On April 29, 2009 Sequenom, Inc., based in San Diego, California, issued a press release disclosing employees at Sequenom had “mishandled” data by Company employees, which raised “significant concerns regarding the integrity of that data.” On a conference call late Wednesday, Sequenom declined to comment whether the errant data was fraudulent, or at what level the data errors occurred. “The clinical performance that was portrayed for these tests appears to be questionable,” said Harry Stylli, president and chief executive.
Sequenom disclosed four research and development employees were suspended, an independent investigation launched, and Sequenom informed both the Food and Drug Administration and the Securities and Exchange Commission of the happenings. These disclosures mean Sequenom must delay the launch of its SEQureDx Technology, in part because the actual test data and results invalidate previous pronouncements about the effectiveness of its noninvasive prenatal Down syndrome test.
Following Sequenom’s disclosure, its common shares fell precipitously by 68% to $4.76 in after-hours trading as the Company also reported its first-quarter net loss widened on higher expenses and costs purportedly related to the planned launch of the SEQureDx Technology prenatal tests. These results were worse than the market had been led to expect, and the Company also forecast a larger 2009 loss than the market had been led to expect. Sequenom further disclosed its Board of Directors had formed a special committee of independent directors to oversee an investigation of its previously misstated test data and results.
The news has shakened Wall Street’s trust in the company. While management reaffirmed confidence in the technology, JMP Securities analyst Charles Duncan said, “Sequenom’s tenuous credibility has evaporated” and restoring it “could prove to be a long and treacherous road.” Sequenom’s common stock plunged from $11.43 to an intraday low of $3.48 on over 85 million shares trading, or 27 times its average daily volume over the past 30 days. Over 75% of Sequenom’s market capitalization vanished as artificial inflation evaporated from the share price.
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