Sequenom says 4 executives were fired or resigned after review of Down syndrome studies

Sequenom fires CEO and others after investigation

SAN DIEGO — Sequenom Inc. on Monday forced out four executives and three other employees, including its president and CEO and the executive in charge of research and development, after an investigation into the mishandling of test results for its Down syndrome blood test.

Shares of the company plunged on the news, losing $2.86, or 50 percent, to $2.82 in aftermarket trading. The stock shed about three-quarters of its value after the mishandled testing was disclosed, and finished at $5.69 on Monday. Shares have traded between $2.86 and $28.60 over the last year.

The company said it terminated the employment of Harry Stylli and Elizabeth Dragon, who had been senior vice president for research and development. The terminations are effective immediately, and Stylli was asked to resign from the board of directors. Three other employees were also let go, Sequenom said.

The genetic analysis test maker said Chief Financial Officer Paul Hawran resigned on Friday, as did one other unnamed executive. The moves followed an investigation by a committee of independent directors.

“While each of these officers and employees has denied wrongdoing, the special committee’s investigation has raised serious concerns, resulting in a loss of confidence by the independent members of the company’s board of directors in the personnel involved,” the company said in a statement.

The company did not say that any deliberate wrongdoing was discovered, but in a filing with the Securities and Exchange Commission, it said it did not put adequate protocols and controls in place. Some employees were not adequately supervised, it said.

Sequenom said Harry Hixson Jr., 71, a member of its own board and a former president and chief operating officer of Amgen Inc., will take over as interim CEO. Another board member, Ronald Lindsay, 61, will be interim CFO, and controller Justin File, 39, will be the principal financial and accounting officer.

On April 29, Sequenom said study data and results for the SEQureDx Down test could not be relied on due to “employee mishandling.” SEQureDx appeared to be a promising test that was faster, cheaper, less invasive and less risky than other methods, like amniocentesis. Its results in preliminary studies were close to perfect.

The company said its still believes in the science behind the SEQureDx test, but the previous test results should not be relied on.

Sequenom once planned to launch the test in June, but it will not reach the market until the first half of 2010 at the earliest, as the company is now waiting for results from two large, independent clinical studies.

Stylli had been Sequenom’s president and CEO since June 2005, while Dragon joined the company in May 2006. Hawran became CFO in April 2007.

The independent counsel retained by Sequenom interviewed more than 40 witnesses and reviewed more than 300,000 documents, the company said. The counsel found the inadequate controls and supervision lead to “inadequately substantiated claims, inconsistencies and errors” for SEQureDx.

The company said it will create new disclosure protocols and procedures and give employees more training in ethics and scientific procedures, and make new rules for the conduct of research and development and clinical studies, including relying more on independent third parties. It will also create new procedures for storage and management of samples for testing, and form a science committee on the board of directors to oversee research and development strategy and activities.