12:00 AM
May 04, 2009
 |  BioCentury  |  Finance

Ebb & Flow

If the data seem too good to be true, maybe they are. Last week, genomic testing company Sequenom Inc. (NASDAQ:

SQNM) disclosed that all the data that has been publicly released for its non-invasive SEQureDx Down syndrome test are "questionable."

From June 2, 2008, Sequenom shares gained $19.99 (258%) to reach a peak of $27.74 on Sept. 26 on the back of several data announcements for the test. The reported results showed 100% accuracy, detecting all cases of Down syndrome.

But after market close on Wednesday, the company said it is no longer standing behind the five data announcements, made between June 4, 2008, and Feb. 3 this year, due to "employee mishandling" of data. On Thursday, Sequenom's shares dropped $11.30 (76%) to $3.61; they were down $9.95 (71%) to $4.11 on the week.

Sequenom will redo its validation studies, which President and CEO Harry Stylli dubbed as "suspect" on a conference call.

The company is developing two versions of the test, one RNA-based and the other DNA-based. The problems with the data encompass both versions and Sequenom hopes to revalidate them in parallel, Stylli said. The results are anticipated in 4Q09.

Rather than launch the test through its CLIA laboratory this June as planned, Sequenom said it hopes to launch after the publication of positive results from two independent clinical studies in peer-reviewed journals in 1H10. The academics conducting them had already planned to report data at that time. Both studies are enrolling and collecting maternal blood samples.

Sequenom spokesperson Ian Clements told Ebb & Flow that the investigators will choose to use the RNA- and/or DNA-based assay to test the samples once the validation testing is completed.

Stylli said the news would not affect a planned PMA submission, which he expects in 2H10.

The fallout

Sequenom suspended four R&D employees and formed a committee of independent directors to oversee an investigation by independent counsel into the employees' activity. The company also will review data for its other SEQureDx-based tests, which will delay launch of tests for Rhesus D and cystic fibrosis (CF) from this quarter to next.

CFO Paul Hawran said the validation studies will cost about $400 per maternal blood sample. According to the company, the studies will require about 1,000 samples, putting the price tag at about $400,000.

At March 31, Sequenom had $87 million in cash, and Hawran expects the company to end 2009 with more than $50 million. The company laid off about 30 employees in the first quarter in a restructuring.

Before the week was out, a class action lawsuit on behalf of people who purchased the company's common stock between June 4, 2008 and April 29 was filed in the U.S. District Court for the Southern District of California, alleging violations of federal securities law against Sequenom and its senior executive officers.

At Dec. 31, the major holders of Sequenom were Ridgeback Capital with 10.6 million shares (17.4%); RA Capital Management with 5.8 million shares (9.6%); Sectoral Asset Management with 4.2 million shares (6.9%); Barclays Global Investors with 3.3 million shares (5.4%); and Franklin Resources with 3.1 million shares (5%).

Institutional and mutual fund owners hold 85% of the shares (see "Sequenom Chronicles," A17).

Chickening out

Investors apparently got cold feet immediately in advance of detailed Provenge data, as Dendreon Corp. (NASDAQ:

DNDN) lost $9.74 (45%) to $11.81 on 33 million shares on Tuesday before trading was...

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