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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 September 30, 2009



| ̈ | 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).     ̈  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 large accelerated filer, accelerated filer 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 smallerreporting 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 October 23, 2009, was 61,248,403.









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SEQUENOM, INC.

INDEX



|                               |  |                                                                                                                             |  |         
|------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------- |  | --------
|                               |  |                                                                                                                             |  | Page No.
|PART I  FINANCIAL INFORMATION |  |                                                                                                                            
|                               |  |                                                                                                                            
|Item 1.                        |  | Financial Statements                                                                                                        |  | 3       
|                               |  |                                                                                                                            
|                               |  | Condensed Consolidated Balance Sheets  as of September 30, 2009 (unaudited) and December 31, 2008                          |  | 3       
|                               |  |                                                                                                                            
|                               |  | Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2009 and 2008 (unaudited) |  | 4       
|                               |  |                                                                                                                            
|                               |  | Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2009 and 2008 (unaudited)           |  | 5       
|                               |  |                                                                                                                            
|                               |  | Notes to Unaudited Condensed Consolidated Financial Statements                                                              |  | 6       
|                               |  |                                                                                                                            
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                       |  | 21      
|                               |  |                                                                                                                            
|Item 3.                        |  | Quantitative and Qualitative Disclosures About Market Risk                                                                  |  | 28      
|                               |  |                                                                                                                            
|Item 4.                        |  | Controls and Procedures                                                                                                     |  | 29      
|                              
|PART II  OTHER INFORMATION   
|                               |  |                                                                                                                            
|Item 1.                        |  | Legal Proceedings                                                                                                           |  | 30      
|                               |  |                                                                                                                            
|Item 1A.                       |  | Risk Factors                                                                                                                |  | 33      
|                               |  |                                                                                                                            
|Item 6.                        |  | Exhibits                                                                                                                    |  | 50      



2



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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)



|                                                                                                                                                                                 |  |                   |          |   |                  |   |          |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | -------- | - | ---------------- | - | -------- | -
|                                                                                                                                                                                 |  | September 30,2009 |          |   | December 31,2008 |  
|                                                                                                                                                                                 |  | (Unaudited)       |          |   |                  |  
|Assets                                                                                                                                                                           |  |                   |          |   |                  |   |          |  
|Current assets:                                                                                                                                                                  |  |                   |          |   |                  |   |          |  
|Cash and cash equivalents                                                                                                                                                        |  | $                 | 20,087   |   |                  | $ | 68,338   |  
|Marketable securities                                                                                                                                                            |  |                   | 29,996   |   |                  |   | 29,991   |  
|Restricted cash                                                                                                                                                                  |  |                   | 1,416    |   |                  |   | 1,371    |  
|Accounts receivable, net                                                                                                                                                         |  |                   | 7,182    |   |                  |   | 10,642   |  
|Inventories, net                                                                                                                                                                 |  |                   | 9,858    |   |                  |   | 10,631   |  
|Other current assets and prepaid expenses                                                                                                                                        |  |                   | 3,291    |   |                  |   | 1,311    |  
|                                                                                                                                                                                 |  |                   |          |   |                  |   |          |  
|Total current assets                                                                                                                                                             |  |                   | 71,830   |   |                  |   | 122,284  |  
|Equipment and leasehold improvements, net                                                                                                                                        |  |                   | 12,467   |   |                  |   | 9,195    |  
|Marketable securities                                                                                                                                                            |  |                   | 5,710    |   |                  |   | 5,748    |  
|Goodwill                                                                                                                                                                         |  |                   | 10,007   |   |                  |   | 2,398    |  
|Other assets                                                                                                                                                                     |  |                   | 1,928    |   |                  |   | 859      |  
|                                                                                                                                                                                 |  |                   |          |   |                  |   |          |  
|Total assets                                                                                                                                                                     |  | $                 | 101,942  |   |                  | $ | 140,484  |  
|                                                                                                                                                                                 |  |                   |          |   |                  |   |          |  
|Liabilities and stockholders equity                                                                                                                                             |  |                   |          |   |                  |   |          |  
|Current liabilities:                                                                                                                                                             |  |                   |          |   |                  |   |          |  
|Accounts payable                                                                                                                                                                 |  | $                 | 8,102    |   |                  | $ | 8,321    |  
|Accrued expenses                                                                                                                                                                 |  |                   | 6,661    |   |                  |   | 8,170    |  
|Deferred revenue                                                                                                                                                                 |  |                   | 1,950    |   |                  |   | 1,444    |  
|Current portion debt and obligations                                                                                                                                             |  |                   | 1,378    |   |                  |   | 647      |  
|Other current liabilities                                                                                                                                                        |  |                   | 398      |   |                  |   | 456      |  
|                                                                                                                                                                                 |  |                   |          |   |                  |   |          |  
|Total current liabilities                                                                                                                                                        |  |                   | 18,489   |   |                  |   | 19,038   |  
|Deferred revenue, less current portion                                                                                                                                           |  |                   | 384      |   |                  |   | 454      |  
|Other long-term liabilities                                                                                                                                                      |  |                   | 3,693    |   |                  |   | 4,205    |  
|Long-term portion debt and obligations                                                                                                                                           |  |                   | 2,141    |   |                  |   | 574      |  
|Commitments and contingencies                                                                                                                                                    |  |                   |          |   |                  |   |          |  
|Stockholders equity:                                                                                                                                                            |  |                   |          |   |                  |   |          |  
|Convertible preferred stock, par value $0.001; 5,000,000 shares authorized, no shares issued or outstanding at September 30,
2009 and December 31, 2008, respectively            |  |                   |         |   |                  |   |         |  
|Common stock, par value $0.001; 185,000,000 shares authorized, 61,245,277 and 60,943,469 shares issued and outstanding at
September 30, 2009 and December 31, 2008, respectively |  |                   | 61       |   |                  |   | 61       |  
|Additional paid-in capital                                                                                                                                                       |  |                   | 654,870  |   |                  |   | 641,098  |  
|Accumulated other comprehensive income                                                                                                                                           |  |                   | 1,187    |   |                  |   | 1,328    |  
|Accumulated deficit                                                                                                                                                              |  |                   | (578,883 | ) |                  |   | (526,274 | )
|                                                                                                                                                                                 |  |                   |          |   |                  |   |          |  
|Total stockholders equity                                                                                                                                                       |  |                   | 77,235   |   |                  |   | 116,213  |  
|                                                                                                                                                                                 |  |                   |          |   |                  |   |          |  
|Total liabilities and stockholders equity                                                                                                                                       |  | $                 | 101,942  |   |                  | $ | 140,484  |  
|                                                                                                                                                                                 |  |                   |          |   |                  |   |          |  

See accompanying notes.



3



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SEQUENOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share information)



|                                                       |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|------------------------------------------------------ |  | ------------------------------- | ------- | - | ------------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                       |  | Three months endedSeptember 30, |         |   | Nine months endedSeptember 30, |  
|                                                       |  | 2009                            |         |   | 2008                           |   |         | 2009 |  |   | 2008    |  
|                                                       |  | (Unaudited)                     |         |   | (Unaudited)                    |  
|Revenues:                                              |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Consumables                                            |  | $                               | 5,443   |   |                                | $ | 4,958   |      |  | $ | 15,363  |   |  | $ | 14,558  |  
|MassARRAY and product related                          |  |                                 | 3,671   |   |                                |   | 5,710   |      |  |   | 10,092  |   |  |   | 16,911  |  
|Services                                               |  |                                 | 103     |   |                                |   | 902     |      |  |   | 1,617   |   |  |   | 3,450   |  
|Research and other                                     |  |                                 | 3       |   |                                |   |        |      |  |   | 5       |   |  |   | 71      |  
|                                                       |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Total revenues                                         |  |                                 | 9,220   |   |                                |   | 11,570  |      |  |   | 27,077  |   |  |   | 34,990  |  
|                                                       |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Costs and expenses:                                    |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Cost of consumables and products revenue               |  |                                 | 2,499   |   |                                |   | 3,492   |      |  |   | 7,330   |   |  |   | 11,314  |  
|Cost of services revenue                               |  |                                 | 179     |   |                                |   | 1,036   |      |  |   | 1,897   |   |  |   | 3,348   |  
|Research and development                               |  |                                 | 8,479   |   |                                |   | 7,083   |      |  |   | 27,486  |   |  |   | 18,381  |  
|Selling and marketing                                  |  |                                 | 5,914   |   |                                |   | 5,860   |      |  |   | 20,167  |   |  |   | 17,999  |  
|General and administrative                             |  |                                 | 6,724   |   |                                |   | 4,843   |      |  |   | 21,862  |   |  |   | 12,464  |  
|Restructuring charges                                  |  |                                 | 480     |   |                                |   |        |      |  |   | 1,482   |   |  |   |        |  
|                                                       |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Total costs and expenses                               |  |                                 | 24,275  |   |                                |   | 22,314  |      |  |   | 80,224  |   |  |   | 63,506  |  
|                                                       |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Loss from operations                                   |  |                                 | (15,055 | ) |                                |   | (10,744 | )    |  |   | (53,147 | ) |  |   | (28,516 | )
|Interest income, net                                   |  |                                 | 78      |   |                                |   | 505     |      |  |   | 370     |   |  |   | 1,151   |  
|Loss on marketable securities                          |  |                                 |        |   |                                |   | (100    | )    |  |   | (38     | ) |  |   | (1,171  | )
|Other income (expense), net                            |  |                                 | 204     |   |                                |   | (29     | )    |  |   | 382     |   |  |   | (131    | )
|                                                       |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Loss before income taxes                               |  |                                 | (14,773 | ) |                                |   | (10,368 | )    |  |   | (52,433 | ) |  |   | (28,667 | )
|Income tax expense                                     |  |                                 | (102    | ) |                                |   | (3      | )    |  |   | (176    | ) |  |   | (74     | )
|                                                       |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Net loss                                               |  | $                               | (14,875 | ) |                                | $ | (10,371 | )    |  | $ | (52,609 | ) |  | $ | (28,741 | )
|                                                       |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Net loss per share, basic and diluted                  |  | $                               | (0.24   | ) |                                | $ | (0.18   | )    |  | $ | (0.86   | ) |  | $ | (0.57   | )
|                                                       |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Weighted average shares outstanding, basic and diluted |  |                                 | 61,211  |   |                                |   | 59,115  |      |  |   | 61,123  |   |  |   | 50,562  |  
|                                                       |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  

See accompanying notes.



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SEQUENOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



|                                                                            |  |                                |         |   |      |   |         |  
|--------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                            |  | Nine months endedSeptember 30, |        
|                                                                            |  | 2009                           |         |   | 2008 |  
|                                                                            |  | (Unaudited)                    |        
|Operating activities                                                        |  |                                |         |   |      |   |         |  
|Net loss                                                                    |  | $                              | (52,609 | ) |      | $ | (28,741 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                                |         |   |      |   |         |  
|Share-based compensation                                                    |  |                                | 9,206   |   |      |   | 5,018   |  
|Depreciation and amortization                                               |  |                                | 3,786   |   |      |   | 1,764   |  
|Loss on marketable securities                                               |  |                                | 38      |   |      |   | 1,171   |  
|Deferred rent                                                               |  |                                | (402    | ) |      |   | (308    | )
|Bad debt expense                                                            |  |                                | (148    | ) |      |   | 221     |  
|Restricted stock                                                            |  |                                | 331     |   |      |   | 161     |  
|Other non-cash items                                                        |  |                                | 92      |   |      |   | 5       |  
|Changes in operating assets and liabilities:                                |  |                                |         |   |      |   |         |  
|Accounts receivable, net                                                    |  |                                | 3,203   |   |      |   | 2,028   |  
|Inventories, net                                                            |  |                                | 828     |   |      |   | (4,478  | )
|Other current assets and prepaid expenses                                   |  |                                | (1,872  | ) |      |   | (836    | )
|Accounts payable and accrued expenses                                       |  |                                | (1,729  | ) |      |   | 187     |  
|Deferred revenue                                                            |  |                                | 400     |   |      |   | 651     |  
|Other liabilities                                                           |  |                                | (176    | ) |      |   | 561     |  
|                                                                            |  |                                |         |   |      |   |         |  
|Net cash used in operating activities                                       |  |                                | (39,052 | ) |      |   | (22,596 | )
|Investing activities                                                        |  |                                |         |   |      |   |         |  
|Purchases of equipment and leasehold improvements                           |  |                                | (7,246  | ) |      |   | (2,442  | )
|Acquisition of SensiGen, LLC, net of cash acquired                          |  |                                | (2,017  | ) |      |   |        |  
|Purchases of marketable securities                                          |  |                                | (30,006 | ) |      |   | (14,821 | )
|Sales of marketable securities                                              |  |                                |        |   |      |   | 24,217  |  
|Maturities of marketable securities                                         |  |                                | 30,000  |   |      |   | 21,683  |  
|Net change in restricted cash                                               |  |                                | (46     | ) |      |   | (42     | )
|                                                                            |  |                                |         |   |      |   |         |  
|Net cash (used in) provided by investing activities                         |  |                                | (9,315  | ) |      |   | 28,595  |  
|Financing activities                                                        |  |                                |         |   |      |   |         |  
|Proceeds from exercise of stock options and ESPP purchases                  |  |                                | 1,230   |   |      |   | 1,532   |  
|Proceeds from issuance of common stock and warrants                         |  |                                |        |   |      |   | 91,928  |  
|Borrowings from asset-backed loan                                           |  |                                |        |   |      |   | 610     |  
|Repayments on asset-backed loan                                             |  |                                | (479    | ) |      |   | (406    | )
|Borrowings from capital lease                                               |  |                                | 351     |   |      |   |        |  
|Repayments on capital lease obligation                                      |  |                                | (53     | ) |      |   |        |  
|Repayments on long-term debt                                                |  |                                | (763    | ) |      |   |        |  
|                                                                            |  |                                |         |   |      |   |         |  
|Net cash provided by financing activities                                   |  |                                | 286     |   |      |   | 93,664  |  
|                                                                            |  |                                |         |   |      |   |         |  
|Net (decrease) increase in cash and cash equivalents                        |  |                                | (48,081 | ) |      |   | 99,663  |  
|Effect of exchange rate changes on cash and cash equivalents                |  |                                | (170    | ) |      |   | (3      | )
|Cash and cash equivalents at beginning of period                            |  |                                | 68,338  |   |      |   | 13,116  |  
|                                                                            |  |                                |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                  |  | $                              | 20,087  |   |      | $ | 112,776 |  
|                                                                            |  |                                |         |   |      |   |         |  
|Supplemental schedule of non cash items                                     |  |                                |         |   |      |   |         |  
|Non cash investing activityaccrued Isis license fee                        |  | $                              | 1,000   |   |      | $ |        |  
|                                                                            |  |                                |         |   |      |   |         |  

See accompanying notes.



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SEQUENOM, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation

In the opinion of management, 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 GAAP 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, 2008 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, 2008, as filed with the Securities and Exchange Commission (SEC) on March 12, 2009. In connection with preparation of the condensed consolidated financial statements we evaluated subsequent events after the
balance sheet date of September 30, 2009, through November 9, 2009, and disclosed, if necessary, any material subsequent events in the notes to these financial statements.

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; our discounted cash flow analysis valuation model, which affects the valuation of our auction rate securities (ARS) and other marketable securities; the determination of fair value of acquired assets, which affects the valuation
of goodwill; 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. Management considers many factors in selecting appropriate financial
accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect
estimates, including: expected business and operational change, sensitivity and volatility associated with the assumptions used in developing estimates and whether historical trends are expected to be representative of future trends. The estimation
process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. 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

As of July 1, 2009, the Financial Accounting
Standards Board (FASB) formally approved the FASB Accounting Standards Codification (Codification) as the single source of authoritative U.S. accounting and reporting standards, other than guidance issued by the SEC. At that time, the Codification
superseded all then-existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification became non-authoritative. The Codification is effective for interim and annual
periods ending after September 15, 2009. We adopted the provisions of the Codification in the third quarter of 2009. The adoption of the Codification did not have a material impact on our condensed consolidated financial statements.

In May 2009, the FASB issued authoritative guidance that establishes general standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or are available to be issued. This guidance became effective for interim periods and fiscal years ending after June 15, 2009. We adopted the provisions of this guidance in the
second quarter of 2009. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements.

In
April 2009, the FASB issued authoritative guidance that requires publicly traded companies to include in their interim financial reports certain disclosures about the carrying value and fair value of financial instruments previously required only in
annual financial statements and to disclose changes in significant assumptions used to calculate the fair value of financial instruments. This guidance became effective for all interim reporting periods ending after June 15, 2009, with early
adoption permitted for interim reporting periods ending after March 15, 2009. We adopted the provisions of this guidance in the second quarter of 2009. The adoption of this guidance did not have a material impact on our condensed consolidated
financial statements. In December 2007, the FASB issued authoritative guidance that significantly changes the accounting and reporting requirements for business combination transactions, including capitalization of in-process research and
development assets and expensing acquisition costs as incurred. This guidance became effective for business combination transactions occurring in fiscal years beginning after December 15, 2008. We adopted the provisions of this guidance in the
first quarter of 2009. The impact of the adoption of this guidance on our condensed consolidated financial statements will depend on the economic terms of any future business combination transactions.

In November 2008, the FASB issued authoritative guidance that clarifies how to account for acquired intangible assets subsequent to initial measurement in
situations in which an entity does not intend to actively use the assets but intends to hold the asset to prevent others from obtaining access to the asset (a defensive intangible asset), except for intangible assets that are used in research and
development activities. This guidance requires that a defensive intangible asset be accounted for as a separate unit of accounting and assigned a useful life that reflects the entitys consumption of the expected benefits related to that asset.
This guidance became effective for intangible assets acquired on or after December 15, 2008. We adopted the provisions of this guidance in the first quarter of 2009. The adoption of this guidance did not have a material impact on our condensed
consolidated financial statements.



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In April 2008, the FASB issued authoritative guidance that amends the guidance for estimating the useful
lives of recognized intangible assets and requires additional disclosure related to renewing or extending the useful lives of recognized intangible assets. This guidance became effective for fiscal years and interim periods beginning after
December 15, 2008. We adopted the provisions of this guidance in the first quarter of 2009. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements.

In December 2007, the FASB issued authoritative guidance that defines collaborative arrangements and requires that transactions with third parties that do
not participate in the arrangement be reported in the appropriate income statement line items pursuant to existing authoritative accounting literature. In accordance with this guidance, income statement classification of payments made between
participants of a collaborative arrangement is to be based on other applicable authoritative accounting literature. If the payments are not within the scope or analogy of other authoritative accounting literature, a reasonable, rational and
consistent accounting policy is to be elected. This guidance became effective for fiscal years beginning after December 15, 2008 and was to be applied as a change in accounting principle to all prior periods retrospectively for all
collaborative arrangements existing as of the effective date. We adopted the provisions of this guidance in the first quarter of 2009. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements.

New Accounting Standards Not Yet Adopted

In October 2009, the FASB issued an accounting standards update that requires an entity to allocate arrangement consideration at the inception of an arrangement to all of its deliverables based on their
relative selling prices, eliminates the use of the residual method of allocation, and requires the relative-selling-price method in all circumstances in which an entity recognizes revenue of an arrangement with multiple deliverables. This guidance
will be effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, which will be our fiscal year 2010, with earlier application permitted. We have not yet evaluated the potential
impact of adopting this guidance on our condensed consolidated financial statements.

(2) Liquidity and Capital Resources

We have a history of recurring losses from operations and have an accumulated deficit of $578.9 million as of September 30, 2009. Our capital
requirements to sustain operations, including research and development projects, have been and will continue to be significant. As of September 30, 2009, we had available cash, cash equivalents and current marketable securities totaling
$50.1 million and working capital of $53.3 million. We also have approximately $5.7 million of ARS investments classified as noncurrent assets at September 30, 2009. See further discussion of our marketable securities at Note 5.

(3) Restructuring

In April
2009, we announced that we reduced our genetic analysis employee workforce in accordance with our initiative to reduce costs and restructure our workforce. Severance related charges are included in the restructuring charges in the accompanying
condensed consolidated statement of operations for the three and nine months ended September 30, 2009 and 2008.

The beginning balance
for facilities costs prior to the April 2009 reduction in workforce consisted of a $0.4 million in accrued facility exit costs associated with exiting our lease commitments for the Boston, Massachusetts facility. This facility was initially leased
in conjunction with the acquisition of Gemini Genomics, plc in 2001.

The reduction in workforce included the closure of our leased facility
near Boston, Massachusetts, with a lease expiration on December 31, 2010, as well as the closure of our office located in New Delhi, India during the second quarter of 2009.



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The following table summarizes the activity and balance of accrued restructuring charges included in accrued
expenses through September 30, 2009 associated with the April 2009 reduction in workforce (in thousands):



|                              |  |                 |      |   |            |   |      |       |  |   |       |   |  |   |        |  
|----------------------------- |  | --------------- | ---- | - | ---------- | - | ---- | ----- |  | - | ----- | - |  | - | ------ | -
|Description                   |  | EmployeeRelated |      |   | Facilities |   |      | Other |  |   | Total |  
|Balance at March 31, 2009     |  | $               |     |   |            | $ | 425  |       |  | $ |      |   |  | $ | 425    |  
|Accrued restructuring charges |  |                 | 573  |   |            |   | 553  |       |  |   | 356   |   |  |   | 1,482  |  
|Cash payments                 |  |                 | (573 | ) |            |   | (312 | )     |  |   | (302  | ) |  |   | (1,187 | )
|                              |  |                 |      |   |            |   |      |       |  |   |       |   |  |   |        |  
|Balance at September 30, 2009 |  | $               |     |   |            | $ | 666  |       |  | $ | 54    |   |  | $ | 720    |  
|                              |  |                 |      |   |            |   |      |       |  |   |       |   |  |   |        |  



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(4) Acquisitions

Center for Molecular Medicine, LLC

On November 14, 2008, we completed our
acquisition of certain assets of the Center for Molecular Medicine, LLC (CMM). The assets are now part of our wholly owned subsidiary, the Sequenom Center for Molecular Medicine, LLC (Sequenom CMM). Under the terms of the asset purchase agreement,
we paid to CMM $4.0 million for certain assets related to CMMs business in advanced molecular pathology laboratory services relating to diagnostics, translational research and clinical trials, less all cash and cash equivalents. Ninety percent
of the purchase price consisted of 187,794 shares of our common stock (valued at $3.6 million as of the acquisition closing date) and the remainder of the purchase price of $0.4 million was paid in cash, which was deposited into an escrow account.
The escrow account will remain in place for 18 months following the closing of the transaction to satisfy potential indemnification claims. The acquisition of CMM provides us with a laboratory that has the required accreditations and certifications
already in place to develop and market laboratory developed tests and have contributed to the purchase price for the acquisition of CMM, which resulted in the recognition of goodwill of approximately $3.0 million.

In connection with this acquisition, we completed a valuation study of the intangible assets acquired in order to allocate the purchase price. We have
allocated the excess purchase price over the fair value of net tangible assets and identifiable intangible assets acquired to goodwill. We believe the fair values assigned to the CMM assets acquired were based on reasonable assumptions, as
determined by management. The purchase price has been allocated as follows (in thousands):



|                              |  |   |      
|----------------------------- |  | - | -----
|Net tangible assets           |  | $ | 893  
|Identifiable intangible asset |  |   | 117  
|Goodwill                      |  |   | 2,990
|                              |  |   |      
|Total consideration           |  | $ | 4,000
|                              |  |   |      

No supplemental pro forma information is presented for the acquisition due to the immaterial effect
of the acquisition on our results of operations.

SensiGen, LLC

On February 27, 2009, we completed the acquisition of certain assets and assumption of certain liabilities of SensiGen, LLC (SensiGen). The assets are now part of our wholly owned subsidiary,
Sequenom CMM. Under the terms of the asset purchase agreement (the Agreement), we acquired certain assets related to SensiGens business in gene-based molecular diagnostic tests relating to cervical cancer, head and neck cancer, chronic kidney
disease and lupus. We paid SensiGen cash consideration of approximately $1.9 million, which included a loan advance of $340,000, and issued common stock valued at $1.9 million (utilizing the minimum floor price of $20.94 per share in accordance with
the Agreement). An additional $1.3 million is contingently payable to SensiGen upon the completion of certain triggering events with either cash or shares of our common stock (priced at the average closing price of our common stock over the ten
trading day period ending on the third trading day prior to the applicable triggering event for such payment). In June 2009 we satisfied one of the triggering events related to the Agreement with a cash payment of $130,000. The acquisition of the
SensiGen assets provides us with intellectual property related to certain molecular diagnostics for womens health and cancer and have contributed to the purchase price for the acquisition of SensiGen, which resulted in the recognition of
goodwill of approximately $7.0 million.

The total purchase consideration, excluding potential contingent consideration fair values, consisted
of (in thousands, except share and per share data):



|                                                                                     |  |   |      
|------------------------------------------------------------------------------------ |  | - | -----
|Cash paid to SensiGen                                                                |  | $ | 2,017
|Sequenom common stock issued on the closing date (92,679 shares at $20.94 per share) |  |   | 1,941
|Assumed liabilities                                                                  |  |   | 3,242
|Write-off of preexisting receivables                                                 |  |   | 403  
|                                                                                     |  |   |      
|Total purchase price                                                                 |  | $ | 7,603
|                                                                                     |  |   |      



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In connection with this acquisition we completed a valuation study of the intangible assets acquired in
order to allocate the purchase price. We have allocated the excess purchase price over the fair value of net tangible assets and liabilities assumed to goodwill, as well as provided an estimate of the fair value of the contingent consideration as of
the closing date of the acquisition. We believe the fair values assigned to SensiGens assets acquired and contingent consideration were based on reasonable assumptions, as determined by management. The purchase price has been allocated as
follows (in thousands):



|                                       |  |   |      
|-------------------------------------- |  | - | -----
|Net tangible assets                    |  | $ | 613  
|Goodwill                               |  |   | 6,990
|                                       |  |   |      
|                                       |  |   | 7,603
|Fair value of contingent consideration |  |   | 27   
|                                       |  |   |      
|Total consideration                    |  | $ | 7,630
|                                       |  |   |      

No supplemental pro forma information is presented for the acquisition due to the immaterial effect
of the acquisition on our results of operations.

(5) Marketable Securities and Fair Value Measurements

Marketable securities

The
appropriate classification of marketable securities is determined at the time of purchase and reevaluated as of each balance sheet date. As a result, at September 30, 2009 and December 31, 2008, all of our investments in marketable
securities were classified as available for sale and were reported at fair value. We measure fair value based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. 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 and unrealized gains and losses on the sale of our available-for-sale securities.

Historically, we have invested in 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. In April 2008, we revised our investment policy to maintain our portfolio of cash equivalents and marketable securities in a variety of securities, including U.S. Government securities with ratings of AAA, and repurchase
agreements collateralized by U.S. Government securities with ratings of AAA at the time of acquisition. Our investment policy includes a minimum quality rating for all new investments, as well as limits the amount of credit exposure to only
issuances from the U.S. Government. 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 September 30, 2009 and December 31, 2008, $9.4 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 September 30, 2009, have experienced multiple failed auctions as the amount of securities submitted for sale has exceeded the amount of purchase orders and we
have been unable to liquidate these securities.

The estimated fair value of all ARS holdings at September 30, 2009, was approximately
$5.7 million, which reflects a $3.7 million adjustment to the principal value of $9.4 million. The $3.7 million adjustment includes other-than-temporary impairment losses charged to operations during the years ended December 31, 2008 and 2007
of $2.6 million and $1.1 million, respectively. For the three months ended September 30, 2009, no other-than-temporary impairment losses were charged to operations. As of September 30, 2009, there are no accumulated unrealized losses in
other comprehensive income related to these ARS and any future other-than temporary impairments losses will be charged to operations, as incurred.



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##### Table of Contents

Fair Value Measurements

Fair value is defined 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. A fair value
hierarchy has also been established that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are
described as:

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 the Level 3 hierarchy.

The fair value of our investments in ARS instruments is estimated utilizing a discounted cash flow analysis valuation model as of September 30, 2009. This analysis considers, 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.

Based on the underlying assumptions utilized in our valuation of ARS and subject to the completion of an ongoing review of planned expenditures and operations for 2010 by our management, we have continued to classify these investments as
long-term on the condensed consolidated balance sheet at September 30, 2009. Future valuation adjustments determined to be other-than-temporary will be recorded to operations, as incurred.

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 September 30, 2009 (in thousands):



|                                    |  |       |        |         |   |         |  |         |     |  |   |      
|----------------------------------- |  | ----- | ------ | ------- | - | ------- |  | ------- | --- |  | - | -----
|Description                         |  | Total |        | Level 1 |   | Level 2 |  | Level 3
|Cash and cash equivalents           |  | $     | 20,087 |         | $ | 20,087  |  | $       |    |  | $ |     
|Marketable securities, current1     |  |       | 29,996 |         |   | 29,996  |  |         |    |  |   |     
|Restricted cash                     |  |       | 1,416  |         |   | 1,416   |  |         |    |  |   |     
|Marketable securities, non-current1 |  |       | 5,710  |         |   |        |  |         | 239 |  |   | 5,471
|                                    |  |       |        |         |   |         |  |         |     |  |   |      
|Total                               |  | $     | 57,209 |         | $ | 51,499  |  | $       | 239 |  | $ | 5,471
|                                    |  |       |        |         |   |         |  |         |     |  |   |      

The following table sets forth our financial assets and liabilities that were accounted for at fair
value on a recurring basis as of December 31, 2008 (in thousands):



|                                    |  |       |         |         |   |         |  |         |     |  |   |      
|----------------------------------- |  | ----- | ------- | ------- | - | ------- |  | ------- | --- |  | - | -----
|Description                         |  | Total |         | Level 1 |   | Level 2 |  | Level 3
|Cash and cash equivalents           |  | $     | 68,338  |         | $ | 68,338  |  | $       |    |  | $ |     
|Restricted cash                     |  |       | 1,371   |         |   | 1,371   |  |         |    |  |   |     
|Marketable securities, current1     |  |       | 29,991  |         |   | 29,991  |  |         |    |  |   |     
|Marketable securities, non-current1 |  |       | 5,748   |         |   |        |  |         | 239 |  |   | 5,509
|                                    |  |       |         |         |   |         |  |         |     |  |   |      
|Total                               |  | $     | 105,448 |         | $ | 99,700  |  | $       | 239 |  | $ | 5,509
|                                    |  |       |         |         |   |         |  |         |     |  |   |      



|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.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The following table presents our assets measured at fair value on a recurring basis using significant
unobservable inputs (Level 3) at September 30, 2009 (in thousands):



|                                                                                                                                             |  |                        |       |  
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ----- | -
|                                                                                                                                             |  | Auction RateSecurities |      
|Balance at December 31, 2008                                                                                                                 |  | $                      | 5,509 |  
|Transfers to Level 3                                                                                                                         |  |                        |      |  
|Total gains or losses:                                                                                                                       |  |                        |       |  
|Included in operations                                                                                                                       |  |                        | (38   | )
|                                                                                                                                             |  |                        |       |  
|Balance at September 30, 2009                                                                                                                |  | $                      | 5,471 |  
|                                                                                                                                             |  |                        |       |  
|Gains or losses included in operations (or changes in net assets) for the period (above) relating to assets still held at
September 30, 2009 |  |                        |       |  
|Total gains or losses for the period included in operations                                                                                  |  | $                      | (38   | )
|                                                                                                                                             |  |                        |       |  
|Total change in unrealized gains or losses included in other comprehensive loss                                                              |  | $                      |      |  
|                                                                                                                                             |  |                        |       |  

(6) Comprehensive Loss

We disclose comprehensive income (loss) and its components, which includes net loss, unrealized gains and losses on investments and foreign currency translation gains and losses as a separate component of
stockholders equity. A summary of our comprehensive loss is as follows (in thousands):



|                                                |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|----------------------------------------------- |  | ------------------------------- | ------- | - | ------------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                |  | Three months endedSeptember 30, |         |   | Nine months endedSeptember 30, |  
|                                                |  | 2009                            |         |   | 2008                           |   |         | 2009 |  |   | 2008    |  
|Comprehensive loss:                             |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Net loss                                        |  | $                               | (14,875 | ) |                                | $ | (10,371 | )    |  | $ | (52,609 | ) |  | $ | (28,741 | )
|Unrealized gain (loss) on marketable securities |  |                                 | 43      |   |                                |   | (5      | )    |  |   | (1      | ) |  |   | 253     |  
|Foreign currency translation adjustments        |  |                                 | 212     |   |                                |   | (384    | )    |  |   | (140    | ) |  |   | (14     | )
|                                                |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Comprehensive loss                              |  | $                               | (14,620 | ) |                                | $ | (10,760 | )    |  | $ | (52,750 | ) |  | $ | (28,502 | )
|                                                |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  

(7) Net Loss 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.

(8) Stockholders Equity

On July 1, 2008, we closed an underwritten public offering of 5,500,000 shares of our common stock at $15.50 per share, with the
underwriters exercising their option to purchase an additional 825,000 shares on July 8, 2008. Including the additional shares, the offering resulted in aggregate net proceeds of approximately $91.8 million after deducting underwriting
discounts, commissions and estimated transaction expenses.

On March 3, 2009, our Board of Directors adopted a Share Purchase Rights Plan
(Rights Plan). The terms of the Rights Plan provide for a dividend distribution of one preferred share purchase right (a Right) for each outstanding share of our common stock, par value $0.001 per share. Common shares that are newly issued after the
record date of March 20, 2009, also carry Rights.

The Rights have certain anti-takeover effects and will cause substantial dilution to a
person or group that attempts to acquire us on terms not approved by our Board of Directors. The Rights should not interfere with any merger or other business combination approved by the Board of Directors, since the Rights may be amended to permit
such acquisition or redeemed by us at $0.001 per Right prior to the earliest of (i) the time that a person or group has acquired beneficial ownership of 15% or more of our shares of common stock or (ii) the final expiration date, as
defined by the Rights Plan.

(9) 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. 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.



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For the three months ended September 30, 2009 and 2008, we recorded $3.0 million and $1.6 million,
respectively, of compensation expense related to our share-based compensation awards. The compensation expense related to our share-based compensation arrangements is recorded as components of research and development expenses ($1.0 million and $0.3
million), selling and marketing expenses ($0.8 million and $0.4 million) and general and administrative expenses ($1.2 million and $0.9 million) for the three months ended September 30, 2009 and 2008, respectively.

For the nine months ended September 30, 2009 and 2008, we recorded $8.8 million and $4.3 million, respectively, of compensation expense related to our
share-based compensation awards. The compensation expense related to our share-based compensation arrangements is recorded as a component of research and development expense ($2.7 million and $0.9 million), selling and marketing expense ($2.5
million and $1.0 million) and general and administrative expense ($3.7 million and $2.3 million) for the nine months ended September 30, 2009 and 2008, 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.

The fair value of options granted to non-employees are estimated at the measurement date
using the Black-Scholes pricing model. Stock-based compensation for options granted to non-employees for the three months ended September 30, 2009 and 2008, was $52,000 and $382,000, respectively, and is included in the statements of operations
within research and development expenses ($11,000 and $100,000) and in sales and marketing expenses ($41,000 and $282,000). For the nine months ended September 30, 2009 and 2008, share-based compensation for options granted to non-employees
included in the statements of operations was $282,000 and $473,000, respectively, and is included within research and development expenses ($71,000 and $113,000) and in sales and marketing expenses ($211,000 and $360,000). There were no amounts
included in general and administrative expenses in the statement of operations for the three or nine months ended September 30, 2009, and 2008, respectively.

Share-Based Compensation Plans

Stock Compensation Plans

On May 31, 2006, our stockholders approved our 2006 equity incentive plan (2006 Plan), as the successor to our 1999 stock option plan (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 September 30, 2009, the aggregate number of shares of common stock that may be issued under the 2006 Plan was 8,074,816 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 October 18, 2007, we granted 50,000 restricted stock units to an executive officer with a grant date fair value of $11.04. These units vest over 4
years, with 13/48th of the units vesting 13 months after the grant date, and the remaining units vesting in equal monthly installments, thereafter. At September 30, 2009, 23,929 of these restricted stock units have vested and the remaining
26,071 have been cancelled.

On January 29, 2008, we granted 18,628 restricted stock awards and 20,974 restricted stock units to certain
executive officers and employees with a weighted average grant date fair value of $8.16 per share. During 2008, restricted stock awards totaling 1,781 were cancelled. The remaining 16,847 restricted stock awards vested on January 29, 2009 and
the 20,974 restricted stock units vested on February 28, 2009.

On July 17, 2008, we granted 55,555 restricted stock units to an
executive officer with a grant date fair value of $20.00 per share. These units vest over 4 years, with 13/48th of the units vesting 13 months after the grant date, and the remaining units vesting in equal monthly installments, thereafter. At
September 30, 2009, 16,159 of these restricted stock units have vested and the remaining 39,396 have been cancelled.



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##### Table of Contents

On February 9, 2009, we granted 15,907 restricted stock units to executive officers with a grant date
fair value of $17.60 per share, of which 7,234 vest after 12 months and 8,673 vest over 13 months, respectively. During the three months ended September 30, 2009, 5,978 of these units were cancelled. At September 30, 2009, the remaining
restricted stock units of 9,929 are outstanding and unvested.

On February 17, 2009, we granted 5,552 restricted stock units to an
executive officer with a grant date fair value of $16.38 per share, which vests after over 13 months. At September 30, 2009, all of these restricted stock units were cancelled.

The cancellation of the restricted stock units referred to in the above paragraphs were related to the departure of certain executive officers as disclosed in our current report on Form 8-K, filed with
the SEC on September 28, 2009.

On January 2, 2009, we granted 5,754 restricted stock awards to certain of our board members with a
grant date fair value of $20.58 per share, which vest quarterly over one year. At September 30, 2009, 4,316 of these restricted stock awards had vested and 1,438 awards remained outstanding and unvested.

Employee Stock Purchase Plan

In 1999, we
adopted the 1999 Employee Stock Purchase Plan (the 1999 ESPP). As of September 30, 2009, we had reserved 936,902 shares of common stock for issuance under the 1999 ESPP. During the term of 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 provides 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 beginning or end of the period price.

In October 2006, our Board of Directors approved a change to all offerings under the 1999 ESPP that commence on or after February 1, 2007. New
offerings are for a duration of six months and consist of one purchase interval, but do 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 on February 1, 2007. Those employees not electing to enroll in the new offering period continued under the then current offering until the 24 month offering period expired. On July 31, 2008, the final 24 month
offering period expired and all 1999 ESPP participants are now under six month offering periods. As of September 30, 2009, employees have contributed approximately $0.1 million to the current offering of the 1999 ESPP, since the beginning of
the offering period that commenced August 1, 2009. For the three months ended September 30, 2009 and 2008, we have recognized a benefit of approximately ($44,000) and an expense of $0.2 million, respectively, as share-based compensation
expense related to the 1999 ESPP. For the nine months ended September 30, 2009 and 2008, we have recognized approximately $0.1 million and $0.2 million, 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 per share, 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 September 30, 2009, 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 September 30, 2009, the warrant remained 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).
During 2008, investors exercised all remaining warrants of 11,301,499 in a series of cashless exercises to purchase 8,982,521 shares of our common stock. As of December 31, 2008, all of these warrants had been exercised.

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. 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. During 2007, the



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placement agent transferred portions of the warrant to certain of its employees. During 2008, the placement agent and its transferees had exercised warrants utilizing both cash and cashless
exercises to purchase an aggregate of 110,781 shares of our common stock. As of September 30, 2009, 7,500 of these warrants remained outstanding and exercisable and expire in June 2011.



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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 for the three months ended September 30, 2009 and 2008:



|                                                                |  |               |       |   |      |   |       |  
|--------------------------------------------------------------- |  | ------------- | ----- | - | ---- | - | ----- | -
|                                                                |  | September 30, |      
|                                                                |  | 2009          |       |   | 2008 |  
|Risk free interest rates                                        |  |               | 2.7   | % |      |   | 3.5   | %
|Volatility                                                      |  |               | 100.7 | % |      |   | 96.3  | %
|Dividend yield                                                  |  |               | 0     | % |      |   | 0     | %
|Expected option term (years)                                    |  |               | 7.0   |   |      |   | 6.6   |  
|Weighted average fair value of stock option grants to employees |  | $             | 3.10  |   |      | $ | 16.46 |  

The determination of fair value using the Black-Scholes option-pricing model is affected by our stock
price as well as assumptions regarding a number of highly complex and subjective variables, including expected stock price volatility, risk-free interest rate, expected dividends and projected employee stock option exercise and cancellation
behaviors. The expected volatility is based on the historical volatility of our stock. The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected term of our employee stock options. 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. Forfeitures are 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 10.4% based on historical experience over seven years. Our determination of fair value is affected by our stock price as well as a number of assumptions that require judgment.

A summary of the status of our stock option plans as of September 30, 2009, and of changes in stock options outstanding under the plans during the
nine months ended September 30, 2009, is as follows:



|                                                     |  |                          |   |  |                                         |       |                                                    |     |                          |   |          
|---------------------------------------------------- |  | ------------------------ | - |  | --------------------------------------- | ----- | -------------------------------------------------- | --- | ------------------------ | - | ---------
|Outstanding                                          |  | Shares Subjectto Options |   |  | WeightedAverage ExercisePrice per Share |       | WeightedAverageRemainingContractualTerm (in years) |     | AggregateIntrinsic Value
|Outstanding at December 31, 2008                     |  | 6,238,071                |   |  | $                                       | 7.70  |                                                    |     |                          |   |          
|Granted                                              |  | 1,536,481                |   |  |                                         | 19.09 |                                                    |     |                          |   |          
|Cancelled                                            |  | (1,266,764               | ) |  |                                         | 11.18 |                                                    |     |                          |   |          
|Exercised                                            |  | (105,292                 | ) |  |                                         | 4.43  |                                                    |     |                          |   |          
|                                                     |  |                          |   |  |                                         |       |                                                    |     |                          |   |          
|Outstanding at September 30, 2009                    |  | 6,402,496                |   |  | $                                       | 9.80  |                                                    | 5.5 |                          | $ | 2,057,956
|                                                     |  |                          |   |  |                                         |       |                                                    |     |                          |   |          
|Options vested and exercisable at September 30, 2009 |  | 4,059,138                |   |  | $                                       | 8.06  |                                                    | 3.6 |                          | $ | 1,951,358
|                                                     |  |                          |   |  |                                         |       |                                                    |     |                          |   |          

As of September 30, 2009, there was $25.0 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 2.6 years. Cash received from stock option exercises for the nine months ended September 30, 2009 and 2008 was $0.5
million and $0.9 million, respectively. At September 30, 2009, there were 1,603,390 shares available for future option grants.

(10) 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):



|                |  |                   |       |                  |   |       
|--------------- |  | ----------------- | ----- | ---------------- | - | ------
|                |  | September 30,2009 |       | December 31,2008
|                |  | (Unaudited)       |       | (Audited)       
|Raw materials   |  | $                 | 5,267 |                  | $ | 7,560 
|Work in process |  |                   |      |                  |   | 282   
|Finished goods  |  |                   | 4,591 |                  |   | 2,789 
|                |  |                   |       |                  |   |       
|Total           |  | $                 | 9,858 |                  | $ | 10,631
|                |  |                   |       |                  |   |       



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Inventories are shown net of excess and obsolescence reserves of $1.8 million at September 30, 2009 and
December 31, 2008, respectively.

(11) 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 funding of
$100,000 up to an aggregate limit of $3.0 million through December 23, 2008. All borrowings are secured by the underlying financed equipment.

As of September 30, 2009, we had an aggregate of $0.7 million outstanding on this asset-backed loan line relating to four fundings with interest rates from 10.6% to 9.73% to be repaid in 36 monthly installments. Our right to borrow
additional funds under this facility expired in December 2008.

(12) Warranty Costs and Reserves

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 consumables and products revenue in the condensed consolidated statement of operations. During the nine months ended
September 30, 2009, we have reduced our warranty requirements related to improvements in our MassARRAY Compact system and its components that have resulted in increased reliability from prior historical periods.

Changes in our warranty liability during the nine months ended September 30, 2009, were as follows (in thousands):



|                                     |  |   |        |  
|------------------------------------ |  | - | ------ | -
|Balance as of December 31, 2008      |  | $ | 606    |  
|Reductions to liability requirements |  |   | (1,029 | )
|Repairs and replacements             |  |   | 491    |  
|                                     |  |   |        |  
|Balance as of September 30, 2009     |  | $ | 68     |  
|                                     |  |   |        |  

(13) 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. 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. 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 (the IPO Cases).

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, as amended (the
Exchange Act), 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, as amended (the
Securities Act).

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 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.

In February 2009, liaison counsel for plaintiffs informed the District Court that a new settlement of all IPO Cases had been agreed to in principle, subject
to formal approval by the parties and preliminary and final approval by the District Court. In April 2009, the parties submitted a tentative settlement agreement to the District Court and moved for preliminary approval thereof. In June 2009, the



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District Court granted preliminary approval of the tentative settlement and ordered that notice of the
settlement be published and mailed to class members. The District Court held a final fairness hearing in September 2009 and granted final approval of the settlement in October 2009. Objectors will have 30 days to appeal this ruling although
they may request up to an additional 30 days. If no appeal is filed, the settlement will become effective and will result in the dismissal of all claims against us and our officers and directors with prejudice, and our pro rata share of the
settlement fund will be fully funded by insurance.

In October 2008, we filed a patent infringement suit against Ibis Biosciences, Inc.
(IBIS), formerly a subsidiary of Isis Pharmaceuticals, Inc. The complaint was served on the defendant in February 2009. IBIS has been acquired by Abbott Molecular. The lawsuit was filed in the U.S. District Court for the District of Delaware. The
lawsuit alleged that the sale or offer for sale of the Ibis T5000 Biosensor System and related technology infringes three U.S. patents: 6,300,076, 6,500,621 and 7,419,787. The defendant filed an answer and counterclaims against us seeking
declaratory judgments that the patents are not infringed and are invalid and unenforceable. We sought a permanent injunction enjoining the defendant from further infringement and monetary damages, including enhanced damages pursuant to 35 U.S.C.
§ 284, costs, attorneys fees and other relief as the court deems just and proper. On October 22, 2009, we and IBIS entered into a non-exclusive license and settlement agreement and the court dismissed with prejudice all claims and
counterclaims in the lawsuit. Pursuant to the terms of the agreement, we have agreed to grant IBIS and its affiliates a non-exclusive license under the three mass spectrometry-based patents involved in the lawsuit and certain pending
mass-spectrometry-based applications and foreign counterparts to manufacture, use, practice, sell, offer to sell, and import products and methods protected by the licensed patents. As part of the agreement, we have also agreed to dismiss the
litigation with prejudice and have granted IBIS, and its affiliates, immunity from suit for patent infringement for past, present or future damages related to the IBIS T5000 Biosensor System and T6000 System. Additionally under the agreement, IBIS
has agreed to pay us $1.0 million.

In April 2009, we announced that the expected launch of our test for Trisomy 21 (Down syndrome) had been
delayed and that we were no longer relying on our previously announced test data and results for that test. We also announced that our Board of Directors had formed a special committee of independent directors to oversee an independent investigation
of activity related to the test data and results and that the committee had engaged independent counsel to assist the committee in the conduct of the investigation. On September 28, 2009, we announced that the committees investigation had
been completed. Based on the committees work and recommendations, the independent directors concluded that as a result of our attempted transition from researching potential molecular diagnostic tests to developing and commercializing those
tests, we failed to put in place adequate protocols and controls for the conduct of studies in the Trisomy 21 program at our company. Certain of our employees also failed to provide adequate supervision. In the absence of such protocols, controls
and supervision, the test data and results in our Trisomy 21 program included inadequately substantiated claims, inconsistencies and errors. Due to deficiencies in our disclosure controls and procedures, in a number of instances such test data and
results were reported to the public in our press releases and other public statements. At the recommendation of the special committee, our Board of Directors has begun implementing a number of remedial measures including:



| |  |  | new disclosure controls and procedures;
| | - |  | ---------------------------------------



| |  |  | changes in our organizational and reporting structure;
| | - |  | ------------------------------------------------------



| |  |  | enhanced training in ethics and scientific processes for our employees;
| | - |  | -----------------------------------------------------------------------



| |  |  | new procedures for the conduct of research and development and clinical studies, including increased roles and responsibilities for independent third
parties;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | new procedures for the storage and management of samples for testing; and
| | - |  | -------------------------------------------------------------------------



| |  |  | creation of a science committee of our board of directors to oversee our research and development strategy and activities.
| | - |  | --------------------------------------------------------------------------------------------------------------------------

We also terminated the employment of our president and chief executive officer, Harry Stylli, Ph.D., and our senior vice
president of research and development, Elizabeth Dragon, Ph.D., effective immediately. In connection with the termination of Dr. Styllis employment, Dr. Stylli resigned as a director. We also obtained the resignation of our chief
financial officer, Paul Hawran. We also terminated the employment of three other employees and obtained the resignation of one other officer. While each of these officers and employees denied wrongdoing, the committees investigation raised
serious concerns, resulting in a loss of confidence by the independent directors in the personnel involved.

Our board of directors appointed
our chairman of the board, Harry F. Hixson, Jr., Ph.D., to serve as our interim chief executive officer. Our board of directors appointed Ronald M. Lindsay, Ph.D., one of our directors, to serve as our interim senior vice president of research and
development. Our board of directors appointed Paul V. Maier as our interim chief financial officer effective November 10, 2009. Mr. Maier will serve as a consultant to us until November 10, 2009. Our controller, Justin J. File, was
designated as our principal financial and accounting officer until the effective date of Mr. Maiers appointment as interim chief financial officer.

Following our April 2009 announcement, several complaints were filed in the U.S. District Court for the Southern District of California against us and certain of our officers and directors on behalf of
certain purchasers of our common stock. The complaints



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include claims asserted under Sections 10 and 20(a) of the Exchange Act and Sections 11 and 12(a)(2) of the Securities Act and have been brought as purported shareholder class actions. In
general, the complaints allege that we and certain of our officers and directors violated federal securities laws by making materially false and misleading statements regarding our Trisomy 21 test under development, thereby artificially inflating
the price of our common stock. The plaintiffs are seeking unspecified monetary damages and other relief. On September 1, 2009, the complaints were consolidated under the caption In re Sequenom, Inc. Securities Litigation, S.D. Cal. Case
No. 09-CV-0921 LAB (WMc) and a lead plaintiff was appointed. The lead plaintiff has been given until November 12, 2009 to file a consolidated complaint. We will vigorously defend against the claims advanced and intend to file a motion to
dismiss the consolidated complaint.

In May 2009, a shareholder derivative complaint was filed in the Superior Court of California for
the County of San Diego against our directors and certain of our officers. Thereafter, a number of similar actions, also styled as shareholder derivative suits, were filed in state court and have been consolidated in a single court. On July 1,
2009, the first of three shareholder derivative suits were filed in the U.S. District Court for the Southern District of California. The federal shareholder derivative actions have been transferred to a single court under the caption In re
Sequenom, Inc. Derivative Litigation, S.D. Cal. Case No. 09-CV-1341 LAB (WMc) and plaintiffs filed a single consolidated complaint. The state and federal shareholder derivative actions are hereinafter collectively referred to as the
Derivative Actions. The complaints in the Derivative Actions allege breaches of fiduciary duties by the defendants and other violations of law. In general, the complaints allege that our directors and certain of our officers caused or
allowed for the dissemination of materially false and misleading statements regarding our Trisomy 21 test under development, thereby artificially inflating the price of our common stock. The plaintiffs are seeking unspecified monetary damages and
other relief, including reforms and improvements to our corporate governance and internal procedures. We have not yet responded to the Derivative Actions, but will vigorously defend against the claims advanced.

In June 2009, we received written notification that the Enforcement Staff of the SEC has initiated an investigation following our April 2009
announcement regarding our Trisomy 21 test under development. Following our September 2009 announcement, members of the special committee and its independent counsel met with the SEC staff in connection with its investigation. As part of this
investigation, the SEC staff has also required us to produce information with respect to our announcements relating to our offer to acquire EXACT Sciences, Inc. in January 2009. We intend to cooperate fully with the SEC in this matter.

In July 2009, an attorney who claims to represent certain stockholders who were issued an aggregate of 71,836 shares of our common stock when we acquired
the assets of SensiGen in February 2009 sent us a letter claiming that we had breached our representations and warranties made in the asset purchase agreement and alleging that his clients had suffered approximately $1.3 million in damages as a
result. No complaint has been filed.

Following our September 2009 announcement, representatives of the Office of the U.S. Attorney for the
Southern District of California contacted us to inquire about the announcement. We have met with representatives of the U.S. Attorney and the Federal Bureau of Investigation (FBI) in connection with their investigations. We intend to cooperate fully
with the U.S. Attorney and the FBI in this matter.

Following our September 2009 announcement, representatives of Nasdaq also contacted us to
inquire about the announcement. We have met with representatives from Nasdaq in connection with their investigation and we intend to cooperate fully with Nasdaq in this matter.

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.



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Because of the uncertainties related to the incurrence, amount and range of loss on any pending litigation,
investigation, inquiry or claim, management is currently unable to predict the ultimate outcome of any litigation, investigation, inquiry or claim, determine whether a liability has been incurred or make an estimate of the reasonably possible
liability that could result from an unfavorable outcome. An adverse ruling or outcome in any lawsuit involving us could materially affect our business, liquidity, consolidated financial position, or results of operation. In view of the unpredictable
nature of such matters, we cannot provide any assurances regarding the outcome of any litigation, investigation, inquiry or claim to which we are a party or the impact on us of an adverse ruling of such matters.

(14) Income Taxes

We evaluate whether the
benefits of our tax positions are more-likely-than-not of being sustained upon audit based on the technical merits of the tax position. We recognize the impact of an uncertain income tax position taken on our income tax return at the largest amount
that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position is not recognized if it has less than a 50% likelihood of being sustained. There were no unrecognized tax benefits included in
the balance sheet at September 30, 2009, or December 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 September 30, 2009 and December 31, 2008, and have recognized no
interest or penalties in the consolidated statement of operations for the nine months ended September 30, 2009, and the year ended December 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 1994 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.

We completed a Section 382/383 analysis regarding the limitation of net operating loss and research and development credit carryforwards in April 2008.
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. As of December 31, 2008, we had updated our
unrecognized tax benefits and due to the existence of the valuation allowance, future changes in our unrecognized tax benefits will not impact our effective tax rate.

At December 31, 2008, we had federal and state tax net operating loss carryforwards of approximately $74.7 million and $74.7 million, respectively. The federal and state tax loss carryforwards
are reduced by the Section 382 limitation. The federal tax loss carryforwards will begin to expire in 2021, unless previously utilized. Also at December 31, 2008, we had German net operating loss carryforwards of approximately
$11.0 million, which may be carried forward indefinitely.

We also had federal and California research and development tax credit
carryforwards of approximately $1.8 million and $8.9 million, respectively as of December 31, 2008. The federal research and development credits have been reduced by the Section 383 limitation. The federal research and development tax
credit carryforwards will begin to expire in 2011 unless previously utilized. The California research and development credit carryforward indefinitely.

(15) Subsequent Events

On October 21, 2009, Dr. Hixson, our interim chief
executive officer, was granted two stock options pursuant to the 2006 Plan, each with an exercise price per share equal to $3.39, the fair market value of our common stock on the date of grant. The first is an option to purchase 187,500 shares,
vesting in 12 equal monthly installments beginning September 28, 2009 so long as Dr. Hixson provides service to us. The second is an option to purchase 187,500 shares, vesting in 12 equal monthly installments beginning September 28,
2010 so long as Dr. Hixson is serving as our chief executive officer. We also approved an additional stock option to be granted on or after September 28, 2010. This additional stock option will have an exercise price equal to the fair
market value of our common stock on the date of grant and will be for a number of shares equal to the difference between 187,500 and the number determined by multiplying the fully diluted shares outstanding on the date of grant by the percentage
that 187,500 shares represented of the fully diluted shares outstanding on October 21, 2009.

On October 21, 2009, Dr. Lindsay,
our interim senior vice president of research and development, was granted an option to purchase 150,000 shares pursuant to the 2006 Plan, with an exercise price per share equal to $3.39. The option vests in 12 equal monthly installments beginning
September 28, 2009 so long as Dr. Lindsay provides service to us. We also approved an additional stock option to be granted on or after September 28, 2010. This additional stock option will have an exercise price equal to the fair
market value of our common stock on the date of grant and will be for a number of shares equal to the difference between 150,000 and the number determined by multiplying the fully diluted shares outstanding on the date of grant by the percentage
that 150,000 shares represented of the fully diluted shares outstanding on October 21, 2009.

We have also approved Drs. Hixson and
Lindsay restricted stock units covering 225,000 and 90,000 shares, respectively, which will



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vest upon the achievement of specific performance-based milestones in accordance with a program for all of our employees, to be finalized by the compensation committee of our board of directors.

We have been named as a defendant in a complaint filed on October 28, 2009, by Xenomics, Inc. in the Supreme Court of the State of New
York. In the complaint, Xenomics alleges that due to materially false and misleading statements regarding our Trisomy 21 test under development, we have breached the license agreement entered into by the parties on October 29, 2008, which
provides us with exclusively licensed patent rights for the use of fetal nucleic acids obtained from maternal urine, and that Xenomics has suffered damages as a result. Xenomics is seeking equitable relief and $300 million in damages. We have not
yet been served with the complaint. We intend to vigorously defend against the claims advanced.

On November 3, 2009, we entered into a
third amendment to the Exclusive License of Technology Agreement dated October 14, 2005 and as amended thereafter, between us and Isis Innovation Limited, under which we in-license our fundamental noninvasive prenatal diagnostic technology,
including U.S. Patent No. 6,258,540. Pursuant to the amendment, Isis Innovation has agreed to a modification of certain time-based commercial launch milestones relating to aneuploidy and other products. In exchange for this modification, we
have agreed to make an immediate one-time payment of $1,000,000, increase royalty payments under the agreement during the final 12 months of the patent term and increase the specified minimum royalty amounts.



|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, MassCLEAVE, iSEQ, AttoSenseand SensiGene are trademarks of Sequenom, Inc. This report may
also refer to trade names and trademarks of other organizations.

Sequenom, Inc. was incorporated in 1994 under the laws of the State of
Delaware. As used in this report, the words we, us, our, and Sequenom refer to Sequenom, Inc. and its wholly owned subsidiaries on a consolidated basis, unless explicitly noted otherwise.

Overview

We are a life sciences company
committed to improving healthcare through genetic analysis solutions. We provide technology, products and laboratory developed diagnostic tests that target and serve discovery and clinical research and molecular diagnostic markets. Our customers use
our products to translate the results of genomic science into solutions for biomedical research, translational research, molecular medicine applications, agricultural, livestock, and other areas of research. Our development and commercialization
efforts in various diagnostic areas include noninvasive prenatal diagnostics, oncology, infectious diseases, autoimmune, endocrine and other disorders.

Molecular Diagnostics and SEQureDx Technology

Molecular Diagnostics

We
are committed to researching, developing and pursuing the commercialization of various noninvasive molecular diagnostic tests for prenatal genetic disorders and diseases, oncology, infectious diseases, and other diseases and disorders. We have
branded our diagnostic technology for prenatal diagnostics under the trademark SEQureDx. Our efforts in molecular diagnostics are focused on noninvasive diagnostics currently using our proprietary MassARRAY system; however, we may in the future
employ other platforms with our applications as may be more suitable on a case-by-case basis considering optimum test performance and commercialization factors.

Currently, we are primarily focused on developing and commercializing prenatal screening and diagnostic tests using our noninvasive, circulating cell-free fetal (ccff) nucleic acid based assay technology.
This technology would use a simple maternal blood



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draw from the patients arm for a prenatal diagnosis or risk assessment in order to provide reliable information about the status of the fetus early in pregnancy. Our planned screening and
diagnostic tests in areas of womens health, oncology, and infectious disease are also noninvasive and are expected to use simple blood draws from patients rather than invasive procedures such as surgery.

Supporting our initiatives in womens health, oncology and infectious disease we completed our acquisition of the complete AttoSense portfolio of
gene-based molecular tests and related assets from SensiGen, LLC in February 2009. The acquisition includes highly-sensitive and specific tests for the detection and monitoring of human papillomavirus (HPV) (the primary cause of cervical and head
and neck cancers), systemic lupus erythematosus (Lupus), chronic kidney disease (CKD), and other tests, all of which utilize our proprietary MassARRAY platform.

Prenatal Diagnostics

Noninvasive prenatal diagnostic tests based on our foundational ccff
nucleic acid analysis intellectual property are initially being developed on our MassARRAY platform for chromosomal aneuploidies including Trisomy 21 (Down syndrome), Rhesus D genotyping and fetal sex determination. Through our College of American
Pathology (CAP) accredited and Clinical Laboratory Improvement Amendments (CLIA) certified laboratory, the Sequenom Center for Molecular Medicine (Sequenom CMM), located in Grand Rapids, Michigan, we intend to develop, validate and commercialize
noninvasive prenatal laboratory developed tests (LDTs). This is a common approach used for most molecular genetic tests. We have made substantial investments in our information technology infrastructure to enhance the capabilities of our CLIA
certified laboratory to track samples and provide electronic ordering and reporting, and have put in place sample collection and transportation logistics that can be readily scaled. We are also actively engaging relationships with third party payors
that will support our pricing structure and reimbursement opportunities.

In April 2009, we announced that the expected launch of our Trisomy
21 test has been delayed. We are no longer relying on our previously announced research and development (R&D) test data and results. We are evaluating both RNA and DNA approaches, including sequencing, for a Trisomy 21 test. We are continuing to
collect clinical samples for sponsored clinical studies through independent third parties, the results of which will be published in peer-reviewed journals prior to the launch of any Trisomy 21 test that we develop.

In September 2009, we launched a carrier screening LDT for Cystic Fibrosis through our CAP/CLIA certified laboratory, Sequenom CMM. Subject to the
completion of a final and rigorous review of data for all of our tests under development, we plan to launch separate noninvasive prenatal screening LDTs for Rhesus D genotyping and fetal sex determination in the late first quarter or early second
quarter of 2010. Concurrent with our LDT commercialization activities, we plan to conduct the development, validation, and other activities necessary to file submissions with the Food and Drug Administration (FDA) seeking approval for selected
diagnostic tests. We anticipate revenues from our Cystic Fibrosis test to be minimal through the end of 2009.



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Genetic Analysis

Our proprietary MassARRAY system, comprised of hardware, software applications, consumable chips and reagents, is a high performance (in speed, accuracy and cost efficiency) nucleic acid analysis platform
that quantitatively and precisely measures genetic target material and variations. Our platform is widely accepted as a leading high-performance DNA analysis platform for the fine mapping genotyping market and is gaining traction in newer developing
markets, such as agricultural-biotechnology and clinical research. Our customers include premier clinical research laboratories, bio-agriculture, bio-technology and pharmaceutical companies, academic institutions, various government agencies
worldwide. To provide customer support for our expanding user base and in an effort to maximize market penetration, we have established direct sales and support personnel serving North America, Europe, Australia and Asia, in addition to regional
distribution partners in France, India, Israel, Russia, Eastern Europe, South Korea, New Zealand, Singapore, Taiwan, Kuwait, Saudi Arabia and Turkey.

Our MassARRAY system provides reliable results for a wide range of DNA/RNA analysis applications including single nucleotide polymorphism (SNP) genotyping detection of mutations, analysis of copy number variants and other structural genome
variations. In addition, the system provides quantitative gene expression analysis, quantitative DNA methylation analysis, comparative sequence analysis of haploid organisms, SNP discovery, and oligonucleotide quality control. These applications are
provided through proprietary application software that operates on the MassARRAY platform and through the purchase of consumable chips and reagent sets. While the MassARRAY system is versatile across many applications, it is a robust and
cost-effective genotyping solution for fine mapping projects enabled through our iPLEX multiplexing assay, which permits multiplexed SNP analysis using approximately the same amount of reagents and chip surface area as is used for a single locus/SNP
analysis.

Our research and development efforts in genetic analysis are committed to producing new and improved components and applications
for the MassARRAY system that deliver greater system versatility and excellent data quality at a competitive price per data point. These research and development activities and new applications also facilitate and support our diagnostics
initiatives.

As a result of weaker demand for our MassARRAY systems resulting from the economic environment in early 2009, in April 2009 we
formally approved and implemented a cost cutting initiative in our genetic analysis business which is expected to result in an approximately $8.0 million decrease in costs in 2009 and an overall annualized reduction in costs of approximately $10.0
million. This initiative included a decrease in the genetic analysis workforce that resulted in a cumulative charge of approximately $1.5 million for the nine months ended September 30, 2009 in connection with one-time termination benefits,
office closures and other related costs.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP. 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:



| |  |  | Revenue recognition
| | - |  | -------------------



| |  |  | Goodwill and impairment evaluations of long-lived assets
| | - |  | --------------------------------------------------------



| |  |  | Allowance for doubtful accounts
| | - |  | -------------------------------



| |  |  | Reserves for obsolete and slow-moving inventory
| | - |  | -----------------------------------------------



| |  |  | Warranty costs
| | - |  | --------------



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



| |  |  | Share-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 our Board of Directors.



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During the first nine months of 2009, 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, 2008 for
a more complete discussion of our critical accounting policies and estimates.

Results of Operations for the Three and Nine Months Ended
September 30, 2009 and 2008

Revenues

Total revenues for the three months ended September 30, 2009 decreased to $9.2 million from $11.6 million for the same period in 2008 and was comprised of product related sales and contract research
services. Total revenues for the nine months ended September 30, 2009 decreased to $27.1 million from $35.0 million for the same period in 2008. Product related 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.

Consumables revenue for the three and nine months ended September 30, 2009 increased to $5.4 million and $15.4 million, respectively, compared to $5.0 million and $14.6 million, respectively, for the
same periods in 2008 due to increased consumables orders from our customers in the biomedical research and agricultural biology markets. MassARRAY and product related revenues for the three and nine months ended September 30, 2009 were $3.7
million and $10.1 million, respectively, as compared to $5.7 million and $16.9 million for the same periods in 2008. The decrease of $2.0 million and $6.8 million for the three and nine months ended September 30, 2009, respectively, as compared
to the same period in 2008 was due to fewer system placements in the three and nine months ended September 30, 2009. The decrease in MassARRAY system hardware and software sales was attributable to the continued slowing of academic,
pharmaceutical, and clinical research institutions capital expenditure requirements associated with the current economic environment. The decrease in revenue from MassARRAY and product related sales were offset by increased revenue recognized from
MassARRAY system maintenance contracts. System maintenance contracts revenue for the three and nine months ended September 30, 2009 were $1.4 million and $3.0 million, respectively, compared to $0.8 million and $2.3 million, respectively, for
the same periods in 2008. The increase in MassARRAY system maintenance contracts revenue is primarily attributable to our higher installed system base when compared to the prior periods.

We recorded services revenue of $0.1 million and $1.6 million, respectively, for the three and nine months ended September 30, 2009, as compared to $0.9 million and $3.5 million, respectively, for
the same periods in 2008. The decreases of $0.8 million and $1.9 million are attributable to our cost cutting initiative that commenced in April 2009. Service revenue is expected to be minimal for the remainder of 2009.

Research and other revenues, which consists of license and research grant payments, were approximately $3,000 and $5,000, respectively, for the three and
nine months ended September 30, 2009 compared to $0 and $71,000, respectively, for the same periods in 2008. The timing of research revenues depends upon our expenditures on grant research and our receipt of grant funding from sponsoring
agencies. We expect license and 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 system, general economic conditions, revenue recognition criteria, the overall acceptance and demand for our new and
existing commercial products and services, as well as the future adoption rates of our cystic fibrosis carrier screening assay and future assays.

Cost of product and service revenues and gross margin

Cost of consumables and products revenues for the three and nine months
ended September 30, 2009 were $2.5 million and $7.3 million, respectively, compared to $3.5 million and $11.3 million, respectively, for the same periods in 2008. Gross margins on consumables and product related sales for the three and nine
months ended September 30, 2009 were 73% and 71%, respectively, compared to 67% and 64%, respectively, for the same periods in 2008. Gross margins increased primarily due to fewer system placements, which historically sell at lower gross
margins, during the three and nine months ended September 30, 2009, as compared to same period in 2008, offset by higher consumable sales, which historically sell at higher average gross margins, to the comparable period in 2008.

Cost of services revenue for the three and nine months ended September 30, 2009 were $0.2 million and $1.9 million, respectively, compared to $1.0
million and $3.3 million, respectively, for the same periods in 2008. Gross margins were negative for the three and nine months ended September 30, 2009 due to the completion of remaining unfavorable, low volume contracts. Gross margins on
contract research services have been dependent on particular contract terms of the work undertaken in each quarter.



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Our overall gross margin for the three and nine months ended September 30, 2009 was 71% and 66%,
respectively, compared to 61% and 58%, respectively, for the same periods in 2008. When compared to the prior periods, the increase in overall gross margin was attributable to lower system and contract research revenues, which are sold at a lower
margin than consumables. The increase in consumables revenue during the third quarter of 2009 as compared to the third quarter of 2008 also contributed to the improved margin.

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 product sales
and the type of services, competitive conditions, sales volumes, discounts offered, sales through distributors, as well as the cost of goods sold, inventory reserves and obsolescence charges required and royalty payment obligations on in-licensed
technologies. Our gross margin will also be affected by the adoption rates of our diagnostic LDTs we commercialize, the payor contracts for laboratory developed or diagnostic tests and the volume of tests sold.

Research and development expenses

Research
and development expenses for the three and nine months ended September 30, 2009, increased to $8.5 million and $27.5 million, respectively, as compared to $7.1 million and $18.4 million, respectively, for the same periods in 2008. 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 research and development expenses of $1.4 million for the three months ended September 30, 2009, as compared to the same period in 2008 primarily relates to increased headcount and
related costs of $0.7 million, an increase of $1.3 million for clinical trial costs associated with our prenatal diagnostic, molecular diagnostic and genetic analysis programs, $0.5 million for higher share-based compensation charges and an increase
of other miscellaneous expenses of $0.1 million primarily associated with travel for clinical site monitoring and higher facilities related charges, offset by a decrease of $1.1 million in collaboration costs associated with various research and
development projects and related licensing activities.

The increase in research and development expenses of $9.1 million for the nine months
ended September 30, 2009 compared to the same period in 2008 primarily relates to headcount and related costs of $2.2 million, an increase of $2.8 million for clinical trial costs associated with our prenatal diagnostic, molecular diagnostic
and genetic analysis programs, an increase of $1.8 million for higher share-based compensation charges, increased operating supplies of $0.5 million primarily associated with our noninvasive prenatal diagnostic research and development, $0.4 million
of higher rent, communications and general facilities expenses associated with Sequenom CMM, our CLIA certified laboratory acquired in the fourth quarter of 2008, $0.8 million of increased depreciation primarily associated with the acquisition of
Sequenom CMM, an increase of other miscellaneous expenses of $0.2 million primarily associated with travel for clinical site monitoring and higher corporate related charges and $0.9 million in higher allocated overhead charges primarily due to the
full allocation of our IT department across all functional areas. These increases were offset by decreased consultant expenses of $0.5 million due to the increase in headcount to support various research and development projects.

We expect our research and development expenses to remain higher through the end of 2009 compared to 2008, due to our investments during 2009 in the
development of noninvasive prenatal nucleic acid based tests, as well as new products and applications for our MassARRAY platform.

Selling
and marketing expenses

Selling and marketing expenses for the three and nine months ended September 30, 2009 increased to $5.9
million and $20.2 million, respectively, as compared to $5.9 million and $18.0 million, respectively, for the same periods in 2008. These expenses consisted primarily of salaries and related expenses for sales and marketing, customer support, and
business development personnel and their related department expenses.

There was minimal change in selling and marketing expenses for the
three months ended September 30, 2009 compared to the same period in 2008 with minor fluctuations related to increased headcount and related costs of $0.1 million associated with building our contract sales force infrastructure for our
noninvasive diagnostics business and $0.1 million for higher share-based compensation charges, offset by a decrease of $0.2 million in various sales and marketing expenditures, primarily related to reduced advertising and public relations expenses
for sales and marketing projects associated with genetic analysis programs, decreased travel expenditures and lower facilities related expenses.

The increase in selling and marketing expenses of $2.2 million for the nine months ended September 30, 2009 compared to the same period in 2008 primarily was related to increased headcount and related costs of $0.6 million, increased
travel and related costs of $0.5 million associated with building our contract sales force infrastructure for our noninvasive diagnostics business, increased consulting charges of $0.5 million related to our managed care and corporate branding
activities and $1.2 million for higher share-based compensation charges. These increases were offset by a decrease of $0.3 million in reduced advertising and public relations expenses for sales and marketing projects associated with our noninvasive
prenatal technology and a decrease of $0.4 million from adjustments to our bad debt reserve related to the collection of previously reserved receivables.



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We expect our sales and marketing expenses to remain higher in 2009 compared to 2008, due to our increased
headcount and related expenditures incurred during 2009 as we strengthed our sales force and built our marketing and commercial development teams for our molecular diagnostic tests.

General and administrative expenses

General and administrative expenses for the three and
nine months ended September 30, 2009 increased to $6.7 million and $21.9 million, respectively, as compared to $4.8 million and $12.5 million, respectively, for the same periods in 2008. These expenses consisted primarily of headcount and
related expenses for legal, the independent investigation, finance and human resource personnel and their related department expenses.

The
increase in general and administrative expenses of $1.9 million for the three months ended September 30, 2009 from the same period in 2008 was primarily due to $0.8 million of increased legal fees associated with new and ongoing litigation, as
well as the independent investigation expenses, $0.3 million for increased headcount and related expenses, $0.2 million of increased insurance expense and other corporation expense, $0.3 million of higher rent and communications expenses associated
with our San Diego facilities, increased consulting charges of $0.2 million and $0.2 million in higher share-based compensation charges.

The
increase in general and administrative expenses of $9.4 million for the nine months ended September 30, 2009 from the same period in 2008 was primarily due to $5.9 million for increased legal fees related to new and ongoing litigation, as well
as independent investigation expenses, $1.2 million in higher share-based compensation charges, $0.6 million for increased headcount and related expenses, $1.2 million for higher rent and communications expenses associated with our San Diego
facilities maintenance and communications expenses, $0.2 million in increased investor relations consulting, audit and tax related expenses, $0.3 million of higher insurance and other corporation expense and $0.2 million for higher depreciation
expense, offset by a decrease of $0.2 million in miscellaneous department expenses.

We expect general and administrative expenses to remain
higher through the end of 2009 compared to 2008, due to the build-out of our infrastructure during 2009 to support our anticipated growth and from higher legal costs due to ongoing litigation and investigation expenses.

Restructuring expense

Restructuring
expense for the three and nine months ended September 30, 2009 was $0.5 million and $1.5 million, respectively, as compared to none in the same periods in 2008. The increase in restructuring expense was due to our April 2009 reduction in our
genetic analysis workforce, two office closures and other related costs. We expect to continue to experience higher margins compared to prior periods, as well as annualized reduction in costs as a result of this cost cutting initiative.

Interest income, net

Interest income,
net, was $0.1 million and $0.4 million, respectively, for the three and nine months ended September 30, 2009, as compared to $0.5 million and $1.2 million, respectively, for the same periods in 2008. A reduction of our cash, cash equivalents
and marketable securities balances in the current periods, in conjunction with changes in our investment policy and the overall reduction in the rates of return in our investment portfolio are attributable to the decreases of $0.4 million and $0.8
million, respectively, for the three and nine months ended September 30, 2009.

Loss on marketable securities

Loss on marketable securities was none and $38,000, respectively, for the three and nine months ended September 30, 2009, as compared to $0.1 million
and $1.2 million, respectively, for the comparable periods in 2008. The recognized loss through the nine months ended September 30, 2009, was due to an other-than-temporary impairment of one of our investments in auction rate securities (ARS),
as compared to the prior comparable periods, which was due to an other-than-temporary impairment of two of our investments in ARS. 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 income (expense), net

Other income
(expense), net, was $204,000 and $382,000, respectively, for the three and nine months ended September 30, 2009, as compared to other (expense) income, net, of $(29,000) and $(131,000), respectively, for the comparable periods in 2008. The
increase in other income (expense), net, for the three and nine months ended September 30, 2009 was due to favorable realized foreign currency translations, the receipt of a research and development tax credit from the U.S. Government of $0.3
million and miscellaneous other income items, offsetting interest expense associated with our loans.



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Liquidity and Capital Resources

As of September 30, 2009, our cash, cash equivalents and current marketable securities totaled $50.1 million, compared to $98.3 million at December 31, 2008. Our cash equivalents and current
marketable securities are held in U.S. Government securities with ratings of AAA and repurchase agreements collateralized by U.S. Government securities with ratings of AAA. As of September 30, 2009, we have $5.7 million of ARS, which reflects a
$3.7 million adjustment to the principal value of $9.4 million. Additional discussion with respect to the risks and uncertainties associated with our ARS is included in the Risk Factors in Item 1A of this report, in
Quantitative and Qualitative Disclosures about Market Risk in Item 3 of this report and in the notes to our condensed consolidated financial statements included elsewhere in this report.

We have a history of recurring losses from operations and have an accumulated deficit of $578.9 million as of September 30, 2009. Our capital
requirements to sustain operations, including research and development projects, have been and will continue to be significant. As of September 30, 2009, we had working capital of $53.3 million.

On July 1, 2008, we closed an underwritten public offering of 5,500,000 shares of our common stock at $15.50 per share, with the underwriters
exercising their option to purchase an additional 825,000 shares on July 8, 2008. Including the additional shares, the offering resulted in aggregate net proceeds of approximately $91.8 million after deducting underwriting discounts,
commissions and transaction expenses.

We consider the material drivers of our cash flow to be sales volumes, working capital, inventory
management, research and development and operating expenses. Our principal sources of liquidity are our cash, cash equivalents and marketable securities. Cash used in operations for the nine months ended September 30, 2009, was $39.2 million,
as compared to $22.6 million for the same period in 2008. The use of cash was primarily a result of the net loss of $52.6 million for the nine months ended September 30, 2009, adjusted for non-cash items of depreciation and amortization of $3.8
million, share-based compensation of $9.2 million, and non-cash compensation charges related to vesting of restricted stock of $0.3 million, offset by a non-cash change in deferred rent of $0.4 million and the recovery of bad debt expense of $0.1
million. The uses in our operating assets and liabilities primarily consisted of an increase in other current assets and prepaid expenses of $1.9 million and decreases in accounts payable and accrued expenses of $1.9 million and other liabilities of
$0.2 million at September 30, 2009 compared to December 31, 2008. These changes were offset by decreases in accounts receivable of $3.2 million, inventory of $0.8 million and an increase in deferred revenue of $0.4 million at
September 30, 2009 compared to December 31, 2008. 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.

Net cash used by investing activities was $9.2 million for the nine months ended September 30, 2009, as compared to net cash provided of $28.6 million
for the same period in 2008. Other than the maturity and repurchase of $30.0 million of marketable securities, investing activities during the nine months ended September 30, 2009, consisted of purchases for capital equipment for $7.2 million
and cash paid in connection with our acquisition of SensiGen, LLC of $1.9 million during the nine months ended September 30, 2009.

Net
cash provided by financing activities was $0.3 million for the nine months ended September 30, 2009, as compared to net cash provided by financing activities of $93.7 million for the same period in 2008. Financing activities during the nine
months ended September 30, 2009, included the receipt of proceeds from the exercise of stock options and employee stock purchase plan purchases during the period of $1.2 million and receipt of $0.4 million from a capital lease. Our cash used
consisted of repayments on our asset-backed loan of $0.5 million, repayments on our capital lease of $0.1 million and repayments on our long-term debt of $0.8 million for the nine months ended September 30, 2009.

Our business will require additional investment that we have not yet secured. We anticipate that our cash, cash equivalents and current marketable
securities will total approximately $39 million on December 31, 2009, which would not be sufficient to fund our operating expenses and capital expenditures through the end of 2010 if we continue our spending at our current levels. This would
raise substantial doubt about our ability to continue as a going concern unless we adopt measures to conserve our cash resources and prolong our ability to operate. Our management team is in the process of reviewing our planned expenditures and
operations and preparing recommendations for our board of directors to consider in an effort to conserve our cash resources. If we fail to reduce our operating expenses and capital expenditures sufficiently, our requirements for additional financing
will become more urgent. The amount of funds that we will need and the timing of any such investment will be determined by many factors, some of which are beyond our control. 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 and LDT services through Sequenom CMM;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 including the expenses associated with the ongoing investigations and litigation;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | our ability to validate our diagnostic tests and the level of sensitivity and specificity of our diagnostic tests;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | 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 noninvasive
prenatal analysis technology, research and other collaborations, joint ventures and other business arrangements;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the level of our legal expenses, litigation or any other legal proceedings, the investigation initiated by the SEC and inquiries from Nasdaq, the
Office of the U.S. Attorney for the Southern District of California and the FBI, intellectual property protection and those expenses and any damages payments associated with litigation, including intellectual property litigation and securities
related litigation;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | our ability to hold to maturity or necessity to liquidate any ARS holdings;
| | - |  | ---------------------------------------------------------------------------



| |  |  | 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, the market price of our common stock, uncertainty about our Trisomy 21 and other diagnostic tests, the uncertainty regarding the results of ongoing litigation matters, the
investigations by the SEC, Nasdaq, the Office of the U.S. Attorney for Southern District of California and the FBI, or other factors may not support capital raising transactions. If we are unable to obtain sufficient 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, to merge all or a portion of our business with another entity or to cease as a going concern. If we raise additional funds by selling shares of our capital stock, the ownership interest of our current stockholders will
be diluted.

We evaluate goodwill for impairment on an annual basis, or more frequently if we believe indicators of impairment exist, by
comparing the carrying value of our reporting unit to its estimated fair value.

At September 30, 2009, 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, and repurchase agreements collateralized by U.S. Government securities with ratings of AAA. Our investment policy includes a minimum quality rating for all new investments, as
well as limits the amount of credit exposure to only issuances from the U.S. Government. 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.

Consistent with our investment policy guidelines in effect when originally purchased,
the ARS investments held by us all had AAA/AA credit ratings at the time of purchase. At September 30, 2009, $9.4 million of principal was invested in 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. With the



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liquidity issues experienced in global credit and capital markets, the ARS held by us at September 30, 2009 have experienced multiple failed auctions as the amount of securities submitted
for sale has exceeded the amount of purchase orders.

Due to changes in the underlying assumptions utilized in our discounted cash flow
analyses and subject to the completion of an ongoing review of planned expenditures and operations for 2010 by our management, we have continued to classify our ARS investments of $5.7 million as noncurrent assets on the condensed consolidated
balance sheet at September 30, 2009. 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 for other-than-temporary impairment losses of $2.6 million and $1.1 million, respectively, were charged to operations during the years ended December 31, 2008 and 2007 and did not have a material impact on our liquidity or
financial flexibility for those periods. For the three and nine months ended September 30, 2009, none and $38,000, respectively, of other-than temporary impairment losses were charged to operations. Any future fluctuation in fair value related
to our ARS investments would be recorded as a charge to operations as appropriate.

Since there is a lack of observable market quotes on our
investment portfolio of marketable securities in 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, Japanese Yen, 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 (AUD). 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 September 30,
2009Net foreign monetary assets/(liabilities)
|                                  | AUD |                                                                   | EUR
|                                  |     | ($ in millions)                                                  
|USD                               |     | $                                                                 | 0.6 |  | $ | 0.3

A movement of 10% in the U.S. dollar to AUD exchange rate would create an unrealized gain or loss of
approximately $59,000. A movement of 10% in the U.S. dollar to EUR exchange rate would create an unrealized gain or loss of approximately $27,000.

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 September 30, 2009. 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.



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

On
April 29, 2009, we announced that the expected launch of our noninvasive prenatal test for Trisomy 21 had been delayed and that we were no longer relying on our previously announced test data and results for that test. We also announced that
our board of directors had formed a special committee of independent directors to oversee an independent investigation and that the committee had



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engaged independent counsel to assist the committee in the conduct of the investigation. The investigation has been completed. Based on the committees work and recommendations, the
independent members of our board of directors have concluded that as a result of our attempted transition from researching potential molecular diagnostic tests to developing and commercializing those tests, we failed to put in place adequate
protocols and controls for the conduct of studies in the Trisomy 21 program at our company. Certain employees also failed to provide adequate supervision. In the absence of such protocols, controls and supervision, the test data and results in our
Trisomy 21 program included inadequately substantiated claims, inconsistencies and errors. Due to deficiencies in our disclosure controls and procedures, in a number of instances such test data and results were reported to the public in our press
releases and other public statements.

As a result of the investigation and in connection with our regular quarterly procedures, 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 Securities Exchange Act of 1934, as
amended (the Exchange Act) and the rules and regulations of the SEC. This evaluation was made under the supervision and with the participation of management, including our principal executive officer and principal financial and accounting officer as
of September 30, 2009. Our principal executive officer and principal financial and accounting 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 not effective as of September 30, 2009, and were not sufficient to ensure that information required to be disclosed by us in reports that we file under the Exchange Act was recorded, processed, summarized and reported within the
time periods specified in the SECs rules and forms.

At the recommendation of the special committee, our board of directors has begun
implementing, among other things, new disclosure controls and procedures. Our new disclosure controls and procedures have been designed to ensure that we record, process, summarize, and report information we are required to disclose in our periodic
reports filed with the SEC in the manner and within the time periods specified in the SECs rules and forms. Our new disclosure controls and procedures are also designed 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.

Our management does not expect that our new disclosure controls or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived, implemented 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.

An evaluation was also performed under the
supervision and with the participation of our management, including our principal executive officer and principal financial and accounting 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. 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. 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 (the IPO Cases).



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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 Exchange Act, 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, as amended (the Securities Act).

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 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.

In February 2009, liaison
counsel for plaintiffs informed the District Court that a new settlement of all IPO Cases had been agreed to in principle, subject to formal approval by the parties and preliminary and final approval by the District Court. In April 2009, the parties
submitted a tentative settlement agreement to the District Court and moved for preliminary approval thereof. In June 2009, the District Court granted preliminary approval of the tentative settlement and ordered that notice of the settlement be
published and mailed to class members. The District Court held a final fairness hearing in September 2009 and granted final approval of the settlement in October 2009. Objectors will have 30 days to appeal this ruling although they may request
up to an additional 30 days. If no appeal is filed, the settlement will become effective and will result in the dismissal of all claims against us and our officers and directors with prejudice, and our pro rata share of the settlement fund will
be fully funded by insurance

In October 2008, we filed a patent infringement suit against Ibis Biosciences, Inc. (IBIS), formerly a
subsidiary of Isis Pharmaceuticals, Inc. The complaint was served on the defendant in February 2009. IBIS has been acquired by Abbott Molecular. The lawsuit was filed in the U.S. District Court for the District of Delaware. The lawsuit alleged that
the sale or offer for sale of the Ibis T5000 Biosensor System and related technology infringes three U.S. patents: 6,300,076, 6,500,621 and 7,419,787. Defendant has filed an answer and counterclaims against us seeking declaratory judgments that the
patents are not infringed and are invalid and/or unenforceable. We sought a permanent injunction enjoining the defendant from further infringement and monetary damages, including enhanced damages pursuant to 35 U.S.C. § 284, costs,
attorneys fees and other relief as the court deems just and proper. On October 22, 2009, we and IBIS entered into a non-exclusive license and settlement agreement and the court dismissed with prejudice all claims and counterclaims in the
lawsuit. Pursuant to the terms of the agreement, we have agreed to grant IBIS and its affiliates a non-exclusive license under the three mass spectrometry-based patents involved in the lawsuit and certain pending mass-spectrometry-based applications
and foreign counterparts to manufacture, use, practice, sell, offer to sell, and import products and methods protected by the licensed patents. As part of the agreement, we have also agreed to dismiss the litigation with prejudice and have granted
IBIS, and its affiliates, immunity from suit for patent infringement for past, present or future damages related to the IBIS T5000 Biosensor System and T6000 System. Additionally under the agreement, IBIS has agreed to pay us $1.0 million.

In April 2009, we announced that the expected launch of our test for Trisomy 21 (Down syndrome) had been delayed and that we were no longer
relying on our previously announced test data and results for that test. We also announced that our Board of Directors had formed a special committee of independent directors to oversee an independent investigation of activity related to the test
data and results and that the committee had engaged independent counsel to assist the committee in the conduct of the investigation. On September 28, 2009, we announced that the committees investigation had been completed. Based on the
committees work and recommendations, the independent directors concluded that as a result of our attempted transition from researching potential molecular diagnostic tests to developing and commercializing those tests, we failed to put in
place adequate protocols and controls for the conduct of studies in the Trisomy 21 program at our company. Certain of our employees also failed to provide adequate supervision. In the absence of such protocols, controls and supervision, the test
data and results in our Trisomy 21 program included inadequately substantiated claims, inconsistencies and errors. Due to deficiencies in our disclosure controls and procedures, in a number of instances such test data and results were reported to
the public in our press releases and other public statements. At the recommendation of the special committee, our Board of Directors has begun implementing a number of remedial measures including:



| |  |  | new disclosure controls and procedures;
| | - |  | ---------------------------------------



| |  |  | changes in our organizational and reporting structure;
| | - |  | ------------------------------------------------------



| |  |  | enhanced training in ethics and scientific processes for our employees;
| | - |  | -----------------------------------------------------------------------



| |  |  | new procedures for the conduct of research and development and clinical studies, including increased roles and responsibilities for independent third
parties;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | new procedures for the storage and management of samples for testing; and
| | - |  | -------------------------------------------------------------------------



| |  |  | creation of a science committee of our board of directors to oversee our research and development strategy and activities.
| | - |  | --------------------------------------------------------------------------------------------------------------------------

We also terminated the employment of our president and chief executive officer, Harry Stylli, Ph.D., and our senior vice
president of research and development, Elizabeth Dragon, Ph.D., effective immediately. In connection with the termination of Dr. Styllis employment, Dr. Stylli resigned as a director. We also obtained the resignation of our chief
financial officer, Paul Hawran. We also terminated the employment of three other employees and obtained the resignation of one other officer. While each of these officers and employees denied wrongdoing, the committees investigation raised
serious concerns, resulting in a loss of confidence by the independent directors in the personnel involved.

Our board of directors appointed
our chairman of the board, Harry F. Hixson, Jr., Ph.D., to serve as our interim chief executive officer. Our board of directors appointed Ronald M. Lindsay, Ph.D., one of our directors, to serve as our interim senior vice president of research and
development. Our board of directors appointed Paul V. Maier as our interim chief financial officer effective November 10, 2009. Mr. Maier will serve as a consultant to us until November 10, 2009. Our controller, Justin J. File, was
designated as our principal financial and accounting officer until the effective date of Mr. Maiers appointment as interim chief financial officer.

Following our April 2009 announcement, several complaints were filed in the U.S. District Court for the Southern District of California against us and certain of our officers and directors on behalf of
certain purchasers of our common stock. The complaints include claims asserted under Sections 10 and 20(a) of the Exchange Act and Sections 11 and 12(a)(2) of the Securities Act and have been brought as purported shareholder class actions. In
general, the complaints allege that we and certain of our officers and directors violated federal securities laws by making materially false and misleading statements regarding our Trisomy 21 test under development, thereby artificially inflating
the price of our common stock. The plaintiffs are seeking unspecified monetary damages and other relief. On September 1, 2009, the complaints were consolidated under the caption In re Sequenom, Inc. Securities Litigation, S.D. Cal. Case
No. 09-CV-0921 LAB (WMc) and a lead plaintiff was appointed. The lead plaintiff has been given until November 12, 2009, to file a consolidated complaint. We will vigorously defend against the claims advanced and intend to file a motion to
dismiss the consolidated complaint.

In May 2009, a shareholder derivative complaint was filed in the Superior Court of California for
the County of San Diego against our directors and certain of our officers. Thereafter, a number of similar actions, also styled as shareholder derivative suits, were filed in state court and have been consolidated in a single court. On July 1,
2009, the first of three shareholder derivative suits were filed in the U.S. District Court for the Southern District of California. The federal shareholder derivative actions have been transferred to a single court under the caption In re
Sequenom, Inc. Derivative Litigation, S.D. Cal. Case No. 09-CV-1341 LAB (WMc) and plaintiffs filed a single consolidated complaint. The state and federal shareholder derivative actions are hereinafter collectively referred to as the
Derivative Actions. The complaints in the Derivative Actions allege breaches of fiduciary duties by the defendants and other violations of law. In general, the complaints allege that our directors and certain of our officers caused or
allowed for the dissemination of materially false and misleading statements regarding our Trisomy 21 test under development, thereby artificially inflating the price of our common stock. The plaintiffs are seeking unspecified monetary damages and
other relief, including reforms and improvements to our corporate governance and internal procedures. We have not yet responded to the Derivative Actions, but will vigorously defend against the claims advanced.

In June 2009, we received written notification that the Enforcement Staff of the SEC has initiated an investigation following our April 2009
announcement regarding our Trisomy 21 test under development. Following our September 2009 announcement, members of the special committee and its independent counsel met with the SEC staff in connection with its investigation. As part of this
investigation, the SEC staff has also required us to produce information with respect to our announcement relating to our offer to acquire EXACT Sciences, Inc. in January 2009. We intend to cooperate fully with the SEC in this matter.

In July 2009, an attorney who claims to represent certain stockholders who were issued an aggregate of 71,836 shares of our common stock when we acquired
the assets of SensiGen in February 2009 sent us a letter claiming that we had breached our representations and warranties made in the asset purchase agreement and alleging that his clients had suffered approximately $1.3 million in damages as a
result. No complaint has been filed.

Following our September 2009 announcement, representatives of the Office of the U.S. Attorney for the
Southern District of California contacted us to inquire about the announcement. We have met with representatives of the U.S. Attorney and the Federal Bureau of Investigation (FBI) in connection with their investigations. We intend to cooperate fully
with the U.S. Attorney and the FBI in this matter.

Following our September 2009 announcement, representatives of Nasdaq also contacted us to
inquire about the announcement. We have met with representatives from Nasdaq in connection with their investigation and we intend to cooperate fully with Nasdaq in this matter.



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We have been named as a defendant in a complaint filed on October 28, 2009, by plaintiff Xenomics, Inc.
in the Supreme Court of the State of New York. In the complaint, the plaintiff alleges that due to materially false and misleading statements regarding our Trisomy 21 test under development, we have breached the license agreement entered into by the
parties on October 29, 2008, which provides us with exclusively licensed patent rights for the use of fetal nucleic acids obtained from maternal urine, and that the plaintiff has suffered damages as a result. The plaintiff is seeking equitable
relief and $300 million in damages. We have not yet been served with the complaint. We intend to vigorously defend against the claims advanced.

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.

Because of the uncertainties related to the incurrence, amount and range of loss on any pending litigation, investigation, inquiry or claim, management is currently unable to predict the ultimate outcome
of any litigation, investigation, inquiry or claim, determine whether a liability has been incurred or make an estimate of the reasonably possible liability that could result from an unfavorable outcome. An adverse ruling or outcome in any lawsuit
involving us could materially affect our business, liquidity, consolidated financial position, or results of operations ability to sell one or more of our products or could result in additional competition. In view of the unpredictable nature of
such matters, we cannot provide any assurances regarding the outcome of any litigation, investigation, inquiry or claim to which we are a party or the impact on us of an adverse ruling of such matters.



|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, 2008. 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, 2008, as filed with the SEC.

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

Our business will require additional investment that we have not yet secured. We anticipate that our cash, cash equivalents and
current marketable securities will total approximately $39 million on December 31, 2009, which would not be sufficient to fund our operating expenses and capital expenditures through the end of 2010 if we continue our spending at our current
levels. This would raise substantial doubt about our ability to continue as a going concern unless we adopt measures to conserve our cash resources and prolong our ability to operate. Our management team is reviewing our planned expenditures and
operations and preparing recommendations for our board of directors to consider in an effort to conserve our cash resources. If we fail to reduce our operating expenses and capital expenditures sufficiently, our requirements for additional financing
will become more urgent. The actual amount of funds that we will need and the timing of any such investment will be determined by many factors, some of which are beyond our control. 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;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | 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 noninvasive prenatal
diagnostic technology, development, commercialization, and regulatory approval;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to validate our diagnostic tests and the level of sensitivity and specificity of our diagnostic tests;
| | - |  | ------------------------------------------------------------------------------------------------------------------



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| |  |  | 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 and success 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 noninvasive
prenatal analysis technology, research and other collaborations, joint ventures and other business arrangements;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the level of our legal expenses, including those expenses associated with the completion of the independent investigation, the investigations by the
SEC, Nasdaq, the Office of the U.S. Attorney for the Southern District of California and the FBI, intellectual property protection, securities class actions and those expenses and any damages payments associated with litigation;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | our ability hold to maturity or necessity to liquidate any ARS holdings;
| | - |  | ------------------------------------------------------------------------



| |  |  | 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, the market price of our common stock, uncertainty about our Trisomy 21 and other diagnostic tests, the uncertainty regarding the results of ongoing litigation matters, the
investigations by the SEC, Nasdaq, the Office of the U.S. Attorney for the Southern District of California and the FBI or other factors may not support capital raising transactions. In addition, our ability to raise additional capital may depend
upon obtaining shareholder approval. There can be no assurance that we will be able to obtain shareholder approval if it is necessary. If we are unable to obtain sufficient 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, to merge all or
a portion of our business with another entity or we may not be able to continue as a going concern. If we raise additional funds by selling shares of our capital stock (or otherwise issue shares of our capital stock or rights to acquire share of our
capital stock), the ownership interest of our current stockholders will be diluted.

*Uncertainty regarding our Trisomy
21 test could materially adversely affect our business, financial condition and results of operations.

We have announced that
previously announced test data and results for our noninvasive prenatal test for Trisomy 21 cannot be relied on and that the launch of the test will be delayed. While we are continuing our research and development program for the test, we are unable
to provide guidance on the timetable for completing this program or for the potential commercialization of the test. The launch of the test will require the completion of certain clinical development and commercialization activities, including the
efforts of collaborative partners on which we rely, and the expenditure of additional cash resources. We can give no assurance that we will be able to successfully complete the clinical development of this test or that we will be able to maintain
the collaborative relationships that are essential to our clinical development efforts. We also can give no assurance that we will be able to reduce our expenditures sufficiently or raise enough capital to complete clinical development or
commercialization for this test. Any failure to complete clinical development or commercialization of our Trisomy 21 test could have a material adverse effect on our business, operating results or financial condition.

The launch of any of our diagnostic tests under development will require the completion of certain clinical development and commercialization activities and
the expenditure of additional cash resources. We can give no assurance that we will be able to successfully complete the clinical development of any test under development or that we will have sufficient cash resources to do so. We can give no
assurance that we will not have to reduce other expenditures or raise additional capital to do so or that we will be able to reduce our expenditures sufficiently or raise enough capital to complete clinical development or commercialization for any
test. Any failure to complete clinical development or commercialization of a test could have a material adverse effect on our business, operating results or financial condition.



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*We and certain of our executive officers and directors have been named as defendants
in recently initiated securities class actions that could result in substantial costs and divert managements attention.

We are
aware of lawsuits in which we, and certain of our executive officers, have been sued for alleged violations of federal securities laws related to alleged false and misleading statements regarding our Trisomy 21 test under development. We intend to
engage in a vigorous defense of such claims. If we are not successful in our defense of such claims, we could be forced to make significant payments to or other settlements with our stockholders and their lawyers, and such payments or settlement
arrangements could have a material adverse effect on our business, operating results or financial condition. Even if such claims are not successful, the litigation could result in substantial costs and significant adverse impact on our reputation
and divert managements attention and resources, which could have a material adverse effect on our business, operating results or financial condition.

*We are the subject of an investigation by the SEC and have been contacted by representatives of Nasdaq, the Office of the U.S. Attorney for the Southern District of California and the FBI, each of
which could adversely affect our reputation, business prospects, operating results, or financial condition.

In June 2009, we received
written notification that the staff of the SEC has initiated an investigation relating to our April 29, 2009 announcement regarding our Trisomy 21 test under development. As part of this investigation, the SEC staff is also requiring us to
produce information with respect to our announcements relating to our offer to acquire EXACT Sciences, Inc. in January 2009. We intend to continue to cooperate fully with the SEC on its investigation. Following our announcement on September 28,
2009 regarding the completion of the independent investigation by the special committee of our board of directors, representatives of Nasdaq, the Office of the U.S. Attorney for the Southern District of California and the FBI separately contacted us
to inquire about our announcement. We intend to continue to cooperate fully with Nasdaq, the U.S. Attorney and the FBI. We cannot predict the duration, scope or outcome of the investigations by the SEC, Nasdaq, the U.S. Attorney and the FBI. If
these matters continue for a prolonged period of time, it may have an adverse impact on our reputation, business prospects, operating results or financial condition regardless of the ultimate outcome of these matters. In the event that the
investigations by the SEC, Nasdaq, the U.S. Attorney or the FBI leads to action against us, any current or former officer or director, our reputation, business prospects, operating results or financial condition may be adversely impacted. These
matters may result in the incurrence of significant legal expenses and the diversion of managements attention from our business, and are likely to have a negative effect on employee morale.

*We have limited experience.

Many of our technologies, particularly our noninvasive prenatal and other molecular diagnostic technologies, are at an early stage of discovery and development. We continue to develop and commercialize new products and create new
applications for our products. We are also researching, developing and pursuing the commercialization of various noninvasive molecular diagnostic tests for prenatal genetic disorders and other diseases and disorders for use on our MassARRAY platform
and potentially other platforms 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. Based on our limited experience, in developing new products and applications,
we may not effectively execute on or focus our research and development efforts, properly model new opportunities to ensure appropriate resource allocation, create products that are appropriately developed to meet customer needs, perform adequate
and timely validation testing of such products and applications, ensure appropriate communication between different departments responsible for commercialization activities, implement effective product launch or sales strategies, effectively design
and manufacture products that achieve commercial success, or take other actions that ultimately lead to commercial success of any new products or applications that we develop. We may face setbacks in the development and commercialization of our
noninvasive prenatal and other molecular diagnostic tests and technologies. As previously announced, we are no longer relying on certain prior studies and will need to perform additional validation studies of our Trisomy 21 test prior to
commercialization. We need to make significant investments to ensure our genetic analysis products and applications and our diagnostics tests 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 or satisfy customers in the genomic, diagnostic, noninvasive prenatal, clinical research, pharmaceutical, or other markets or the emerging field of molecular medicine and that can be marketed and sold
successfully.

*We may not be able to generate any revenue from noninvasive prenatal diagnostic tests or any other tests
we may develop.

Our business is substantially dependant on our ability to develop and launch our research-use-only and diagnostic
tests. We have committed significant research and development resources to the development of research-use-only and diagnostic tests, particularly noninvasive 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 Rhesus D using a reverse transcription polymerase chain reaction (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. In September 2009, we launched a carrier screening LDT for Cystic Fibrosis through our CAP/CLIA certified laboratory. We plan to launch through our CAP/CLIA certified laboratory noninvasive prenatal
screening LDTs for Rhesus D and fetal sex determination in



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the late first quarter or early second quarter of 2010. We also plan to launch through our CAP/CLIA certified laboratory a noninvasive prenatal screening LDT for Trisomy 21 and additional tests
in the future. However, there is no guarantee that we will be able to successfully launch these or other diagnostic tests on anticipated timelines or at all. 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 noninvasive 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 noninvasive prenatal research-use-only or diagnostic or other tests for sale in the marketplace, a number of
factors could impact our ability to sell such tests or generate any significant revenue from the sale of such tests, including the following:



| |  |  | the outcome of the pending lawsuits, SEC investigation and the investigations by Nasdaq, the Office of the U.S. Attorney for the Southern District of
California and the FBI;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to successfully implement the remedial measures recommended by the special committee following our independent investigation and the
effectiveness of those measures;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the availability of adequate study samples for validation studies for any diagnostic tests we develop;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | reliance on our Sequenom Center for Molecular Medicine, or Sequenom CMM, and third-party CLIA certified laboratories, which are subject to routine
governmental oversight and inspections for continued operation pursuant to CLIA, to process tests that we develop;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reliance on Sequenom CMM and third parties to manufacture any noninvasive prenatal research-use-only or diagnostic or other tests that we may develop;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to establish and maintain adequate infrastructure to support the commercial launch and sale of our diagnostic tests through Sequenom CMM or
a third-party CLIA certified laboratory, including establishing adequate laboratory space, information technology infrastructure, sample collection and tracking systems, electronic ordering and reporting systems and other infrastructure and hiring
adequate laboratory and other personnel;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the success of the validation studies for our diagnostic tests under development and our ability to publish study results in peer-reviewed journals;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the availability of alternative and competing tests or products and technological innovations or other advances in medicine that cause our technologies
to be less competitive;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | compliance with federal, state and foreign regulations governing laboratory testing and the sale and marketing of research-use-only or diagnostic or
other tests, including noninvasive prenatal tests;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | concerns regarding the safety or effectiveness or clinical utility of noninvasive 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 and any laws regulating prenatal testing;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the extent and success of our sales and marketing efforts and ability to drive adoption of our diagnostic tests;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | coverage and reimbursement levels by government payors and private insurers;
| | - |  | ----------------------------------------------------------------------------



| |  |  | the level of physician and customer adoption of any diagnostic tests we develop;
| | - |  | --------------------------------------------------------------------------------



| |  |  | 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;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



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



| |  |  | 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;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to provide effective customer support;
| | - |  | --------------------------------------------------



| |  |  | our ability to promote and protect our SEQureDx brand and technology; and
| | - |  | -------------------------------------------------------------------------



| |  |  | intellectual property rights held by others or others infringing our intellectual property rights.
| | - |  | --------------------------------------------------------------------------------------------------

*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 marketing and selling, and changes in the demand for, our products and services including our MassARRAY
Compact platform and iPLEX multiplex genotyping 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 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;
| | - |  | ----------------------------------------------------------------------



| |  |  | our success in collecting payments from customers;
| | - |  | --------------------------------------------------



| |  |  | our success in responding to customer complaints effectively and managing relationships with our customers, 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 identify and develop in a cost-efficient manner new applications and products, such as noninvasive 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 noninvasive 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 noninvasive prenatal or other diagnostic related products and obtain regulatory approval of any
potential diagnostic products; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | expenses related to the pending lawsuits, the investigations by the SEC, Nasdaq, the Office of the U.S. Attorney for the Southern District of
California and the FBI.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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 and the quantity and timing of consumables sales for the installed base of systems. Changes in the relative mix of our MassARRAY system and consumables sales, as well as
service 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 international revenues and operating results are also
difficult to predict because they depend upon the activities of our distributors. We experienced reduced demand for our MassARRAY systems during the first nine months of 2009 as a result of the current economic environment and are uncertain whether
demand for our products and services will further deteriorate in future periods as a result of the weak economy or other factors. 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.

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.

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

The demand for MassARRAY systems has declined over time, and any continued or further decline in demand will further reduce our total revenues. We
expect that sales of MassARRAY systems and consumables will account for most of our total revenues through at least the remainder of the year and perhaps thereafter, unless and until our noninvasive prenatal laboratory developed tests are launched,
if at all, and revenues from those tests are generated and increase over time, if at all. The following factors, among others, would further reduce the demand for MassARRAY products and services:



| |  |  | continued unstable, weak, or deteriorating economic conditions and fiscal policies or changes in fiscal policies that negatively impact customer buying
decisions;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | negative publicity or evaluations, particularly with respect to product warranty and repair and troubleshooting services provided to existing
customers, with respect to enabling or performing, or with respect to the completion of the independent investigation, the investigations by the SEC, Nasdaq, the Office of the U.S. Attorney for the Southern District of California and the FBI,
ongoing litigation matters or developments or events in our prenatal diagnostic and other programs.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

*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 for at least the remainder of the year and perhaps thereafter, unless and until our noninvasive prenatal laboratory developed tests are launched, if at all, and revenues
from those tests are generated and increase over time, if at all, will be derived primarily from MassARRAY system products provided to academic institutions 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 certified 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 59% and 57% of our total revenues for the three and nine months ended September 30, 2009, respectively, as compared to 43% and 42% of our total revenues for the three and nine months ended
September 30, 2008, respectively. 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 iPLEX applications;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | the availability and adoption of new technologies and applications provided by our competitors;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | 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;
| | - |  | --------------------------------------------------



| |  |  | any negative publicity with respect to ongoing litigation matters, the completion of our independent investigation, the SEC investigations, the
investigations by Nasdaq, the Office of the U.S. Attorney for the Southern District of California and the FBI or developments or events in our prenatal diagnostic and other programs;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 our ability to maintain such relationships.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------

*We only recently acquired our CLIA certified laboratory and have limited experience operating a
diagnostic laboratory. Our ability to successfully develop and commercialize diagnostic tests will depend on our ability to successfully operate our CLIA certified laboratory and obtain and maintain required regulatory approvals.

We plan to validate LDT assays and commercialize them through Sequenom CMM, our CLIA certified laboratory located in Grand Rapids, Michigan. We only
recently acquired Sequenom CMM in 2008 and as a result have little experience operating a CLIA certified laboratory. Because there is substantial distance between Sequenom CMM and us, we may have logistical and operational challenges in effectively
managing and operating Sequenom CMM. If we are unable to successfully transfer our diagnostic technology and tests to Sequenom CMM for validation or if Sequenom CMM is unable to successfully validate any LDT or other tests that we intend to
commercialize through Sequenom CMM, we may not be able to successfully commercialize such tests on the anticipated timelines or at all. Although we have invested substantially in Sequenom CMMs infrastructure, it is possible that we may not
have adequate infrastructure in place for the commercial launch and sale of any diagnostic tests that we develop through Sequenom CMM. Our ability to successfully develop and commercialize diagnostic tests will depend on our ability to successfully
operate Sequenom CMM and obtain and maintain required regulatory approvals.



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Sequenom CMM as a clinical laboratory is subject to CLIA, which is designed to ensure the quality and
reliability of clinical laboratories by mandating specific standards in the areas of personnel qualifications, administration and participation in proficiency testing, patient test management, quality control, quality assurance and inspections. The
sanction for failure to comply with CLIA requirements may be suspension, revocation or limitation of a laboratorys CLIA certificate, which is necessary to conduct business, as well as significant fines and/or criminal penalties. Sequenom CMM
is also subject to regulation of laboratory operations under state clinical laboratory laws. State clinical laboratory laws may require that laboratories and/or laboratory personnel meet certain qualifications, specify certain quality controls or
require maintenance of certain records. Certain states, including Florida, Maryland, New York, Pennsylvania and Rhode Island, each require that you obtain licenses to test specimens from patients residing in those states and additional states may
require similar licenses in the future. If we are unable to obtain or maintain licenses from these states or there is delay in obtaining such licenses, we will not be able to process any samples from patients located in those states until we have
obtained the requisite licenses. Potential sanctions for violation of these statutes and regulations include significant fines and the suspension or loss of various licenses, certificates and authorizations, which could adversely affect our business
and results of operations.

*We may not successfully obtain regulatory approval of any noninvasive 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 certified laboratories with respect to diagnostic products.

Products that we or our collaborators develop in the molecular medicine, diagnostic, noninvasive 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, or 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 significantly longer. The PMA process is much more costly, lengthy, uncertain, and generally takes from nine months to one year or longer from submission. 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 studies or trials do not necessarily predict final results, and acceptable results in early studies or trials may not be repeated in later studies or trials. A number of companies in the
diagnostics industry, including biotechnology companies, have suffered significant setbacks in 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.

We initially plan to validate assays and commercialize them in the form of
LDTs through Sequenom CMM or a third-party CLIA certified laboratory. Although LDT testing is currently solely under the purview of CMS and state agencies who provide oversight of the safe and effective use of LDTs, the FDA and the U.S. Department
of Health and Human Services have been reviewing their approach to regulation in the area of genetic testing and LDTs, and the laws and regulations may undergo change in the near future. Although we have no current plans to utilize in our LDT
strategy analyte specific reagents (ASRs) or In Vitro Diagnostic Multivariate Index Assays (IVDMIAs), which have been the focus of recent reforms and enforcement actions by the FDA, we cannot predict the extent of the FDAs future regulation
and policies with respect to LDTs in general or our diagnostic tests in particular. Concurrently with our LDT commercialization activities, we plan to conduct the development, validation, and other activities necessary to file submissions with the
FDA seeking approval for selected diagnostic tests. If we are unable to successfully launch any diagnostic tests as LDTs or if we are otherwise required to obtain FDA premarket clearance or approval prior to commercializing any diagnostic tests, our
ability to generate revenue from the sale of such tests may be delayed and we may never be able to generate significant revenues from sales of diagnostic products.

*The results of preclinical studies and completed clinical trials are not necessarily predictive of future results, and our current diagnostic product candidates may not have favorable results in
later studies or trials.

To date, long-term safety and efficacy have not yet been demonstrated in clinical trials for any of our
diagnostic product candidates. Favorable results in our early studies or trials may not be repeated in later studies or trials that will be required to obtain either PMA or 510(k) clearance from the FDA prior to marketing any of our product
candidates. Our product candidates, including any diagnostic or other tests we develop, may fail to demonstrate positive results in clinical trials despite having progressed through earlier-stage studies or trials. The limited results that we have
obtained for our prenatal diagnostic tests may not predict results from studies in larger numbers of subjects drawn from more diverse populations over a longer period of time. Unfavorable results from ongoing preclinical studies or clinical trials
could result in delays, modifications or abandonment of ongoing or future clinical trials, or abandonment of a product development program. Preclinical and clinical results or other study results are frequently susceptible to varying interpretations
that may delay, limit or prevent regulatory approvals or commercialization.



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*Because we exclusively licensed our noninvasive prenatal diagnostic and gender
determination testing rights from Isis Innovation Limited 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 noninvasive prenatal diagnostic rights (United States Patent No. 6,258,540 and foreign
equivalents) with Isis Innovation Limited (Isis) which we amended in October 2006 and in November 2007 to also include exclusive rights to intellectual property for noninvasive prenatal gender determination testing for social and lifestyle purposes.
On November 3, 2009, we entered into a third amendment to modify certain time-based commercial launch milestones relating to aneuploidy and other products. In exchange for this modification, we have agreed to make an immediate one-time payment
of $1,000,000, increase royalty payments under the agreement during the final 12 months of the patent term and increase the specified minimum royalty amounts. We intend to use the rights that we acquired under the license to develop noninvasive
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 the commercial launch milestones, as modified, 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.

*We and our licensees and collaborators may not be successful in developing or commercializing diagnostic products, diagnostic assays
including noninvasive 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 or otherwise not be effectively marketed;
| | - |  | -------------------------------------------------------------------



| |  |  | 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, under which we in-license our fundamental noninvasive 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.

Our ability to compete in the
market may decline if we lose or do not obtain 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 in litigation or by proceedings such as
interference, oppositions and reexaminations, as is the case with the appeal pending before the European Patent Office with respect to



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the patent rights that we in-licensed from Isis for prenatal diagnostics (United States Patent No. 6,258,540 and European Patent No. 994963), 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 noninvasive 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 noninvasive prenatal and other
diagnostic commercialization opportunities. To protect or enforce our patent rights, we may initiate interference proceedings, oppositions, reexaminations or litigation against others. However, these activities are expensive, take significant time
and divert managements attention from other business concerns. We may not prevail in these activities. 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.

*Claims by other companies that we infringe their intellectual property rights or that patents on which we rely are
invalid could adversely affect our business.

From time to time, companies have asserted, and may again assert, patent, copyright and
other intellectual proprietary rights against our products or products using our technologies. These claims have resulted and may in the future result in lawsuits being brought against us. We may not prevail in any future lawsuits alleging patent
infringement given the complex technical issues and inherent uncertainties in intellectual property litigation. If any of our products, technologies or activities, in particular our iPLEX products from which we derive a substantial portion of our
revenues, were found to infringe on another companys intellectual property rights, we could be subject to an injunction that would force the removal of our products from the market or we could be required to redesign our products, which could
be costly. We could also be ordered to pay damages or other compensation, including punitive damages and attorneys fees to such other company. A negative outcome in any such litigation could also severely disrupt the sales of our marketed
products to our customers or their customers, which in turn could harm our relationships with our customers, our market share and and/or product revenues. Even if we are ultimately successful in defending any intellectual property litigation, such
litigation is expensive and time consuming to address, will divert our managements attention from our business and may harm our reputation.

Other companies or entities also may commence actions seeking to establish the invalidity of our patents. In the event that one or more of our patents are challenged, a court may invalidate the patent(s) or determine that the patent(s) is
not enforceable, which could harm our competitive position. If one or more of our patents are invalidated or found to be unenforceable, or if the scope of the claims in any of these patents is limited by a court decision, we could lose certain
market exclusivity afforded by patents owned or in-licensed by us and potential competitors could more easily bring products to the market that directly compete with our own. Such adverse decisions may negatively impact our revenues.

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.

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.

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



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complex, the MassARRAY system may not generate a reading or a correct reading. If our customers experience these difficulties, they might achieve lower throughput levels 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 noninvasive prenatal and other
molecular testing, may require significant enhancements in our core technology or the in-licensing of intellectual property rights or technologies. In connection with developing new products and applications, we may not effectively deploy our
research and development efforts in a cost-efficient manner or otherwise in a manner that leads to the successful commercialization of such products and applications. 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 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 and products are 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 and other 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 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 replacement components for our mass spectrometers, PSI, Inc.
supplies our chips, Majer Precision Engineering, Inc. supplies the pins for the pin-tools and Paragon Medsystems LLC and Thermo Fischer Matrix who supply our nano dispenser liquid handling devices.

Our consumables also include components provided by sole suppliers, New England Biolabs, Epicentre, BioRad, 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:



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| |  |  | 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.
| | - |  | ----------------------------------------------------------------------------------------

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 commercial 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 single nucleotide
polymorphism, or 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.

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 noninvasive prenatal analysis rights that we acquired from Isis (United States Patent No. 6,258,540 and foreign equivalents), to potentially
expand our product portfolio and generate additional sources of revenue. If we do not achieve certain milestones in a timely manner, particularly with respect to our planned test for Trisomy 21, 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



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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 affect 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.

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 noninvasive
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.

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

Genetic testing,
including gender determination and Trisomy 21 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 replacement components for mass spectrometers, PSI, Inc. supplies our chips and Majer Precision Engineering supplies the pins for our present nanodispenser (pin-tool)
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. 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 and may not successfully complete the acquisition of businesses or technologies that we desire to acquire.

We may acquire additional businesses or technologies, or enter into other strategic transactions. For example, in November 2008, we completed the acquisition
of the Center for Molecular Medicine, LLC, a CLIA certified laboratory facility and in February 2009 we completed the acquisition of substantially all of the assets of SensiGen, LLC.

Managing these and future acquisitions entails numerous operational and financial risks, including:



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| |  |  | 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 or disputes with the former stakeholders or management or employees of acquired businesses;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | 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 also attempt to acquire businesses or technologies or attempt to enter into strategic
transactions that we are unable to complete. For example, in January 2009, we launched an exchange offer to acquire EXACT Sciences Corporation, but were not able to complete the transaction prior to EXACT Sciences selling and licensing a substantial
portion of its assets and intellectual property to a third party. If we are unable to complete such transactions, we may expend substantial resources and ultimately not successfully complete the transaction. Such transactions may also distract
management and result in other adverse effects on our business and operations.

*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, noninvasive 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 and
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. Our recent announcement of the delay in the expected launch of our Trisomy 21 test may adversely affect our competitive position
and the market acceptance of any tests that we may commercialize.



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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.

* If we cannot attract and retain highly-skilled personnel, our growth might not proceed as
rapidly as we intend and our business may be adversely affected.

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. Following the completion of the investigation by the special committee of our
board of directors, a number of our senior officers and members of the research and development program for our Trisomy 21 test have left our company. We have asked two of our directors, Harry F. Hixson, Jr. and Ronald M. Lindsay, to serve our
company as interim chief executive officer and interim senior vice president of research and development, respectively, and have appointed Paul V. Maier as our interim chief financial officer effective November 10, 2009. When we seek to hire
personnel to fill these positions on a permanent basis, we can give no assurance that we will be able to hire qualified replacements for the positions that we need to fill, and there may be significant costs associated with the recruiting, hiring
and retention of officers and employees for the open positions. The announcement of the results of the investigation and the departure of the officers and employees has had negative effect on employee morale. If we lose additional key employees or
if our management team is not able to effectively manage us through these events, 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, particularly our attempted transition to developing and
commercializing molecular diagnostic tests, has placed and may continue to place a significant strain on our personnel, facilities, management systems, information technology infrastructure, disclosure controls, internal controls and resources. We
will need to successfully implement the remedial measures recommended by the special committee following our independent investigation and 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 transition to also being a provider of diagnostic
products as well as the significant restructuring changes and other significant events 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 43% and 50% of our sales were made
outside of the United States during the three and nine months ended September 30, 2009, respectively, compared to 42% and 46% for the three and nine months ended September 30, 2008, 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;
| | - |  | -----------------------------------



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



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



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



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| |  |  | 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 for genetic analysis products is located in San Diego, California, where we also have laboratories. We also have laboratory
facilities in Grand Rapids, Michigan. 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 molecular tests, including LDTs and diagnostics for prenatal and other applications. We have product and general liability insurance that covers us against specific product liability and
other claims up to an annual aggregate limit of $15.0 million and $2.0 million, respectively. 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 and value of a portion of our investment portfolio.

As of September 30, 2009, our marketable securities classified as noncurrent consist of $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, which have been reduced by impairment charges of approximately $3.7 million reflecting the
change in market value.

The recent negative conditions in the global credit markets and the financial services industry have prevented some
investors from liquidating their holdings, including their holdings of ARS. 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. 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. Although
the ARS have continued to pay interest according to their stated terms, based on valuation models and an analysis of other-than-temporary impairment factors, recognized losses of approximately $2.6 million and $1.1 million were recorded for the
years ended December 31, 2008 and 2007, respectively, reflecting the portion of ARS holdings that we have concluded have an other-than-temporary decline in value. For the three and nine months ended September 30, 2009, none and $38,000,
respectively, of other-than temporary impairment losses were charged to operations. 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 further 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 ARS or might have to incur further recognized losses. It is possible that our ARS investments may be subject to credit rating downgrades, which could also affect the value of the securities and any ability we
may have to liquidate these securities in the future.



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*The uncertainty of the current economic and political conditions could harm our
revenues and operating results.

Current domestic and global economic conditions are uncertain and have continued to be volatile and
deteriorate over the past year. The recent turmoil in the economic environment in many parts of the world may continue to put pressure on global economic conditions. Our revenues and operating results may be affected by uncertain or changing
economic and market conditions, including the recent crisis in the credit markets and financial services industry and general conditions in the global capital markets. If global economic and market conditions, or economic conditions in the United
States or other key markets, remain uncertain or persist, spread, or deteriorate further, we may experience material impacts on our business, operating results, and financial condition.

*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, valuation test and clinical study results, and research and development progress or setbacks 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;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 and services;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the status of litigation against us and certain of our executive officers and directors, or that we are pursuing against others;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to successfully implement the remedial measures recommended by the special committee following our independent investigation and the
effectiveness of those measures;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the status, duration, scope and outcome of the SEC investigation that has been initiated following our April 2009 announcement regarding our
Trisomy 21 test and the investigations by Nasdaq, the Office of the U.S. Attorney for the Southern District of California and the FBI following our September 28, 2009 announcement regarding the completion of our independent investigation;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | general market conditions, including the recent crisis in global financial markets.
| | - |  | -----------------------------------------------------------------------------------

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. We have subsequently been named as defendants in various lawsuits alleging violations of federal securities laws related to alleged false and misleading statements regarding our Trisomy 21 test
under development and are the subject of investigations by the SEC, Nasdaq, the Office of the U.S. Attorney for the Southern District of California and the FBI. Such litigation and investigations could result in substantial expenses and other
liabilities and a diversion of managements attention and resources, which would seriously harm our business, financial condition, and results of operations.



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



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



|              |  |                                                                                                                           
|------------- |  | --------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Document                                                                                                   
|              | 
|3.1 (1)       |  | Restated Certificate of Incorporation of the Registrant.                                                                  
|              | 
|3.2 (2)       |  | Restated Bylaws of Registrant, as amended.                                                                                
|              | 
|3.3 (3)       |  | Registrants Certificate of Designation of Series A Junior Participating Preferred Stock.                                 
|              | 
|4.1 (1)       |  | Specimen common stock certificate.                                                                                        
|              | 
|4.2 (3)       |  | Rights Agreement dated as of March 3, 2009, between the Registrant and American Stock Transfer and Trust Company, LLC.    
|              | 
|4.3 (3)       |  | Form of Right 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 reference to the Registrants Current Report on Form 8-K filed December 7, 2007.
|--- | ------------------------------------------------------------------------------------------------



|(3) | Incorporated by reference to the Registrants Current Report on Form 8-K filed March 4, 2009
|--- | --------------------------------------------------------------------------------------------



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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: November 9, 2009 |  |  |  | By:            |  | /s/ JUSTIN J. FILE
|                        |  |  |  |                |  |                    |  | Justin J. File                              
|                        |  |  |  |                |  |                    |  | Controller                                  
|                        |  |  |  |                |  |                    |  | (Principal Financial and Accounting Officer)



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