Everytime SQNM's S/P seems to have an upward established trend/momentum or potential breakthrough to the upside, some news, perceived as negative, results in the shorts coming out of the woodwork and going on a "killing spree".
Us longs invested in this company for it's potential. IMHO, that potential will be realized this year, and, then some, if not already.
According to the weekly adoption T21 test run rate chart, presented at the OPPY conference, in mid-Jul the weekly run rate was at about 1,250 tests per week, or 65k annualized. Within just under 6 months, by the end of this year, that run rate doubled to a little over 2,500 tests per week, or annualized, at least, 130k. I say WOW!
The goals presented for total accessioned tests for 2013 ranged from 150k to 200k. According to my math, to accomplish the 200k, all SQNM has to do by mid year is what they did the last six months in 2012, that is to double the annualized run rate from 130k to 260k, again, by mid-year. Should be a "no-brainer", given the recent endorsements.
Think about it, a total of 200k T21 tests processed in 2013, what do you think the revenues will be, cash or accrual, (eventually) doesn't matter, you do the math. Also, the other tests SQNM performs are also ramping up slowly, but surely, and then you have the revenues coming in from across the pond at an ever increasing rate.
I say regardless of ILMN's recent Verinata acquisition, SQNM is/will be the established "go to"/"gold standard" company for the "best" quality test out there. There's been discussion about the T21 test being or becoming commoditized, thus, putting pressure on margins, I say BS. I believe when there's a superior test out there competing against other inferior tests I believe the commodization argument is marginalized. Do you think the Docs are going to order an "inferior" test, because of its lower price, or will they opt for the best/better test that's available for their patients, to do otherwise would be irresponsible, a disservice, IMO. I just don't believe commodization can be applied when you're talking about a test relating to the health of a fetus versus commoditizing other products. i.e. micro chips. The best T21 test will trump that issue, IMO. Also, it's a factoid, anytime last year SQNM went head-to-head with Vernata's test, SQNM, basically, always won. (Somebody tell JF that, or is it too late) Hell, they're using the MaterniT21 test at Tuft's, where D. Bianchi works.
Bottom Line: I don't know what lies way down the road, regarding the ILMN/Vernata implications, but SQNM will "not" be denied profitability this year and that, my friends, equates to a much, much higher S/P.
PS At this time, I'd like to hand over the "mike" to a fellow colleague of mine, the illustrious "Mastino88" to say a few words (I hope he's still with us)
PPS "FIRE UP THE HEAT" (baby)
PPPS Got to put Mr. rabbit back on the back burner for the time being, the shorts gave him a "temporary" reprieve. LOL!
PPPPS. What do you think "King", should we top off that/"your" marinate?
Sentiment: Strong Buy
As I said, you pumpers just don't get it. Will a doctor order an inferior test? Have you ever heard of generics? Many are clearly not as good as branded, however, economics win out. Every time.
So lets say the cheaper test has a higher no-call rate. Who cares, just reorder the test. A week later and you have your answer. The insurance company dictates where, when, how and why. Doctors don't have flexibility at all. Must except reality that most people have very little disposable income and will only do as their insurance dictates. There is no way an insurance carrier is going to pay $1500/test. They don't pay that much for surgery.
So, will sqnm be profitable this year? no. They will never catch the rabbit.
I'll start with the bottom line: We agree to disagree. At this juncture it doesn't matter what either of us thinks, what matters is where SQNM will be a year from now. I'll either be eating the "most" succulant rabbit I've ever had or crow. (And, I'm sure you'll be bookmarking this msg to use in a year as a reminder if things go your way)
Now that I'm here, I'll try addressing/entertain your so-called points in order.
"Generics?" You mean as in drugs, pills? "Economics win out every time". I believe they'll be other due considerations applied regarding the decision making process beyond just 'economics", i.e. testing quality in arriving at a reasonable reimbursement price, acceptable to both parties.
"No way insurance provider will pay $1500/test". I'm a worst case scenario guy, and, I'll be especially for you. What if they only get $1000-$1200 per test, and make a profit of $500-$700 per test. SQNM is at an annualized run rate of 130k, or higher, now. At $700 profit they're at about breakeven right now and at $500 profit per test they're at B/E at the end of the 1st Qtr. You don't buy that? OK, then let's go another worst step further. I believe the annualized run rate will double by mid-year to 260k. Why, look at their weekly adoption run rate chart used in the OPPY conf., that graph line shoots straight up from Nov to the end of the year, coinciding with those key endorsements. (their run rate increased by 30k in just those 2 months?) SQNM's COGS is in decline, probably somewhere south of $500 by now. What if they price the T21 test just under $1000 or even $900 and make only $400 profit, on average, per test. With a 260k run rate, making $400 per test, they're, basically, at B/E at/by mid-year, or, whevever they do reach the 260k rate level.
"They lose a thousand dollars per test". Hummm. SQNM's COGS is only, what, give or take $500 per test. Enough said.
" WHY THEY CAN"T GET INSURANCE COMPANIES ON BOARD. Although there has been reimbursement price precedents set via contracts already inked at the lower tier levels of the insurance provider arena, this first "big" national carrier/dominoe (a different league), IMO, is the very hardest to negotiate. Again, IMO, this first biggie to get signed is the "very" hardest, as "it" will set, basically, a price precedent for the rest of the "biggies" or the rest of the remaining dominoes to fall. (Once that first carrier is signed, then we'll be switching from playing dominoes to "Bingo" (big time))
Well, I'll close with that. You got my gist. Again, we'll know in a year which direction SQNM is headed. No excuses then!
PS You mean to tell me that a company just paid close to a half billion dollars for a SQNM competitor just to chase "the" rabbit, that they don't believe this is a lucrative market? To boot, that competitor, compared to SQNM, is still trapped on the "hamster wheel" (since last Mar) while SQNM is processing 2,500 T21 tests per week. "Puzzling"? Best describes it? YEP!
PPS What is "not" puzzling to me of all this, is, I still believe after all the dust settles some sort of partnership between SQNM and ILMN will be formed to share in addressing the "low/average" risk market. The synergy between the two, IMO, is perfect for this. SQNM will have the FDA approval for the entire market, using ILMN machine platform, and ILMN has the picks and shovels and, now, additonal lab space and lab manpower at the ready. It's like, how else is ILMN going to get their ROI? The "entire" market is both theirs for the taking.
Sentiment: Strong Buy
p.s. Why do you think run rates are so high and they are losing so much money? Because they give the test away. They don't make money. They lose money. They lose a thousand dollars per test. They are in a viscous cycle of trying to cut their cost down below their reimbursement rate. But, there never will be that pay day when cogs are significantly lower than reimbursements. And hence WHY THEY CAN"T GET INSURANCE COMPANIES ON BOARD. Insurance companies never questioned the validity of the test, they just got to wail till the price comes down. Way down. You can't expect reimbursements to compete with an invasive amnio. Why? Well, an invasive procedure demands a premium, and an invasive procedure is just that: invasive. It carries risk. Therefore, many more cases for T21 will be formed that amnio. So, the insurance companies will demand a relative reduction in reimbursements. and they will get it.
Nice Post Bud!! We will cook Mr. rabbit a little "lower and slower" (lower heat and longer time) to prevent it from drying out. Regards, The King Of Patience and Slow Cooking Rabbit Recipes
"LOW" and "SLOW" (OH BABY), now we're talkin. Never to old to learn "that" technique. The King Of Patience and Slow Cooking Rabbit (and squirrel) Recipes, and Allen and Mast have got "it" together. Been a long day "whiskey chasin my blues away" (if you know what I mean). On that note, how bout lettin me show my age and suggesting you guys u-tube "Doobie Brothers "South City Midnight Lady" (at the Wolf) ( My all time fav) and, if you like, go to "Rockin Down the Highway".
PS To Allen, our in-house OB/GYN (ACOG____) indicated the MaterniT21 test is being requested by "name". He described the demand as "huge" and w/i his practice the test demand is growing by the day. I believe, if not already, the demand is approaching "frenzy" pitch. Having said that, HH knows this and, as a result, appears to be calm, for that "reason". Bottom line: "SQNM's got what the rest "ain't" got!!!
PPS To ILMN, $450 mil, for what???
PPPS These backstabbers/sabateurs can only hurt us for just so much longer. Then, it's our turn "for good"!!!
Sentiment: Strong Buy
I am long, but if sqnm doubles capacity to 260k in 6 months, then they better have the NC lab up and running. Our current capacity is 200k. We are already running two shifts, 6 days a week. I guess we could open up the 3rd shift if needed, but they will need to staff for that.
Last I heard NC lab is scheduled to be up running by Q3....
Sentiment: Strong Buy