Sequenom's Stock Falls, Clouded With Uncertainty

Sequenom Inc (SQNM) has been a disaster of a trade today. Down huge. Today alone lost 39%, trading down to 3.46. A year ago Sequenom was trading at 21.41. They were recovering slightly from their FDA false data reports for their clinical studies on pre-natal testing for Down's Syndrome, or Trisomy 21.

Sequenom Inc (SQNM.O) shares plunged Tuesday, a day after the company removed almost its entire top management following an independent probe that found the company failed to prevent mishandling of data related to its prenatal Down Syndrome test.

In April, Sequenom had delayed the launch of the SEQureDx test, citing mishandling of research and development test data by employees and initiated an independent investigation into the matter. Earlier this month, the company launched its cystic fibrosis carrier screening test. It is also developing other prenatal tests, including one for gender determination.

"While considerable uncertainty remains regarding the timeline of the company's diagnostics pipeline, we continue to believe that the underlying science, which has been published in peer reviewed journals independent of the company, remains sound," said Barclays Capital analyst Anthony Butler.

Sequenom's SEQureDx technology, which isolates and analyzes circulating fetal nucleic acid from a maternal blood sample, is based on the work of Dennis Lo, a professor at the Chinese University of Hong Kong.

"While Sequenom maintains an extensive intellectual property portfolio in prenatal diagnosis, it is not clear if some of the patents may revert to their innovator, Dennis Lo, if adequate progress is not made," said Rodman & Renshaw analyst Elemer Piros.

JMP Securities analyst Charles Duncan said a potential equity financing will be an overhang until clarity can be provided on both the development timelines and budget for the development of the prenatal Down Syndrome test.

As of June 30, Sequenom had total cash and cash equivalents of $69.3 million. It is also facing a U.S. Securities and Exchange Commission investigation and a series of investor lawsuits over the publication of misleading data.

Sequenom's Tragic Downfall: Sequenom Bloodied and Unbowed

Here is news of the Sept 28, 2009 Sequenom Conference Call. It announces the firing of CEO Harry Stylli and Sr VP of R & D Elizabeth Dragon.

Just last week Sequenom annouced similar testing for Cystic Fybrosis: SEQUENOM Announces Launch of SensiGene Cystic Fibrosis Carrier Screening Test

Early this year the biotech firm Sequenom made waves by saying it could test a sample of a mother's blood to detect Down syndrome as early as eight weeks into pregnancy with nearly 100% accuracy.

The results of clinical studies conducted by the company fanned hopes for a noninvasive and highly accurate alternative to amniocentesis, which carries risks for mother and baby.

But in April, Sequenom disclosed that the launch of the new Down syndrome test, expected in June, would be delayed "due to the discovery of mishandling of research and development test data and results."

That bombshell slammed the company's stock and triggered an independent investigation by outside lawyers, shareholder lawsuits and an inquiry by the Securities and Exchange Commission. Now, five months later, Sequenom said the independent report is in and it has fired company president and CEO Harry Stylli and R&D chief Elizabeth Dragon. Several other employees were let go or resigned.

What went wrong?

The report, prepared with the help of more than 40 witnesses and 300,000 pages of documents and emails, wasn't released. But the company did say it had "failed to put in place adequate protocols and controls for the conduct of studies" for the Down syndrome test. The company will be sharing the details with the SEC soon, though.

Does the test work? In a Monday conference call, Interim CEO Harry Hixson said Sequenom had made "inadequately substantiated claims" about the Down syndrome test and that in several instances "flawed test data and results were reported to the public." The company said nobody should rely on the data it has publicly reported on the test either. That's something you don't hear every day.

One investor on the call accused the company of "dancing around what happened" and demanded to know when details would be revealed. Hixson said the shareholder suits and SEC investigation constrained what he and Sequenom could say.

Still, the company maintains confidence in its technology for using mass spectrometry to assay fetal genetic material circulating in maternal blood as a way to catch birth defects early and accurately. Sequenom recently launched this sort of test to detect cystic fibrosis.

You can listen to the Monday conference call between Sequenom and investors here. Zip ahead to around minute 32 to hear the angry shareholder press Hixson for details.
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