Missing Data? Feh. In Sequenom's Hall of Mirrors, Investors See Only What They Want

(MoneyWatch) 

• UPDATE: Sequenom's Disappearing Down Syndrome Test Mystery -- Solved!

Troubled biotech Sequenom (SQNM) has been on a roll recently with investors -- which would be great, except that many of them seem to be projecting their wildly optimistic expectations onto a real blank slate of a company.

In the last month, Sequenom's share price has gone from $4.13 to $8.07 on the back of a couple of analyst reports claiming "pipeline progress" at the company. One of those analysts expects the stock to double again. Sequenom also recently launched a non-invasive fetal sex test.

Only problem is that no one really understands exactly happened last year when Sequenom dropped a bomb and announced that data for its lead product -- a non-invasive fetal test for Down syndrome -- was "inadequately substantiated." And papers filed in a lawsuit continue to raise questions about who owns the basis of the test.

Sequenom's CEO and six other execs were kicked out in the scandal. The company is currently under investigation by the SEC and the FBI. One of the departing execs was sued for alleged insider trading prior to the release of bad news. Sequenom has since started from scratch on its Down syndrome test.

None of this seems to bother Sequenom investors, as they watch their stock climb ever higher. And yet there continues to be a background drumbeat of negative sentiment about the company. Right now, people are seeing in Sequenom whatever they want to see.

On Jim Cramer's Mad Money show on CNBC, he was asked about Sequenom:

Now, I never, ever say this-- but this one may be too controversial for this guy-- I have got guys who are telling me that it is the greatest thing, it is all clear, everything is good, all the management, everything has gotten better-- and I have other guys telling me that it is the same old team, be careful -- I say that we settle it by inviting management on the show -- then we will get the answers that we need.

Over at The Street, Adam Feuerstein accused the bullish Cantor Fitzgerald analyst of getting her math wrong:

It looks to me like Pamela Bassett came up with her new, super-bullish $16 price target for Sequenom first, then worked backwards in her financial model to justify it.

I don't know who this guy is at Seeking Alpha, but he raises a good point:

I am not sure how you value a company that no longer has verifiable results, but I'd assume that 90% of the people in the stock today could care less about such details as long as it's moving in the right direction - it's the right stock for the week.

Xenomics, the company that claims it sold the basis of the Down syndrome test to Sequenom, repeated its allegation that Sequenom won't actually be developing such a test. In a press statement to BNET, chairman Thomas Adams said:

It looks like they took the technology purely for competitive reasons -- to keep us out of the market. They elected to put it on the shelf.

In court, exchanges between Xenomics (now renamed TrovaGene) and Sequenom border on the surreal. They can't even agree on what Sequenom bought from Xenomics.

Xenomics' case is that they sold the company a testing technology for Down Syndrome; Sequenom's defense is that Xenomics' technology simply wasn't the basis of the test. Xenomics sold Sequenom a urine-based test for fetal nucleic acids, Sequenom alleges, but Sequenom actually developed a blood-based test for Down syndrome. Sequenom's papers argue:

... there are no representations in the Agreement about any Down syndrome test.

It all raises two interesting possibilities: Either Xenomics has gotten this hopelessly wrong and its technology has nothing to do with Sequenom's Down syndrome test. Or Sequenom bought a Down syndrome test from Xenomics that it now claims is not a Down syndrome test.

Related:

• Sequenom: The Case for the Defense ...
• Crazy Question: What If Sequenom's Down Syndrome Test Doesn't Exist?
• Sequenom Settlement Offers Clues to What Went Wrong Last Year

Image via Flickr user Panoramas, CC 2.0