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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q





(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ending March 31, 2008



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from ___________ to __________

Commission File
Number: 000-29101





SEQUENOM, INC.

(Exact name of
registrant as specified in its charter)







|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|DELAWARE                                                       |  | 77-0365889                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)



|                                              |  |           
|--------------------------------------------- |  | ----------
|3595 John Hopkins Court San Diego, California |  | 92121     
|(Address of principal executive offices)      |  | (Zip Code)

Registrants telephone number, including area code: (858) 202-9000





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    x  Yes     ̈  No

Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of accelerated filers, large accelerated filers and smaller reporting company in Rule
12b-2 of the Exchange Act. (check one):



|                           |  |                      |  |                                               |  |                                   
|-------------------------- |  | -------------------- |  | --------------------------------------------- |  | ----------------------------------
|Large accelerated filer   ̈ |  | Accelerated filer  x |  | Non-accelerated filer   ̈                      |  | Smaller reporting company filer   ̈
|                           |  |                      |  | (Do not check if a smaller reporting company) |  |                                   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).    Yes   ̈    No  x

The number of shares of the Registrants Common Stock outstanding as of April 14, 2008, was 45,406,663.









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SEQUENOM, INC.

INDEX



|                               |  |                                                                                                                |  |         
|------------------------------ |  | -------------------------------------------------------------------------------------------------------------- |  | --------
|                               |  |                                                                                                                |  | Page No.
|PART I - FINANCIAL INFORMATION |  |                                                                                                               
|                               |  |                                                                                                               
|Item 1.                        |  | Financial Statements                                                                                           |  | 3       
|                               |  |                                                                                                               
|                               |  | Condensed Consolidated Balance Sheets  as of March 31, 2008 (unaudited) and December 31, 2007                 |  | 3       
|                               |  |                                                                                                               
|                               |  | Condensed Consolidated Statements of Operations for the three months ended March 31, 2008 and 2007 (unaudited) |  | 4       
|                               |  |                                                                                                               
|                               |  | Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007 (unaudited) |  | 5       
|                               |  |                                                                                                               
|                               |  | Notes to Unaudited Condensed Consolidated Financial Statements                                                 |  | 6       
|                               |  |                                                                                                               
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                          |  | 15      
|                               |  |                                                                                                               
|Item 3.                        |  | Quantitative and Qualitative Disclosures About Market Risk                                                     |  | 22      
|                               |  |                                                                                                               
|Item 4.                        |  | Controls and Procedures                                                                                        |  | 24      
|                               | 
|PART II  OTHER INFORMATION    |  |                                                                                                               
|                               |  |                                                                                                               
|Item 1.                        |  | Legal Proceedings                                                                                              |  | 24      
|                               |  |                                                                                                               
|Item 1A.                       |  | Risk Factors                                                                                                   |  | 25      
|                               |  |                                                                                                               
|Item 6.                        |  | Exhibits                                                                                                       |  | 38      



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PART I - FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

SEQUENOM, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share information)



|                                                                                                                                                                             |  |               |          |   |                  |   |          |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | -------- | - | ---------------- | - | -------- | -
|                                                                                                                                                                             |  | March 31,2008 |          |   | December 31,2007 |  
|                                                                                                                                                                             |  | (Unaudited)   |          |   |                  |  
|Assets                                                                                                                                                                       |  |               |          |   |                  |   |          |  
|Current assets:                                                                                                                                                              |  |               |          |   |                  |   |          |  
|Cash and cash equivalents                                                                                                                                                    |  | $             | 25,907   |   |                  | $ | 13,116   |  
|Marketable securities                                                                                                                                                        |  |               | 9,133    |   |                  |   | 37,704   |  
|Restricted cash                                                                                                                                                              |  |               | 1,330    |   |                  |   | 1,330    |  
|Accounts receivable, net                                                                                                                                                     |  |               | 11,477   |   |                  |   | 10,957   |  
|Inventories, net                                                                                                                                                             |  |               | 5,715    |   |                  |   | 4,191    |  
|Other current assets and prepaid expenses                                                                                                                                    |  |               | 1,251    |   |                  |   | 1,094    |  
|                                                                                                                                                                             |  |               |          |   |                  |   |          |  
|Total current assets                                                                                                                                                         |  |               | 54,813   |   |                  |   | 68,392   |  
|Equipment and leasehold improvements, net                                                                                                                                    |  |               | 6,102    |   |                  |   | 5,959    |  
|Marketable securities                                                                                                                                                        |  |               | 6,993    |   |                  |   | 929      |  
|Other long-term assets                                                                                                                                                       |  |               | 787      |   |                  |   | 766      |  
|                                                                                                                                                                             |  |               |          |   |                  |   |          |  
|Total assets                                                                                                                                                                 |  | $             | 68,695   |   |                  | $ | 76,046   |  
|                                                                                                                                                                             |  |               |          |   |                  |   |          |  
|Liabilities and stockholders equity                                                                                                                                         |  |               |          |   |                  |   |          |  
|Current liabilities:                                                                                                                                                         |  |               |          |   |                  |   |          |  
|Accounts payable                                                                                                                                                             |  | $             | 7,039    |   |                  | $ | 8,408    |  
|Accrued expenses                                                                                                                                                             |  |               | 4,675    |   |                  |   | 5,669    |  
|Accrued acquisition and integration costs                                                                                                                                    |  |               | 237      |   |                  |   | 237      |  
|Deferred revenue                                                                                                                                                             |  |               | 1,527    |   |                  |   | 873      |  
|Current portion asset-backed loan                                                                                                                                            |  |               | 507      |   |                  |   | 424      |  
|Other current liabilities                                                                                                                                                    |  |               | 309      |   |                  |   | 91       |  
|                                                                                                                                                                             |  |               |          |   |                  |   |          |  
|Total current liabilities                                                                                                                                                    |  |               | 14,294   |   |                  |   | 15,702   |  
|Deferred revenue, less current portion                                                                                                                                       |  |               | 394      |   |                  |   | 335      |  
|Other long-term liabilities                                                                                                                                                  |  |               | 4,333    |   |                  |   | 4,437    |  
|Long-term portion asset-backed loan                                                                                                                                          |  |               | 928      |   |                  |   | 823      |  
|Long-term accrued acquisition and integration costs, less current portion                                                                                                    |  |               | 425      |   |                  |   | 484      |  
|Stockholders equity:                                                                                                                                                        |  |               |          |   |                  |   |          |  
|Convertible preferred stock, par value $0.001; 5,000,000 shares authorized, no shares issued or outstanding at March 31, 2008 and
December 31, 2007, respectively            |  |               |         |   |                  |   |         |  
|Common stock, par value $0.001; 185,000,000 shares authorized, 45,406,215 and 44,888,656 shares issued and outstanding at March 31, 2008
and December 31, 2007, respectively |  |               | 45       |   |                  |   | 44       |  
|Additional paid-in capital                                                                                                                                                   |  |               | 537,983  |   |                  |   | 536,022  |  
|Accumulated other comprehensive income                                                                                                                                       |  |               | 1,039    |   |                  |   | 319      |  
|Accumulated deficit                                                                                                                                                          |  |               | (490,746 | ) |                  |   | (482,120 | )
|                                                                                                                                                                             |  |               |          |   |                  |   |          |  
|Total stockholders equity                                                                                                                                                   |  |               | 48,321   |   |                  |   | 54,265   |  
|                                                                                                                                                                             |  |               |          |   |                  |   |          |  
|Total liabilities and stockholders equity                                                                                                                                   |  | $             | 68,695   |   |                  | $ | 76,046   |  
|                                                                                                                                                                             |  |               |          |   |                  |   |          |  

See accompanying notes.



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SEQUENOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share information)



|                                                       |  |                             |        |   |      |   |        |  
|------------------------------------------------------ |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                       |  | Three months endedMarch 31, |       
|                                                       |  | 2008                        |        |   | 2007 |  
|                                                       |  | (Unaudited)                 |       
|Product revenues:                                      |  |                             |        |   |      |   |        |  
|Consumables                                            |  | $                           | 4,660  |   |      | $ | 4,199  |  
|System related                                         |  |                             | 4,500  |   |      |   | 4,909  |  
|Services                                               |  |                             | 1,357  |   |      |   | 773    |  
|Research and other                                     |  |                             | 57     |   |      |   | 11     |  
|                                                       |  |                             |        |   |      |   |        |  
|Total revenues                                         |  |                             | 10,574 |   |      |   | 9,892  |  
|                                                       |  |                             |        |   |      |   |        |  
|Costs and expenses:                                    |  |                             |        |   |      |   |        |  
|Cost of product revenue                                |  |                             | 3,519  |   |      |   | 3,692  |  
|Cost of service revenue                                |  |                             | 1,152  |   |      |   | 734    |  
|Research and development                               |  |                             | 4,885  |   |      |   | 2,875  |  
|Selling and marketing                                  |  |                             | 5,813  |   |      |   | 3,460  |  
|General and administrative                             |  |                             | 3,370  |   |      |   | 3,220  |  
|                                                       |  |                             |        |   |      |   |        |  
|Total costs and expenses                               |  |                             | 18,739 |   |      |   | 13,981 |  
|                                                       |  |                             |        |   |      |   |        |  
|Loss from operations                                   |  |                             | (8,165 | ) |      |   | (4,089 | )
|Interest income, net                                   |  |                             | 493    |   |      |   | 340    |  
|Loss on marketable securities                          |  |                             | (829   | ) |      |   |       |  
|Other expense, net                                     |  |                             | (111   | ) |      |   | (19    | )
|                                                       |  |                             |        |   |      |   |        |  
|Loss before income taxes                               |  |                             | (8,612 | ) |      |   | (3,768 | )
|Income tax expense                                     |  |                             | (14    | ) |      |   |       |  
|                                                       |  |                             |        |   |      |   |        |  
|Net loss                                               |  | $                           | (8,626 | ) |      | $ | (3,768 | )
|                                                       |  |                             |        |   |      |   |        |  
|Net loss per common share, basic and diluted           |  | $                           | (0. 19 | ) |      | $ | (0. 11 | )
|                                                       |  |                             |        |   |      |   |        |  
|Weighted average shares outstanding, basic and diluted |  |                             | 45,330 |   |      |   | 33,447 |  
|                                                       |  |                             |        |   |      |   |        |  

See accompanying notes.



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SEQUENOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



|                                                                            |  |                             |         |   |      |   |        |  
|--------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------ | -
|                                                                            |  | Three months endedMarch 31, |        
|                                                                            |  | 2008                        |         |   | 2007 |  
|                                                                            |  | (Unaudited)                 |        
|Operating activities                                                        |  |                             |         |   |      |   |        |  
|Net loss                                                                    |  | $                           | (8,626  | ) |      | $ | (3,768 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                             |         |   |      |   |        |  
|Share-based compensation expense                                            |  |                             | 1,249   |   |      |   | 428    |  
|Depreciation and amortization                                               |  |                             | 551     |   |      |   | 433    |  
|Loss on marketable securities                                               |  |                             | 829     |   |      |   |       |  
|Deferred rent                                                               |  |                             | (103    | ) |      |   | 578    |  
|Bad debt expense                                                            |  |                             | 128     |   |      |   | 21     |  
|Restricted stock                                                            |  |                             | 161     |   |      |   |       |  
|Other non-cash items                                                        |  |                             | 2       |   |      |   | 2      |  
|Changes in operating assets and liabilities:                                |  |                             |         |   |      |   |        |  
|Accounts receivable, net                                                    |  |                             | (384    | ) |      |   | (2,308 | )
|Inventories, net                                                            |  |                             | (1,435  | ) |      |   | 493    |  
|Other current assets and prepaid expenses                                   |  |                             | (141    | ) |      |   | (353   | )
|Accounts payable and accrued expenses                                       |  |                             | (2,139  | ) |      |   | 306    |  
|Deferred revenue                                                            |  |                             | 674     |   |      |   | 27     |  
|Other liabilities                                                           |  |                             | 143     |   |      |   | 116    |  
|                                                                            |  |                             |         |   |      |   |        |  
|Net cash used in operating activities                                       |  |                             | (9,091  | ) |      |   | (4,025 | )
|Investing activities                                                        |  |                             |         |   |      |   |        |  
|Purchases of equipment and leasehold improvements                           |  |                             | (638    | ) |      |   | (591   | )
|Purchases of marketable securities                                          |  |                             | (14,941 | ) |      |   | (6,036 | )
|Sales of marketable securities                                              |  |                             | 24,217  |   |      |   | 11,475 |  
|Maturity of marketable securities                                           |  |                             | 12,683  |   |      |   |       |  
|Net change in restricted cash                                               |  |                             | (50     | ) |      |   |       |  
|                                                                            |  |                             |         |   |      |   |        |  
|Net cash provided by investing activities                                   |  |                             | 21,271  |   |      |   | 4,848  |  
|Financing activities                                                        |  |                             |         |   |      |   |        |  
|Proceeds from exercise of stock options and ESPP purchases                  |  |                             | 289     |   |      |   | 17     |  
|Borrowings from asset-backed loan                                           |  |                             | 316     |   |      |   |       |  
|Repayments on asset-backed loan                                             |  |                             | (129    | ) |      |   |       |  
|                                                                            |  |                             |         |   |      |   |        |  
|Net cash provided by financing activities                                   |  |                             | 476     |   |      |   | 17     |  
|                                                                            |  |                             |         |   |      |   |        |  
|Net increase in cash and cash equivalents                                   |  |                             | 12,656  |   |      |   | 840    |  
|Effect of exchange rate changes on cash and cash equivalents                |  |                             | 135     |   |      |   | 19     |  
|Cash and cash equivalents at beginning of period                            |  |                             | 13,116  |   |      |   | 1,932  |  
|                                                                            |  |                             |         |   |      |   |        |  
|Cash and cash equivalents at end of period                                  |  | $                           | 25,907  |   |      | $ | 2,791  |  
|                                                                            |  |                             |         |   |      |   |        |  

See accompanying notes.



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SEQUENOM, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation

The accompanying unaudited condensed
consolidated financial statements of Sequenom, Inc. have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and disclosures required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair
presentation have been included. Interim results are not necessarily indicative of results for a full year. Certain reclassifications have been made to the prior period amounts in order to conform to the current presentation.

The condensed consolidated balance sheet at December 31, 2007 has been derived from the audited financial statements at that date, but does not include all of the
information and disclosures required by GAAP for complete financial statements.

These financial statements should be read in conjunction with the audited
financial statements and disclosures included in our Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the Securities and Exchange Commission (SEC) on March 17, 2008.

Use of Estimates

The preparation of financial statements in
accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses in the reporting period. We regularly evaluate estimates and assumptions related to inventory valuation and warranty liabilities, which affects cost of sales and gross margin; the allowance for doubtful accounts,
which affects revenue recognition; the valuation of restructuring liabilities, which affects the amount and timing of restructuring charges; and the valuation of deferred income taxes, which affects income tax expense and benefit. We base our
estimates and assumptions on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from managements estimates. To the extent there are material differences between the estimates and the actual results,
future results of operations will be affected.

Recent Accounting Pronouncements

In March 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS
No. 161). This statement changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and its related interpretations, and (c) how derivative instruments and related
hedged items affect an entitys financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early
application encouraged. This statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. The adoption of SFAS No. 161 is not expected to have a material impact on our consolidated financial
statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157). This statement establishes a
common definition for fair value to be applied to U.S. GAAP requiring use of fair value, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. SFAS No. 157 is effective for financial assets
and financial liabilities for fiscal years beginning after November 15, 2007. Issued in February 2008, FSP 157-1 Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address
Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 removed leasing transactions accounted for under SFAS No. 13 and related guidance from the scope of SFAS No. 157. FSP 157-2 Partial
Deferral of the Effective Date of Statement 157 (FSP 157-2), deferred the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities to fiscal years beginning after November 15, 2008. The implementation
of SFAS No. 157 for financial assets and financial liabilities, effective January 1, 2008, did not have a material impact on our consolidated financial statements. We are currently assessing the impact of SFAS No. 157 for nonfinancial
assets and nonfinancial liabilities on our consolidated financial statements. See Note 3, Marketable Securities and Fair Value Measurements.



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SFAS No. 141(R), Business Combinations (SFAS No. 141(R)), was issued in December 2007.
SFAS No. 141(R) established principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in
the acquiree. SFAS No. 141(R) also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the
nature and financial effects of the business combination. SFAS No. 141(R) will become effective for fiscal years beginning after December 15, 2008. We do not expect the adoption of this pronouncement to have a material impact on our
consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities -Including an amendment of FASB Statement No. 115. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. This statement is effective as of the beginning of an
entitys first fiscal year that begins after November 15, 2007. Management is currently evaluating the impact that the implementation of SFAS No. 159 may have on our consolidated financial statements.

In June 2007, the FASB ratified Emerging Issues Task Force Issue (EITF) No. 07-3, Accounting for Nonrefundable Advance Payments for Goods or Services Received
for Use in Future Research and Development Activities (EITF No. 07-3). EITF No. 07-3 requires that nonrefundable advance payments for goods and services that will be used or rendered in future research and development activities
pursuant to executory contractual arrangements be deferred and recognized as an expense in the period that the related goods are delivered or services are performed. We adopted EITF No. 07-3 as of January 1, 2008, and its adoption did not
have a material impact on our consolidated financial statements.

(2) Liquidity and Capital Resources

We have a history of recurring losses from operations and have an accumulated deficit of $490.7 million as of March 31, 2008. Our capital requirements to sustain
operations, including research and development projects, have been and will continue to be significant. In April 2007, we closed a registered direct offering of our common stock and in October 2007 we closed a private placement of our common stock,
both further described in Note 5 Stockholders Equity. As of March 31, 2008, we had available cash, cash equivalents and current marketable securities totaling $35.0 million and working capital of $40.5 million. We also
have approximately $7.0 million of auction rate security (ARS) investments classified as noncurrent assets at March 31, 2008.

(3) Marketable Securities
and Fair Value Measurements

Marketable securities

We account
for marketable securities in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities and have determined the appropriate classification of marketable securities was
available-for-sale at the time of purchase. As such, at March 31, 2008 and December 31, 2007, all of our investments in marketable securities were reported at fair value. Fair value is determined based on observable market
quotes or valuation models using assessments of counterparty credit worthiness, credit default risk or underlying security and overall capital market liquidity. Declines in fair value that are considered other-than-temporary are charged to
operations and those that are considered temporary are reported as a component of accumulated other comprehensive income in stockholders equity. We use the specific identification method of determining the cost basis in computing realized
gains and losses on the sale of its available-for-sale securities.

Historically, we have invested in auction rate securities (ARS), commercial paper of
prime quality, certificates of deposit, guaranteed bankers acceptance and U.S. Government instruments, and by policy, limit the amount of credit exposure to any one issuer. At March 31, 2008 and December 31, 2007, $9.4 million and $20.9
million of principal was invested in ARS, respectively. The ARS held are private placement securities with various long-term nominal maturities with interest rates reset through a dutch auction each month, except for one ARS that resets every 92
days. The monthly auctions historically have provided a liquid market for these securities. The investments in ARS represent interests in collateralized debt obligations supported by insurance securitizations and other structured credits, including
corporate bonds and to a lesser degree, pools of residential and commercial mortgages.

Consistent with our investment policy guidelines in affect when
originally purchased, the ARS investments held by us all had AAA/AA credit ratings at the time of purchase. With the liquidity issues experienced in global credit and capital markets, the $9.4 million ARS held by us at March 31, 2008, have
experienced multiple failed auctions as the amount of securities submitted for sale



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has exceeded the amount of purchase orders and we have been unable to liquidate. During the first quarter of 2008, one of our ARS investments was downgraded
to a credit rating of B2.

The estimated market value of all ARS holdings at March 31, 2008, was approximately $7.0 million, which reflects a $2.4
million adjustment to the principal value of $9.4 million. The $2.4 million adjustment consists of a $1.9 million other-than-temporary impairment loss charged to operations and a $0.5 million unrealized loss recorded to accumulated other
comprehensive income. Although the ARS continue to pay interest according to their stated terms, based on input assumptions to valuation models and an analysis of other-than-temporary impairment factors, we recognized a loss of approximately $0.8
million in the three months ended March 31, 2008 of which $0.5 million represented the reclassification of previously recorded unrealized losses in other comprehensive income. As of March 31, 2008, the accumulated unrealized losses in
other comprehensive income total $0.5 million related to these ARS.

Fair Value Measurements

SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date.
SFAS No. 157 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that
may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities. We have determined that our
investments in money market accounts, certificates of deposit and U.S. Government securities meet the criteria for definition within the Level 1 hierarchy.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs include quoted prices for similar assets or liabilities; quoted prices in
markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. We have determined that our investments in commercial paper meet the
criteria for definition within the Level 2 hierarchy.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities. We have determined that our investments in ARS meet the criteria for definition within Level 3 hierarchy.

The fair value of our investments in ARS instruments are estimated utilizing a discounted cash flow analysis valuation model as of March 31, 2008. These analyses consider, among other items, the
collateralization underlying the security investments, the credit quality of the counterparty, the timing of expected future cash flows, the default risk underlying the security, discount rates, the expected time until a successful auction and the
overall capital market liquidity. These securities were also compared, when possible, to other observable market data with similar characteristics to the securities. Management has reviewed the valuation input criteria utilized by our
investment manager, which generally consists of the price of credit protection, information available on the trading of senior and subordinated securities and other debt in the market place for comparable types of maturities, the current credit
rating of the trust sponsor and/or bond insurer, as well as the ultimate maturity and the underlying collateral of the securities and have deemed them to be reasonable assumptions in determining fair value. The valuation of our ARS investments is
subject to uncertainties that are difficult to predict. Factors that may impact our valuation include changes to credit ratings of the securities, as well as to the underlying assets supporting those securities, rates of credit default of the
underlying assets, underlying collateral value, discount rates, counterparty risk and the ongoing strength and quality of market credit and liquidity.

Due
to the underlying assumptions utilized in our discounted cash flow analyses and that our holdings of ARS are not required for operational purposes in 2008, which allows sufficient time for the securities to return to full value, we have classified
these investments as noncurrent assets on the unaudited Condensed Consolidated Balance Sheet at March 31, 2008 and December 31, 2007 of $7.0 million and $1.0 million, respectively. If we determine that any future valuation adjustment was other
than temporary, we would record a charge to operations as appropriate, based on changes in assumptions and input from our valuation models. Any future fluctuation in fair value related to these instruments that we determine to be temporary,
including any recoveries of previous write-downs, would be recorded to accumulated other comprehensive income.



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We endeavor to utilize the best available information in measuring fair value. Financial assets and liabilities are
classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table sets forth our financial assets and liabilities that were accounted for at fair value on a recurring basis as of
March 31, 2008:



|                                    |  |       |        |         |   |         |  |         |       |  |   |      
|----------------------------------- |  | ----- | ------ | ------- | - | ------- |  | ------- | ----- |  | - | -----
|(in thousands) Description          |  | Total |        | Level 1 |   | Level 2 |  | Level 3
|Cash equivalents                    |  | $     | 21,476 |         | $ | 21,476  |  | $       |      |  | $ |     
|Marketable securities, current1     |  |       | 15,524 |         |   | 2,040   |  |         | 7,093 |  |   | 6,391
|Restricted cash                     |  |       | 1,330  |         |   | 1,330   |  |         |      |  |   |     
|Marketable securities, non-current1 |  |       | 602    |         |   |        |  |         |      |  |   | 602  
|                                    |  |       |        |         |   |         |  |         |       |  |   |      
|Total                               |  | $     | 38,932 |         | $ | 24,846  |  | $       | 7,093 |  | $ | 6,993
|                                    |  |       |        |         |   |         |  |         |       |  |   |      



|1 | Gains or losses considered to be temporary are recorded to accumulated other comprehensive loss at each measurement date. Other than temporary losses are recorded to operations at
each measurement date.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table presents our assets measured at fair value on a recurring basis using significant unobservable
inputs (Level 3) as defined in SFAS No. 157 at March 31, 2008:



|                                                                                                                                         |  |                        |         |  
|---------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ------- | -
|(in thousands)                                                                                                                           |  | Auction RateSecurities |        
|Balance at December 31, 2007                                                                                                             |  | $                      | 19,018  |  
|Transfers to Level 3                                                                                                                     |  |                        |        |  
|Total gains or losses:                                                                                                                   |  |                        |         |  
|Included in operations                                                                                                                   |  |                        | (829    | )
|Recognized loss previously included in other comprehensive income                                                                        |  |                        | 469     |  
|Included in other comprehensive loss                                                                                                     |  |                        | (167    | )
|Purchases and settlements, net                                                                                                           |  |                        | (11,498 | )
|                                                                                                                                         |  |                        |         |  
|Balance at March 31, 2008                                                                                                                |  | $                      | 6,993   |  
|                                                                                                                                         |  |                        |         |  
|Gains or losses included in operations (or changes in net assets) for the period (above) relating to assets still held at March 31,
2008 |  |                        |         |  
|Total losses for the period included in operations                                                                                       |  | $                      | (829    | )
|                                                                                                                                         |  |                        |         |  
|Total change in unrealized losses included in other comprehensive loss                                                                   |  | $                      | 302     |  
|                                                                                                                                         |  |                        |         |  

(4) Comprehensive Loss

SFAS No. 130, Reporting Comprehensive Income (SFAS No. 130), requires reporting and displaying comprehensive income (loss) and its components, which, for us, includes net loss and unrealized gains and losses on
investments and foreign currency translation gains and losses. In accordance with SFAS No. 130, the accumulated balance of other comprehensive income (loss) is disclosed as a separate component of stockholders equity. A summary of our
comprehensive loss is as follows (in thousands):



|                                                            |  |                             |        |   |      |   |        |  
|----------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                            |  | Three months endedMarch 31, |       
|                                                            |  | 2008                        |        |   | 2007 |  
|                                                            |  | (Unaudited)                 |       
|Net loss                                                    |  | $                           | (8,626 | ) |      | $ | (3,768 | )
|Unrealized gain on available-for-sale marketable securities |  |                             | 282    |   |      |   |       |  
|Foreign currency translation adjustments                    |  |                             | 439    |   |      |   | 38     |  
|                                                            |  |                             |        |   |      |   |        |  
|Comprehensive loss                                          |  | $                           | (7,905 | ) |      | $ | (3,730 | )
|                                                            |  |                             |        |   |      |   |        |  



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(5) Net Loss Per Share

In
accordance with SFAS No. 128, Earnings Per Share, basic net loss per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period. Diluted net loss per share
is computed by dividing the net loss for the period by the weighted average number of common and common equivalent shares outstanding during the period. Common stock equivalents consisting of stock options, warrants and restricted stock were not
included in the computation of diluted net loss per share as their effect was anti-dilutive for both periods presented.

(6) Stockholders Equity

During 2007, we closed a $20.0 million registered direct offering of our common stock to several new and existing investors, as well as a $30.5 million
private placement of our common stock. Under the terms of the registered direct offering we issued and sold 6,666,666 shares at $3.00 per share, with net aggregate proceeds of approximately $18.3 million after deducting placement agents fees
and transaction expenses. Under the terms of the private placement of our common stock we issued and sold 3,383,335 shares at $9.00 per share, with net aggregate proceeds of approximately $28.1 million after deducting placement agents fees and
estimated transaction expenses.

(7) Share-Based Compensation

We maintain several share-based compensation plans for the grant of incentive stock options and non-qualified stock options to employees, consultants and non-employee directors. In accordance with the provisions of SFAS No. 123,
Share-Based Payment (SFAS No. 123(R)) the estimated fair value of share-based payments is measured at the grant date and is recognized as stock-based compensation expense over the employees requisite service period. We adopted
the provisions of SFAS No. 123(R) on January 1, 2006 using the modified prospective method, which provided for certain changes to the method for valuing stock-based compensation.

For the three months ended March 31, 2008 and 2007, we recorded $1.2 million and $0.4 million of compensation expense related to our share-based compensation
awards, respectively. The compensation expense related to our share-based compensation arrangements is recorded as components of research and development expenses ($0.3 million and $0.1 million), selling and marketing expenses ($0.3 million and $0.1
million) and general and administrative expenses ($0.6 million and $0.2 million) for the three months ended March 31, 2008 and 2007, respectively.

We
have not recognized, and do not expect to recognize in the near future, any tax benefit related to stock-based compensation cost as a result of the full valuation allowance of our net deferred tax assets and our net operating loss carryforwards.

We account for options granted to non-employees in accordance with EITF No. 96-18, Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, and SFAS No. 123(R). The fair value of these options at the measurement dates was estimated using the Black-Scholes pricing model. Total stock-based
compensation for options granted to non-employees for the three months ended March 31, 2008 and 2007, was $28,000 and $39,000, respectively, and is included in research and development expenses ($7,000 and $0), in sales and marketing expenses
($21,000 and $0), and in general and administrative expenses ($0 and $39,000) in the statements of operations for the three months ended March 31, 2008 and 2007, respectively.

Share-Based Compensation Plans

Stock Compensation Plans

On May 31, 2006, stockholders approved our 2006 equity incentive plan (the 2006 Plan), as the successor to our 1999 stock option plan (the 1999 Plan). In
connection with the adoption of the 2006 Plan, we terminated the automatic annual increase feature under the 1999 Plan and resolved to cease to grant additional stock awards under the 1999 Plan following the effectiveness of the 2006 Plan. As of
March 31, 2008, the aggregate number of shares of common stock that may be issued under the 2006 Plan was 5,696,584 shares, plus the number of shares subject to any stock awards under the 1999 Plan that terminate or are forfeited or repurchased
and would otherwise have been returned to the share reserve under the 1999 Plan.

Restricted Stock

On January 18, 2007, we granted restricted stock awards to certain executive officers and employees. At December 31, 2007, 57,126 shares with a weighted average
grant date fair value of $4.60 per share remained outstanding and 7,247 shares were cancelled prior to vesting. The awards fully vested on January 18, 2008.



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On October 18, 2007, we granted 50,000 restricted stock units to an executive officer with a grant date fair value
of $11.04. At December 31, 2007, all units remain outstanding. These units vest over 4 years, with 13/48th of the units vesting 13 months after the grant date, then equal monthly installments thereafter.

On January 29, 2008, we granted restricted stock awards of 18,628 and restricted stock units of 20,974 to certain executive officers and employees. These grants
have a weighted average grant date fair value of $8.16 per share and remain outstanding as of March 31, 2008. These awards vest on January 29, 2009.

Employee Stock Purchase Plan

In 1999 we adopted the 1999 Employee Stock Purchase Plan (the 1999 ESPP). As of March 31, 2008, we had
reserved 899,539 shares of common stock for issuance under the 1999 ESPP. Beginning in 2001, the amount of authorized shares available under the 1999 ESPP automatically increases each January 1st by an amount equal to 1% of the outstanding
common stock on the last trading day of the prior year, subject to an annual increase limitation of 166,666 shares. The 1999 ESPP allows for a series of concurrent offering periods, each with a maximum duration of 24 months. Shares are purchased
semi-annually at 85% of the lower of the closing stock price at the beginning or end of the period.

In October 2006 the Board of Directors approved a
change to all offerings under the 1999 ESPP that commence on or after February 1, 2007. New offerings will be for a duration of six months and will consist of one purchase interval, but will not impose either an individual or
all-participant limitation on the number of shares purchasable on a purchase date, although the 1999 ESPP limits stock purchases to $25,000 per individual per calendar year. Participants had the option of: continuing under the current plan
offering period until its expiration, or, withdrawing from the current offering prior to its expiration and enrolling in the new offering commencing February 1, 2007. Those employees not electing to enroll in the new offering period will
continue under the then current offering until the 24 month offering period expires. As of March 31, 2008, employees have contributed approximately $0.1 million to the current offering period of the 1999 ESPP, since the beginning of the
offering period that commenced February 1, 2008. For the three months ended March 31, 2008 and 2007, we have recognized $2,000 and $0, respectively, as share-based compensation expense related to the 1999 ESPP.

Warrants

In connection with the acquisition of Axiom Biotechnologies
in 2002, we assumed an outstanding warrant to purchase 7,333 Axiom ordinary shares at an exercise price of $10.50, which was adjusted to become a warrant to purchase 1,535 shares of our common stock at an exercise price of $50.19 per share. As of
March 31, 2008, this warrant has not been exercised and expires in December 2011.

In connection with an amendment to our lease for our corporate
headquarters in San Diego, California in September 2005, we issued to the landlord a warrant to purchase 50,000 shares of our common stock with an exercise price of $2.64 per share. The warrant expires in October 2015. As of March 31, 2008, the
warrant remains outstanding and exercisable.

In connection with the private placement financing completed in June 2006, we issued to the investors
warrants to purchase an aggregate of 11,999,999 shares of our common stock at an exercise price of $2.10 per share. These warrants contain anti-dilution provisions that adjust the exercise price and number of shares subject to the warrants upon
reorganization, mergers, stock splits and combinations, reclassifications of our common stock, stock dividends, or other issuances of our common stock at purchase prices less than the warrants exercise price (other than certain exempt
issuances, such as sales of common stock to our employees or conversions of convertible securities and options that were outstanding prior to the issuance of the warrants). These warrants expire in September 2013. During the quarter ended
March 31, 2008, an investor exercised warrants in the amount of 509,550 shares utilizing cashless exercises to purchase 389,988 shares of our common stock. As of March 31, 2008, warrants to purchase 10,791,949 remain outstanding and
exercisable.

Additionally in connection with the June 2006 private placement financing, we issued to our placement agent a warrant to purchase 866,666
shares of our common stock at an exercise price of $2.52 per share and expires in June 2011. This warrant contains anti-dilution provisions that adjust the exercise price and number of shares subject to the warrants upon reorganization, mergers,
stock splits and combinations, reclassifications of our common stock, or stock dividends, but not for other issuances of our common stock. As of March 31, 2008, warrants to purchase an aggregate of 125,233 shares remained outstanding and
exercisable.



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Stock Options

The estimated fair value of each stock option award granted was determined on the date of grant using the Black-Scholes option valuation model with the following weighted-average assumptions for stock option grants:



|                             |  |           |   |  |      |  
|---------------------------- |  | --------- | - |  | ---- | -
|                             |  | March 31, |  
|                             |  | 2008      |   |  | 2007 |  
|Risk free interest rates     |  | 4.1       | % |  | 4.8  | %
|Volatility                   |  | 80.0      | % |  | 82.0 | %
|Dividend yield               |  | 0         | % |  | 0    | %
|Expected option term (years) |  | 6.8       |   |  | 6.7  |  

The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected term of
our employee stock options. The expected volatility is based on the historical volatility of our stock. We have not paid any dividends on common stock since our inception and do not anticipate paying dividends on our common stock in the foreseeable
future. The computation of the expected option term is based on a weighted-average calculation combining the average life of stock options that have already been exercised or cancelled with the estimated life of all unexercised stock options.

SFAS No. 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures
differ from those estimates. Pre-vesting forfeitures were estimated to be 12.4% based on historical experience. Our determination of fair value is affected by our stock price as well as a number of assumptions that require judgment. The
weighted-average fair value of each stock option granted to employees during the three months ended March 31, 2008 and 2007, estimated as of the grant date using the Black-Scholes option valuation model was $6.23 and $3.36, respectively, per
share of our common stock subject to the stock option.

A summary of the status of our stock option plans as of March 31, 2008, and of changes in
stock options outstanding under the plans during the three months ended March 31, 2008, is as follows:



|                                                 |  |                          |   |  |                                         |      |                                                    |     |                          |   |           
|------------------------------------------------ |  | ------------------------ | - |  | --------------------------------------- | ---- | -------------------------------------------------- | --- | ------------------------ | - | ----------
|Outstanding                                      |  | Shares Subjectto Options |   |  | WeightedAverage ExercisePrice per Share |      | WeightedAverageRemainingContractualTerm (in years) |     | AggregateIntrinsic Value
|Outstanding at December 31, 2007                 |  | 5,080,236                |   |  | $                                       | 6.16 |                                                    |     |                          |   |           
|Granted                                          |  | 817,948                  |   |  |                                         | 8.41 |                                                    |     |                          |   |           
|Canceled                                         |  | (59,181                  | ) |  |                                         | 6.40 |                                                    |     |                          |   |           
|Exercised                                        |  | (8,340                   | ) |  |                                         | 3.43 |                                                    |     |                          |   |           
|                                                 |  |                          |   |  |                                         |      |                                                    |     |                          |   |           
|Outstanding at March 31, 2008                    |  | 5,830,663                |   |  | $                                       | 6.47 |                                                    | 8.3 |                          | $ | 13,622,603
|                                                 |  |                          |   |  |                                         |      |                                                    |     |                          |   |           
|Options vested and exercisable at March 31, 2008 |  | 1,988,251                |   |  | $                                       | 9.35 |                                                    | 7.0 |                          | $ | 5,446,817 
|                                                 |  |                          |   |  |                                         |      |                                                    |     |                          |   |           

As of March 31, 2008, there was $10.6 million of unamortized compensation expense related to unvested
stock option awards, which is expected to be recognized over a remaining weighted-average vesting period of 2.7 years. Cash received from stock option exercises for the three months ended March 31, 2008 and 2007 was $43,000 and $10,000,
respectively. At March 31, 2008, there were 1,058,787 shares available for future option grants.

(8) Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market value. Standard cost, which approximates actual cost, is used to value inventories. The
components of inventories were (in thousands):



|                |  |               |       |                  |   |      
|--------------- |  | ------------- | ----- | ---------------- | - | -----
|                |  | March 31,2008 |       | December 31,2007
|                |  | (Unaudited)   |       | (Audited)       
|Raw materials   |  | $             | 3,209 |                  | $ | 3,053
|Work in process |  |               | 25    |                  |   |     
|Finished goods  |  |               | 2,481 |                  |   | 1,138
|                |  |               |       |                  |   |      
|Total           |  | $             | 5,715 |                  | $ | 4,191
|                |  |               |       |                  |   |      

Inventories are shown net of excess and obsolescence reserves of $1.4 million and $1.1 million at March 31,
2008 and December 31, 2007, respectively.



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(9) Asset-backed Loan

On
August 31, 2007, we signed an amendment to our existing asset-backed loan line that had previously expired. Under the terms of this amendment, we may elect to have individual minimum fundings of $100,000 up to an aggregate limit of $3.0 million
through December 23, 2008. All borrowings will be secured by the underlying financed equipment.

As of March 31, 2008, we have an aggregate of
$1.4 million outstanding on this asset-backed loan line relating to three fundings with interest rates of 10.27%, 10.05% and 9.73%, to be repaid in 36 monthly installments.

(10) Acquisition and Integration Costs

As of March 31, 2008, we had approximately $0.7 million remaining in accrued
acquisition costs, relating to the acquisition of Gemini Genomics, plc in 2001. The remaining acquisition liability relates to facility exit costs.

The
accrued acquisition cost activity in the three months ended March 31, 2008, was as follows (in thousands):



|                                                     |  |                            |     |             |   |     |                          |  |   |    
|---------------------------------------------------- |  | -------------------------- | --- | ----------- | - | --- | ------------------------ |  | - | ---
|                                                     |  | Balance atDecember 31,2007 |     | Deductions  |   |     | Balance atMarch 31, 2008
|                                                     |  | (Audited)                  |     | (Unaudited) |   |     | (Unaudited)             
|Costs to close facilities and exit lease commitments |  | $                          | 721 |             | $ | (59 | )                        |  | $ | 662

(11) Warranty Costs and Reserves

In accordance with FASB Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN No. 45),
we provide a warranty provision related to the sales of our MassARRAY equipment based on our experience of returns and repairs required under the warranty period.

We generally provide a one-year warranty on our MassARRAY Compact system and related equipment. We establish an accrual for estimated warranty expenses associated with system sales based on historical amounts. This expense is recorded as a
component of cost of product revenue in the statement of operations.

Changes in our warranty liability during the three months ended March 31, 2008,
were as follows (in thousands):



|                                      |  |   |      |  
|------------------------------------- |  | - | ---- | -
|Balance as of December 31, 2007       |  | $ | 526  |  
|Additions charged to cost of revenues |  |   | 281  |  
|Repairs and replacements              |  |   | (141 | )
|                                      |  |   |      |  
|Balance as of March 31, 2008          |  | $ | 666  |  
|                                      |  |   |      |  

(12) Litigation

In
November 2001, we and certain of our current or former officers and directors were named as defendants in a class action shareholder complaint filed by Collegeware USA in the U.S. District Court for the Southern District of New York (now captioned
In re Sequenom, Inc. IPO Securities Litigation) Case No. 01-CV-10831. Similar complaints were filed in the same District Court against hundreds of other public companies that conducted initial public offerings of their common stock in the late
1990s and 2000. In the complaint, the plaintiffs allege that our underwriters, certain of our officers and directors and we violated the federal securities laws because our registration statement and prospectus contained untrue
statements of material fact or omitted material facts regarding the compensation to be received by and the stock allocation practices of the underwriters. The plaintiffs seek unspecified monetary damages and other relief. In October 2002, our
officers and directors were dismissed without prejudice pursuant to a stipulated dismissal and tolling agreement with the plaintiffs. In February 2003, the District Court dismissed the claim against us brought under Section 10(b) of the
Securities Exchange Act of 1934, without giving the plaintiffs leave to amend the complaint with respect to that claim. The District Court declined to dismiss the claim against us brought under Section 11 of the Securities Act of 1933.

In September 2003, pursuant to the authorization of a special litigation committee of our board of directors, we approved in principle a settlement offer
by the plaintiffs. In September 2004, we entered into a settlement agreement with the plaintiffs. In February 2005, the District Court issued a decision certifying a class action for settlement purposes and granting preliminary approval of the
settlement subject to modification of certain bar orders contemplated by the settlement. In August 2005, the District Court reaffirmed class certification and preliminary approval of the modified settlement. In February 2006, the District Court
dismissed litigation filed against certain underwriters in connection with the claims to be assigned to the plaintiffs under the settlement. In April 2006, the



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##### Table of Contents

District Court held a final fairness hearing to determine whether to grant final approval of the settlement. In December 2006, the U.S. Court of Appeals
for the Second Circuit vacated the District Courts decision certifying as class actions the six lawsuits designated as focus cases. Thereafter the District Court ordered a stay of all proceedings in all of the lawsuits pending
the outcome of plaintiffs petition to the Second Circuit for rehearing en banc. In April 2007, the Second Circuit denied plaintiffs rehearing petition, but clarified that the plaintiffs may seek to certify a more limited
class in the District Court. Accordingly, the settlement as originally negotiated was terminated pursuant to stipulation and will not receive final approval. Plaintiffs filed amended complaints in the six focus cases in August 2007. Sequenom is not
one of the focus case issuers. In September 2007, Sequenoms named officers and directors again extended the tolling agreement with the plaintiffs. Also in September 2007, the plaintiffs moved to certify the classes alleged in the focus cases
and to appoint class representatives and class counsel in those cases. The focus case issuers filed motions to dismiss the claims against them in November 2007 and an opposition to plaintiffs motion for class certification in December 2007.
The District Court denied the motions to dismiss in March 2008. A date for the focus case defendants to answer the complaints has not yet been set.

On
August 3, 2007, we received a demand letter dated July 31, 2007, demanding on behalf of an alleged stockholder, Vanessa Simmonds, that our board of directors prosecute a claim against our IPO underwriters, in addition to certain unnamed
officers, directors and principal stockholders as identified in our IPO prospectus, for violations of sections 16(a) and 16(b) of the Securities Exchange Act of 1934. The demand letter asserts purchases and sales of our common stock within periods
of less than six months and failure to report such transactions, and seeks unspecified disgorgement of profits. We requested further information from Ms. Simmonds in order to evaluate the demand and although Ms. Simmonds provided a
response, we still do not have adequate information to evaluate the demand and there has been no further correspondence or communication with Ms. Simmonds.

We do not anticipate that the ultimate outcome of either of the events set forth above will have a material adverse impact on our financial position.

In addition, from time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business.

(13) Income Taxes

In July 2006, the FASB issued FIN No. 48, Accounting for Uncertainty in Income Taxes(FIN No. 48), which
prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. Additionally, FIN No. 48 provides guidance on de-recognition,
classification, accounting in interim periods and disclosure requirements for uncertain tax positions.

We adopted the provisions of FIN No. 48 on
January 1, 2007. There were no unrecognized tax benefits as of the date of adoption and there are no unrecognized tax benefits included in the balance sheet at December 31, 2007 or March 31, 2008 that would, if recognized, affect the
effective tax rate.

Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. We had no accrual for
interest and penalties on our balance sheets at December 31, 2007 and March 31, 2008, and have recognized no interest and/or penalties in the statement of operations for the year ended December 31, 2007 and the three months ended
March 31, 2008. Due to the existence of the valuation allowance, future changes in our unrecognized tax benefits will not impact our effective tax rate.

We are subject to taxation in the U.S., foreign and various state jurisdictions. Our tax years for 1993 and forward are subject to examination by the Federal and California tax authorities due to the carryforward of unutilized net operating
losses and research and development credits.

During the first quarter of 2008, we substantially completed our IRC Sections 382/383 study and
analysis. The results of this study concluded that we experienced an ownership change for purposes of the IRC Sections 382/383 limitation in June 2006. As a result of this ownership change, utilization of our net operating loss and credits are
subject to an annual limitation under Sections 382/383. Generally, the annual limitation is determined by multiplying the value of our stock immediately before the ownership change by the applicable long-term tax-exempt rate. We estimate our
annual limitation for GAAP reporting purposes to be approximately $1.0 million. Of the aggregate $239.3 million net operating carryforwards as of December 31, 2007, we have approximately $40.5 million available for GAAP reporting federal
purposes. Our research and development credits are also limited under Sections 382/383. The federal research and development credit of $10.3 million at December 31, 2007, was eliminated as a result of the ordering rules and limitations
under Sections 382/383. The California research and development credits of $8.0 million carryforward indefinitely and under Sections 382/383 can be utilized beginning in 2016 with an annual limitation of approximately $85,000 per year.



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Based on the conclusion of the Sections 382/383 study, we reduced our deferred tax assets and valuation allowance on
these assets by approximately $89.8 million to reflect this limitation.



|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

All statements in this report that are not historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act. These forward-looking statements can generally be identified
as such because the context of the statement will include words such as may, will, intend, plans, believes, anticipates, expects, estimates,
predicts, potential, continue, opportunity, goals, or should, the negative of these words or words of similar import. Similarly, statements that describe our future plans,
strategies, intentions, expectations, objectives, goals or prospects are also forward-looking statements. These forward-looking statements are or will be, as applicable, based largely on our expectations and projections about future events and
future trends affecting our business, and so are or will be, as applicable, subject to risks and uncertainties including but not limited to the risk factors discussed in this report, that could cause actual results to differ materially from those
anticipated in the forward-looking statements. We caution investors that there can be no assurance that actual results or business conditions will not differ materially from those projected or suggested in such forward-looking statements. Our views
and the events, conditions and circumstances on which these future forward-looking statements are based, may change. All forward statements are qualified in their entirety by this cautionary statement and we undertake no obligation to revise or
update any such statements to reflect events or circumstances after the date hereof.

SEQUENOM®, SpectroCHIP®, iPLEX® and MassARRAY® are registered trademarks and EpiTYPER, SEQureDx and iSEQ are trademarks of SEQUENOM, Inc. This report may also refer to trade names and trademarks of other organizations.

Sequenom was incorporated in 1994 under the laws of the State of Delaware.

Overview

We are a genetics and molecular diagnostic company providing genetic analysis products and services and developing diagnostic
tests initially targeted at non-invasive prenatal genetic disorders. Our genetic analysis business provides applications that translate genomic science into solutions for biomedical research, agricultural and molecular medicine applications.

Genetic Analysis

Our proprietary MassARRAY system,
comprised of hardware, software applications, consumable chips and reagents, is a high performance nucleic acid analysis platform that quantitatively and precisely measures genetic target material and variations. Our genetic services business
provides genetic analysis services to customers as a complement and as an alternative to our systems product offerings and assists in developing and expanding our genetic analysis products. Our research and development efforts are committed to
producing new and improved components and applications for our MassARRAY system that will deliver greater system versatility and also reduce the cost per data point generated.

We derive revenue primarily from sales of our MassARRAY hardware, software and consumable products. Our standard MassARRAY system combines four basic components:



| |  |  | proprietary analytical reaction technology and sample preparation and dispensing hardware to prepare DNA for analysis;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | a coated silicon chip known as the SpectroCHIP bioarray;
| | - |  | --------------------------------------------------------



| |  |  | a mass spectrometer, which uses an established analytical method that we have adapted for DNA analysis; and
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | bioinformatics software that records, calculates, and reports the data generated by the mass spectrometer.
| | - |  | ----------------------------------------------------------------------------------------------------------

Our MassARRAY technology is accepted as a leading high-performance DNA analysis system for the fine mapping genotyping market. Our customers include clinical research
laboratories, biotechnology companies, academic institutions and government agencies. To maximize market penetration and provide customer support for our expanding user base, we have established direct sales and support personnel serving North
America, Europe, India, Japan and other regions of Asia, in addition to regional distribution partners in France, Israel, South Korea, New Zealand, Singapore, Taiwan, and Turkey.

Our MassARRAY system provides reliable results for numerous types of DNA analysis applications including single
nucleotide polymorphisms (SNP) genotyping and allelotyping, quantitative gene expression analysis, quantitative methylation marker analysis, SNP discovery, and oligonucleotide quality control. While the MassARRAY system is versatile, it has also
became a cost-effective genotyping solution for customer needs with the launch of the iPLEX Gold assay which reduced cost per genotype to about 31/2cent per data point for a typical study. The iPLEX Gold assay is a proprietary assay, which provides for multiplexed DNA sample analysis that in turn provides



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cost-effectiveness by allowing the user to perform multiple sample genotyping analyses using a similar amount of reagents and chip surface area as used for a
single DNA sample analysis. Customers purchase the iPLEX Gold assay capability in the form of a software upgrade to the MassARRAY system and through the purchase of consumable chip and reagent kits.

Biomedical Research Market

Our MassARRAY systems are used in
numerous academic, pharmaceutical, and clinical research institutions in the biomedical research market to identify genetic markers with clinical utility. Our products are cost competitive and desirable for the fine mapping genotyping sector of the
biomedical research market. Institutions conducting fine mapping genotyping studies use the MassARRAY system to perform candidate gene and candidate region association studies. These studies typically analyze up to several thousand SNP with
thousands of samples. Customers conduct candidate region associations to narrow down regions of interest where previous linkage studies have correlated disease phenotypes to specific regions on the chromosome. Candidate gene association studies
demonstrate for specific patient samples that underlying genetic defects reside in specific biological pathways. From there, biomarker discovery efforts can potentially lead to clinical validation and use.

Candidate gene and candidate region association studies typically follow whole-genome population genetics studies, whole genome association studies, and linkage studies.
Whole-genome population studies are conducted for general research purposes to create SNP maps and to determine allelic frequencies in different ethnicities and species. Whole genome association studies and linkage studies are conducted for genetic
discovery purposes. In general, these studies are high throughput studies that analyze a small number of samples against a high number of SNPs. Once target regions are identified and connections to disease are made, these institutions then typically
perform fine mapping genotyping studies, which are conducted in an effort to apply genetics to diseases.

Agricultural Market

Widespread livestock testing is partly being driven by government mandate. With growing requests for farm-of-origin verification, country-of-origin verification,
age-verification, and national ID programs, the market for traceability analysis is expanding. These programs rely upon accurate traceability analysis for their success. The MassARRAY platform is widely recognized as one of the most accurate and
cost effective platforms for providing traceability testing in this context. Additionally, there is market demand for genetic testing as it relates to trait selection and feedlot management. There is also growing demand for genetic analysis of
crops, including maize, rice, and others for potentially growing agricultural products with enhanced traits, such as nutritional quality, disease resistance, and crop yields.

Our MassARRAY platform is becoming widely accepted by livestock-focused service providers in the United States and Europe for genotyping, due to its suitability for routine testing of a large number of DNA samples
with modest numbers of SNPs. Beginning with our first MassARRAY system placement with the U.S. Department of Agriculture in 1999, we have provided genotyping solutions for livestock customers. We serve the livestock market through product sales,
panel development and optimization, and providing services, including back-up testing, over-flow, and quality control. Our competitive advantage in the livestock market is based upon the capability of the MassARRAY system to perform high-volume
routine testing. While other platform companies have been successful in the whole genome mapping segment of the market, utilizing tens of thousands of SNPs, their platforms are not as optimal for routine tests utilizing tens to hundreds of SNPs.

Molecular Diagnostics

We are developing various
molecular diagnostic tests in prenatal genetic disorders, oncology and infectious diseases. We have branded our diagnostic technology, including prenatal diagnostics, under the name SEQureDx. We have in-licensed exclusive rights to use free fetal
nucleic acids for diagnostic testing from maternal serum or plasma to ascertain various genetic disorders, including gender determination, through an agreement with Isis Innovation Ltd (ISIS). Our exclusive license rights cover the general
diagnostic use of fetal nucleic acids derived from maternal plasma or serum in territories including the United States, Europe, Australia, Canada, Hong Kong and Japan as well as non-exclusive rights in China, to non-invasive prenatal diagnostic
intellectual property from The Chinese University of Hong Kong. Our exclusively licensed patent portfolio includes the general use, on any technology platform, of fetal nucleic acids derived from maternal plasma, serum and in some cases blood for
non-invasive prenatal genetic diagnostic testing, including genetic, expression and epigenetic-based assays and tests. Diagnostic tests based on our foundational intellectual property, which is disease independent, could be developed provided
certain technical challenges are overcome for cystic fibrosis, Tay Sachs, hemoglobinopathies (sickle cell anemia and the thalassemias), Rhesus D (RhD), gender determination for x-linked disorders, and chromosomal aneuploidies (such as Downs
Syndrome), and others, on any platform including mass spectrometry and real time polymerase chain reaction (RT-PCR) amplification platforms.



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Our collaboration with Qiagen, announced in January 2007, is focused on the joint development of a gold-standard
preanalytical solution for small molecule (fetal) DNA enrichment for prenatal diagnostics. We have exclusive global commercialization rights to products that may be derived from this collaboration. If developed, this solution is expected to play an
integral part in our further development and commercialization of diagnostic tests in the field of non-invasive prenatal diagnostics.

We are in the
process of developing non-invasive prenatal nucleic acid based tests using fetal DNA or RNA applications for Downs syndrome, RhD, x-linked disorders and gender determination that may provide more fundamental and reliable diagnostic information
earlier in pregnancy. In January 2007, as part of our platform independent commercialization strategy, we announced our first commercial partnership with Lenetix Medical Screening Laboratory, Inc. who has now developed a CLIA validated test for RhD
blood incompatibility using RT-PCR amplification (the Lenetix Agreement).

Under the Lenetix Agreement, we each licensed to the other on a non-exclusive
and royalty-free basis, rights to certain intellectual property for purposes of conducting the study and research plan contemplated by the collaboration. We also granted to Lenetix a non-exclusive, non-sublicensable and royalty-bearing commercial
license during the term of the Lenetix Agreement which permits Lenetix to sell tests developed under the Lenetix Agreement throughout the United States in exchange for royalties payable to us on sales of such tests. We also entered into
cross-licensing arrangements with respect to improvements on each partys respective intellectual property. We also have an option to exclusively license on a royalty-bearing basis any improvement or modification made by Lenetix or by us to
Lenetixs background intellectual property in connection with the study or implementation of the research plan.

Pursuant to the Lenetix Agreement,
Lenetix is responsible for conducting the research contemplated by the collaboration and maintaining all research documentation to support any submissions made to the United States Food and Drug Administration (the FDA). We have agreed to reimburse
certain expenses to be incurred by Lenetix in connection with the collaboration and we remain responsible for preparing and submitting any documents to the FDA pertaining to any tests or products developed under the Lenetix Agreement.

The Lenetix Agreement terminates upon the earliest of (i) three years from the date of the first commercial sale by Lenetix of a test developed under the Lenetix
Agreement, (ii) January 24, 2011, (iii) thirty days after written notice by the Registrant if Lenetix does not achieve the first commercial sale of a test developed under the Lenetix Agreement by a specified date or fails to maintain
minimum annual test sales, or (iv) written notice by either party for material breach of the Lenetix Agreement by the other party if such breach has not been cured within 60 days of notice of breach to such party.

In December 2007, Lenetix received New York State approval of a non-invasive prenatal laboratory developed test (LDT) performed on a RT-PCR platform to detect RhD
incompatibility, based on our technology licensed and the work performed under the Lenetix Agreement. Commercial sales of the test by Lenetix commenced in January 2008.

In October 2005, and as amended thereafter, we entered into an agreement (Agreement) with ISIS Innovation Limited (ISIS), a wholly owned subsidiary of the University of Oxford (the University), pursuant to which ISIS
granted us an exclusive royalty-bearing license in the United States, Canada, France, Germany, Great Britain and other countries in Europe, to develop, use and market products covered by the patent claims licensed under the Agreement (Licensed
Products), except for the field of RhD blood typing by RT-PCR amplification platforms in Europe. The licensed technology, including improvements made by the inventors prior to the Agreement, covers non-invasive prenatal genetic diagnostic testing on
fetal nucleic acids.

In October 2006 we entered into an amendment to the Agreement pursuant to which, in exchange for an upfront payment by us and
entitlement to milestone and royalty payments, ISIS granted us an expanded exclusive license including the field of prenatal gender determination for social or lifestyle purposes and an expanded territory for the field of gender determination for
social or lifestyle purposes including Japan and Australia. In November 2007, we entered into a second amendment to the Agreement pursuant to which, in exchange for an upfront payment by us, a right to a milestone fee upon completion of a specified
event, and royalty payments on sales, ISIS granted us an expanded licensed territory to include Japan, Australia, and Hong Kong, excluding in the case of Hong Kong the field of gender determination for social or lifestyle purposes.

We also have an exclusive option to negotiate a further license of any improvements made by the inventors. Subject to the license rights granted under the Agreement,
intellectual property rights created in connection with improvements made to the licensed technology will belong to the party developing the improvements. We also granted to ISIS a perpetual royalty-free license to the University to use and publish
material relating to the licensed technology and any of our improvements solely for non-commercial use. The Universitys right to publish is subject to our right to delay publication of information to protect the licensed technology or our
improvements.



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We have agreed to make up-front payments to ISIS and to pay ISIS royalties on net sales of Licensed Products, including
specified minimum royalty amounts, and milestone payments upon the completion of commercial events with respect to Licensed Products for particular indications.

The Agreement will remain in force for the life of any patent issued in connection with the patent application covering the licensed technology, subject to earlier termination by either party upon an uncured material breach or other
specified circumstances. ISIS may terminate the Agreement if we file a petition to wind-up or dissolve or upon 30 days written notice if we were to challenge the validity of the patent rights covering the licensed technology or fail to make the
up-front payments as provided in the Agreement. After the third anniversary of the Agreement, we may terminate the Agreement for any reason with six months advance written notice. In the event we fail to achieve certain milestone requirements with
respect to particular indications, ISIS may convert the exclusive license into a non-exclusive license with respect to those indications.

As of
March 31, 2008, our revenues consisted of sales of MassARRAY hardware, software, consumables, maintenance agreements, and from services contracts through our genetic analysis contract research services business. The impact of our product
offerings and contract research services business on future revenues, margins, expenses, and cash flows remains uncertain and depends on many factors as described in Item 1A of this report under the caption Risk Factors.

We expect revenues from out-licensing and commercialization of our non-invasive prenatal diagnostics technology, including technology for RhD incompatibility using a
real-time polymerase chain reaction platform, to be minimal for the foreseeable future. To the extent that revenues are realized from our non-invasive prenatal diagnostics technology or from our prior disease gene discoveries, if at all, they
may fluctuate significantly as revenues will be based upon the occurrence of certain milestones, our reliance upon and the progress made by our collaborative partners, successful product development and commercialization, and product demand, all of
which are uncertain and difficult to predict. As a result, our entitlement to, and the timing and amounts of, any licensing and milestone payments and royalty or revenue sharing payments on future product sales are uncertain and difficult to
predict. To achieve such revenues we will likely be dependent upon the efforts, resources and success of present and future collaborators and licensees who may need to invest significant dollar amounts in research and development efforts,
commercialization efforts, clinical trials, and obtaining regulatory approvals over several years. Such revenues, if any, are uncertain and also depend on many factors as described in Item 1A of this report under the caption Risk
Factors.

We have a history of recurring losses from operations and have an accumulated deficit of $490.7 million as of March 31, 2008. Our
capital requirements to sustain operations, including research and development projects, have been and will continue to be significant. As of March 31, 2008, we had available cash, cash equivalents and marketable securities totaling
$35.0 million and working capital of $40.5 million.

During 2007, we closed a $20.0 million registered direct offering of our common stock to several
new and existing investors, as well as a $30.5 million private placement of our common stock. Under the terms of the registered direct offering we issued and sold 6,666,666 shares at $3.00 per share, with net aggregate proceeds of approximately
$18.3 million after deducting placement agents fees and transaction expenses. Under the terms of the private placement of our common stock we issued and sold 3,383,335 shares at $9.00 per share, with net aggregate proceeds of approximately
$28.1 million after deducting placement agents fees and estimated transaction expenses.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. These accounting
principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments
and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods
presented. To the extent there are material differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. The accounting policies that reflect our more significant estimates, judgments
and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:



| |  |  | Accrued acquisition and integration costs
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| |  |  | Impairment of long-lived assets
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| |  |  | Allowance for doubtful accounts
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| |  |  | Reserves for obsolete and slow-moving inventory
| | - |  | -----------------------------------------------



| |  |  | Income taxes
| | - |  | ------------



| |  |  | Stock-based compensation
| | - |  | ------------------------

In many cases, the
accounting treatment of a particular transaction is specifically dictated by GAAP and does not require managements judgment in its application. There are also areas in which managements judgment in selecting among available alternatives
would not produce a materially different result. Our senior management has reviewed these critical accounting policies and related disclosures with the Audit Committee of the Board of Directors.

During the first three months of 2008 there were no significant changes in our critical accounting policies and estimates. Please refer to Managements Discussion
and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for our the year ended December 31, 2007 for a more complete discussion of our critical accounting
policies and estimates.

Results of Operations for the Three Months Ended March 31, 2008 and 2007

Product revenues

Total product revenues for the three months ended
March 31, 2008 increased to $10.6 million from $9.9 million for the same period in 2007 and are comprised of product sales and contract research services. Product revenues are derived from sales of consumables including our SpectroCHIP bioarray
chips used with our iPLEX and other assays, MassARRAY systems, maintenance agreements, sales and licensing of our proprietary software, and license fees from end-users.

For the three months ended March 31, 2008 compared to the three months ended March 31, 2007, consumable revenues increased to $4.7 million from $4.2 million due to an increased installed base of MassARRAY
Compact systems to the comparative period.

System related revenue was $4.5 million for the three months ended March 31, 2008, compared to $4.9
million for the same period in 2007. The decrease of $0.4 million was primarily due to a decrease in MassARRAY system hardware sales to $3.6 million for the three months ended March 31, 2008 from $4.0 million for the same period in 2007 due to
fewer system placements in the current quarter. The decrease in system hardware sales was attributable to delays in our domestic customers capital equipment funding primarily with research and academic institutions. Income from other product
sales, including MassARRAY system maintenance contracts and software for the three months ended March 31, 2008 and 2007 were $1.0 million in each quarter.

We recorded genetic analysis contract research service revenues of $1.4 million for the three months ended March 31, 2008, compared to $0.8 million for the comparative period in 2007. The increase of $0.6 million is attributable to our
service business growth in primarily the commercial, clinical analysis and the academic research markets as we expand from the level of services provided in 2007.

Research and other revenues were approximately $57,000 and $11,000, respectively, for the three months ended March 31, 2008 and 2007. The timing of research revenues depends upon our expenditures on grant research and our receipt of
grant funding from sponsoring agencies. We expect grant revenue to be minimal going forward.

Our revenues have historically fluctuated from period to
period and likely will continue to fluctuate substantially in the future based upon the unpredictable sales cycle for the MassARRAY Compact system, revenue recognition criteria, and the overall acceptance and demand for our new and existing
commercial products and services.

Cost of product and service revenues and gross margin

Cost of product revenues for the three months ended March 31, 2008 and 2007 were $3.5 million and $3.7 million, respectively. Gross margins on product sales for the
three months ended March 31, 2008 were 62%, compared to 59% for the same period in 2007. Gross margins primarily increased due to a favorable mix of regional system placements at improved margins, as well increased consumable sales that sell at
higher average gross margins.

Cost of contract research service revenues for the three months ended March 31, 2008 were $1.2 million compared to $0.7
million, or gross margins of 15% compared to 5%, for the same period in 2007. Gross margins primarily increased due to growth in the genetic analysis research service contracts completed during the current quarter compared to the prior period,
improvement in contract terms in the current quarter, as well as stabilization of expenses incurred, primarily in salaries and related personnel expenses, as we are beginning to benefit from economies of scale in production. Gross margins on
contract research service revenues are dependent on the particular contract terms of the work undertaken in each quarter.



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The Companys overall gross margin was 56% and 55% for the three months ended March 31, 2008 and 2007,
respectively. The increase in overall gross margin in the three months ended March 31, 2008 compared to 2007 is attributable to improved margins on system placements, increased consumables sales and improved margins in contract research
services.

We believe that gross margin in future periods will be affected by, among other things, the selling price for systems and consumables,
consumable sales per MassARRAY system sold, the mix of products sales and contract research services, competitive conditions, sales volumes, discounts offered, sales through distributors, inventory reserves and obsolescence charges required and
royalty payment obligations on in-licensed technologies.

Research and development expenses

Research and development expenses increased to $4.9 million for the three months ended March 31, 2008 from $2.9 million for the same period in 2007. These expenses
consisted primarily of salaries and related personnel expenses, product development costs, and expenses relating to work performed under research contracts.

The increase in expenses of $2.0 million for the three months ended March 31, 2008 compared to the same period in 2007 primarily relates to increased headcount and related costs of $1.2 million, $0.2 million for higher share-based
compensation charges, increased operating supplies of $0.2 million primarily associated with our non-invasive prenatal diagnostic research and development, $0.1 million in higher advisory board, license and maintenance fees, $0.1 million of
increased depreciation and equipment related expenses and $0.2 million in higher allocated overhead charges primarily due to the full allocation of our information technology department across all functional areas.

Selling and marketing expenses

Selling and marketing expenses for
the three months ended March 31, 2008 increased to $5.8 million compared to $3.5 million for the same period in 2007. These expenses consisted primarily of salaries and related expenses for sales and marketing, customer support, and business
development personnel and their related department expenses.

The increase in expense of $2.3 million for sales and marketing expenses in the three months
ended March 31, 2008 compared to the same period in 2007 were primarily affected by increased costs of $1.7 million for increased headcount and travel related expenses, $0.2 million for higher share-based compensation charges, $0.1 million of
advertising and public relations expenses for sales and marketing projects associated with our non-invasive prenatal technology, $0.1 million related to higher rent and increased operating supplies related to worldwide operations and $0.2 million in
higher allocated overhead charges primarily due to the full allocation of our information technology department across all functional areas.

We expect our
sales and marketing headcount and associated expenses to increase during 2008 as we strengthen our sales force for our MassARRAY system and related product sales and contract research services business and as we build our commercial development team
for our non-invasive prenatal diagnostic tests.

General and administrative expenses

General and administrative expenses for the three months ended March 31, 2008 were $3.4 million, compared to $3.2 million for the same period in 2007. These expenses consisted primarily of salaries and related
expenses for legal, finance and human resource personnel, and their related department expenses.

The increase of $0.2 million for the three months ended
March 31, 2008 from the same period in 2007 was primarily due to $0.5 million for increased headcount and related expenses, $0.1 million of higher consulting costs, $0.1 million in increased audit and tax related expenses and $0.4 million in
higher share-based compensation charges, offset by increased allocation of information technology department expenses to other functional departments of $0.8 million and $0.1 million of lower rent expense.

We expect general and administrative costs to increase in 2008 compared to 2007, as we build our infrastructure to support our anticipated growth.

Net interest income

Net interest income was $0.5 million for the
three months ended March 31, 2008, compared to $0.3 million for the same period in 2007, as our cash, cash equivalents and marketable securities balances were higher in the current period due to the closing of our registered direct offering and
private placement of our common stock in April and October 2007, respectively.



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Loss on marketable securities

Loss on marketable securities was $0.8 million for the three months ended March 31, 2008, compared to no recognized loss in the comparable period. The recognized loss was due to an other-than-temporary impairment on two of our
investments in auction rate securities. If the credit ratings of the security issuers deteriorate or if uncertainties in these markets continue and any decline in market value is determined to be other-than-temporary in our remaining auction rate
security investments, we would be required to adjust the carrying value of the investment through additional impairment charges.

Other expense, net

Interest expense was $0.1 million and $19,000 for the three months ended March 31, 2008 and 2007, respectively. The increase in interest expense
for the three month months ended March 31, 2008 was due to the utilization of our asset-backed loan commencing in the third quarter of 2007 and our most recent funding in March 2008.

Liquidity and Capital Resources

As of March 31, 2008, cash,
cash equivalents and current marketable securities totaled $35.0 million, compared to $50.8 million at December 31, 2007. Our cash reserves are held primarily in a variety of interest-bearing instruments, including auction rate securities,
commercial paper of prime quality, certificates of deposit, guaranteed bankers acceptance and U.S. Government instruments. We also have approximately $7.0 million of ARS investments classified as noncurrent assets at March 31, 2008.

We have a history of recurring losses from operations and have an accumulated deficit of $490.7 million as of March 31, 2008. Our capital requirements to sustain
operations, including research and development projects, have been and will continue to be significant. As of March 31, 2008, we had working capital of $40.5 million.

During 2007, we closed a $20.0 million registered direct offering of our common stock to several new and existing investors, as well as a $30.5 million private placement of our common stock. Under the terms of the
registered direct offering we issued and sold 6,666,666 shares at $3.00 per share, with net aggregate proceeds of approximately $18.3 million after deducting placement agents fees and transaction expenses. Under the terms of the private
placement of our common stock we issued and sold 3,383,335 shares at $9.00 per share, with net aggregate proceeds of approximately $28.1 million after deducting placement agents fees and estimated transaction expenses.

We consider the material drivers of our cash flow to be sales volumes, accounts receivable, inventory management and operating expenses. Our principal sources of
liquidity are our cash, cash equivalents and marketable securities. Cash used in operations for the three months ended March 31, 2008, was $9.1 million compared to $4.0 million for the same period in 2007. The use of cash was primarily a result
of the net loss of $8.6 million for the three months ended March 31, 2008, adjusted for non-cash items of depreciation and amortization of $0.6 million, share-based compensation of $1.2 million, loss on marketable securities of $0.8 million,
non-cash compensation charges related to vesting of restricted stock of $0.2 million and bad debt expense of $0.1 million, offset by a non-cash change in deferred rent of $0.1 million. The changes in our operating assets and liabilities primarily
consisted of a decrease in accounts receivable of $0.4 million, inventories of $1.4 million, other current assets of $0.1 million and accounts payable and accrued expenses of $2.1 million. These decreases were offset by increases in deferred revenue
of $0.7 million and other liabilities of $0.1 million. At our current and anticipated level of operating loss, we expect to continue to incur an operating cash outflow on a quarterly basis for the foreseeable future.

Investing activities, other than the changes in our marketable securities and restricted cash of $21.9 million, consists of purchases for capital equipment that used
$0.7 million in cash during the three months ended March 31, 2008.

Net cash provided by financing activities was $0.5 million for the three months
ended March 31, 2008, compared to cash provided of $17,000 for the same period in 2007. Financing activities during the three months ended March 31, 2008, included the receipt of proceeds from the exercise of stock options and employee
stock purchase plan purchases during the period of $0.3 million and proceeds from our equipment financing line of $0.3 million. Our cash used consisted of repayments on our asset-backed loan of $0.1 million for the three months ended March 31,
2008.

Based on our current plans, we believe our cash, cash equivalents and current marketable securities, will be sufficient to fund our operating
expenses and capital requirements through at least 2009. However, the actual amount of funds that we will need will be determined by many factors, some of which are beyond our control, and we may need funds sooner than currently anticipated. These
factors include but are not limited to:



| |  |  | the size of our future operating losses;
| | - |  | ----------------------------------------



| |  |  | the level of our success in selling our MassARRAY products and services;
| | - |  | ------------------------------------------------------------------------



| |  |  | our ability to introduce and sell new products and services, and successfully reduce inventory levels of earlier products;
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| |  |  | the level of our selling, general and administrative expenses;
| | - |  | --------------------------------------------------------------



| |  |  | our success in and the expenses associated with researching, developing and commercializing diagnostic products, alone or in collaboration with our partners, and
obtaining any required regulatory approval for those products;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the extent of our research and development pursuits, including our level of investment in MassARRAY product research and development, and diagnostic research and
development, particularly for non-invasive prenatal diagnostics;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the extent to which we enter into, maintain, and derive revenues from licensing agreements, including agreements to out-license our non-invasive prenatal diagnostic
technology, research and other collaborations, joint ventures and other business arrangements;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the extent to which we acquire, and our success in integrating, technologies or companies;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | the level of our legal expenses including those expenses associated with litigation and with intellectual property protection; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | regulatory changes and technological developments in our markets.
| | - |  | -----------------------------------------------------------------

At March 31, 2008, we had outstanding stand-by letters of credit with financial institutions totaling $1.1 million related to our building and operating leases, which will remain in place until the
expiration of the Newton, Massachusetts building lease agreement in December 2010.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

Marketable Securities and Fair Value Measurements

The primary objective of our investment activities is to preserve principal while at the
same time maximizing the income we receive from our investments without significantly increasing risk. Some of the securities that we invest in may have market risk. This means that a change in prevailing interest rates may cause the fair value of
the principal amount of the investment to fluctuate. For example, if we hold a security that was issued with a fixed interest rate at the then-prevailing rate and interest rates later rise, the fair value of the principal amount of our investment
will probably decline. To minimize this risk in the future, we revised our investment policy in April 2008 to maintain our portfolio of cash equivalents and marketable securities in a variety of securities, including U.S. government securities with
ratings of AAA, repurchase agreements collateralized by U.S. government securities with ratings of AAA and non-U.S. government securities issued or guaranteed by a government of a major, development country, or its agencies, with a rating of AAA.
Our investment policy includes a minimum quality rating for all new investments, as well as limits the amount of credit exposure to any one issuer. If an investment we hold falls below this level, we research the reasons for the fall and determine
if we should continue to hold the investment in order to minimize our exposure to market risk of the investment.

At March 31, 2008, $9.4 million of
principal was invested in auction rate securities (ARS). The ARS held are private placement securities with various long-term nominal maturities with interest rates reset through a dutch auction each month, except for one ARS that resets every 92
days. The monthly auctions historically have provided a liquid market for these securities. The investments in ARS represent interests in collateralized debt obligations supported by insurance securitizations and other structured credits, including
corporate bonds and to a lesser degree, pools of residential and commercial mortgages. All ARS investments purchased by us had AAA/AA credit ratings at the time of purchase. With the liquidity issues experienced in global credit and capital markets,
the ARS held at December 31, 2007 and March 31, 2008 have experienced multiple failed auctions as the amount of securities submitted for sale has exceeded the amount of purchase orders.

We account for our marketable securities in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, and
originally classified these securities as available-for-sale. During the fourth quarter of 2007, we determined that one of our ARS investments that had continued to incur failed auctions, as well as had a reduction in credit rating
subsequent to the year ended December 31, 2007 to B2 had an other-then temporary decline in value and was reclassified to long-term assets. In addition, we recognized a loss of approximately $1.1 million on this ARS in the fourth quarter of
2007.



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Due to the underlying assumptions utilized in our discounted cash flow analyses and that our holdings of ARS are not
required for operational purposes in 2008, which allows sufficient time for the securities to return to full value, we have classified all ARS investments as noncurrent assets on the unaudited Condensed Consolidated Balance Sheet at March 31,
2008 of $7.0 million. Although the ARS continue to pay interest according to their stated terms, based on changes in assumptions and input from our valuation models and an analysis of other-than-temporary impairment factors, a recognized loss of
approximately $0.8 million was recorded in the first quarter of 2008, of which $0.5 million represented the reclassification of previously recorded unrealized losses in other comprehensive income and reflects the portion of ARS holdings that we have
concluded have an other-than-temporary decline in value. The $0.8 million impairment charge does not have a material impact on our liquidity or financial flexibility. If we determine that any future valuation adjustment was other than temporary, we
would record a charge to operations as appropriate. Any future fluctuation in fair value related to these instruments that we determine to be temporary, including any recoveries of previous write-downs, would be recorded to accumulated other
comprehensive income.

Since there is a lack of observable market quotes on our investment portfolio of marketable securities and ARS, we utilize valuation
models including those that are based on expected cash flow streams and collateral values, including assessments of counterparty credit quality, default risk underlying the security, discount rates and overall capital market liquidity. The valuation
of our investment portfolio is subject to uncertainties that are difficult to predict. Factors that may impact our valuation include changes to credit ratings of the securities as well as to the underlying assets supporting those securities, rates
of default of the underlying assets, underlying collateral value, discount rates, counterparty risk and ongoing strength and quality of market credit and liquidity. In the event we need to access the ARS investments that are in an illiquid state, we
will not be able to do so without the possible loss of principal, until a future auction for these investments is successful or they are redeemed by the issuer or they mature. The market value of these securities may decline.

Foreign currency rate fluctuations

We have foreign subsidiaries
whose functional currencies are the Great British Pound (GBP), and the Euro (EUR). The subsidiaries accounts are translated from the relevant functional currency to the U.S. dollar using the current exchange rate in effect at the balance sheet
date, for balance sheet accounts, and using the average exchange rate during the period for revenues and expense accounts. The effects of translation are recorded as a separate component of stockholders equity. Our subsidiaries conduct their
business with customers in local currencies. Additionally, we occasionally invoice Australian customers in their local currency (AUS). Exchange gains and losses arising from these transactions are recorded using the actual exchange differences on
the date of the transaction. We have not taken any action to reduce our exposure to changes in foreign currency exchange rates, such as options or futures contracts, with respect to transactions with our subsidiaries or transactions with our
customers where the invoicing currency is not the U.S. dollar.

The table below sets forth our currency exposure (i.e., those transactional exposures that
give rise to the net currency gains and losses recognized in the income and expenditure account) on our net monetary assets and liabilities. These exposures consist of our monetary assets and liabilities that are not denominated in the functional
currency used by us or our subsidiary having the asset or liability.



|                                  |     |                                                               |     |  |   |  
|--------------------------------- | --- | ------------------------------------------------------------- | --- |  | - | -
|Functional currency of operations |     | As of March 31, 2008Net foreign monetary assets/(liabilities)
|                                  | USD |                                                               | GBP
|                                  |     | ($ in millions)                                              
|Euro                              |     | $                                                             | 0.9 |  | $ | 

A movement of 10% in the U.S. dollar to AUS exchange rate would create an unrealized gain or loss of approximately
$32,000. A movement of 10% in the U.S. dollar to EUR exchange rate would create an unrealized gain or loss of approximately $91,000.

We had no off balance
sheet, or unrecognized, gains and losses in respect of financial instruments used as hedges at the beginning or end of the three month period ended March 31, 2008. We had no deferred gains or losses during the period covered.

Inflation

We do not believe that inflation has had a material
adverse impact on our business or operating results during the periods presented.



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|Item 4. | Controls and Procedures
|------- | -----------------------

We have established and maintain
disclosure controls and procedures that are designed to ensure that we record, process, summarize, and report information we are required to disclose in our periodic reports filed with the Securities and Exchange Commission in the manner and within
the time periods specified in the Security and Exchange Commissions rules and forms. We also design our disclosure controls to ensure that the information is accumulated and communicated to our management, including the principal executive
officer and the principal financial officer, as appropriate to allow timely decisions regarding required disclosure. We also maintain internal controls and procedures that are designed to ensure that we comply with applicable laws and our
established financial policies. We design our internal controls to provide reasonable assurance that (1) our transactions are properly authorized; (2) our assets are safeguarded against unauthorized or improper use; and (3) our
transactions are properly recorded and reported in conformity with accounting principles generally accepted in the United States.

We have evaluated the
design and operation of our disclosure controls and procedures to determine whether they are effective in ensuring that the disclosure of required information is timely made in accordance with the Exchange Act and the rules and regulations of the
Securities and Exchange Commission. This evaluation was made under the supervision and with the participation of management, including our principal executive officer and principal financial officer as of March 31, 2008. Our management does not
expect that our disclosure controls or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control
system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems,
no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of
controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may
become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur
and not be detected.

Our principal executive officer and principal financial officer have concluded, based on their review, that our disclosure controls
and procedures, as defined by Exchange Act Rules 13a-15(e) and 15d-15(e), were effective as of March 31, 2008, to ensure that information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms.

An evaluation was also
performed under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of any change in our internal control over financial reporting that occurred during our last
fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. That evaluation did not identify any such change.

PART II  OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

In November 2001, we and certain of our current
or former officers and directors were named as defendants in a class action shareholder complaint filed by Collegeware USA in the U.S. District Court for the Southern District of New York (now captioned In re Sequenom, Inc. IPO Securities
Litigation) Case No. 01-CV-10831. Similar complaints were filed in the same District Court against hundreds of other public companies that conducted initial public offerings of their common stock in the late 1990s and 2000. In the complaint,
the plaintiffs allege that our underwriters, certain of our officers and directors and we violated the federal securities laws because our registration statement and prospectus contained untrue statements of material fact or
omitted material facts regarding the compensation to be received by and the stock allocation practices of the underwriters. The plaintiffs seek unspecified monetary damages and other relief. In October 2002, our officers and directors were
dismissed without prejudice pursuant to a stipulated dismissal and tolling agreement with the plaintiffs. In February 2003, the District Court dismissed the claim against us brought under Section 10(b) of the Securities Exchange Act of
1934, without giving the plaintiffs leave to amend the complaint with respect to that claim. The District Court declined to dismiss the claim against us brought under Section 11 of the Securities Act of 1933.

In September 2003, pursuant to the authorization of a special litigation committee of our board of directors, we approved in principle a settlement offer by the
plaintiffs. In September 2004, we entered into a settlement agreement with the plaintiffs. In February 2005, the District Court issued a decision certifying a class action for settlement purposes and granting preliminary approval of the



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settlement subject to modification of certain bar orders contemplated by the settlement. In August 2005, the District Court reaffirmed class certification
and preliminary approval of the modified settlement. In February 2006, the District Court dismissed litigation filed against certain underwriters in connection with the claims to be assigned to the plaintiffs under the settlement. In April
2006, the District Court held a final fairness hearing to determine whether to grant final approval of the settlement. In December 2006, the U.S. Court of Appeals for the Second Circuit vacated the District Courts decision certifying as
class actions the six lawsuits designated as focus cases. Thereafter the District Court ordered a stay of all proceedings in all of the lawsuits pending the outcome of plaintiffs petition to the Second Circuit for rehearing
en banc. In April 2007, the Second Circuit denied plaintiffs rehearing petition, but clarified that the plaintiffs may seek to certify a more limited class in the District Court. Accordingly, the settlement as originally negotiated
was terminated pursuant to stipulation and will not receive final approval. Plaintiffs filed amended complaints in the six focus cases in August 2007. Sequenom is not one of the focus case issuers. In September 2007, Sequenoms named officers
and directors again extended the tolling agreement with the plaintiffs. Also in September 2007, the plaintiffs moved to certify the classes alleged in the focus cases and to appoint class representatives and class counsel in those cases. The focus
case issuers filed motions to dismiss the claims against them in November 2007 and an opposition to plaintiffs motion for class certification in December 2007. The District Court denied the motions to dismiss in March 2008. A date for the
focus case defendants to answer the complaints has not yet been sent.

On August 3, 2007, we received a demand letter dated July 31, 2007,
demanding on behalf of an alleged stockholder, Vanessa Simmonds, that our board of directors prosecute a claim against our IPO underwriters, in addition to certain unnamed officers, directors and principal stockholders as identified in our IPO
prospectus, for violations of sections 16(a) and 16(b) of the Securities Exchange Act of 1934. The demand letter asserts purchases and sales of our common stock within periods of less than six months and failure to report such transactions, and
seeks unspecified disgorgement of profits. We requested further information from Ms. Simmonds in order to evaluate the demand and although Ms. Simmonds provided a response, we still do not have adequate information to evaluate the demand
and there has been no further correspondence or communication with Ms. Simmonds.

We do not anticipate that the ultimate outcome of either of the
events set forth above will have a material adverse impact on our financial position.

In addition, from time to time, we may be involved in litigation
relating to claims arising out of our operations in the normal course of business.



|Item 1A. | Risk Factors
|-------- | ------------

Before deciding to invest in us or deciding to
maintain or increase your investment, you should carefully consider the risks described below, in addition to the other information contained in this report and in our other filings with the SEC. The risks and uncertainties described below and in
our other filings are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business. If any of these known or unknown risks or uncertainties actually
occurs, our business, financial condition and results of operations could be seriously harmed. In that event, the market price for our common stock could decline and you may lose your investment. The risk factors in this report have been revised to
incorporate changes to our risk factors from those included in our annual report on Form 10-K for the year ended December 31, 2007. The risk factors set forth below with an asterisk (*) next to the title are new risk factors or risk
factors containing changes, including any material changes, from the risk factors previously disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the SEC.

*We may need additional capital to support our growth, which will result in additional dilution to our stockholders.

Our business may require additional investment that we have not yet secured. As of March 31, 2008, we have available cash, cash equivalents and
current marketable securities of approximately $35.0 million. We also have approximately $7.0 million of ARS investments classified as noncurrent assets at March 31, 2008. In April 2007, we closed a $20.0 million registered direct offering of our
common stock resulting in aggregate net proceeds of $18.3 million, after deducting placement agents fees and transaction expenses. In October 2007, we closed a private placement of our common stock for approximately $30.5 million. Under
the terms of the transaction we issued and sold 3,383,335 shares at $9.00 per share, with net aggregate proceeds of approximately $28.1 million after deducting placement agents fees and estimated transaction expenses.

We believe our cash, cash equivalents and marketable securities will be sufficient to fund our operating expenses and capital requirements through 2009.
However, based upon our current plans, our business will require additional investment that we have not yet secured. The actual amount of funds that we will need will be determined by many factors, some of which are beyond our control, and we may
need funds sooner than currently anticipated. These factors include but are not limited to:



| |  |  | the size of our future operating losses;
| | - |  | ----------------------------------------



| |  |  | the level of our and our distributors success in selling our MassARRAY products and services;
| | - |  | ----------------------------------------------------------------------------------------------



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| |  |  | the terms and conditions of sales contracts, including extended payment terms;
| | - |  | ------------------------------------------------------------------------------



| |  |  | our ability to introduce and sell new products and services and successfully reduce inventory levels of earlier products;
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | the level of our selling, general and administrative expenses;
| | - |  | --------------------------------------------------------------



| |  |  | the extent of our investment in diagnostic technology, including prenatal genetic analysis technology, molecular diagnostics and non-invasive prenatal diagnostic
technology, development, commercialization, and regulatory approval;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our success in and the expenses associated with researching, developing and commercializing diagnostic products, alone or in collaboration with our partners, and
obtaining any required regulatory approval for those products;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the level of our success alone or in collaboration with our partners in launching and selling any diagnostic products and services;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | the extent of our research and development pursuits, including our level of investment in MassARRAY product research and development, and diagnostic assay and other
technology research and development;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the extent to which we enter into, maintain, and derive revenues from licensing agreements, including agreements to out-license our non-invasive prenatal analysis
technology, research and other collaborations, joint ventures and other business arrangements;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the extent to which we acquire, and our success in integrating, technologies or companies;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | the level of our legal expenses including those expenses associated with litigation and with intellectual property protection;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | the level of our expenses associated with the audit of our consolidated financial statements as well as compliance with other corporate governance and regulatory
developments or initiatives; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | regulatory changes and technological developments in our markets.
| | - |  | -----------------------------------------------------------------

General market conditions or the market price of our common stock may not support capital raising transactions such as an additional public or private offering of our common stock or other securities. In addition, our
ability to raise additional capital may be dependent upon our stock being quoted on the NASDAQ Global Market or upon obtaining shareholder approval. There can be no assurance that we will be able to satisfy the criteria for continued listing on
NASDAQ or that we will be able to obtain shareholder approval if it is necessary. If we are unable to obtain additional funds on a timely basis or on terms favorable to us, we may be required to cease or reduce further commercialization of our
products, to cease or reduce certain research and development projects, to sell, license or otherwise dispose of some or all of our technology or assets or business units or to merge all or a portion of our business with another entity. If we raise
additional funds by selling shares of our capital stock, the ownership interest of our current stockholders will be diluted. Insufficient funds may require us to delay, scale back, or eliminate some or all of our activities.

We have limited experience.

Many of our technologies, particularly our non-invasive prenatal and other molecular diagnostic technologies, are at an early stage of discovery and development. We continue to commercialize new products and create new applications for our
products. We are developing research-use-only and diagnostic applications for our MassARRAY platform and we have limited or no experience in these applications of our technology and operating in these markets. You should evaluate us in the context
of the uncertainties and complexities affecting an early stage company developing products and applications for the life science industries and experiencing the challenges associated with entering into new markets that are highly competitive. We
need to make significant investments to ensure our products perform properly and are cost-effective, and we or our partners will likely need to apply for and obtain certain regulatory approvals to sell our products for diagnostic applications and it
is uncertain whether such approvals will be granted. Even if we develop products for commercial use and obtain all necessary regulatory approvals, we may not be able to develop products that are accepted in the genomic, diagnostic, non-invasive
prenatal, clinical research, pharmaceutical, or other markets or the emerging field of molecular medicine and that can be marketed and sold successfully.



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*We have a history of operating losses, anticipate future losses and may never become profitable.

We have experienced significant operating losses in each period since our inception. At March 31, 2008, our accumulated
deficit was approximately $490.7 million. These losses have resulted principally from expenses incurred in research and development, from selling, general, and administrative expenses associated with our operations and our significant lease
obligations. We expect to incur operating losses in the future as a result of expenses associated with research and product development, production, marketing and selling, general and administrative expenses, and our significant lease obligations,
as well as expenses associated with consolidating and completing the integration of any business or technology that we may acquire in the future. To achieve profitability, we would need to generate significant additional revenue with significant
gross margins. It is uncertain when, if ever, we will become profitable, or cash-flow positive. Even if we were to become profitable, we might not be able to sustain or increase profitability on a quarterly or annual basis.

Our operating results may fluctuate significantly.

Our revenues and results of operations may fluctuate significantly, depending on a variety of factors, including the following:



| |  |  | our ability to manage costs and expenses and effectively implement our business strategy;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | our and our distributors success in selling, and changes in the demand for, our products and services including our MassARRAY Compact platform and iPLEX Gold
multiplexing application and other applications and related consumables, and demand for products and services for genotyping, DNA methylation (epigenetic analysis) and QGE (gene expression analysis) applications;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our success in selling genetic analysis contract research services;
| | - |  | -------------------------------------------------------------------



| |  |  | our success in depleting or reducing current product inventories in view of new or upcoming product introductions;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | the pricing of our products and services and those of our competitors;
| | - |  | ----------------------------------------------------------------------



| |  |  | variations in the timing of payments from customers and collaborative partners and the recognition of these payments as revenues;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | the timing and cost of any new product or service offerings by us;
| | - |  | ------------------------------------------------------------------



| |  |  | our ability to develop new applications and products, such as non-invasive prenatal or other diagnostic assays and other diagnostic technologies, the success of
such applications and products, and our ability to improve current products to increase demand for such products;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the potential need to acquire licenses to new technology, including genetic markers that may be useful in diagnostic applications, or to use our technology in new
markets, which could require us to pay unanticipated license fees and royalties in connection with licenses we may need to acquire;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our research and development progress and how rapidly we are able to achieve technical milestones, including the milestone of sufficient fetal DNA enrichment and/or
RNA based solutions with respect to our non-invasive prenatal technologies;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the cost, quality and availability of our consumable chips, also known as SpectroCHIP bioarrays, oligonucleotides, DNA samples, tissue samples, reagents and related
components and technologies;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | material developments in our customer and supplier relationships including our ability to successfully transition to new technologies to successfully maintain our
relationships with our customers and suppliers;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to clinically validate any potential non-invasive prenatal or other diagnostic related products and obtain regulatory approval of any potential
products; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | expenses related to, and the results of, any litigation or other legal proceedings.
| | - |  | -----------------------------------------------------------------------------------

Further, our revenues and operating results are difficult to predict because they depend on the number, timing, and type of MassARRAY system placements
that we make during the year, the number, timing, and types of software licensed or sold, and the quantity and timing of consumables sales for the installed base of systems and the number, timing and type of contract research services agreements
that we enter into. Changes in the relative mix of our MassARRAY system and consumables sales and service



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agreements can have a significant impact on our gross margin, as consumable sales and service agreements typically have margins significantly different than
MassARRAY system sales. Our revenues and operating results are also difficult to predict because they depend upon the activities of our distributors. The absence of or delay in generating revenues could cause significant variations in our operating
results from year to year and could result in increased operating losses. Although we plan to invest substantial capital toward developing non-invasive prenatal and other diagnostic assays during 2008, we do not expect significant revenues from our
diagnostic related initiatives during 2008.

We believe that period-to-period comparisons of our financial results will not necessarily be
meaningful. You should not rely on these comparisons as an indication of our future performance. If our operating results in any future period fall below the expectations of securities analysts and investors, our stock price will likely fall.

We have a history of generating a large percentage of our revenue at the end of each quarterly accounting period.

Due to the manner in which many customers in our target markets allocate and spend their budgeted funds for acquisition of our
products, a large percentage of our sales are booked at the end of each quarterly accounting period. Because of this timing of our sales, we may not be able to reliably predict order volumes and our quarterly revenues. A sales delay of only a few
days may significantly impact our quarter-to-quarter comparisons. If our quarterly revenues fall below the expectations of securities analysts and investors, our stock price may decline. Similarly, if we are unable to ship our customer orders on
time, or if extended payment terms are required, there could be a material adverse effect on revenues for a given quarter.

A
reduction in revenues from sales of MassARRAY products would harm our business.

The demand for MassARRAY systems and consumables
and contract research services has changed over time, and any decline in demand will reduce our total revenues. We expect that sales of MassARRAY systems and consumables will account for most of our total revenues for the foreseeable future. Also,
our competitors have offered low priced fee-for-service genotyping services and technologies to the DNA analysis marketplace. These factors and the following factors, among others, would reduce the demand for MassARRAY products and services:



| |  |  | competition from other products and service providers or failure of our products or applications or services;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | changes in fiscal policies and the economy which negatively impact customer buying decisions; and
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | negative publicity or evaluations, particularly with respect to product warranty and repair and troubleshooting services provided to existing customers and with
respect to our license rights to perform gender testing for social or lifestyle purposes.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our revenues are subject
to the risks faced by biotechnology and diagnostic companies, pharmaceutical companies, and governmental and other research institutions.

We expect that our revenues in the foreseeable future will be derived primarily from MassARRAY system products provided to academic institutions, biotechnology, diagnostic, and pharmaceutical companies, laboratories, companies and
institutions that service the livestock industry, and governmental and other research institutions. Our operating results could fluctuate substantially due to reductions and delays in research and development expenditures by these customers. These
reductions and delays could result from factors such as:



| |  |  | changes in economic conditions and possible country-based boycotts;
| | - |  | -------------------------------------------------------------------



| |  |  | changes in government programs that provide funding;
| | - |  | ----------------------------------------------------



| |  |  | changes in the regulatory environment affecting health care and health care providers, and for example, recent draft FDA guidance which, if effected, may impose
additional restrictions on CLIA licensed laboratories performing laboratory diagnostic tests;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | pricing pressures and reimbursement policies;
| | - |  | ---------------------------------------------



| |  |  | market-driven pressures on companies to consolidate and reduce costs;
| | - |  | ---------------------------------------------------------------------



| |  |  | other factors affecting research and development spending; and
| | - |  | --------------------------------------------------------------



| |  |  | uncertainty about our ability to fund operations and supply products and services to customers.
| | - |  | -----------------------------------------------------------------------------------------------



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None of these factors are within our control. We have broadened the markets to which we sell our products
and applications and continue to develop new applications and products for use in new markets. We are targeting customers in clinical research and clinical marker validation, the emerging field of molecular medicine, genetic service laboratories,
and animal testing laboratories and diagnostic testing markets. We have limited or no experience operating in these potential markets and, as a result, may be unable to develop products and applications that allow us to penetrate these markets or
successfully generate any revenue from sales in these markets. We will have limited ability to forecast future demand for our existing and any new products and applications in these markets.

*We depend on sales of our consumable chips and other MassARRAY consumables for a significant portion of our revenues.

Sales of our consumable chips and other consumables for the MassARRAY system are an important source of revenue. Revenues from MassARRAY consumables
totaled approximately 44% of our total revenues for the three months ended March 31, 2008, compared to 42% of our total revenues for the year three months ended March 31, 2007. Factors which may limit the use of our consumable chips and
other consumables or otherwise adversely affect our revenues from consumables include:



| |  |  | the extent of our customers level of utilization of their MassARRAY systems;
| | - |  | -----------------------------------------------------------------------------



| |  |  | our ability to provide timely repair services and our ability to secure replacement parts, such as lasers, for our MassARRAY systems;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the extent to which customers increase multiplexing levels using the iPLEX Gold application;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | failure to sell additional MassARRAY systems;
| | - |  | ---------------------------------------------



| |  |  | the termination of contracts with or adverse developments in our relations with suppliers of our consumables;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | the training of customer personnel;
| | - |  | -----------------------------------



| |  |  | the acceptance of our technology by our customers;
| | - |  | --------------------------------------------------



| |  |  | the ability to maintain necessary quality standards and specifications for our SpectroCHIP products; and
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | our inability to transition to new suppliers for components for our MassARRAY system and/or our ability to maintain such relationships.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------

We may not be able to generate any revenue from non-invasive prenatal research-use only or diagnostic tests, or
any other tests we may develop.

We have committed significant research and development resources to the development of research-use
only and diagnostic tests, particularly non-invasive prenatal tests, for use on our MassARRAY system and other platforms. Although our licensed partner launched the first research use only test, a test for RhD using a RT-PCR platform in early 2008,
there is no guarantee that our partner or we will successfully generate significant revenues from this or any other tests for any use. We have no experience in licensing, manufacturing, selling, marketing or distributing our SEQureDx technology, or
diagnostic or other tests. If we, or our partners, are not able to successfully market or sell non-invasive prenatal research-use only or diagnostic tests or other tests we may develop for any reason, including the failure to obtain any required
regulatory approvals, we will not generate any revenue from the sale of such tests. Even if we are able to develop non-invasive prenatal research-use only or diagnostic or other tests for sale in the marketplace, a number of factors could impact our
ability to generate any significant revenue from the sale of such tests, including the following:



| |  |  | reliance on third-party CLIA-certified (Clinical Laboratory Improvement Amendments, 1988) laboratories, which are subject to routine governmental oversight and
inspections for continued operation pursuant to CLIA, to process tests that we develop;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reliance on third parties to manufacture any non-invasive prenatal research-use only or diagnostic or other tests that we may develop;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the availability of alternative and competing tests or products;
| | - |  | ----------------------------------------------------------------



| |  |  | compliance with federal, state (including New York state) and foreign regulations for the sale and marketing of research-use only or diagnostic or other tests,
including non-invasive prenatal tests;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | the accuracy rates of such tests, including rates of false-negatives and/or false-positives;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | concerns regarding the safety or effectiveness of non-invasive prenatal or other tests;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | changes in the regulatory environment affecting health care and health care providers, including changes in laws regulating laboratory testing and/or device
manufacturers;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the extent and success of our sales and marketing efforts;
| | - |  | ----------------------------------------------------------



| |  |  | pricing pressures and changes in third-party payor reimbursement policies;
| | - |  | --------------------------------------------------------------------------



| |  |  | general changes or developments in the market for womens and/or prenatal health diagnostics, or diagnostics in general;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | ethical and legal issues concerning the appropriate use of the information resulting from diagnostic or other tests; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | the refusal by women to undergo such tests for moral, religious or other reasons, or based on perceptions about the safety or reliability of such tests.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------

If our customers are unable to adequately prepare samples for our MassARRAY system, the overall market demand for
our products may decline.

Before using the MassARRAY system, customers must prepare samples by following several steps that are
subject to human error, including DNA isolation and DNA amplification. If DNA samples are not prepared appropriately, or the proposed assays are too complex, the MassARRAY system may not generate a reading or a correct reading. If our customers
experience these difficulties, they might achieve lower levels of throughput than specified for the system. If our customers are unable to generate expected levels of throughput, they might not continue to purchase our consumables, they could
express their discontent with our products to others, or they could collaborate with others to jointly benefit from the use of our products. Any or all of these actions would reduce the overall market demand for our products. From time to time, we
have experienced customer complaints regarding data quality and difficulty in processing more complex assays.

The sales cycles for
our products are lengthy, and we may expend substantial funds and management effort with no assurance of successfully selling our products or services.

The sales cycles for our MassARRAY system products are typically lengthy. Our sales and licensing efforts require the effective demonstration of the benefits, value, and differentiation and validation of our products
and services, and significant education and training of multiple personnel and departments within a customer organization. We may be required to negotiate agreements containing terms unique to each prospective customer or licensee which would
lengthen the sales cycle. We may expend substantial funds and management effort with no assurance that we will sell our products or services. In addition, this lengthy sales cycle makes it more difficult for us to accurately forecast revenue in
future periods and may cause revenues and operating results to vary significantly in such periods.

We may not be able to
successfully adapt our products for commercial applications.

A number of potential applications of our MassARRAY technology,
including research-use-only and diagnostic applications for non-invasive prenatal and other molecular testing, may require significant enhancements in our core technology or the in-licensing of intellectual property rights or technologies. If we are
unable to complete the development, introduction, or scale-up of any product, or if any of our products or applications, such as gene expression analysis, epigenetic analysis or iPLEX Gold multiplexing, do not achieve a significant level of market
acceptance, our business, financial condition and results of operations could be seriously harmed. Achieving market acceptance will depend on many factors, including demonstrating to customers that our technology is cost competitive or superior to
other technologies and products that are available now or that may become available in the future. We believe that our revenue growth and profitability will substantially depend on our ability to overcome significant technological challenges and
successfully introduce our newly developed products, applications, and services into the marketplace.

We have limited commercial
production capability and experience and may encounter production problems or delays, which could result in lower revenue.

We
partially assemble the MassARRAY system and partially manufacture our consumable chips and MassARRAY kits. To date, we have only produced these products in moderate quantities. We may not be able to maintain acceptable quality standards as we
continue or ramp up production. For example, we have experienced crystallized matrix on some of our chips, which has interfered



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with chip performance. To achieve anticipated customer demand levels, we will need to scale-up our production capability and maintain adequate levels of
inventory while manufacturing our products at a reasonable cost. We may not be able to produce sufficient quantities to meet market demand or manufacture our product at a reasonable cost. If we cannot achieve the required level and quality of
production, we may need to outsource production or rely on licensing and other arrangements with third parties. This reliance could reduce our gross margins and expose us to the risks inherent in relying on others. We might not be able to
successfully outsource our production or enter into licensing or other arrangements with these third parties, which would adversely affect our business.

We depend on third-party products and services and limited sources of supply to develop and manufacture our products.

We rely on outside vendors to supply certain products and the components and materials used in our products. Some of these products, components and materials are obtained from a single supplier or a limited group of
suppliers. Our MassARRAY system is comprised of several components, of which the following are currently obtained from a single supplier: Bruker Daltonics, Inc. supplies our mass spectrometers, PSI, Inc. supplies our chips and Majer Precision
Engineering, Inc. supplies the pins for the pintools and Paragon Medsystems LLC supplies our nano dispenser liquid handling devices.

Our
consumables also include components provided by sole suppliers, New England Biolabs, Epicentre, and USB. In the event of any adverse developments with these vendors, our product supply may be interrupted, which would have an adverse impact on our
business. In the past, we have experienced quality problems with and delays in receiving components used to produce our consumable chips, problems with laser reliability in our mass spectrometers supplied by Bruker and lengthy delays in obtaining
lasers for replacement, problems with matrix crystallization on our chips, and also had technical difficulties with our pin-tool nanoliter dispenser device. We have also experienced software and operational difficulties with our MassARRAY Compact
system. Our reliance on outside vendors generally and a sole or a limited group of suppliers in particular involves several risks, including:



| |  |  | the inability to obtain an adequate supply of properly functioning, required products, components, and materials due to capacity constraints, product defects, a
discontinuance of a product by a supplier, or other supply constraints;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reduced control over quality and pricing of products, components, and materials; and
| | - |  | ------------------------------------------------------------------------------------



| |  |  | delays and long lead times in receiving products, components, or materials from vendors.
| | - |  | ----------------------------------------------------------------------------------------

We and our licensees and collaborators may not be successful in developing or commercializing diagnostic products, diagnostic assays including
non-invasive prenatal diagnostic products, or other products using our products, services, or discoveries.

Development of
diagnostic or other products by us, our licensees, or our collaborators including assays, are subject to risks of failure inherent in the development and commercial viability of any such product, such as demand for such product. These risks further
include the possibility that such product would:



| |  |  | be found to be ineffective, unreliable, or otherwise inadequate or otherwise fail to receive regulatory approval;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | be difficult or impossible to manufacture on a commercial scale;
| | - |  | ----------------------------------------------------------------



| |  |  | be uneconomical to market;
| | - |  | --------------------------



| |  |  | fail to be successfully commercialized if adequate reimbursement from government health administration authorities, private health insurers, and other organizations
for the costs of these products is unavailable;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | be impossible to commercialize because they infringe on the proprietary rights of others or compete with products marketed by others that are superior; or
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | fail to be commercialized prior to the successful marketing of similar products by competitors.
| | - |  | -----------------------------------------------------------------------------------------------

If a licensee discovers or develops diagnostic products or we or a collaborator discover or develop diagnostic or other products using our technology,
products, services, or discoveries, we may rely on that licensee or collaborator (hereafter referred to as partner) for product development, regulatory approval, manufacturing, and marketing of those products before we can realize
revenue and some or all of the milestone payments, royalties, or other payments we may be entitled to under the terms of the licensing or collaboration agreement. If we are unable to successfully achieve milestones or our partners fail to develop
successful products, we will not earn the revenues contemplated and we may also lose exclusive (as in the case of our license agreement with Isis Innovation



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Ltd, under which we in-license our fundamental non-invasive prenatal diagnostic technology) or non-exclusive license rights to intellectual property that are
required to commercialize such products. Our agreements may allow our partners significant discretion in electing whether to pursue any of these activities. We cannot control the amount and timing of resources our partners may devote to our programs
or potential products. As a result, we cannot be certain that our partners will choose to develop or commercialize any products or will be successful in doing so. In addition, if a partner is involved in a business combination, such as a merger or
acquisition, or changes its business focus, its performance under its agreement with us may suffer and, as a result, we may not generate any revenues or only limited revenues from the royalty, milestone, and similar payment provisions contained in
our agreement with that partner.

We may not successfully obtain regulatory approval of any non-invasive prenatal or other diagnostic
product or other product which we or our licensing or collaborative partners develop and we may not be able to successfully partner with CLIA licensed laboratories with respect to research-use-only products.

Products that we or our collaborators develop in the molecular medicine, diagnostic, non-invasive prenatal diagnostic, or other markets, depending on
their intended use, may be regulated as medical devices by the FDA and comparable agencies of other countries and require either premarket approval (PMA) or 510(k) clearance from the FDA, prior to marketing. The 510(k) clearance process usually
takes from three to six months from submission, but can take longer. The premarket approval process is much more costly, lengthy, uncertain, and generally takes from nine months to one year or longer from submission. Also, recent draft guidance from
the FDA suggests changes in regulations that would be applicable to CLIA laboratories which, if such regulations become effective, could burden and delay our ability to partner or collaborate with CLIA laboratories with respect to our
commercialization plans for diagnostic products. In addition, commercialization of any diagnostic or other product that our licensees or collaborators or we develop would depend upon successful completion of preclinical testing and clinical trials.
Preclinical testing and clinical trials are long, expensive, and uncertain processes, and we do not know whether we, our licensees, or any of our collaborators, would be permitted or able to undertake clinical trials of any potential products. It
may take us or our licensees or collaborators many years to complete any such testing, and failure could occur at any stage. Preliminary results of trials do not necessarily predict final results, and acceptable results in early trials may not be
repeated in later trials. A number of companies in the pharmaceutical industry, including biotechnology companies, have suffered significant setbacks in advanced clinical trials, even after promising results in earlier trials. Delays or rejections
of potential products may be encountered based on changes in regulatory policy for product approval during the period of product development and regulatory agency review. If our projects reach clinical trials, we or our licensees or collaborators
could decide to discontinue development of any or all of these projects at any time for commercial, scientific, or other reasons.

If
the validity of the consents from volunteers were to be challenged, we could be forced to stop using some of our resources, which would hinder our gene discovery outlicensing efforts and our diagnostic product development efforts.

We have attempted to ensure that all clinical data and genetic and other biological samples that we receive from our subsidiaries
and our clinical collaborators have been collected from volunteers who have provided our collaborators or us with appropriate consents for the data and samples provided for purposes which extend to include diagnostic product development activities.
We have attempted to ensure that data and samples that have been collected by our clinical collaborators are provided to us on an anonymous basis. We have also attempted to ensure that the volunteers from whom our data and samples are collected do
not retain or have conferred on them any proprietary or commercial rights to the data or any discoveries derived from them. Our clinical collaborators are based in a number of different countries, and to a large extent we rely upon our clinical
collaborators for appropriate compliance with the voluntary consents provided and with local law and regulation. That our data and samples come from and are collected by entities based in different countries results in complex legal questions
regarding the adequacy of consents and the status of genetic material under a large number of different legal systems. The consents obtained in any particular country could be challenged in the future, and those consents could prove invalid,
unlawful or otherwise inadequate for our purposes. Any findings against us, or our clinical collaborators, could deny us access to or force us to stop using some of our clinical or genetic resources, which would hinder our diagnostic product
development efforts. We could become involved in legal challenges, which could consume a substantial proportion of our management and financial resources.

If we cannot obtain licenses to patented SNPs and genes, we could be prevented from obtaining significant revenue or becoming profitable.

The U.S. Patent and Trademark Office has issued and continues to issue patents claiming SNP and gene discoveries and their related associations and
functions. If certain SNPs and genes are patented, we will need to obtain rights to those SNPs and genes to develop, use, and sell related assays and other types of products or services utilizing such SNPs and genes. Required licenses may not be
available on commercially acceptable terms. If we were to fail to obtain licenses to certain patented SNPs and genes, we might never achieve significant revenue from our diagnostic product development.



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If the medical relevance of SNPs is not demonstrated or is not recognized by others, we may have
less demand for our products and services and may have less opportunity to enter into diagnostic product development and commercialization collaborations with others.

Some of the products we hope to develop involve new and unproven approaches or involve applications in markets that we are only beginning to explore. They
are based on the assumption that information about genes and SNPs may help scientists better understand conditions or complex disease processes. Scientists generally have a limited understanding of the role of genes and SNPs in diseases, and few
products based on gene discoveries have been developed. We cannot be certain that genetic information will play a key role in the development of diagnostics or other products in the future, or that any genetic-based findings would be accepted by
diagnostic, pharmaceutical, or biotechnology companies or by any other potential market or industry segment. If we or our customers or collaborators are unable to generate valuable information that can be used to develop diagnostics or other
products, the demand for our products, applications, and services will be reduced and our business will be harmed.

We may not be
able to form and maintain the collaborative relationships or the rights to third-party intellectual property and technologies that our business strategy requires and such relationships may lead to disputes over technology rights or product revenue,
royalties, or other payments.

We form research collaborations and licensing arrangements with collaborators to operate our business
successfully. To succeed, we will have to maintain our existing relationships and establish additional collaborations and licensing arrangements. Our current strategy includes pursuing partnering opportunities with larger companies interested in or
involved in the development of pharmaceutical and diagnostic products to potentially advance our disease gene discoveries and related targets toward drug or diagnostic development. Our strategy also includes obtaining licenses to third-party
intellectual property rights and technologies, such as our exclusive license to non-invasive prenatal analysis rights that we acquired from ISIS, to potentially expand our product portfolio and generate additional sources of revenue. If we do not
achieve certain milestones in a timely manner, we risk losing our exclusive license rights from ISIS. We cannot be sure that we will be able to establish any additional research collaborations, licensing arrangements, or other partnerships necessary
to develop and commercialize products or that we can do so on terms favorable to us. If we are unable to establish these collaborations or licensing arrangements, we may not be able to successfully develop any diagnostic or other products or
applications and generate any milestone, royalty, or other revenue from sales of these products or applications. If our collaborations or licensing arrangements are not successful or we are not able to manage multiple collaborations successfully,
our programs will suffer and we may never generate any revenue from sales of products based on licensed rights or technologies or under these collaborative or licensing arrangements. If we increase the number of collaborations or licensing
agreements, it will become more difficult to manage the various relationships successfully and the potential for conflicts among the collaborators and licensees or licensors will increase. Conflicts with our collaborators, licensees or licensors, or
other factors may lead to disputes over technology or intellectual property rights or product revenue, royalties, or other payments, which may adversely effect our business.

In addition, our government grants provide the government certain license rights to inventions resulting from funded work. Our business could be harmed
if the government exercises those rights.

Because we exclusively licensed our non-invasive prenatal diagnostic and gender
determination testing rights from ISIS any dispute with ISIS may adversely affect our ability to develop and commercialize diagnostic tests based on these licensed rights.

In October 2005, we entered into an exclusive license to non-invasive prenatal diagnostic rights with ISIS which we amended in October 2006 and in
November 2007 to also include exclusive rights to intellectual property for non-invasive prenatal gender determination testing for social and lifestyle purposes. We intend to use the rights that we acquired under the license to develop non-invasive
prenatal nucleic acid based tests, including gender determination tests. If there is any dispute between us and Isis regarding our rights under the license agreement, or we do not achieve certain commercial launch milestones, in a timely manner, our
ability to exclusively commercialize these diagnostic tests may be adversely affected and could delay or completely terminate our product development and commercialization efforts for these diagnostic tests.

If we do not succeed in obtaining development and marketing rights for products developed in collaboration with others, our revenue and
profitability prospects could be substantially harmed.

Our business strategy includes, in part, the development of non-invasive
prenatal diagnostic and other products in collaboration with others, or utilizing the technology of others, and we intend to obtain commercialization or royalty rights to those products or technologies. If we are unable to obtain such rights, or are
unable to do so on favorable financial terms, our revenue and profitability prospects could be substantially harmed. To date, we have initiated limited activities towards commercializing products developed in collaboration with, or utilizing the
technology of, others. Even if we obtain commercialization rights, commercialization of products may require resources that we do not currently possess and may not be able to develop or obtain, or commercialization may be financially unattractive
based upon the revenue-sharing terms offered by potential licensors or provided for in the relevant agreement.



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Ethical, privacy, or other concerns about the use of genetic information could reduce demand for
our products and services.

Genetic testing, including gender determination testing, has raised ethical issues regarding privacy and
the appropriate uses of the resulting information. For these reasons, governmental authorities may limit or otherwise regulate the use of genetic testing or prohibit testing for genetic predisposition to certain conditions, particularly for those
that have no known cure. Such concerns may lead individuals to refuse to use genetics tests even if permitted. Any of these scenarios could reduce the potential markets for our products and services, which would seriously harm our business,
financial condition, and results of operations.

If we breach any of the terms of our license or supply agreements, or these
agreements are otherwise terminated or modified, the termination or modification of such agreements could result in our loss of access to critical components and could delay or suspend our commercialization efforts.

We have sourced or licensed components of our technology from other parties. For example, Bruker Daltonics supplies our mass spectrometers, PSI, Inc.
supplies our chips and Majer Precision Engineering supplies the pins for our present nanodispenser (pintool) product, and New England Biolabs, Epicentre and USB supply us with reagents used with our consumables. Our failure to maintain continued
supply of such components, particularly in the case of sole suppliers, or the right to use these components would seriously harm our business, financial condition, and results of operations. We have minimum purchase obligations under our supply
agreement with Bruker. As a result, in the event that demand for our products declines or does not meet our forecasts, we could have excess inventory or increased expenses or our margins could decrease which could have an adverse impact on our
financial condition and business. In the event of any adverse developments with these vendors, our product supply may be interrupted, which would have an adverse impact on our business. Changes to or termination of our agreements or inability to
renew our agreements with these parties or enter into new agreements with other suppliers could result in the loss of access to these aspects of our technology or other intellectual property rights or technologies that we may acquire from time to
time and could impair, delay, or suspend our commercialization efforts. While we negotiate for agreement periods or notice of termination periods that provide us reasonable periods of time to secure alternative supplies, and require that such
agreements may not be terminated without advance notice arbitrarily or without good reason, such as uncured breach or insolvency, such provisions may not provide us with adequate time to secure alternative supplies, provide us with access to
alternative technologies on commercially acceptable terms, or otherwise provide us with adequate protection.

We may not successfully
integrate acquired businesses.

We may acquire additional businesses or technologies, or enter into other strategic transactions.
Managing acquisitions entails numerous operational and financial risks, including:



| |  |  | the inability to retain key employees of any acquired businesses or hire enough qualified personnel to staff any new or expanded operations;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the impairment of relationships with key customers of acquired businesses due to changes in management and ownership of the acquired businesses;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the inability to sublease on financially acceptable terms excess leased space or terminate lease obligations of acquired businesses that are not necessary or useful
for the operation of our business;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the exposure to federal, state, local and foreign tax liabilities in connection with any acquisition or the integration of any acquired businesses;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the exposure to unknown liabilities;
| | - |  | ------------------------------------



| |  |  | higher than expected acquisition and integration expenses that would cause our quarterly and annual operating results to fluctuate;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | increased amortization expenses if an acquisition results in significant intangible assets;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | combining the operations and personnel of acquired businesses with our own, which would be difficult and costly;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | disputes over rights to acquired technologies or with licensors or licensees of those technologies; and
| | - |  | -------------------------------------------------------------------------------------------------------



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| |  |  | integrating or completing the development and application of any acquired technologies, which would disrupt our business and divert managements time and
attention.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

We may not be able to successfully compete in the biotechnology and diagnostic industries.

The biotechnology and diagnostic industries are highly competitive. We expect to compete with a broad range of companies in the United
States and other countries that are engaged in the development and production of products, applications, services, and strategies to analyze genetic information and strategies to develop and commercialize diagnostic, non-invasive prenatal
diagnostic, and other products for customers in the clinical research and clinical marker validation and molecular medicine fields as well as diagnostic service laboratories, animal testing & food safety labs, and customers in other
markets. They include:



| |  |  | biotechnology, pharmaceutical, diagnostic, chemical, and other companies;
| | - |  | -------------------------------------------------------------------------



| |  |  | academic and scientific institutions;
| | - |  | -------------------------------------



| |  |  | governmental agencies; and
| | - |  | --------------------------



| |  |  | public and private research organizations.
| | - |  | ------------------------------------------

Many of our competitors have much greater financial, technical, research, marketing, sales, distribution, service, and other resources than we do. Our competitors may offer broader product lines and services and have greater name
recognition than we do. Several companies are currently making or developing products that compete with our products. Our competitors may develop or market technologies or products that are more effective or commercially attractive than our current
or future products, or that may render our technologies or products obsolete.

We may potentially compete with our customers, which
may adversely affect our business.

We have sold MassARRAY systems worldwide to pharmaceutical and biotechnology companies, academic
research centers, and government laboratories. Some of our customers use our DNA analysis products to perform contract research services, or to perform genetics studies on their own disease populations for potential diagnostic and drug target
identification in the same or similar manner as we have done. Although there are many potential contract research services opportunities and disease areas and diagnostic applications, our customers may seek service work or develop diagnostic assays
or may target diseases areas that may overlap with those that we have chosen to pursue. In such cases we may potentially compete against our customers. Competition from our customers may adversely affect our services business or our ability to
successfully commercialize diagnostic products.

Our ability to compete in the market may decline if we lose some of our intellectual
property rights.

Our success will depend on our ability to obtain and protect patents on our technology, to protect our trade
secrets, and to maintain our rights to licensed intellectual property or technologies. Our patent applications or those of our licensors may not result in the issue of patents in the United States or other countries. Our patents or those of our
licensors may not afford meaningful protection for our technology and products. Others may challenge our patents or those of our licensors, as is the case with the appeal pending before the EPO with respect to the patent rights that we in-licensed
from Isis Innovation, Ltd. for prenatal diagnostics, and as a result, our patents or those of our licensors could be narrowed or invalidated or become unenforceable. Competitors may develop products similar to ours that do not conflict with our
patents or patent rights. Others may develop non-invasive prenatal tests or other diagnostic tests or products,technologies or methods in violation of our patents or those of our licensors, or by operating around our patents or license agreements,
which could reduce sales of our consumables or reduce or remove our non-invasive prenatal and other diagnostic commercialization opportunities. To protect or enforce our patent rights, we may initiate interference proceedings, oppositions, or
litigation against others. However, these activities are expensive, take significant time and divert managements attention from other business concerns. The patent position of biotechnology companies generally is highly uncertain and involves
complex legal and factual questions that are often the subject of litigation. No consistent policy has emerged from the U.S. Patent and Trademark Office, the offices of foreign countries or the courts regarding the breadth of claims allowed or the
degree of protection afforded under biotechnology patents. There is a substantial backlog of biotechnology patent applications at the U.S. Patent and Trademark Office and of the equivalent offices around the world and the approval or rejection of
patent applications may take several years.



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Our success will depend partly on our ability to operate without infringing on or misappropriating
the proprietary rights of others.

We may be accused of infringing on the patent rights or misappropriating the proprietary rights
of others. From time to time, we receive letters from companies regarding their issued patents and patent applications alleging or suggesting possible infringement. Generally these letters are offers to license and fail to provide adequate evidence
or state the basis for a reasonable claim that we are engaging in any infringing activity. Intellectual property litigation is costly, and, even if we prevail, the cost of such litigation would adversely affect our business, financial condition, and
results of operations. Litigation is also time consuming and would divert managements attention and resources away from our operations and other activities. If we were not to prevail in any litigation, in addition to any damages we would have
to pay, we could be required to stop the infringing activity or obtain a license. Any required license might not be available to us on acceptable terms. Some licenses might be non-exclusive, and our competitors could have access to the same
technology licensed to us. If we were to fail to obtain a required license or were unable to design around a patent, we would be unable to sell or continue to develop some of our products, which would have a material adverse affect on our business,
financial condition, and results of operations.

The rights we rely upon to protect the intellectual property underlying our products
may not be adequate, which could enable others to use our technology and reduce our ability to compete with them.

We require our
employees, consultants, advisors, and collaborators to execute confidentiality agreements and in certain cases, assignment or license agreements. We cannot guarantee that these agreements will provide us with adequate intellectual property ownership
or protection against improper or unauthorized use or disclosure of confidential information or inventions. In some situations, these agreements may conflict with or be subject to the rights of others with whom our employees, consultants, advisors,
or collaborators have prior employment or consulting relationships. In some situations, as is the case with our employees in Germany, these types of agreements or relationships are subject to foreign law, which provides us with less favorable rights
or treatment than under U.S. law. Others may gain access to our inventions, trade secrets or independently develop substantially equivalent proprietary materials, products, information, and techniques.

If we cannot attract and retain highly-skilled personnel, our growth might not proceed as rapidly as we intend.

The success of our business will depend on our ability to identify, attract, hire, train, retain, maintain, and motivate highly skilled personnel,
particularly sales, scientific, medical, and technical personnel, for our future success. Competition for highly skilled personnel is intense, and we might not succeed in attracting and retaining these employees. If we cannot attract and retain the
personnel we require, we would not be able to expand our business as rapidly as we intend. In particular, if we lose any key member of our management team, we may not be able to find suitable replacements and our business may be harmed as a result.
If our management team is not able to effectively manage us through these restructuring changes and transitions, our business, financial condition, and results of operations may be adversely affected. We do not carry key person insurance
covering any of our officers or other employees.

If we do not effectively manage our business as it evolves, it could affect our
ability to pursue opportunities and expand our business.

Evolution in our business has placed and may continue to place a
significant strain on our personnel, facilities, management systems, and resources. We will need to continue to improve our operational and financial systems and managerial controls and procedures and train and manage our workforce. We will have to
maintain close coordination among our various departments. If we fail to effectively manage the evolution of our business and the significant restructuring changes that we have experienced, our ability to pursue business opportunities, expand our
business, and sell our products and applications in new markets may be adversely affected.

*We are subject to risks associated with
our foreign operations.

We expect that a significant portion of our sales will continue to be made outside the United States.
Approximately 56% and 50% of our sales were made outside of the United States during the three months ended March 31, 2008 and 2007, respectively. A successful international effort will require us to develop relationships with international
customers and collaborators, including distributors. We may not be able to identify, attract, retain, or maintain suitable international customers or collaborators. Expansion into international markets will require us to establish and grow foreign
operations, hire additional personnel to run these operations, and maintain good relations with our foreign customers and collaborators or distributors. International operations also involve a number of risks not typically present in domestic
operations, including:



| |  |  | currency fluctuation risks;
| | - |  | ---------------------------



| |  |  | changes in regulatory requirements;
| | - |  | -----------------------------------



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| |  |  | costs and risks of deploying systems in foreign countries;
| | - |  | ----------------------------------------------------------



| |  |  | licenses, tariffs, and other trade barriers;
| | - |  | --------------------------------------------



| |  |  | political and economic instability and possible country-based boycotts;
| | - |  | -----------------------------------------------------------------------



| |  |  | difficulties in staffing and managing foreign operations;
| | - |  | ---------------------------------------------------------



| |  |  | potentially adverse tax consequences;
| | - |  | -------------------------------------



| |  |  | the burden of complying with a wide variety of complex foreign laws and treaties; and
| | - |  | -------------------------------------------------------------------------------------



| |  |  | different rules, regulations, and policies governing intellectual property protection and enforcement.
| | - |  | ------------------------------------------------------------------------------------------------------

Our international operations are also subject to the risks associated with the imposition of legislation and regulations relating to the import or export
of high technology products. We cannot predict whether tariffs or restrictions upon the importation or exportation of our products will be implemented by the United States or other countries.

If our production and laboratory facilities are damaged, our business would be seriously harmed.

Our only production facility is located in San Diego, California, where we also have laboratories. Damage to our facilities due to war, fire, natural
disaster, power loss, communications failure, terrorism, unauthorized entry, or other events could prevent us from conducting our business for an indefinite period, could result in a loss of important data or cause us to cease development and
production of our products. We cannot be certain that our limited insurance to protect against business interruption would be adequate or would continue to be available to us on commercially reasonable terms, or at all.

Responding to claims relating to improper handling, storage or disposal of hazardous chemicals, and radioactive and biological materials which we
use could be time consuming and costly.

We use controlled hazardous and radioactive materials in the conduct of our business, as
well as biological materials that have the potential to transmit disease. The risk of accidental contamination or injury from these materials cannot be completely eliminated. If an accident with these substances occurs, we could be liable for any
damages that result, which could seriously harm our business. Additionally, an accident could damage our research and manufacturing facilities and operations, resulting in delays and increased costs. Such damage and any expense resulting from
delays, disruptions, or any claims may not be covered by our insurance policies.

We may not have adequate insurance if we become
subject to product liability or other claims.

Our business exposes us to potential product liability and other types of claims and
our exposure will increase as we and our partners and collaborators prepare to commercialize research-use-only or other types of non-invasive prenatal tests. We have product and general liability insurance that covers us against specific product
liability and other claims up to an annual aggregate limit of $5 million. Any claim in excess of our insurance coverage would have to be paid out of our cash reserves, which would have a detrimental effect on our financial condition. It is difficult
to determine whether we have obtained sufficient insurance to cover potential claims. Also, we cannot assure you that we can or will maintain our insurance policies on commercially acceptable terms, or at all.

*Negative conditions in the global credit markets may impair the liquidity of a portion of our investment portfolio.

Our marketable securities consist of auction rate securities (ARS), corporate debt securities and government agency securities. As of March 31, 2008,
our marketable securities included $9.4 million of ARS issued primarily by municipalities and insurance companies that have experienced failed auctions due to lack of liquidity at the time their interest rates were to reset. The recent negative
conditions in the global credit markets have prevented some investors from liquidating their holdings, including their holdings of auction rate securities. As a result, certain of these types of securities are not fully liquid and we could be
required to hold them until they are redeemed by the issuer or to maturity. We may experience a similar situation with our remaining auction rate securities. In the event we need to access the funds that are in an illiquid state, we will not be able
to do so without a loss of principal, until a future auction on these investments is successful, the securities are redeemed by the issuer or they mature. As of March 31, 2008, the carrying value of all ARS was reduced by $2.4 million, from
$9.4 million to approximately $7.0 million, reflecting the change in fair market value. Although the ARS continue to pay interest according to their stated terms, based on valuation models and an analysis of other-than-temporary impairment factors,
a recognized loss of approximately $0.8 million has been recorded for the



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three months ended March 31, 2008, reflecting the portion of ARS holdings that we have concluded have an other-than-temporary decline in value. If the
credit ratings of the security issuers deteriorate or if uncertainties in these markets continue and any decline in market value is determined to be other-than-temporary, we would be required to adjust the carrying value of the investment through an
impairment charge, which could negatively affect our financial condition, cash flow and reported earnings. There is no guarantee that we will be able to liquidate our remaining auction rate securities or might have to incur further recognized
losses. In addition, during the first quarter of 2008, one of our ARS investments was downgraded to a credit rating of B2 and it is possible that our remaining ARS investments may be subject to additional credit rating downgrades, which could affect
the value of the securities and any ability we may have to liquidate these securities in the future.

Our stock price has been and
may continue to be volatile, and your investment could suffer a decline in value.

The trading price of our common stock has been
volatile and could be subject to wide fluctuations in price in response to various factors, many of which are beyond our control, including but not limited to:



| |  |  | actual or anticipated variations in quarterly and annual operating results;
| | - |  | ---------------------------------------------------------------------------



| |  |  | announcements of technological innovations by us or our competitors;
| | - |  | --------------------------------------------------------------------



| |  |  | our success in entering into, and the success in performing under, licensing and product development and commercialization agreements with others;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | securities analysts earnings projections or securities analysts recommendations;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | general market conditions out of our control.
| | - |  | ---------------------------------------------

The
stock market in general, and The NASDAQ Global Market and the market for life sciences companies in particular, have experienced extreme price and volume fluctuations that may have been unrelated or disproportionate to the operating performance of
the listed companies. There have been dramatic fluctuations in the market prices of securities of biotechnology companies. These price fluctuations may be rapid and severe and may leave investors little time to react. Broad market and industry
factors may seriously harm the market price of our common stock, regardless of our operating performance. Sharp drops in the market price of our common stock expose us to securities class-action litigation. Such litigation could result in
substantial expenses and a diversion of managements attention and resources, which would seriously harm our business, financial condition, and results of operations.



|Item  6. | Exhibits
|-------- | --------



|(a) | Exhibits
|--- | --------



|              |  |                                                                                                                           
|------------- |  | --------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Document                                                                                                   
|              | 
|3.1 (1)       |  | Restated Certificate of Incorporation of the Registrant                                                                   
|              | 
|3.2 (2)       |  | Bylaws of Registrant, as amended                                                                                          
|              | 
|4.1 (1)       |  | Specimen common stock certificate                                                                                         
|              | 
|31.1          |  | Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a).                          
|              | 
|31.2          |  | Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a).                      
|              | 
|32.1          |  | 18 U.S.C. Section 1350 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|              | 
|32.2          |  | 18 U.S.C. Section 1350 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



|* | Certain confidential portions of this Exhibit have been omitted pursuant to a request for confidential treatment. Omitted portions have been filed separately with the Securities and
Exchange Commission.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(1) | Incorporated by reference to the Registrants Current Report on Form 8-K filed June 6, 2006.
|--- | --------------------------------------------------------------------------------------------

|(2) | Incorporated by referenced to the Registrants Current Report on Form 8-K filed December 7, 2007.
|--- | -------------------------------------------------------------------------------------------------



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##### Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                   |  |  |  |                |  |                 |  |                        
|------------------ |  |  |  | -------------- |  | --------------- |  | -----------------------
|                   |  |  |  | Sequenom, Inc.
|                   |  |  | 
|Dated: May 7, 2008 |  |  |  | By:            |  | /s/ PAUL HAWRAN
|                   |  |  |  |                |  |                 |  | Paul Hawran            
|                   |  |  |  |                |  |                 |  | Chief Financial Officer



39