Summary
The market cap of Sequenom has been bid up to the $billion US level by the potential of a single product. Many in the investment community have been following this closely. Overwhelmingly, investor sentiment has been bullish, both among the professional investment community, and in the public measures of sentiment (i.e, the motley fool). Recently, the rug has been pulled out from this company by an announcement that it was delaying the launch of its test for Down's syndrome. The collapse of the stock, however, should not come as a surprise. Numerous warning signs were clearly apparent to onlookers familiar with the processes by which new tests become standards of care. Many of these issues were raised previously in this forum. https://news.glgroup.com/cm/Analysis/PostDetail.aspx?pid=35151
Analysis
The current prospects for eventual marketing of a Down's syndrome test from Sequemon would appear to be nil. Based on currently released information, it would appear that there is no reason for anyone to be confident either in the company or the product. Lets be clear on what a test like this is for: Based on its result, someone would terminate a pregnancy. It would be hard to have confidence in a company whose entire product could be derailed by malfeasance of one individual.
Previously, I outlined 5 areas of risk. Failure or delay in any of these areas could lead to failure of the entire model. These areas were:
1)Regulatory approvals
2)General acceptance of the test as clinically reliable.
3)Development of algorithms to either supplement or replace existing tests.
4)Reimbursement.
5)Issues related to service delivery and scale up of services up to three or four orders of magnitude greater than current volumes.
In retrospect, the company was having difficulty convincing the public of the reliability of the product, because, the claims were made in the absence of data or on fraudulent data.
More important than this one company and product, society has an interest in seeing that diagnostic products are safe, reliable, and useful.
Historically, the mechanisms for insuring this are: peer reviewed publication of data, performance of tests by multiple groups using different methodologies, and regulatory oversight.
Independent of fraud, this type of propietary product (proprietary test done in only one lab) is extremely difficult to evaluate using our historic tools. While it should be considered fortunate that this product was not in a full production mode, this incident is likely to increase scrutiny of such proprietary products by regulatory agencies, accrediting organizations, clinicians, or payers.
