The company has entered into an agreement to issue and sell 12,435,000 shares of its common stock at $4.15 per share to certain investors.  The gross proceeds of the private placement are expected to be approximately $51.6 million.  $4.15???? Shares closed at $5.37 yesterday.

Sequenom says that it intends to use the net proceeds to advance its research, development and commercialization of various diagnostic tests.  And it also has the “for general corporate purposes” included in the lot. The private placement is expected to close on or about May 17, 2010.

Jefferies is the sole lead placement agent, while Lazard Capital Markets is the co-placement agent.

The market is not quite at open.  At 9:29 AM EST we have seen shares fall more than 6% to $5.01, still well above the private placement price.  The market cap before the effects of this placement was listed as roughly $333 million.  The 52-week range is $2.55 to $8.65, but that stock is down much more from when this was treated as the next Holy Grail stock.

This may be very dilutive, but if this is not turnaround capital then nothing else is either.

JON C. OGG

Oxigene Inc. (NASDAQ: OXGN) is an example of one such stock which has been given an exponential upside call in a research note.  We decided to back through the rest of our research call history in recent days and weeks to look for the other stocks with exponential or near-exponential calls.  Of course these are not your multi-billion stocks which have already risen exponentially.  Among these are Inovio Biomedical Corporation (AMEX: INO), Novavax, Inc. (NASDAQ: NVAX), Orexigen Therapeutics, Inc. (NASDAQ: OREX), Sequenom Inc. (NASDAQ: SQNM), and Vanda Pharmaceuticals, Inc. (NASDAQ: VNDA).

We have given a breakdown on each of these for the upside of the time and the upside remaining on individual price targets.

Oxigene Inc. (NASDAQ: OXGN) was a rare call because of the $1.00 stock status.  Today Roth Capital gave a Buy rating and a $4.00 price target.  This was a $1.00 at yesterday’s close, making this a call for a whopping 300% upside.

Inovio Biomedical Corporation (AMEX: INO) was started with a Buy rating with a $2.80 price target at Roth Capital on March 26.  Shares were at $1.23 before the upgrade and at $1.32 today the upside is still there for more than a double.

Novavax, Inc. (NASDAQ: NVAX) was initiated with brokerage coverage from Roth Capital on March 15 with a Buy rating and price target of $5.00.  Shares were at $2.33 before the call, so more than 100% upside was seen.  With the stock back at $2.32 today, that is still an expectation of 100% upside.

Orexigen Therapeutics, Inc. (NASDAQ: OREX) was started in early February by Jefferies with a Buy rating and price target of $12.00 per share.  Shares are at $5.86 today, so this still has 100% from today’s $5.86.  Shares were at $6.40 before that upgrade and the stock was at $7.40 afterward, so that 100% upside was not quite there on February 2 when the analyst call was made.

Sequenom Inc. (NASDAQ: SQNM) was a very surprising call because of the woes this stock has faced in 2009. But on March 23, 2010 this was raised to Buy at Lazard with a whopping $13.00 price target.  Shares had been at $5.53 the day before and rose to $6.64 after the call.  There was more than 100% upside at the call time, and at $6.40 today there is still 100% implied upside.

Vanda Pharmaceuticals, Inc. (NASDAQ: VNDA) was a late 2009 call for exponential upside.  On December 12, 2009, Vanda was initiated in coverage by Jefferies with a Buy rating and a $22.00 price target.  Shares were at $11.42, so this was an implied double but in reality at the time it was a call for “only” 96% upside.  The issue is that the stock has traded back under $11.00 on many days since then and today’s $11.65 still leaves 94% upside.

Obviously these are individual calls.  These are not the consensus price targets and in some cases the consensus price targets are not available or there is a huge discrepancy between those positive and negative calls.

JON C. OGG

We would note that actual trading could whip around significantly during the company’s conference call due to very speculative nature of the company and due to its trading history in 2009 and so far in 2010.

The company gave a T21 (Down syndrome) update, and it does not sound like the company is throwing in the towel here nor anything at all like it is backing off… This is the biggest issue, or has been, for the company.  At least that is our take.  Sequenom said that it “remains committed to the development, third party validation and launch of a noninvasive T21 test.  R&D efforts focus on DNA based approaches using our MassARRAY platform and next-generation sequencing platforms. Collectively, the R&D and clinical sample collection costs that will be required to enable a pivotal third party T21 test validation study represent the single largest investment the company will make in 2010.”

More specifically, Paul V. Maier, interim chief financial officer, was quoted as saying, “With the completion of a strategic review in late 2009, we are now focused on funding priority projects in 2010, which includes continuing to make a major investment in T21 development and clinical studies. An additional project which will receive priority funding for 2010 includes development of the next generation of MassARRAY instrumentation.”

The SEC filing stated:

On January 15, 2010, Sequenom, Inc. announced entry into a stipulation of settlement which will resolve the class action securities lawsuits consolidated under the caption In re Sequenom, Inc. Securities Litigation, S.D. Cal. Case No. 09-CV-0921 LAB (WMc), pending in the U.S. District Court for the Southern District of California. Attorneys for Harry Stylli, Paul Hawran, Allan T. Bombard, Charles R. Cantor, Steven Owings, Harry F. Hixson, Jr., and Elizabeth Dragon, all of whom were named as defendants in the consolidated lawsuits, have also entered into the stipulation of settlement. The stipulation of settlement, a copy of which is filed as Exhibit 99.1 hereto, remains subject to preliminary and final approval by the U.S. District Court.

Subject to final approval of the stipulation of settlement by the U.S. District Court, in exchange for a release of all claims by the class members and a dismissal of the consolidated lawsuits, we have agreed (i) to pay the class members and their attorneys a total of $14 million which will be funded from insurance proceeds, (ii) to issue to the class members and their attorneys shares of our common stock, and (iii) to adopt certain corporate governance measures, including an amendment to our Bylaws to provide that at all times a majority of our directors must be independent. The number of shares of our common stock to be issued will be determined on a date to be established after final approval of the settlement by the U.S. District Court and will constitute 9.95% of the shares of our common stock outstanding post-issuance, provided that certain shares issued after entry into the stipulation of settlement, including any shares issued in a bona fide financing, in connection with a licensing, collaboration or acquisition transaction or pursuant to our currently existing equity incentive plans, will be excluded from the shares outstanding calculation. As of December 23, 2009, we had 61,693,241 shares of common stock outstanding, and if the share number had been determined as of that date, we would have been obligated to issue 6,816,743 shares of common stock pursuant to the terms of the settlement.

If the settlement is approved preliminarily by the U.S. District Court, potential class members will be notified of the proposed settlement and the procedure by which they can request to be excluded from the class. The settlement will then be subject to final approval by the U.S. District Court.

Many shareholders are likely at odds over whether they should be in settlements or not.  The company further noted, “The settlement agreement contains no admission of liability, but the company is settling the lawsuit to avoid potentially lengthy, costly, distracting and time-consuming litigation.”  Shareholders here were duped and have been crucified and probably deserve more than what they can or will get from the company if all the fraud allegations are anywhere close to the truth.  Unfortunately, there may only be a limited amount to get back now that the company has limited prospects and has seen its cash dwindle.

It is worth noting that the new management team is not the team involved in the old scandal.  That is at least something that needs to be a reminder when it comes to the pitchfork riots that could have been seen here in this instance.

Shares are up over 5% at $4.39 this morning before the market opens on the news.

JON C. OGG

Acorda Therapeutics, Inc. (NASDAQ: ACOR) is down over 15% after the FDA made public the background material over Acorda’s Fampridine.  Full data can be found at:

• http://www.fda.gov/AdvisoryCommittees/WhatsNew/default.htm

AVANIR Pharmaceuticals, Inc. (NASDAQ: AVNR) is up 6.5% at $2.45 and it was one of the top gainers this morning, but has since come off of highs of $2.68.  The company announced additional detailed results from the confirmatory double-blind Phase III STAR trial evaluating two doses of the investigational drug Zenvia™ in the treatment of pseudobulbar affect among patients with underlying multiple sclerosis (MS) or amyotrophic lateral sclerosis (ALS). Zenvia met the primary efficacy endpoint by reducing PBA episode rates by an incremental 11.9% beyond placebo. The lower dose Zenvia group did not achieve a statistically significant reduction in PBA episode rates compared to placebo.

Cardium Therapeutics Inc. (AMEX: CXM) is one of the top winners of all stocks today with a 19% gain to $1.82.  This one is set to make a presentation soon, but the move today appears to be based upon a positive recommendation from a boutique firm called Skymark Research.

Lexicon Pharmaceuticals, Inc. (NASDAQ: LXRX) is getting tooled after a secondary offering.  The company sold some 33,333,333 shares of common stock at $1.50 per share after a $1.77 close yesterday.  We have shares down about 13% at $1.53.  It turns out that 19,894,076 shares are being offered through the underwriters and 13,439,257 shares are being offered to Invus, L.P., Lexicon’s largest stockholder.

Savient Pharmaceuticals, Inc. (NASDAQ: SVNT) is seeing a surprise 7% gain to $14.28 this morning.  This is surprising considering that its secondary offering of 4.3 million shares priced at $13.29.  One item helping more is that this stock was also Raised to Outperform over at Oppenheimer.

Sequenom Inc. (NASDAQ: SQNM) is running again on no news and is up another 9.8% at $3.67 today.  Traders keep touting that there may be no intentional wrongdoing from management and the recently fired staffers.  This is still very much an at-risk company, although making any predictions at this point would be based entirely upon incomplete data that still has many unknowns.

Spectrum Pharmaceuticals, Inc. (NASDAQ: SPPI) is down some 17% at $5.12 after it received a complete response letter from FDA for FUSILEV in advanced metastatic colorectal cancer noting that it did not demonstrate that FUSILEV is non-inferior to leucovorin.  The response also recommended that it meet with them to discuss options for continuing to seek approval of FUSILEV in advanced metastatic colorectal cancer.

JON C. OGG

The company has terminated the employment of its president and chief executive officer, Harry Stylli, Ph.D., and its senior vice president of research and development, Elizabeth Dragon, Ph.D., effective immediately.

Douglas A. McIntyre

We originally expected a summer 2009 launch on this before the company came out disclosing inconsistencies, and that took out almost three-quarters of the value of the company’s stock overnight.

The trading in call options has been significant on the hopes of this.  Here is the SEPT-2009 CALL OPTIONS trading alone after just over 1 hour since the open:

STRIKE Volume  OpInt
$5.00.    1,439  14,976
$6.00.    7,771  10,405
$7.50.    4,742  16,525
$9.00.    1,915  5,011
$10.00    1,341  3,555

Shares are up about 11% at $5.90 this morning on 11 million shares as of 10:38 AM EST and the 52-week trading is $2.86 to $29.14.

Be advised that the average volume here is about 10.4 million shares.  This is not the first round of rumors that has been out on this one, and it probably won’t be the last round of rumors on it.

This stock is a true coin toss.  The company is on a cash burn rate rather than on an income rate, and it may have to raise cash to keep operations running normal too far beyond the end of this year and to fund much higher legal costs as a result of its Down’s test issues.  If it turns out that the test results were not mishandled or that this is the next holy grail in detecting Down’s, then this stock will be back significantly higher.

Conversely, if this turns out to be all hype and not the next major test for Down’s then this stock will be a much smaller fraction of today’s prices… regardless of its old highs above $20.00.

JON C. OGG

R&D spending rose to $10.2 million from $6.4 million, while its SG&A expenses rose to $8.2 million from $4.3 million a year ago. Those SG&A costs are directly tied to legal expenses and to costs associated with a salesforce.

To add insult to injury, the quarter also included roughly $1 million in restructuring costs.  The company also gave projections saying that it would lose $65 million for all of 2009.

The company’s MassArray sales have continued to take a hit.  We think some is genuinely from the economy and soft sales in medical devices, but we think there is also a cloud over it from the related fallout because of its problems in the Downs Syndrome test data earlier this year.  The company’s legal costs are running much higher and of course the reevaluations needed are driving up its research and development costs.

System-related revenue was essentially halved to $3.3 million, services fell to $677,000 in revenues from $1.2 million.  There was at least a gain in the consumables revenue, as that figure rose to $5.2 million from $4.9 million.

As far as that annual loss projection of -$65 million, it had previously offered a range of -$62 to -$65 million.  The annual target of $32 to $35 million in revenues from genetic analysis was left intact, but we did not get guidance for its molecular diagnostics revenue. This loss expectation for the year is largely in-line with estimates, but it also dashes any quick hopes of a sudden fix after its earlier problems this year.

Sequenom ended the quarter with cash, cash equivalents and short- and long-term marketable securities of $69.3 million and it said accounts receivable were $7.5 million.  Effectively, the company just outlined its cash burn rates versus cash on hand.

The company did note that it is poised to introduce a series of molecular diagnostics tests to the market, including the first of those based on cell free fetal nucleic acids.

The launch of its SEQureDx™ Down syndrome test was delayed because of what appears to be tainted data and that has been the cloud over the company ever since.  Had that not been the case, it is plausible that its other orders might not be soft.  It turns out in life that when companies have tainted or fudged data in one key aspect of their business, it also makes at least a portion of the customer base skeptical of the unrelated products.

Sequenom has traded in a range of $2.86 to $29.14 over the last year.  If the company can demonstrate that its SEQureDx™ Down syndrome test is really the Holy Grail of tests, then the company has a bright future despite the woes.  But if the tests turn out to demonstrate much less in accuracy than thought, then Sequenom may be facing a serious quality of life issue.

JON C. OGG
AUGUST 7, 2009

The test has not even been submitted to the FDA for approval, so it has many hurdles before it could ever become an approved standard of care. That said, the study results may ignite speculation that it may become an important future market for the company, eventually leading to significant HPV re-testing.

The test also shows the value of a recent acquisition. Sequenom acquired the technology from SensiGen in January of this year. It previously was developed under an agreement with Sequenom.

Sequenom remains a potentially radioactive stock. The company has made only a few announcements since the end of April, after it last provided earnings and announced a delay in its SEQureDx Trisomy 21 test due to employee mishandling of R&D data. The data mishandling has sparked investigations, and still poses questions about the value of the company’s intellectual property. 

The company is scheduled to report quarterly results on July 29, where its executives may be grilled. But it appears that after the UofM AttoSense test, analysts may have something potentially positive to talk about on the conference call, as well – Mike Tarsala.

Based upon the company’s potential Holy Grail test for detecting Downs Syndrome in early pregnancy and because of the key needs in detecting other pre-birth abnormalities in babies, we personally have hopes that there is at least some truth to these rumors out there.  But rumors are rumors, and we are skeptical of all unfounded reports.  So we put in a call into the company’s investor relations department, and placed calls into the outside investor relations firm and the outside media relations firm.

We also have the company listed as one of the corporate sponsors of the Genomic Tools & Technologies Summit taking place currently in San Francisco.  So far no data has been seen from the company out of that conference and we have also not heard back from the sponsors about any imminent data or buzz.

The only thing we have so far to hang our hats on is from the outside investor relations firm and as far as they knew at the time there was not any imminent release of data on this matter.  Does that mean that there will not or cannot be any data forthcoming?  Absolutely not.  But it does at least bring some questions up about how solid some rumors are.  The more current short interest data will not be available until tonight or tomorrow, but even after the drop the short interest in SEQUENOM was over 10.4 million shares as of both May 15 and April 30.

The only official SEQUENOM news of late, at least so far, has been news of class action suits going after the company for misrepresentations and shareholder losses.  The June-2009 options were extremely active today.  We saw over 55,000 options contracts trade in the $4 to $10 strike price options for the June 2009 expirations.  Those expire on June 19. That is representative of either hope or expectation of a very large move in the next 8 trading days.

Again, we are still without any official comment from the company itself.  We only have one of three related parties which has spoken to the notion that no news is imminent, and we want to stress that this does not mean no fresh or imminent news could be coming out.

This stock rose by 58% to $5.30, so the buzz needs to at some point be substantiated as the 53.6 million shares is representative of 10-times normal trading volume.    It is rare that rumors can run a stock this much without some word from the company.  What happened for the stock to get to this is equally rare.

JON C. OGG
June 9, 2009