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Two More PacBio Shareholders File Suits against Company Officials

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By Julia Karow

Two additional shareholders of Pacific Biosciences have filed lawsuits against company officials, alleging that they breached their fiduciary duties by withholding material information about the PacBio RS system prior to the firm's initial public offering in 2010.

The new suits follow two class action lawsuits filed by investors last October (IS 12/6/2011).

Investors in PacBio's IPO suffered significantly from the drop in the company's shares last year: while PacBio shares traded at $16.50 shortly after the IPO, prices took a dive last year when the company disclosed that orders for the RS instrument had come in more slowly than expected. As of early this week, shares were trading at $2.90.

Thomas Primo, a PacBio investor, filed a class action complaint against three PacBio officers on Dec. 21 in the US District Court for the Northern District of California, alleging that they "knowingly, or with severe recklessness," made materially misleading statements or failed to disclose certain information. Primo said he purchased PacBio securities "at artificially inflated prices" and has incurred damages as a result.

In particular, he alleged that the company failed to disclose in the prospectus for its IPO the instrument's low raw read accuracy and the variability of the early-access RS instruments.

Primo, who demanded a jury trial, asked the court to declare the suit a class action, award compensatory damages and attorneys' fees to him and the other class members, award rescissionary damages, and other relief.

The court scheduled a case management conference for April 4, 2012.

Separately, PacBio shareholder Robert Burlingame on Dec. 29 filed a verified shareholder derivative complaint against several members of PacBio's board of directors, also in the US District Court for the Northern District of California.

Like Primo, he claimed that the directors breached their fiduciary duties by failing to disclose certain material facts at the time of PacBio's IPO. Specifically, he alleged that the registration statement overstated the status of the RS system's development; omitted the system's relatively low raw-read accuracy, throughput, and yield; and did not discuss "bugs" in the system and negative feedback from early-access customers, among other things.

Burlingame asked the court to award damages and restitution, to direct the company to take reforms and improve its corporate governance, and to award him attorneys' fees and other expenses. He also demanded a jury trial.

A case management conference is scheduled for March 27, 2012.


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