Short interest in SQNM could spur price action Print E-mail
By Patrick Crutcher   
Tuesday, 13 July 2010 07:33
A little digging and smoke spotting has lead many to believe SQNM will be presenting some of their new data on the T-21(Down Syndrome) test on July 13th @ International Society for Prenatal Diagnosis. This could be a fairly interesting presentation. Dr. Dennis Lo is presenting on 'DNA or RNA: Which is better for noninvasive diagnosis of aneuploidy?'. This will likely concern about 800 data points they have collected, based on Dr. Lo’s recently published research. This date makes sense with statements by the company, which stated there would be an update in mid-2010. These results have tremendous potential given the research results out of Dr. Lo's lab (founder of SQNM, current medical advisor) and Dr. Stephen Quake's lab(founder of HLCS). Dr. Lo found that "Massively parallel sequencing-by-ligation of maternal plasma DNA was effective in identifying T21 fetuses noninvasively. The quantitative biases observed among the GRs of certain chromosomes were more likely based on analytical factors than biological factors. Further research is needed to enhance the precision for measuring for the representations of chromosomes 18 and 13."

Quake's lab confirmed that sequencing of maternal plasma DNA was only limited by sample size."We show that sensitivity( of detection of fetal aneuploidy) is limited only by counting statistics and that sensitivity can be increased to arbitrary precision in sample containing arbitrarily small fraction of fetal DNA simply by sequencing more DNA molecules. High throughput shotgun sequencing of maternal plasma DNA should therefore enable noninvasive diagnosis of any type of fetal aneuploidy."

So basically both studies showed that using the same sequencing technology were successful in detecting 100% of the relevant chromosomes. Here, they are looking for an over-representation of chromosome 21. The main problem has been the sensitivity of sequencers. With some of these obstacles now being rooted out and a more clear picture available, a prenatal diagnostic test of Down Syndrome could be on the horizon.

We think SQNM is on track with Dr. Lo's approach. He later goes on to show that, "The epigenetic–genetic chromosome-dosage approach is a new method for noninvasive prenatal detection of T21. The epigenetic part of the analysis can be applied to all pregnancies. Because the genetic part of the analysis uses paternally inherited, fetal-specific genetic markers that are abundant in the genome, broad population coverage should be readily achievable. This approach has the potential to become a generally usable technique for noninvasive prenatal diagnosis."<As I stated earlier, this is an interesting approach, since it gives SQNM the potential for an alternative-less costly approach to detecting T21, than the massively parallel genetic sequencing approach.

Additionally, in another paper he shows that, "For the RNA-SNP approach, we achieved a diagnostic sensitivity and specificity of 100% (95% CI, 40.2%–100%) and 89.7% (95% CI, 78.8%–96.1%), respectively, for both the MS and the digital PCR methods. ... For prenatal screening of trisomy 21, the quantification of the total PLAC4 mRNA concentration can be used in a synergistic manner with the RNA-SNP allelic ratio approach to increase the population coverage of cases in which diagnostic information can be obtained." Here they were studying maternal plasma samples from 153 pregnant women carrying euploid and trisomy 21 fetuses.

There could be potential patent challenges when the test eventually would make it to the market, if others see the results and believe they can do it as well. The courts have had their way with DNA patents already this year, so obviously SQNM would want whatever test they have in place immune from competition. You can find Dr. Lo's patent here. The market potential is substantial and the winner could be the leader in diagnostics for the next decade. Clearly, SQNM believes they have something worth pursuing here and I imagine their initial trial showed the promise, despite the data mishandling. Their June 2010 presentation is quite detailed in regards to their plans.

It’s noteworthy that theflyonthewall.com is reporting that Sequenom management is to meet with Lazard Capital Group at a dinner to be held in Amsterdam on July 13 hosted by Lazard Capital. SQNM has a current short interest of 39% of the float. Great news out of the conference could cause some serious price action.

Citations: Barron's here, here and here. Scientific articles here, here, and here 

 

Disclosure: Long SQNM

Patrick Crutcher is the managing editor of the biotech stock blog chasingthealpha.com




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