Sequenom query puts jobs in limbo
Elizabeth Slowik

More than 500 jobs for Grand Rapids remain in limbo as the federal Securities and Exchange Commission last week launched an investigation into Sequenom Inc., a San Diego company that purchased a local laboratory last year.

Sequenom announced in April that four employees had compromised clinical research data for its SEQureDX test for Down syndrome. That announcement followed several information releases from the company that indicated the blood test for pregnant women had been showing near 100 percent accuracy.

Last fall, Sequenom purchased the Center for Molecular Medicine, a lab in downtown Grand Rapids established in 2007 in a $6 million joint venture by the Van Andel Institute and Spectrum Health. They received $4 million plus Sequenom stock in the deal, which was 90 percent in stock, according to a press release issued at the time.

Sequenom received more than $20 million in state employment and local personal property tax breaks in exchange for promising a $20.25 million investment and bringing 523 jobs to the area by 2013. Those jobs are related to a lab expansion to process the SEQureDX test, which some have estimated has a potential market in the billions of dollars.

In a June 30 filing with the SEC, Sequenom stated: “On June 29, 2009, we received written notification that the Securities and Exchange Commission (the “SEC”) has initiated an investigation relating to our April 29, 2009, announcement regarding our SEQureDx Down syndrome test. We intend to cooperate fully with the SEC in this matter. Our internal investigation is ongoing.”

The company faces several shareholder lawsuits, as well.

A subcommittee of Sequenom’s outside directors hired the San Diego office of law firm Sheppard, Mullin, Richter & Hampton to conduct an investigation, Clements said. As of last week, the results were not yet available, and he said it is unclear when the report will be done.

“We had at one point kind of said, potentially, these kinds of things take in the 30- to 90-day range,” Clements said. “The rather large caveat is that this ain’t our investigation. It’s not a milestone we can be held accountable for.”

But, Clements said, Sequenom still plans to launch three other prenatal tests this year, which are likely to be processed in Grand Rapids. Those tests detect cystic fibrosis, Rhesus D incompatibility and gender, he said.

“We have three other tests that we are looking to start rolling out in the beginning of the third quarter of this year,” he said. “We haven’t publicly talked about the order of those tests and haven’t talked about the exact timing of how that will pan out in the next six months. All those tests will be run in our CLIA lab out there.”

The company’s statements about the apparent high-level accuracy of SEQureDX excited investors, who ran the stock price as high as $29.14 in the past year. The test, which targets fetal DNA material that circulates in the mother’s blood stream, would be less invasive and less risky than the current tests, amniocentesis and chorionic villus sampling, giving it a big advantage in the marketplace.

The April announcement precipitated a single-day 75 percent drop in Sequenom’s stock price. Last week, it was trading around the $4 mark. During November, when Sequenom’s purchase of the CMM from the VAI and Spectrum Health was finalized, the stock price closed in a range from $12.71 to $20.08.

Sequenom needed a laboratory that meets federal Clinical Laboratory Improvement Amendments in order to process the tests. Congress enacted CLIA in 1988 to standardize lab testing on human specimens across the U.S.

“Ultimately, our plans in terms of growing the lab have not changed,” Clements said. “We do need to grow our lab both in terms of space and in terms of employees. That is a period that is going to push out a little further, based on the fact that the largest throughput is delayed by nine to 12 months.”

The Michigan Economic Development Corp. granted Sequenom a 100 percent high-technology employment tax credit for 12 years, according to an MEDC memo. From the city of Grand Rapids, Sequenom also received a 12-year, $500,000 abatement for personal property taxes on laboratory equipment.

Sequenom announced in March it would lease 5,423 square feet on the second floor of Arena Station, 25 Ottawa Ave. SW, while building out the third floor. Grubb & Ellis|Paramount Commerce confirmed that a lease deal has been signed.

A woman answering the phone at the SCMM, located in Grand Valley State University’s Cook-DeVos Center for Health Sciences at 301 Michigan St. NE, referred questions to Clements.