Sequenom Remakes Fiscal, Operational House

Struggling to remake its fiscal house and gain some traction, Sequenom is putting its laboratory in North Carolina on the blocks and will cut its total workforce by more than 20 percent.

Sequenom, which focuses on noninvasive prenatal laboratory tests, announced that it would sell the facility in Research Triangle Park, NC and consolidate its testing operations at its San Diego headquarters by the first half of this year.

It's the second operations consolidation by Sequenom in less than a year. It merged its Michigan laboratory with North Carolina last May and cut a fetal RHD genotyping assay from its menu.

In addition to the latest consolidation, the company will also cut 110 jobs, out of 500 in total, a 22 percent reduction.

"Our employees have always displayed a remarkable passion for innovation and a strong commitment to delivering the highest quality products in support of women's health," said Sequenom CEO Dirk van den Boom in a statement. "In making the difficult decision to sell our North Carolina facility, we are working hard to find a buyer that may be able to employ some or all of our team, thereby minimizing the effect on our employees and their families."

The company said the moves are expected to save about $20 million a year on an ongoing basis. Filings with the Securities and Exchange Commission suggest Sequenom will spend about $4 million severance and lease termination costs.

Van den Boom also announced that Sequenom would refocus its priorities moving forward. It plans to shift research and development to include more tests that serve obstetricians, gynecologists and maternal fetal medicine specialists and expand its sales force in the obstetrics and gynecological arenas. It will also push to commercialize its liquid biopsy assay for oncology patients and seek strategic partners to accomplish that goal.

"In making these changes, we are committed to unlocking the value that already exists in the business," van den Boom said.

Sequenom's past year has been a struggle to maintain a grip on its revenue, which it has attributed to growing competition and price cuts in the noninvasive prenatal test market. For the third quarter of 2015, it reported a drop of 21 percent, from $37.9 million to $29.9 million, while test samples accessioned dropped by 12 percent. Its losses also widened, to $9.4 million for the quarter, compared to $6.1 million for the third quarter of 2014. For the first nine months of last year, it reported a loss of $4.2 million on revenue of $94.3 million, compared to a loss of $17.3 million on revenue of $113.5 million.

Former CEO William Welch abruptly left Sequenom in September, replaced by van den Boom, the company's longtime chief scientific and strategy officer. Little more than a week later, an analyst and investor day conducted by Sequenom led to three brokerage firms downgrading their ratings for the firm.

"We have less confidence in Sequenom's ability to achieve self-funding status and believe deteriorating fundamentals may limit potential interest from strategic buyers," Jefferies analyst Brandon Couillard wrote at the time, adding that Welch's abrupt departure did not help matters.

The company's stock, which was trading at as much as $4.65 a share in the spring of 2015, has plummeted to less than $1.25.

For calendar 2015, Sequenom said its revenue will be about $128 million, down more than 15 percent from the $151.6 million reported for 2014. That places it on the lower range of its prior forecast of between $127 million and $131 million.

Takeaway: Sequenom faces significant challenges in trying to regain market momentum in a competitive area of esoteric laboratory testing.