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Sequenom CEO, Others Terminated Following Investigation

This article has been updated with comments from a conference call.

NEW YORK (GenomeWeb News) – Sequenom President and CEO Harry Stylli and Senior VP of R&D Elizabeth Dragon have had their employment terminated by the firm's board of directors, following an investigation into the mishandling of test data, Sequenom announced after the close of the market Monday.

In addition to those two executives, the firm said that CFO Paul Hawran and Steve Owings, vice president of commercial development for prenatal diagnostics, have resigned from the company, and three other employees have been fired. Stylli also was obligated to resign his position on Sequenom's board of directors.

Sequenom's board appointed Chairman Harry Hixson, a former president and chief operating officer of Amgen, and Director Ronald Lindsay to serve on an interim basis as CEO and SVP of R&D, respectively. The company's board of directors also has designated controller Justin File to serve as principal financial and accounting officer.

The clear out comes following the completion of an investigation into the mishandling of R&D test data and results on the firm's SEQureDx Down syndrome test. Sequenom disclosed the problems last April and opened an investigation at that time.

"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 firm said in a statement.

"In making the transition from researching potential molecular diagnostic tests to developing and commercializing those tests, the company failed to put in place adequate protocols and controls for the conduct of studies in the T21 program … and some employees failed to provide adequate supervision," Hixson said during a conference call following the announcement. "This resulted in inadequately substantiated claims, inconsistencies and errors in the test data, and results for our T21 program."

"I and the other directors wish to emphasize to the stockholders that we continue to believe that Sequenom has the potential to develop important non-invasive pre-natal diagnostic tests," said Hixson. He said that the firm "continues to believe that fetal nucleic acids, which provide important information about the genetic makeup of the fetus, may become the basis for new diagnostic tests."

Hixson said that the firm will continue its efforts in the fetal diagnostics space.

"We're continuing to work on both the DNA- and the RNA-based tests," said Hixson. However, he said that he could not "provide a status report today."

The mishandling of the data nullified the previously reported positive test results and created a significant delay in the firm's timeline for launching the test.

The board of directors said today that the company "is no longer relying on, and the public should no longer rely on, any of the previously announced test data and results for the company's noninvasive prenatal test for Trisomy 21."

The terminations and resignations come following the completion of an independent investigation by a special committee of Sequenom's independent directors. The firm said that the committee interviewed over 40 witnesses and reviewed over 300,000 documents and e-mails in the investigation.

In addition to the personnel changes, Sequenom's board said that it is undertaking a number of remedial measures including new disclosure controls and procedures; changes in the company's organizational and reporting structure; enhanced training in ethics and scientific processes for the company's employees; new procedures governing R&D and clinical studies, including increased roles and responsibilities for independent third parties; new procedures for storing and managing test samples; and creating a science committee of the board of directors to oversee R&D strategy and activities.

"We still firmly believe in the base technology and the mass spectrometry approach to nucleic acid detection, which has been the basis of much of Sequenom's success as a company, primarily as a tool company and now as a diagnostic development company," Lindsay said during the call. "So, I don't think we see any change in the core technology. I think some of the challenges are in the proper collection of blood samples, [and] accruing the right validation technologies."

The special committee and the independent counsel plans to make a presentation to the US Securities and Exchange Commission regarding the investigation.

During the conference call, Hixson declined to answer a question about whether the firm would seek criminal charges against anyone involved in wrongdoing at the company. "We're fully cooperating with the SEC, [and] that's all I think I should say there," he said.

Sequenom's shares were down 34 percent at $3.73 in early Tuesday trade on the Nasdaq.

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