Sequenom shares plummeted 44 percent today in after-hours trading after the San Diego-based company said it has ousted CEO Harry Stylli and its head of R&D in the wake of an investigation into mishandling of data for its prenatal genetic test for Down Syndrome.
Chairman Harry Hixson, 71, the former president of Amgen, has assumed the role of interim CEO of Sequenom (NASDAQ: SQNM), along with the responsibility for explaining the situation to investors on a conference call this afternoon. He couldn’t say much beyond his prepared remarks about what really went wrong with data handling procedures, because the company is facing class-action shareholder lawsuits, and is “fully cooperating” with an ongoing investigation by the Securities and Exchange Commission.
Whatever really happened, the company repeated that the public and investors should no longer rely on the company’s previous claims to have developed a noninvasive prenatal blood test that was 100 percent accurate at detecting Down Syndrome, when compared with the standard, more invasive tests known as CVS and amniocentesis. The company essentially said that its data handling protocols weren’t good enough, and that certain employees failed to provide adequate supervision of the process, leading to errors and inconsistencies in the data released to the public.
When asked by one analyst on the conference call today whether the company will seek to bring criminal charges against people responsible for the mishandling, Hixson would only say “we are fully cooperating with the SEC, and that’s all I should say.”
Sequenom shares fell $2.50, or 44 percent, to $3.20 in after-hours trading after the conference call. That’s a painful free fall for investors who bought last year on the enthusiastic news about Sequenom’s test, which drove shares up to $27.76 the day after the original announcement on Sept. 23, 2008.
Hixson, who said he plans to stay in the CEO job as long as he’s needed, acknowledged that he and Ronald Lindsay, the new senior vice president of R&D, have their work cut out. “This has been a significant setback and the company will face significant challenges ahead,” Hixson said on the conference call. He added, “It’s fair to say that Ron and I will have to work very hard to regain the confidence of investors.”
Even though the data can’t be relied upon anymore, Hixson said the company still believes it has a valid approach to the detection of Down Syndrome, by doing genetic analysis of maternal blood. The company hopes to maintain what Hixson called an “important collaboration” with Oxford University researcher Dennis Lo, who provided an important license to intellectual property for the prenatal test that Sequenom has been seeking to commercialize.
Sequenom is still seeking to further develop the technology for spotting diagnostic clues in maternal blood for Down Syndrome, Hixson says, although he didn’t say what the next steps of development will be, or when Sequenom might be able to bring it to the market.
Interestingly, the company investigation didn’t find any problems with data handling protocol for another diagnostic test the company is commercializing for screening of cystic fibrosis, a genetic lung disease. Data to support that test have been validated by third-party collaborators outside the company, and were handled by a different unit of Sequenom than the one that mishandled the Down Syndrome test, Hixson said.
Hixson said he doesn’t intend to be the permanent CEO of Sequenom, pointing out that he’s 71 years old. He did say that the company hasn’t hired an executive search firm to fill some of the vacancies created, and that he’ll stay in the top job as long as he’s needed.
Hixson and Lindsay are currently in the midst of strategic planning for the coming year, so it’s too early for them to say how the company will adjust its priorities, and its financial forecasts. Hixson went out of his way in prepared remarks to thank the employees of Sequenom for being “extremely professional” and cooperating with the investigation over the past five months.
“We are determined to emerge from this experience stronger,” Hixson said.