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Getting the Story Straight: Sequenom's Ever-Shifting Explanations of Its Down Syndrome Test

By Jim Edwards

Updated on: June 8, 2010 / 10:00 AM EDT / MoneyWatch

Sequenom (SQNM)'s decision to drop its pursuit of an RNA-based test for Down Syndrome in favor of a DNA-based test (noted in a Q1 2010 SEC filing), after months of insisting it was researching both, is a classic example of what I like to call "Joel Cairo Syndrome." The condition afflicts companies that get themselves tied into corporate communications knots while trying to explain their own inconsistent doings.

Cairo was the delightfully sleazy character played by Peter Lorre in The Maltese Falcon. In the movie, he is given a ridiculous alibi by Humphrey Bogart's detective, Sam Spade, to throw the cops off the scent of the bejeweled bird statue they're all trying to locate. Cairo is forced to endlessly repeat the bogus tale during an all-night police interrogation. The next morning, an exhausted Cairo confesses to Spade:

I certainly wish you had devised a more reasonable story. I felt distinctly ridiculous repeating it.

That seems to be the position Sequenom is in right now, and anyone interested in how companies can benefit from playing it straight with the public can learn from it. Sequenom is trying to develop a non-invasive prenatal test for Down Syndrome. If successful, the test could be a billion-dollar blockbuster -- every pregnant woman would want to take it.

But last year, Sequenom came under investigation by the U.S. Attorney's office, the FBI, the SEC and NASDAQ after development of the test technology collapsed in a data corruption-cum-insider-trading scandal. Last week, the SEC charged Elizabeth Dragon, the company's former R&D chief, with making false statements to investors about the test development.

Until recently, Sequenom told everyone that its SEQureDx Trisomy 21 test for Down Syndrome used "RNA- and DNA-based methods." After the data corruption scandal, Sequenom announced it was starting from scratch. One company that licensed technology to Sequenom then sued, accusing the company of essentially running a charade, and that it had "no real non-invasive testing for Down Syndrome."

The company denies the claims. But in its May 7, 2010, 10-Q it disclosed:

We are no longer trying to develop a test that analyzes RNA samples. Instead, we are focusing our current research and development efforts on a noninvasive prenatal Trisomy 21 test that analyzes DNA samples utilizing primarily a sequencing-based approach.

... We anticipate optimization of a DNA sequencing-based test to be completed by the end of the third quarter of 2010.

Sequenom's statements are not completely inconsistent, but they do admit that whatever they're trying to develop now is markedly different from the thing they were trying to develop before the data corruption scandal.

On its own, that's not a problem. But put that together with the argument of TrovaGene, the company that alleges Sequenom's test is non-existent: TrovaGene claims that Sequenom is simply buying up certain types of prenatal testing technology to take them off the market.

A source outside Sequenom tells BNET that research in this field "has been stymied completely by the licencees of the key IP in this field," which is Sequenom. Indeed, in addition to the TrovaGene license, Sequenom recently did two more exclusive prenatal testing license deals, which you can see here and here.

I asked the company to explain in layman's terms what it meant by the changing definition it gave for its Down Syndrome test development. A company spokesman responded:

... the methods they were using a year ago were on MassArray and were in RNA. Now, they're focused on DNA and are using sequencing platforms, the kind developed by Illumina, LifeTech, etc.

So we have two things going on at Sequenom: A moving set of goalposts for its Down Syndrome test and a restriction on other researchers' ability to look into certain types of prenatal testing. Like Joel Cairo, Sequenom is a company that continues to struggle to get its story straight ... and, just like the Maltese Falcon, the Down Syndrome test macguffin remains at large (at least until Q3 2010).

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