Has Sequenom, Inc. (SQNM) Become the Perfect Stock?

Sequenom remains a major player in the genetic analysis and testing business. Its MaterniT21 PLUS prenatal test for Down syndrome has become a major driver of its overall revenue, even though genetic analysis still made up a majority of its revenue during the first three quarters of 2012. Getting a favorable recommendation from the American College of Obstetricians and Gynecologists for the test is a potentially huge sales driver.

The big question, though, is when Sequenom will get major insurance carriers to cover the cost of the test. Coventry Health Care, Inc. (NYSE:CVH) changed its mind about covering the test last May. Without coverage, it will be hard for Sequenom to reach its full revenue potential.

Last month, Sequenom provided preliminary figures for its fourth quarter and the full 2012 year. Despite showing strong revenue growth, Sequenom’s stock plunged on news that rival Illumina, Inc. (NASDAQ:ILMN) would acquire privately held Verinata Health. Verinata has its own prenatal test for Down syndrome that competes against MaterniT21, and Sequenom investors fear that competitive pressure could lead to longer delays before it turns consistently profitable. With Amgen, Inc. (NASDAQ:AMGN)‘s recent purchase of deCODE Genetics, Sequenom will continue to face new rivals in the space.

For Sequenom to improve, it needs to get its balance sheet under control and find ways to become profitable. With increasingly popular tests, the company certainly has potential to make money if it can establish itself well enough to get every health insurer to pony up for their cost.

The article Has Sequenom Become the Perfect Stock? originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Illumina.

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