Shares of Sequenom, Inc. SQNM were down almost 10 percent on Thursday, after the company reported first quarter financial results below the Street’s consensus estimates.
In a report published Thursday, Wedbush analyst Zarak Khurshid downgraded the stock from Outperform to Neutral, maintaining a $4.50 price target. The demotion was based on the lukewarm results, less confidence in 2015 breakeven, the recent run-up in the stock price and “lack of ACOG guideline recommendations this past week.”
The analysts add, “If ACOG were to issue favorable average risk guidelines, the court of appeals reverses the prior ‘540 patent ruling or there is greater benefit from the ILMN patent pool, we could become more bullish on shares again.”
The Results
The note provides some comments on the results.
The company posted a negative revenue delta, driven by slightly lower test volumes. The MaterniT21 franchise retrieved 45k NIPTs tests in the first quarter, which were about 1k below Wedbush’s model. NIPT volume still rose 3 percent in relation to the last quarter and 12 percent year-over-year. “Reimbursement appears to be stable and the tone on reimbursement for 2015 appeared to be fine.”
The analysts “had thought that given ILMN’s recent inflection in NIPT volume recently, SQNM was in a better position to benefit; however, 1Q15 suggests more muted upside potential this year.”
Gross margin trended negative and opex was substantially worse than the firm expected.
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