Look for Sequenom, Inc. (NASDAQ: SQNM) to be smacked hard by selling pressure today. Late Wednesday, the company reported that improper handling of research and development test data and results by its employees has delayed the launch of its Down's Syndrome test. Sequenom said it's forming a special committee to investigate employee activity related to the tainted test data.
The company's SEQureDx tests the DNA of a fetus, via the mother's blood, in order to determine whether their blood groups are compatible. Although Sequenom can no longer rely on previously announced test data and results, Chief Executive Harry Stylli asserted, "We are not back at square one" on a conference call.
Making matters worse, Sequenom also reported that it expects 2009 revenue to range between $32 million and $35 million, sharply lower than analysts' consensus estimate of $55.2 million. The company also reported a wider-than-expected quarterly loss, which means that SQNM hit the virtual trifecta today for damaging downside catalysts.
Analysts are lashing out in response to the news, with a slew of downgrades and price-target cuts issuing forth from Wall Street. JMP Securities seemed particularly irate, with the brokerage firm telling its clients, "Sequenom's tenuous credibility has evaporated."
The shares immediately fell to a fresh 52-week low of $3.23 out of the gate, down roughly 80% from Wednesday's closing price. Short sellers are likely cheering today's precipitous plunge, as a whopping 31% of SQNM's float is sold short. If these bears decide to take profits in the wake of the company's dismal news, it could help the security pare the worst of its losses. And yes, that's very cold comfort for SQNM investors.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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