Is Sequenom Dead? (SQNM)

Sequenom Inc. (NASDAQ: SQNM) is becoming a case study on how to run a medical testing products company into the ground.  The diagnostic test maker has more problems other than just the announcement that it fired CEO Harry Stylli and several others after an investigation into the results for its Down syndrome blood test.  This was supposed to be the Holy Grail for Down testing, and we still lack a full understanding of what happened.

Board member Harry Hixson will fill in as Sequenom’s interim CEO, and board member Ronald Lindsay will take over as interim CFO and controller.  Elizabeth Dragon was senior vice president for research and development, but she is out as well and you have to ask yourself how great a company without a head of R&D can be. Three other employees were fired, and Paul Hawran “resigned” on Friday with another executive. Sure he resigned.

Sequenom came clean in April with the shock that study data and results for its SEQureDx were not to be relied upon…. The reason was “employee mishandling” and the extent of this mishandling is still  up in the air.  Based on this ousting and coup, it sounds like the guys knew they were in the soup and kept proceeding normally as though everything was running smoothly.  The issue is that the company this week said no deliberate wrongdoing was found.  An SEC filing disclosed that adequate protocols and controls were not effectively put in place and that some employees were not adequately supervised.  But now you have to trust a company that just cleared its ranks and Sequenom just now has all the hallmarks of an implosion story.  It is sad too, because this is such a critical area.

The disclosure this week still does not leave you with a formal account of what actually happened.  It is vague about the investigation which found that results led to inadequately substantiated claims as well as inconsistencies and errors.

Analysts are now against the stock entirely.  Auriga assumes $45MM of cash left at the end of 2009 and reiterated a “Sell” rating and $3 price target.  Caris has reaffirmed its “Below Average” ranking on the stock gave it a $0.50 target from $3.00.  Lazard reaffirmed its “hold” and we have seen no support at all from anyone here.

Sequenom now may not have enough bodies familiar with the technology to to ever give a full version of what happened.  There are, of course,  now going to be far more lawsuits and every sale of any stock EVER is going to be pursued now, potentially those with criminal implications.

This lost almost 40% and is now under $3.50.  Frankly, it is shocking that a new 52-week low was not put in as its 52-week trading range is $2.86 to $28.60.  Sequenom is not dead yet, but the prognosis here looks dire.

JON OGG