Sequenom (San Diego) reported that the expected launch of its SEQureDx Down syndrome test has been delayed as a result of employee mishandling of R&D test data and results.

Harry Stylli, PhD, president/CEO of the company, told investors via conference call Wednesday that Sequenom plans to have a validated Down syndrome test in the fourth quarter, but will not launch the test until results from two large, independent clinical studies are published in a peer-reviewed journal. Sequenom shares plummeted $11.29 a share, more than 75%, to close at $3.62 a share Thursday.

Stylli said the company discovered through "internal inquiries" that the R&D study data associated with the Down syndrome assay was "mishandled by individuals in our company," raising "significant concerns regarding the integrity of that data.

"I am enormously disappointed to discover that this could happen here and I'm even more disappointed that it would delay such a promising technology that is based on what we still believe to be solid and truly break-through science," Stylli said. "To say we're taking this situation seriously would be a massive understatement."

Stylli said four employees have been suspended as a result of this discovery, and a new team is in place to oversee the R&D studies for the company's prenatal diagnostics. The board has convened a special committee of independent directors to oversee an investigation, he said. Sequenom has also alerted the SEC and the FDA of the situation and Stylli said the company would follow any recommendations the agency has for it.

"I want to be very clear about this: We will take whatever additional actions are necessary to protect confidence in this company, our research, and our products," Stylli said. "The company has suffered a temporary setback to its plans. Let me reiterate that we are fully determined to bring our Down syndrome assay to market expeditiously." Sequenom plans to continue to develop both the RNA and DNA methods in parallel, he added.

Not surprisingly, investors on the conference call Wednesday were not happy with the news. Stylli dodged many of the questions citing "confidentiality considerations" and because the investigation is not complete.

"It appears to me that you basically have no data that confirms that this test works ... yet you are insisting that you're going to go forward with very large-scale trials that are very expensive that are going to give you your validated test and go forward," said Bob Hodgson, an analyst with BlackRock.

"Correct me if I'm wrong, but if you have no data that you can rely upon, why would you spend that money to go forward with large studies as opposed to doing something smaller to get the data, which does validate it, and then make your choice to go forward? It just doesn't make sense from a burn rate standpoint and the cash position that you have ... when you are developing other tests which could move your company along ..."

Stylli responded by reiterating the company's confidence in the assay performance and said that collection of these samples is "essential for validating the test." "Given the confidence we have in the assay integrity and the underlying technology, we believe by doing so it's a worthwhile investment of our capital," he said.

The "large, independent clinical studies" to which Stylli referred are the Brown University and LDT studies, he noted, which are both in "patient collection mode." Between the two studies, roughly 15,000 patients will be enrolled, he said.

"The science is extremely solid, the assays show a potential and I believe both the RNA and DNA assay is going to fulfill their potential," Stylli said. "We've got some very high-powered teams working on this currently and there's more than optimism that these tests will see the light of day as noninvasive prenatal diagnostics."

As a result of the discovered "mishandling" of data, the company said that data previously released on June 4, Sept. 23, or Dec. 1, of last year; or on Jan. 28 and Feb. 3 of this year can no longer be relied upon.

Sequenom said it is not aware of any "potentially inappropriate activity" related to the reported results of its other tests under development, but that it is currently reviewing the data for all tests. As a result of this ongoing review the Rhesus D, Cystic Fibrosis and Fetalxy tests are now anticipated to begin launching in the third quarter of this year, the company said.

It didn't take law firms specializing in securities class action litigation to file suits against Sequenom. Within a day of the company reporting its discovery of mishandled data, Johnson Bottini, a San Diego firm, said it has filed a class action lawsuit in U.S. District Court for the Southern District of California on behalf of all stockholders who purchased securities between June 4, 2008, and April 29. The complaint alleges that Sequenom violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by issuing false and misleading statements.

The law offices of Howard Smith (Bensalem, Pennsylvania) said it is "investigating potential claims" against Sequenom concerning possible securities violations. The firm said its investigation focuses on allegations that certain company statements regarding the clinical data and efficacy of the noninvasive prenatal genetic test for Down syndrome were false and misleading.

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