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Reversing Slump, Lynx Stock Climbs 36 Percent Since Ernst & Young Disclosure

This article has been updated from an earlier version to include share price and details.

NEW YORK, Nov. 12 (GenomeWeb News) - Shares in Lynx Therapeutics were up for the fifth day in a row today, regaining more than enough ground by late morning to wipe out losses endured since the company disclosed Oct. 29 that its independent auditor had raised "substantial doubts" about its ability to remain solvent.

 

Shares in the embattled gene expression-technology company were up 18.24 percent, or $.54, at $3.50 in late-afternoon trading as investors continued to hold out for good news one day before the firm releases its third-quarter earnings Monday.

 

Wall Street also likely were holding onto hope that the company's fortunes will turn around after it successfully closes its merger with British sequencing-technology company Solexa.

 

However, the surge in share price is not wide enough to prevent a likely stock split. Due to a change in control of Lynx's shares, the firm must requalify for trading on the Nasdaq exchange. Under the exchange's rules, a company's stock must trade above $4 for the 90 days preceding the completion of the merger. According to BioArray News, a GenomeWeb News publication, Lynx informed  the US Securities and Exchange Commission that it "intends to effect a reverse split of its outstanding shares."

 

The firm's shares have not traded above $4 since May, so a reverse split is highly likely. "We'll look at that. If the stock were up, we wouldn't do it," according to 

Lynx President and CEO Kevin Corcoran. The ratio of the split would depend on what the price of the stock was to meet that requirement. "You'd want some buffer there," said Corcoran.

 

The stock, which had reached as high as $3.50 earlier in the day, was up more than 36 percent less than two weeks after Lynx disclosed that its  financial position was more precarious than originally reported, and that Ernst & Young raised "substantial doubts" about the company's ability to remain solvent.

 

Also on Oct. 29, Lynx said that Solexa planned to pour additional cash into Lynx in an attempt to speed the development of new sequencing technologies in time for their merger. BioArray News said Solexa will give Lynx up to $500,000 before the merger to help the company "accelerate development of ... [a new] DNA sequencing instrument.

 

Lynx has pocketed at least $2.5 million from Solexa as part of the companies' merger agreement, disclosed in August.

 

As GenomeWeb News reported in September, Lynx and Solexa signed a definitive merger agreement. As part of the merger, which is expected to close before the end of the year, Lynx will issue up to 29.5 million shares in exchange for all of the outstanding shares and share options of Solexa. The combined company will continue to operate both in the USand in the UKand will trade on the Nasdaq SmallCap Market under the tickers symbol LYNX.

 

The new company plans to develop novel DNA sequencing technology, based on molecular arrays, and to release its first commercial instrument for whole genome resequencing and for gene-expression analysis by sequencing next year.

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