Ariosa Diagnostics defeated Sequenom in a federal court fight over a key patent involving prenatal genetic testing, though an appeal will keep the battle going between the two California companies a while longer.
Whether or not the fight goes on, investors panicked, driving Sequenom's stock down more than 22% on Oct. 31, the day the news came out. Sequenom closed at $1.92.
San Jose-based Ariosa announced the victory, which stems from a suit it filed against San Diego-based Sequenom ($SQNM) in December 2011 seeking to make sure its Harmony Prenatal Test didn't infringe on Sequenom's patent. The U.S. District Court for the Northern District of California sided with Ariosa, invalidating Sequenom's patent for the detection of fetal cell-free DNA in the bloodstream of pregnant women.
Sequenom could not be reached for comment at press time, but the company is licensing the patent exclusively from Isis Innovations, Ariosa said. At issue is the '540 patent, which is a basis for the company's MaterniT21 test, GenomeWeb noted.
Sequenom addressed the ruling in a regulatory filing with a pledge to keep the fight going, noting that it "vigorously disagrees ... [and] intends to appeal the decision to the Federal Circuit Court of Appeals." Ariosa, on the other hand, celebrated its victory with a lengthy statement.
"Ariosa is an innovator in prenatal testing, and we are extremely pleased with the Court's decision in our favor," Dianna DeVore, the company's vice president of intellectual property and legal affairs, said in a statement.
Ariosa also noted that the ruling "validates Ariosa's long-standing view that it has freedom to develop new, innovative and market-leading technologies to provide improved genetic testing for pregnant women." The company's Harmony test is designed to detect whether fetuses are at risk for Down syndrome and other chromosomal abnormalities.
It's unclear how this will affect Sequenom going forward, but plenty is at risk. The company's MaterniT21 Plus blood test spots chromosomal abnormalities such as trisomy 21, a key indicator of Down syndrome. And the test is a major driver of revenue. Although Sequenom's noninvasive prenatal test business has being doing well, the company is otherwise struggling. Sequenom slashed 75 jobs in August--about 12% of its workforce--in a bid to save money. And the company has said it is looking to potentially unload its once-promising genetic analysis arm.
Ariosa has pursued expansion of the market for its Harmony Prenatal Test, recently sealing a deal with a distributor to market the test in Brazil--an important market considering its substantial annual birth rate.
Both companies face an increasingly competitive prenatal diagnostic test market, with rivals including Natera and Illumina ($ILMN).