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Sequenom shares down on possible competition emerging

October 8th, 2008 · No Comments

We have covered promising biotech company Sequenom (SQNM), but a possible alternative to their highly promising blood test for Down syndrome in foetus has emerged. But it’s not as bad as it might seem..

Shares of Sequenom closed down 12.3 percent in late Tuesday afternoon trade after the release of a paper by a noted Stanford researcher demonstrating a potentially competitive technology to the firm’s non-invasive test for Down syndrome.

As reported by GenomeWeb Daily News this morning, Stephen Quake and colleagues at Stanford published a paper in the Proceedings of the National Academy of Sciencesshowing that shotgun sequencing of DNA could detect fetal chromosomal abnormalities in maternal blood. Their study included 18 women and detected all nine cases of Down syndrome as well as two cases of trisomy 18 (also known as Edward syndrome), and a lone case of trisomy 13, called Patau syndrome. These chromosomal abnormalities were evident in a mother’s blood as early as 12 or 14 weeks into her pregnancy.

This methodology could eventually compete with Sequenom’s SEQureDx test, which is currently in clinical trials. The firm recently announced that it successfully tested for Trisomy 21 in 219 patients with no false positives or negatives.

Though stocks were down across the board on Tuesday, Sequenom’s stock took a particularly big hit among life science firms, falling $2.74 to close at $19.50 on the Nasdaq.

But, at least one analyst who covers the firm thinks the sell-off was unwarranted. Sean Lavin of Lazard Capital Markets called the drop in price a buying opportunity and took issue with the factors that hit the stock.

He noted that Quake’s findings “should not come as any surprise. Many sequencing devices should be able to test for Down syndrome and the increasing research gives creditability to the multibillion dollar market.”

He also noted that while Quake’s test costs around $700 to run currently — a price which Quake believes will drop to $300 as sequencing costs decrease — Sequenom’s test costs around $100-$180 to run.

In addition, Lavin noted that the stock may be coming under pressure after recent comments from competitors suggesting Sequenom’s test will require US Food and Drug Administration clearance, even though “FDA regulations clearly indicate that Sequenom’s test does not require an approval and that it can be marketed through CLIA laboratories.”

Two weeks ago, Sequenom announced that it had purchased a Michigan-based CLIA lab, which will run the Down syndrome test among others. In addition to that, the firm is working with the FDA on the design of a 10,000-patient study on the test.

So, we’re still firmly behind this company, even in this difficult market. Today it sold off again, but this market is not entirely (or entirely not, whatever way it suits you) rational, so we won’t go all out here..

Tags: SQNM