SQNM Up Big Again Today

Sequenom Inc. (Nasdaq - SQNM) shares advanced again on Thursday, gaining $1.82 or 19.51% after a $1.67 increase on Wednesday. As we mentioned yesterday, the company's prenatal Down syndrome test was 100% successful in a test population of 200 samples with zero false negatives.

Current testing options have a detection rate of between 70 percent and 90 percent, with false-positive rates as high as 5 percent. Now planning to conduct studies with thousands of test samples, if SQNM receives results similar to those of the 200 sample study, the company could soon come to dominate the $1billion Down syndrome testing market.

Analyst estimates on SQNM's future share price are quite bullish to date and in my opinion this deal is a gamble, albeit not a major one. If the company’s test works on the larger sample size and becomes the market leader over the next year or two, estimates will likely be right on target or even low.

If not, SQNM’s current accumulated deficit of $490.7 million and dire need of capital to fuel the push behind it's noninvasive circulating cell-free fetal (ccff) nucleic acid SEQureDx(TM) Technology will cause some serious dilution and other financial worries going forward and bring things back to the company’s expensive drawing board.

Now trading at roughly 10X trailing twelve month sales - just about the same as competitor Illumina Inc. (NASDAQ: ILMN) with a $4.5B market cap – SQNM is quite intriguing at current levels given the fact that the company will soon find out definitively if its landmark product line will be king of a $1billion market.

If SQNM can achieve 20%-30% penetration of the Down syndrome test market by the end of 2009, which the company anticipates having enough capital to fund operations until, and bring revenues into the $300 million range, the future outlook is incredibly positive.

For now, the $12 question remains, will SQNM’s core product line stand up to large-scale tests and become the industry standard process for Down syndrome testing? If you think the answer is yes. Do your homework and do it quick before share price reflects analyst's very optimistic outlooks. This could prove to be a $10 per share lay-up if everything works out here folks. Don’t say we didn’t warn you.