NEW YORK (GenomeWeb) – Two shareholders have filed a class action lawsuit against Illumina and two of its top officials, claiming that the defendants made materially false and misleading statements regarding the firm's business, operations, and prospects between the announcement of Illumina's second quarter and preliminary third quarter financial results that led to an inflated share price.
Plaintiffs Yi Fan Chen and Frontline Global Trading, of which Chen is president, filed the suit last Friday in the US District Court for the Southern District of California on behalf of a class that consists of persons and entities that bought Illumina securities between July 26 and October 10 of this year. The defendants are Illumina; President and CEO Francis deSouza; and Executive Vice President, Chief Administrative Officer, and CFO Marc Stapley.
On July 26, Illumina announced its second quarter earnings, which included revenue guidance of between $625 million and $630 million for the third quarter. On Oct. 10, the company released preliminary revenues for the third quarter that fell $18 million to $23 million short of that guidance, leading to a drop of Illumina's share price by about 25 percent at the end of that day.
Illumina said at the time that the revenue shortfall was driven by "a larger than anticipated year-over-year decline in high-throughput sequencing instruments."
According to the complaint, the defendants allegedly failed to disclose prior to October 10 that Illumina was experiencing a large decline in high-throughput sequencing instrument sales that was impacting its revenue, that they lacked visibility into trends that could impact its financial results substantially, that they provided unreliable and overstated revenue guidance, and that they made false and misleading positive statements about Illumina's business, operations, and prospects.
As a result, the company's shares traded "at artificially inflated prices" during the class period, according to the plaintiffs, and because of the "precipitous decline" in the market value of Ilumina's shares after the Oct. 10 announcement, the plaintiffs and other class members "suffered significant losses and damages."
The plaintiffs asked the court to award them and the other class members compensatory damages of a yet-to-be determined amount, as well as costs and expenses.
Illumina's shares dropped less than 1 percent to $130.16 in afternoon trading on the Nasdaq.
The company declined to comment on the lawsuit.