Sema4 will shut down its reproductive health testing and services division by early next year, eliminating about a third of its workforce in the process, the company announced this week, joining a handful of other medtech developers that have recently slimmed down their rosters amid the release of less-than-stellar third-quarter earnings reports.
That decision will allow Sema4 to focus instead on its Centrellis and GeneDx divisions, CEO Katherine Stueland said during a call with investors on Monday. Centrellis is Sema4’s “health intelligence platform,” which analyzes massive health data sets using machine learning and natural language processing to aid in disease diagnostics, treatment decisions, drug discovery and more. GeneDx—the subject of a $623 million acquisition deal earlier this year—has built a database of clinical exomes and phenotypes to provide genetic sequencing services and sift through the genome to uncover new links between health conditions and genetics.
Stueland said Sema4 explored a variety of options to avoid simply shutting down the pregnancy-focused genomic testing and services business—including switching to a direct-to-consumer model, moving the business from Connecticut to Maryland and even selling it off to a new buyer—but were unable to find a viable alternative.
“In the end, we determined that the reproductive health testing business is unsustainable, and especially so in light of capital market constraints in the macroeconomic climate,” Stueland said. “It’s not the decision any of us wanted to make, but it’s necessary for the future health of our business, the delivery of better health insights to patients and partners and, ultimately, the generation of shareholder value to those who believe in our ability to change healthcare for the better.”
With that decision made, Sema4 laid out a timeline this week as it winds down its carrier screening, noninvasive prenatal testing, prenatal and point-of-care diagnostic testing and reproductive biochemical and cytogenic testing offerings.
The company will no longer accept testing orders after Dec. 7 and will stop accepting samples at its Stamford, Conn., lab a week later. The last day to schedule genetic counseling services with Sema4 will be Jan. 4, with the final appointments taking place within the following week. All sample processing and reporting will be completed by Jan. 12.
In tandem with the shutdown, nearly 450 Sema4 employees will lose their jobs. In a notice (PDF) submitted this week in accordance with the federal Worker Adjustment and Retraining Notification (WARN) Act, the company said 206 employees based at its Stamford headquarters, 227 from its Stamford lab and another 15 stationed at its Branford, Conn. lab will be permanently laid off beginning Jan. 13.
The dissolution of the reproductive health testing business is expected to cut “at least $30 million in cash burn” per quarter moving forward, Stueland said on the investor call.
Combined with another round of restructuring that was announced earlier this year—and included layoffs of around 30% of employees spread across two tranches—according to Kevin Feeley, chief financial officer of Sema4, “we have dramatically reduced the total cost to operate the Sema4 business and are on track to reduce cash burn 50% in 2023.”
So far in 2022, the company has racked up a net loss of more than $240 million, compared to about $205 million in the first nine months of last year, according to its third-quarter earnings report.