NEW YORK (GenomeWeb News) – Sequenom said today that it has agreed to pay $14 million to shareholders to settle their class action lawsuit against the company.
Sequenom said that the settlement will be funded by insurance proceeds. Additionally, the company has agreed to issue to the plaintiffs a number of shares of Sequenom common stock, to be determined after final approval of the settlement by the US District Court.
Sequenom said that the issued shares will constitute 9.95 percent of the total shares outstanding, subject to certain limitations. As of Dec. 23, 2009, the company had approximately 61.7 million shares of common stock outstanding, which would obligate Sequenom to issue about 6.8 million shares, if the share number had been determined as of that date.
The company said that it has also agreed to adopt or continue implementing changes and additions to certain corporate governance policies, protocols, and practices, including an amendment to its bylaws to ensure that a majority of its directors are independent.
The settlement is pending approval by the US District Court for the Southern District of California, with which the lawsuit was filed.
Sequenom shareholders Leon Ries and Michelle Finlayson filed the suit against Sequenom in November on behalf of other company shareholders.
The suit, which named as defendants the company and several individual current and former executives, related to the alleged mishandling of data surrounding SEQureDx, a non-invasive test for fetal gene and chromosome abnormalities being developed by the company.
Specifically, the plaintiffs alleged breach of fiduciary duties against a number of current and ex-officials, and leveled charges of insider stock trading against a former official who allegedly sold more than 22,000 shares of his personally held Sequenom stock just prior to the company issuing a press release last April detailing the data mishandling.
News of the data mishandling, which followed some 14 instances of the company allegedly providing false information such as positive scientific data about the progress of the test, caused Sequenom's stock price to plunge to $3.62 per share from $14.91 per share, an approximate market capitalization loss of $687 million, according to the suit.
Today, Sequenom said that the settlement agreement "contains no admission of liability," and that Sequenom is settling the lawsuit "to avoid potentially lengthy, costly, distracting, and time-consuming litigation."
Harry Hixson, Sequenom's interim CEO and chairman, said in a statement that the company is "pleased to have reached an agreement with plaintiffs to settle this litigation, and we believe that this outcome is in the best interest of the company and its shareholders. I look forward to closing this chapter for the company and focusing on meeting our 2010 milestones, which include the launch of a number of molecular diagnostic tests."