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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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In the Pipeline

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January 27, 2010

Sequenom: Strike Up the Music, Bring On the Cream Pies

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Posted by Derek

Now here's a weird one. The San Diego diagnostics company Sequenom came up with a non-invasive test for Down's Syndrome, and sold it to another outfit, Xenomics, for development. Update: I've got this transfer backwards - Xenomics licensed some of its nucleic acid technology to Sequenom, and has now regretted it. But late last year, things unraveled spectacularly. In April, Sequenom announced that there were problems with the test and announced that it had launched an internal investigation. In September came the unwelcome news that the data backing up their product were (quoting here) "inadequately substantiated". And they meant it, too, as the CEO and six other higher-ups all left the company under a cloud of confusion, recrimination, and very bad acronyms (like SEC and FBI). Last week it settled a dozen shareholder lawsuits over the whole affair.

But as that story at Bnet makes clear, the terms of the settlement were rather alarming, with Sequenom promising to do things like. . .make sure that everyone involved knew which studies were blinded and which weren't. And requiring bar-codes on the tissue sample vials. And not giving everyone access to the storage room where they were all kept. And. . .well, you get the idea. It's like seeing a sign at the burger place that says "Healthy Choice - Now With 30 Per Cent Less Aardvark Meat! And Try Our New No-Salmonella Menu!"

It can always get worse, though. Now Xenomics is suing, claiming that not only were the data weak and the controls insufficient, but that there never was a test in the first place. The complaint (available as a PDF at that link) is pretty zippy stuff by legal standards, featuring phrases such as "Defendant maintained the charade that it had. . ."

Way before all this lunacy, some people were skeptical about the company's prospects even if things went well. But hey, let's not dwell on the negatives here. If you'd like "Three Reasons to Buy Sequenom Today", this guy has them. I think I'll let this opportunity slip past, personally.

Comments (20) + TrackBacks (0) | Category: Analytical Chemistry | Business and Markets | The Dark Side


COMMENTS

1. phen on January 27, 2010 9:16 AM writes...

Never quote old news, something a good writer always should remember. "Now Xenomics is suing.." Now? That's months old. And did you look into Xenomics, its financial statement, that perhaps a lawsuit is all they have left? Last, you snipe a company promoting that it has upgraded its controls, bar codes, storage and other validation procedures. I think that's great, I'm sure their controls now exceed anyone else in the industry.. is that a bad thing? How about a headline article titled "Sequenom now has most rigorous controls in the genetics industry"

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2. Hsp on January 27, 2010 10:00 AM writes...

Sounds like someone is the unfortunate owner of Sequenom stock. Sorry, dude.

If a pizza place announced that they were no longer providing free cocktails to their delivery people, would you say that "now their delivery people are probably some of the safest in the industry"? No - because the pizza place shouldn't have been doing something that mind-numbingly stupid in the first place. And pizza isn't so dependent on the intelligence of the people running the store - pizza making probably doesn't place as high a value on intelligence as genetic test development. If you can't run your business without people wondering whether your IQ tests came back negative, and your intelligence (and your honesty) are all people have to determine the likely success of your business, well...

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3. Hap on January 27, 2010 10:23 AM writes...

You know, though, my criticism might be easier to take if I could spell my own name...

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4. Richard0623 on January 27, 2010 11:36 AM writes...

Wow, that's the officially the worst analogy I've ever Seen or heard.

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5. Leticia Velasquez on January 27, 2010 11:44 AM writes...

As the recipient of spamming comments from Sequenon when their phony test was news, as well as the proud mother of a child with Down syndrome, I am doubly glad that this test never existed.
Women are under intense pressure already to abort their children with Down syndrome, and the great majority are given no information on which to base their decision. No stats on the increasing life expectancey, no anecdotes on how adults with Down syndrome are graduating high school, starring in films, marrying, driving and swimming Lake Tahoe. No, it's Hollywood horror stories with 50 year old data. No wonder most women abort (the rate of abortion is 90%).
We at Keep Infants with Down Syndrome seek to reverse this trend, fueled by ignorance. We tell the world about our children's accomplishments, and how they have helped our families grow in love, patience, tolerance and sense of humor.
Ask Maddy Curtis, American Idol contestant who has four brothers with Down syndrome what they mean to her. She couldn't imagine life without them.
So there, Sequenom, who wants your fake test?!

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6. coprolite on January 27, 2010 11:46 AM writes...

I once received a letter from a nucleoside supplier in India informing me that they had changed their policies in order to reduce the transmission of anthrax in their product. Thanks.

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7. tbk on January 27, 2010 1:01 PM writes...

Anything can get published on the web without any fact-checking. The Xenomics suit is months old and they were a tiny player trading on the pink-sheets to begin with. Sequenom has already settled with the class-action suit for a relatively modest amount in stock. Clearly in that suit, which was much larger, the defendants thought it made sense to get paid in Sequenom stock.

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8. mikey on January 27, 2010 3:00 PM writes...

"Clearly in that suit, which was much larger, the defendants thought it made sense to get paid in Sequenom stock."--tbk

Interesting point. One that I've been wondering about. It all seemed to go down very quickly too.

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9. Tim on January 27, 2010 3:57 PM writes...

Leticia:
I applaud your efforts at Keep Infants with Down Syndrome. It may seem to be a moral dilemma regarding the DS test. Any DS abortion rate statistic cannot be used to argue against a test that was not around during those abortions. I would encourage you to follow the DS test to compare rates among women who have the test prior to making a conclusion.

I understand and respect your pro-life viewpoint. But having prior knowledge of the conditions of the unborn can only be a good thing for the mother and parents. Fetal testing is for the health of the baby and should not be curtailed. In fact, it should be encouraged.

At the same time, I applaud your educational activities as I do believe that parents of special needs children need as many resources as possible to assist them.

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10. Tim on January 27, 2010 4:16 PM writes...

Derek:
I've been following SQNM for sometime. Now, I may have it wrong but I think you have some basic facts mixed up.
1. SQNM bought the DS blood test from a University.
2. SQNM bought the exclusive rights to Xenomics Urine test.
3. Xenomics is suggesting SQNM used the DS results as a positive selling point to sell Xen's exclusive Urine Test to SQNM.
Xen. is claiming that they would/could have sold their tech to someone else and make the 9 figure profit.
So, as I follow the story. Xen did not buy anything from SQNM... Did I miss something?

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11. Avital on January 27, 2010 6:56 PM writes...

that's all very great and fine, still - just days before DNDN, HGSI and TRGT came out with huge results NO ONE gave them any chance of that happening.
look at them now!
these kind of 'mishaps' is what makes investors get DNDN, HGSI and TRGT at or below 3$ the closing day before the "big bang".
now I ask you - does SQNM at 4$ remind you of something?
if the answer is NO - then answer this question:
why would Goldman and Barclays hold 3m and 3.5m shares of SQNM? why would they be adding?
that's ~5% of the company - each!

unless you believe Goldman and Barclays are hedging their puts by buying 5% of the commons I think you should check your SQNM view - again!

good luck

A

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12. Avital on January 27, 2010 7:03 PM writes...

Tim, u r correct with your points my friend.
pay attention to the fact that when a writer is wrong it usually makes him a "paid basher" on behalf of the market makers.
wall street has always been and still is about making money EVERY WAY POSSIBLE!
do not ruleout anything as unlikely here.

listening to the company it seems like we will have a DS test - at least that is what the "new" CEO says. looking at his backround and recent actions - I think this guy knows what he is talking about.

the other point is Goldman and Barclays positions.
I can't see these first class market makers, the brokers of brokers, making a mistake like that - putting 10M$ each on a company that is faith to fail.

a squeeze trap is mpre like it and that can only come WITH A WORKING DS TEST!

we'll see.

A

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13. Avital on January 27, 2010 7:19 PM writes...

to conclude:
we can all say our views here, make predictions and put future prices tags according to each own experiance BUT the fact remain - we can only wait for Brown University study to come out somewhere in late June this year.
that independant study should shed some light on SQNM's DS test potential.

risk of that data being bad (doesn't work at all) to semi-bad (partially works or doesn't give any advantage on current test or need more samples/work) would send the share to 1$-3$ while good news (work better than current test) or very good (work as SQNM said in the past it does) would put us wll above 30$ even before any rev could be recognized from the test.

the fact SQNM bought a lab worth ~100M$ make me believe they already had (at the time) at least one other review of the test (more likely two) - even a mid term one - beside their own suggesting DS test work very close to the reported results.

this lab would be ready to bring that test to the market - should it be proven write - and with a DS test brought through that lab to market, the stock could skyrocket to a 3 digit fold before 2011 ends.

I shit u not!

A

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14. Old-Timey on January 27, 2010 9:53 PM writes...

@ 11,12,13, Please refer to comment 2, first paragraph & stop drinking the Kool-Aid. Why was 36% of the float shorted as of December 2009?

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15. Avital on January 28, 2010 4:45 AM writes...

I'll try it one last time - then I'll take u for a professional paied basher and there is no reason behind what u r saying.
1.) stop calling names. I know u think you're very smart and I take u for an above average person but there is always someone smarter!
2.) it is clear u have no idea how to form a business and that is fine. people are diferent and not everyone have what it takes to succeed in a field where the other was born to do!
if I'll tell what diffculties companies like GOOG, AAPL, INTC and MSFT had in the beggining you wouldn't believe.
obstacles, fails and illusions are things that u encounter with when you do something - anything.
it doesn't make a business MORE "business like" or less "business like" and have no conection what so ever to a company ability of future success.
the only thing that differ between a succesful company (or person) to a failure one is the ability to continue despite the difficulties with "persistence that do not take failure as part of the reality".
u have no idea what I am talking about - I know.

regarding the 36% short:
why before EVERY turn around in the markets there are far more bulls if it is a top and far more bears if it a bottom?
answer:
"the mub can show a big amount of stupidity but not of common sense".

what the brain doesn't do - does the time.

watch and learn my friend - watch and learn.

A

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16. Lativa on January 28, 2010 8:45 AM writes...

Derek,
I suspect you make these kinds of blog posts just for the entertainment value of the comments. These guys are hilarious!

L

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17. T on January 28, 2010 9:04 AM writes...

Avital - if you get a spare minute or two could you translate #15 into English please?

Thanks

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18. Former Xenomics Employee on January 28, 2010 3:08 PM writes...

I'm not surprised all of this chaos is going on. If anything, I'm moderately surprised the original sale of the Urine test went down in the first place.

Here's the background: the good people at Xenomics developed a urine test based on something called transrenal DNA (Tr-DNA for short). How it works is that it's able to detect DNA that comes from dying cells which also are able to be filtered through the kidneys. As you can guess, that means you're dealing with really short pieces of DNA, somewhere between 100-200 bp. The technology isn't in polished for yet, but it works. They were able to get a test launched for gender determination, and were able to wrap up a test for HPV before the company went broke and sold out to their current owners.

Now, one of the members of management that survived the sale was skeptical of Sequenom's test from jump. When we heard the original test results with Down's Syndrome, the scientific staff was calling BS bigtime. After all, results are rarely that pretty once you get past pilot studies. However, since the fall of the company left them short on cash (up to the point that at the end, lab supply bills were going unpaid), the company took the money to settle the old debts. I'm not surprised at how everything has gone down, but it's a shame. It's a good technology, and all the good people at Xenomics need to do is find someone willing to develop it to maturity.

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19. Tim on January 29, 2010 10:54 AM writes...

Former...:
Good insight. I regret good science going through business suffering like both these companies.

The problem I have with the XEN suit is the damages sought are based upon the fact that they 'could have sold' the tech to someone else. The someone else could have made money. In other words, no damages suffered. I do think they have a complaint that should be heard. But not to the level they are seeking. Why did a Biotech company sell it's IP to another that didn't have it's act together is risking, too. Basing it's complaint on investor publications versus it's own internal Due Diligence is beyond me.

Avital:
Thanks for the support. I see the Author corrected his comments. Albeit questionable so.
He states he
1. "got the transfer backward"
but still claims SQNM
2. "came up with the test"

I say 'No' to both 'corrections'
1. SQNM did not sell a test to XEN. The 'Test' was a blood based and XEN's is urine based.
2. Again, a China university came up with the Blood DS test as listed in the author's own XEN complaint citing.

The China University study validates the science. But it needs to be commercially proven. So a DS-Blood 'test' already exists, just not a commercial one.

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20. gedanken7 on January 31, 2010 9:43 PM writes...

Former... Xeno setup forebearance of debt in exchange for company stock. So there seems like some glimmer of hope albeit very slight. How far are they in getting HPV testing FDA approved?! Did they even file yet? The ASCO study looked promising too, but is it valid?

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