Sequenom President and CEO Harry Stylli and Senior VP of R&D Elizabeth Dragon were terminated by Sequenom’s board of directors, following an internal investigation into the purported “mishandling” of test data by Sequenom employees. CEO Stylli resigned from Sequenom’s board of directors.
Sequenom further disclosed CFO Paul Hawran and Steve Owings, vice president of commercial development for prenatal diagnostics, had resigned, and three other employees were fired. Sequenom’s board appointed Chairman Harry Hixson and Director Ronald Lindsay to serve as interim CEO and SVP of R&D, respectively. Sequenom’s board designated controller Justin File to serve as principal financial and accounting officer. Download Sequenom’s public disclosure on Form 8-K here (pdf).
The terminations and resignations follow Sequenom’s internal investigation concerning “mishandling” of test data from the company’s SEQureDx Down syndrome test. Sequenom disclosed the mishandling in April 2009 and commenced its internal investigation soon thereafter. The SEC and other governmental agencies continue to investigate.
“While each of these officers and employees has denied wrongdoing, the special committee’s investigation has raised serious concerns, resulting in a loss of confidence by the independent members of the company’s board of directors in the personnel involved,” Sequenom said in a written statement.
“In making the transition from researching potential molecular diagnostic tests to developing and commercializing those tests, the company failed to put in place adequate protocols and controls for the conduct of studies in the T21 program … and some employees failed to provide adequate supervision,” said interim CEO Hixson. “This resulted in inadequately substantiated claims, inconsistencies and errors in the test data, and results for our T21 program.”
“I and the other directors wish to emphasize to the stockholders that we continue to believe that Sequenom has the potential to develop important non-invasive pre-natal diagnostic tests,” said Hixson. “We’re continuing to work on both the DNA- and the RNA-based tests,” said Hixson. Hixson said he could not “provide a status report today.”
During a conference call, Hixson declined to answer whether Sequenom would seek criminal charges against anyone involved in wrongdoing. “We’re fully cooperating with the SEC, [and] that’s all I think I should say there,” said Hixson.
Former Sequenom CEO Harry Stylli, terminated following internal investigation
The mishandled Sequenom data called into serious question the reliability of the previously reported positive test results and has resulted in significant launch delay of Sequenom’s most important product. Sequenom’s board said the company is “no longer relying on, and the public should no longer rely on, any of the previously announced test data and results for the company’s noninvasive prenatal test for Trisomy 21.”
The terminations and resignations follow the investigation by a special committee of Sequenom’s directors. Sequenom said the committee interviewed approximately forty witnesses and reviewed 300,000 documents and e-mails in the investigation. Sequenom said it was undertaking certain remedial measures including new disclosure controls and procedures, organizational and reporting changes, enhanced ethics training, new R&D and clinical studies procedures, and creating a science committee of the board of directors to oversee R&D strategy and activities.
The special committee and the independent counsel plan to make a presentation to the U.S. Securities and Exchange Commission about the investigation. Sequenom’s shares were down 34 percent when the investigation’s results were made public.