Wednesday, April 29, 2009

Sequenom (SQNM) Bombshell

I am saying "wow" a lot of late - Sequenom (SQNM) is out with something after hours I've never seen in all the years I've been doing stocks; a delay in their Down Syndrome test due to employee mishandling of data. The stock is down 50% after hours. Worse - this was our only long position I actually have a hedge against, but I covered it into the weakness early this week (and patted myself on the back after it bounced from below $14). Basically we have 50 shares short as a holding position. On the long side we only have a 1.4% stake since the stock chart has been awful but looks like that will be 0.7% by tomorrow. Not good - it's one thing to be hit by an earnings situation but this is out of left field. Here I thought this was my personal Dendreon (DNDN) - something I'd stick with in the long run, waiting for the magical day to arrive it goes up 200% in a session. So much for practicing patience...

Well, we will see what happens tomorrow after management talks with analysts and some clarification - we had a similar drop once in Thoratec (THOR) after hours on a product recall but by the next morning it was down 10% instead of 50%. Since the whole concept of Sequenom is based on the veracity of the test results; this throws a lot of issues on the table. Sequenom reported earnings as well tonight but it's a non issue for this type of company.

Here is the news and YET again, "the stock" (via chart) seems to know before the rest of us... I wonder how that always seems to be the case. Rhetorical comment. I think other than Morgan Stanley (MS) this was the only other long position we held with such a bad condition... I was thinking we finally formed a nice double bottom with early April lows - thankfully I did not pile in. Still going to sting - market gods not kind of late.

Per Sequenom
  • ....the expected launch of its SEQureDx™ Down syndrome test is delayed, due to the discovery by company officials of employee mishandling of R&D test data and results. Accordingly the company is no longer relying on the previously announced R&D test data and results.
  • SEQUENOM has not changed its plans to develop in parallel its RNA- and DNA-based methods for the Down syndrome test and will endeavor to have a validated test in the fourth quarter of 2009.
  • Under the circumstances, and as supported by key clinical opinion leaders, the company now intends to launch the Down syndrome test upon publication in a peer-reviewed journal of the results from the on-going large, independent clinical studies, which are designed to be practice-changing for Down syndrome testing.
  • The company’s board of directors has formed a special committee of independent directors to oversee an independent investigation of the employees’ activity related to the test data and results. The committee has engaged independent counsel to assist the committee in the conduct of the investigation.
  • Although the company is not aware of any potentially inappropriate activity related to the reported results of its other tests under development, the company is currently reviewing the data for all tests. As a result of this ongoing review the Rhesus D, Cystic Fibrosis and Fetalxy tests are now anticipated to begin launching in the third quarter of this year.
  • The company believes that its Down syndrome program has suffered a temporary setback but that the SEQureDx technology is scientifically and technically sound. The company intends to take every possible action to make up lost ground.
  • Today’s announcement regarding the company’s SEQureDx Down syndrome R&D test data and results supersedes all previous announcements about such data and test, including its press releases dated June 4, 2008, September 23, 2008, December 1, 2008, January 28, 2009 and February 3, 2009.
Should be a whopper of a conference call...
  • SEQUENOM has scheduled a conference call for 2:00 p.m. Pacific time today at which Harry Stylli, PhD, SEQUENOM President and Chief Executive Officer, will discuss this announcement and along with other company officials will present information on the company’s operating results for the first quarter of fiscal 2009.
EDIT 5:05 PM : Down 60% after hours.

EDIT 5:10 PM: There appears to be an analyst who initiated the stock with a buy this morning. Ouch.

Long/Short Sequenom in fund - long Thoratec in fund; no personal position

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