Why Sequenom Shares Got Squashed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of diagnostic testing specialist Sequenom plummeted 30% today after its quarterly results disappointed Wall Street.

So what: Sequenom's second-quarter revenue spiked 91%, but a whopping loss of $31 million -- driven largely by cash collection problems caused by Medicare changes -- is forcing analysts to dramatically lower their short-term growth estimates. And while the volume of its MaterniT21 tests weren't affected by the seemingly temporary reimbursement issues, several signs of increasing competitive pressure have Wall Street worried about Sequenom's longer-term prospects, as well.

Now what: The annualized run rate for the MaterniT21 PLUS test at the end of the quarter surpassed 150,000 samples. "[W]e expect improvements in collections in the second half," said Chairman and CEO Dr. Harry Hixson, Jr. "We are taking actions to reduce costs and improve our overall financial performance, including curtailment of services for which there is no current reimbursement available." So while the decision to scale back services will weigh on short-term volumes and market share, long-term investors might want to capitalize on today's big drop.

Obamacare will undoubtedly have far-reaching effects. The Motley Fool's new free report, "Everything You Need to Know About Obamacare," lets you know how your health insurance, your taxes, and your portfolio could be affected. Click here to read more.

The article Why Sequenom Shares Got Squashed originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.