GR lab continues operations as troubles mount for Sequenom

October 17, 2009
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Even as troubles pile up like beach sand at Sequenom Inc.’s San Diego headquarters, the Sequenom Center for Molecular Medicine continues to operate in Grand Rapids.

Local experts say the publicly traded company, under investigation and facing lawsuits related to botched clinical test results for what was expected to be its blockbuster product, can survive.

The Grand Rapids laboratory, which Sequenom purchased from the Van Andel Institute and Spectrum Health about a year ago, is processing test results for the company’s recently launched Cystic Fibrosis Carrier Screening test, company spokesman Ian Clemens said.

“We’ve been receiving samples and returning results to the physicians who ordered the tests,” Sequenom spokesman Ian Clements said. “Having a CLIA (Clinical Laboratory Improvement Amendments) lab like SCMM is an essential part of our strategy. … None of that is going to change.”

In a tumultuous autumn, Sequenom fired five and obtained resignations from two others. Fired were President and CEO Harry Stylli, Senior Vice President of Research and Development Elizabeth Dragon, and three others; CFO Paul Hawran and a sales and marketing executive resigned.

The blood-letting occurred with Sequenom’s announcement of the completion of an investigation into flawed test data and results for its SEQureDx test, meant to detect Down syndrome by analyzing fetal genetic material in the mother’s blood. The company had been touting nearly perfect detection rates in clinical trials for the test, which would be an alternative to amniocentesis.

The company announced in April that those results were flawed, prompting a flurry of shareholder lawsuits. After five months, interviews with 40 people and reviews of 300,000 documents, the investigation, conducted by an outside law firm, found that “the company failed to put in place adequate protocols and controls for the conducts of studies in the Trisomy 21 program,” according to a press release. No other details were released.

Clements said no one at the Grand Rapids laboratory was involved in the botched research.

Harry Hixson, Sequenom board chair, has taken over as interim CEO, and Ronald M. Lindsay also came from the board to become interim senior vice president of research and development. Controller Justin J. File was named principal financial and accounting officer.

Sequenom also has hosted investigators from the Securities and Exchange Commission, NASDAQ, the U.S. Attorney’s Office in San Diego and the Federal Bureau of Investigation.

The litany of woes is unpleasant, but not insurmountable for the SCMM’s parent company, said Kim Baber, a securities attorney with Varnum, Riddering, Schmidt & Howlett.

“I don’t think the fact that a company has the sort of problems this company is having means there is no hope of survival for the company,” Baber said. “It may mean individuals get charged; it may mean the company has sanctions or penalties. It doesn’t necessarily mean the end of the company or its business.”

MichBio Executive Director Steve Rapundalo offered a similar take.

“I don’t want to belittle the significance of what apparently went on and the impact on the company, but it is recoverable,” he said. “I think the board will do the right thing, get all the processes cleaned up, make sure scientific protocols are defined and put new management in place.

“I think they’ll come through with their commitment — when, I don’t know.”

Clements reiterated comments from Hixson that Sequenom continues to work on preparing two other tests for the market — for gender detection and Rh factor — although no timeline was revealed. Those tests also would be processed in Grand Rapids, Clements said.

In a September conference call, Hixson reiterated the role of the Grand Rapids lab, which last year was granted municipal and state tax abatements for the promise of creating 500 jobs by 2013. SCMM currently employs around 20.

“As you know, Sequenom recently announced the launch of its SensiGene CF carrier screening test. This was an important milestone from the company, as it marked the launch of the first test through its CLIA laboratory,” Hixson said. “The Sequenom Center for Molecular Medicine, this lab has already received a number of samples from physicians around the country and successfully provided results back to those physicians.”

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