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12:00 AM
 | 
Sep 29, 2008
 |  BioCentury  |  Finance

Ebb & Flow

Sequenom (NASDAQ:SQNM) has more than quadrupled its market cap to $1.6 billion from $350 million since early June, when the company released initial data on its Down syndrome test.

The $1.2 billion uptick equates to $436 for each of the 2.8 million U.S. women screened annually by the current method.

Last week, the company released additional data for its Trisomy 21 test. In 219 new prospective samples, the non-invasive fetal nucleic acid test identified Trisomy 21 in 100% of cases without any false positives or negatives.

Sequenom plans to start a 3,000-5,000 sample trial of the test at year end, and hopes to launch in June 2009.

The company also said it would acquire the Center for Molecular Medicine, a CLIA-certified laboratory JV from Spectrum Health and the Van Andel Research Institute, for $4 million, 90% of which will be paid in stock.

The company also plans to complete a CLIA-certified laboratory in San Diego. The labs will support Sequenom's clinical validation of the Trisomy 21 test and enable it to launch via CLIA-certified labs.

The company would receive 100% of the revenue for the unpartnered test.

On Wednesday, when Sequenom held an analyst day, the shares were up $7.20 (35%) to $27.76.

One for all

Since 2007, the American College of Obstetricians and Gynecologists(ACOG) has advised that all pregnant women be offered risk assessment for fetal chromosomal abnormalities, including Down syndrome.

The current screening method combines an ultrasound with a measurement of certain hormones in the mother's blood. About 70% of pregnant women in the U.S., or 2.8 million, undergo Down screening annually, according to Sequenom.

According to theUniversity of California at San FranciscoPrenatal Diagnosis Center, the nuchal translucency ultrasound costs $1,594 and the blood test costs $160.

This combination has a 70-90% detection rate for Down syndrome, with a >5% false positive detection rate. When some of these women are subsequently given a follow-up invasive testing procedure - amniocentesis or chorionic villus sampling (CVS) - the false negative rate is 10-20%, according to Allan Bombard, CMO of Sharp Mary Birch Hospital who participated in Sequenom's analyst day.

By contrast, Sequenom's Trisomy 21 test has shown a >99% detection rate with a <1% false positive rate. Subsequent amniocentesis and CVS follow-up has shown a <1% false negative rate. Unlike current screening, the Sequenom test does not require an ultrasound.

Amniocentesis costs $2,612, according to UCSF.

Analysts are scrambling to estimate sales. Sean Lavin of Lazard pegged the estimated price per test at $550 in 2009 and 2010, with a subsequent increase to $850 in 2011. He anticipates gradual penetration in the U.S. market starting at 1% next year and ramping up to 27% by 2012. He thinks the test will launch in Europe in 2010.

Elemer Piros of Rodman & Renshaw estimates the price at $800 per test (see "Analyst Picks & Changes," A23)

On the week, Sequenom gained $7.48 (37%) to $27.40 (see "Tracking Sequenom").

Surviving Lehman undertow

Despite a last minute pull-out by Lehman because of its bankruptcy, monoclonal antibody company KaloBios raised $20 million in the first close of a series D round.

"We were ready to close last Friday: we had the papers signed and ready to go," President and CEO David Pritchard told Ebb & Flow.

But on Monday, Lehman filed for Chapter 11.

"Lehman was investing about $2 million into the round, therefore we didn't meet some of the legal requirements for closing," Pritchard said. "We had to renegotiate with existing investors. It only cost us a business day, but that was some frantic negotiating."

The round was co-led by new investors Mitsubishi UFJ Capital and Genzyme Ventures. Existing investors MPM Capital; Alloy Ventures; GBS Venture Partners; Sofinnova Ventures; Singapore BioInnovations; 5AM Ventures; and Lotus BioScience also participated.

To close out this round, Pritchard hopes to bring in another $5-$10 million before year end. He noted that KaloBios took a step-up in valuation with this round. Montgomery & Co. was the placement agent.

Lehman led the company's $20 million C round in July 2007. This time, Pritchard said the company specifically targeted strategic pharmaceutical investors as well as crossover investors who will go in on a private round if they think it's the last.

He expects this round to carry the company into 2010, including completing seven Phase I/II trials by the end of 1Q09. These include two for KB001 to treat ventilator-associated pneumonia (VAP) and cystic fibrosis (CF) and...

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