Sequenom Can't Go Back; Ladenburg Analysts Downgrade To Sell

Given the absence of a credible commercial strategy, analysts Kevin DeGeeter and James Colby see “minimal near-term prospects for sales growth and significant risk of growing operating losses and SQNM's need to raise capital through dilutive equity offerings.”

Without a plan to lead them to profitability, the experts believe the company could only be sold at a depressed valuation. Moreover, Sequenom only has $129 million in convertible debt outstanding due in 2018. In Ladenburg’s view, any change of control would imply a significant portion of any proceeds probably being captured by note holders.

The report highlighted three key issues in their Sell thesis:

• 1) The company’s reboot will be driven by technology, and not a commercial reform. However, the analysts think the market is not “suited for a technology-driven development strategy.” Additionally, they do not believe the company is poised to be “among the first to market with liquid biopsies.”
• 2) Ladenburg contended that Sequenom “lost its market leadership in NIPT to competitors with more flexible commercial strategies. With the renewed focus on internal product development without first fixing shortcomings in commercial execution, in our view, SQNM risks repeating the past in a new vertical (liquid biopsies),” the experts added.
• 3) The management’s target of $500 million in revenue by 2020 looks quite aggressive.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.