.5 above, shall continue to apply in connection with any such meetings, regardless if Tenant is, or is not, required to hold any such meetings pursuant to this Section

4.2.5 above.

4.3 Notice of Completion: Copy of Record Set of Plans. Within ten (10) days after completion of construction of the Second Amendment Tenant Improvements, Tenant shall cause a Notice of Completion to be recorded in the office of the Recorder of the county in which the Building is located in accordance with Section 8182 of the Civil Code of the State of California or any successor statute, and shall furnish a copy thereof to Landlord upon such recordation. If Tenant fails to do so, Landlord may execute and file the same on behalf of Tenant as Tenant's agent for such purpose, at Tenant's sole cost and expense. At the conclusion of construction, (i) Tenant shall cause the Architect and Contractor (A) to update the Approved Working Drawings as necessary to reflect all changes made to the Approved Working Drawings during the course of construction, (B) to certify to the best of their knowledge that the "record-set" of as-built drawings are true and correct, which certification shall survive the expiration or termination of the Lease, and (C) to deliver to Landlord four (4) sets of copies of such record set of drawings within ninety (90) days following issuance of a certificate of occupancy for the Premises, and (ii) Tenant shall deliver to Landlord a copy of all warranties, guaranties, and operating manuals and information relating to the improvements, equipment, and systems in the Premises.

SECTION 5

MISCELLANEOUS

5.1 Tenants Representative. Tenant has designated Lana Thurman as its sole representative with respect to the matters set forth in this Tenant Work Letter, who shall have full authority and responsibility to act on behalf of the Tenant as required in this Tenant Work Letter.

5.2 Landlord's Representative. Landlord has designated Project Management Advisors, Inc. ("PMA") as a third party project manager for construction oversight of the Second Amendment Tenant

Improvements on behalf of Landlord, who, until further notice to Tenant, shall have full authority and responsibility to act on behalf of the Landlord as required in this Tenant Work Letter.

5.3 Time of the Essence in This Tenant Work Letter. Unless otherwise indicated, all references herein to a "number of days" shall mean and refer to calendar days. If any item requiring approval is timely disapproved by Landlord, the procedure for preparation of the document and approval thereof shall be repeated until the document is approved by Landlord.

5.4 Tenant's Lease Default. Notwithstanding any provision to the contrary contained in the Lease, if an event of default as described in the Lease, as amended, or this Tenant Work Letter has occurred at any time on or before the substantial completion of the Second Amendment Tenant Improvements, then (i) in addition to all other rights and remedies granted to Landlord pursuant to the Lease, as amended, Landlord shall have the right to withhold payment of all or any portion of the Second Amendment Tenant Improvement Allowance and/or Landlord, and (ii) all other obligations of Landlord under the terms of this Tenant Work Letter shall be forgiven until such time as such default is cured pursuant to the terms of the Lease, as amended.

Exhibit 31.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, William J. Welch, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ended September�30, 2014 of Sequenom, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date: November 10, 2014	/s/ William J. Welch ��
�	William J. Welch
�	Chief Executive Officer
�	(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Carolyn D. Beaver, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ended September�30, 2014 of Sequenom, Inc.;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date: November 10, 2014	/s/ Carolyn D. Beaver
�	Carolyn D. Beaver
�	Chief Financial Officer
�	(Principal Financial Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the Exchange Act) and Section�1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. � 1350), William J. Welch, Chief Executive Officer of Sequenom, Inc. (the Company), hereby certify that, to the best of his knowledge:

1. The Company's Quarterly Report on Form 10-Q for the period ended September�30, 2014, to which this Certification is attached as Exhibit 32.1 (the Quarterly Report) fully complies with the requirements of Section�13(a) or Section�15(d) of the Securities Exchange Act, and

2. The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section�906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission (SEC) or its staff upon request.

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Quarterly Report), irrespective of any general incorporation language contained in such filing.

IN WITNESS WHEREOF, the undersigned has set his hand hereto as of the 10th day of November, 2014 .



�
�	�	�
�	�	/s/ William J. Welch
�	�	William J. Welch
�	�	Chief Executive Officer
�	�	(Principal Executive Officer)

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the Exchange Act) and Section�1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. �1350), Carolyn D. Beaver, Principal Financial Officer of Sequenom, Inc. (the Company), hereby certifies that, to the best of her knowledge:

1. The Company's Quarterly Report on Form 10-Q for the period ended September�30, 2014, to which this Certification is attached as Exhibit 32.2 (the Quarterly Report) fully complies with the requirements of Section�13(a) or Section�15(d) of the Securities Exchange Act, and

2. The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF, the undersigned has set her hand hereto as of the 10th day of November, 2014 .



�
�	�	�
�	�	/s/ Carolyn D. Beaver
�	�	Carolyn D. Beaver Chief Financial Officer (Principal Financial Officer)

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Form 10-Q SEQUENOM INC For: Sep 30

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