SAN DIEGO, March 4, 2015 /PRNewswire/ -- Sequenom, Inc. (NASDAQ: SQNM), a life sciences company committed to enabling healthier lives through the development of innovative products and services, today reported total revenues of $36.8 million for the fourth quarter of 2014, an increase of 13% compared to revenues of $32.7 million for the fourth quarter of 2013. Total revenues for the year ended December 31, 2014, were $151.6 million, compared to $119.6 million for the prior year 2013, a 27% increase.
Net loss from continuing operations improved by 87% to $14.4 million, or $0.12 per share, for the full year 2014, as compared to $109.6 million, or $0.95 per share for 2013. The improvement in the loss from continuing operations from prior year is due to improved gross margins, reduced operating expenses and a gain on the pooled patents agreement with Illumina. Net earnings for 2014 were $1.0 million, or $0.01 per share, compared to a net loss of $107.4 million for 2013, or $0.93 per share.
“2014 was a pivotal year for Sequenom. In addition to growing the business and improving profitability, we completed multiple strategic transactions including the divestiture of the Sequenom Bioscience business unit, the buyout of the patent rights from Isis Innovation, as well as the settlement and pooled patents agreements with Illumina,” said Bill Welch, Chief Executive Officer of Sequenom, Inc.
“Separately, I am pleased to announce that Daniel Grosu, M.D. has joined Sequenom as Senior Vice President and Chief Medical Officer. Dr. Grosu has worked extensively with developing and commercializing innovative diagnostic technologies in oncology, reproductive medicine, and human genetics while he worked at Siemens Medical Solutions, Bayer HealthCare Pharmaceuticals, and Johnson & Johnson. Dr. Grosu most recently worked at Illumina as Vice President, Clinical Development and Medical Affairs and was lllumina’s first Chief Medical Officer.”
Fourth Quarter Results
Revenues for the fourth quarter of 2014 were $36.8 million, compared to $32.7 million for the fourth quarter of 2013. Revenues are recorded primarily on a cash basis with accrual accounting used for several third-party payors and for client bill arrangements. International revenue including royalties, accounted for on an accrual basis, contributed 15% of diagnostic services revenues in the fourth quarter. In total, over 44% of Sequenom’s revenue in the fourth quarter of 2014 is accounted for on the accrual basis of accounting.
Total patient samples accessioned increased by 10.7% to 50,900 patient samples during the fourth quarter of 2014, compared to the prior year fourth quarter. Approximately 43,500 of those patient samples accessioned were for the MaterniT21® PLUS laboratory-developed test (LDT), which is an increase in testing volume of 17.9% compared to the fourth quarter of 2013. For the full year 2014, Sequenom Laboratories accessioned 162,600 MaterniT21 PLUS tests and 197,500 total test samples for all its LDTs, compared to 148,500 MaterniT21 PLUS tests and more than 185,000 total tests for the full year 2013.
Total cost of revenues decreased to $17.3 million for the fourth quarter of 2014, compared to $22.3 million for the prior year period. Cost of revenues decreased primarily due to the continued cost improvements to Sequenom Laboratories’ existing tests offset by the impact of higher test volumes.
Gross margin for the fourth quarter of 2014 was 53% as compared to gross margin of 32% for the fourth quarter of 2013. This improvement is attributable primarily to the increase in collections for tests performed in the current and prior quarters, the increase in the volume of tests on accrual accounting in 2014 and improved cost efficiencies in processing patient samples.
Total operating expenses for the fourth quarter of 2014 were $22.4 million, as compared to total operating expenses of $29.5 million for the fourth quarter of 2013. The decrease is primarily due to reductions in selling and marketing expense, research and development expense and litigation related expense.
Operating income for the fourth quarter of 2014 was $20.0 million as compared to a loss of $19.2 million, for the same period in 2013. During the fourth quarter of 2014, the Company recognized a gain of $22.8 million related to the pooled patents agreement and settlement agreement with Illumina. Net earnings for the fourth quarter of 2014 were $18.3 million or $0.14 per diluted share, as compared to a net loss of $18.9 million, or $0.16 per share, for the same period in 2013.
Cash burn for the fourth quarter of 2014 was $7.5 million, compared to $12.7 million in the same period of 2013. Cash receipts and payments related to the Illumina patent pool agreement and purchase of the patent from Isis Innovation are not included in cash burn.
Unrecorded accounts receivable for tests performed are estimated to be $31 to $34 million as of December 31, 2014. This range has declined from the prior quarter due to collections in the fourth quarter and additional amounts recorded as accounts receivable using accrual accounting.
As of December 31, 2014, total cash, cash equivalents, and marketable securities were $93.9 million. This includes the $44.0 million in cash received from Illumina during the fourth quarter.
2014 Operational Updates and Highlights
- Sequenom and Illumina entered into settlement and pooled patents agreements. The patent pool agreement is global in nature and combines patents controlled by both companies, including over 425 patents and patent applications for NIPT. As part of the Illumina settlement, we now share in test fees paid by licensees from around the world to the patent pool. At the date of the agreement, there were 21 licensees to the patent pool including Sequenom Laboratories and Verinata Health. During the fourth quarter, Sequenom received $44.0 million in cash related to the agreements and received an additional $6.0 million in cash in January 2015.
- Sequenom purchased the global rights to the ‘540 patent from Isis Innovation.
- Sequenom signed agreements with Quest Diagnostics and Mayo Medical Laboratories to offer national access to Sequenom Laboratories’ MaterniT21 PLUS LDT.
- Sequenom divested the Bioscience business unit for $33.0 million.
- Sequenom Laboratories launched the Enhanced Sequencing Series II for its MaterniT21 PLUS test and began reporting additional findings for the presence of additional sub chromosomal micro deletions, including 11q deletion (Jacobsen syndrome), 8q deletion (Langer-Giedion syndrome), and 4p deletion (Wolf-Hirschhorn syndrome).
- Sequenom Laboratories launched the VisibiliT test internationally.
Non-GAAP Financial Measures
“GAAP” refers to financial information presented in accordance with generally accepted accounting principles in the United States. To supplement the condensed consolidated financial statements and discussion presented on a GAAP basis, this press release includes non-GAAP financial measures with respect to the quarter ended December 31, 2014. Management uses non-GAAP financial measures because it believes that a cash flow metric incorporating cash used by operations and certain other uses of cash are important to understand the cash requirements of the business. The Company reported cash burn as a non-GAAP financial measure. This non-GAAP financial measure is not in accordance with or an alternative to GAAP.
Management uses cash burn to evaluate performance compared to forecasts. Cash burn is calculated as the sum of net cash used by operating activities less the impact of the royalty prepayment in connection with the patent purchase in 2014, the gain on settlement of litigation, purchases of property, equipment and leasehold improvements, and payments on long-term obligations. The reconciliations of cash used by operating activities, the GAAP measure most directly comparable to cash burn, is provided on the attached schedule.
This press release contains certain unaudited financial results for the Company’s fiscal year and fourth quarter ended December 31, 2014. These unaudited results may change as a result of further review by the Company’s management and its independent auditors. The completion of the audit of our financial results for 2014 could result in changes to the unaudited financial results presented in this press release. Final fourth quarter and annual results will be provided in the company’s annual report to the SEC on Form 10-K.
Conference Call Information
A conference call hosted by Bill Welch, CEO, and other members of senior management will take place today, March 4, at 5:00 p.m. EDT (2:00 p.m. PDT) and will be webcast live on the Sequenom website. To access the live teleconference call, dial 877-883-0383 in the U.S. and Canada, and 412-902-6506 for other international callers.
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