SEC Charges Former Biotech Company Executive for False Claims About Down Syndrome Test
FOR IMMEDIATE RELEASE
Washington, D.C., June 2, 2010 — The Securities and Exchange Commission today charged a former executive at a San Diego-based biotechnology company for making false statements to investors about her company's prenatal test for Down syndrome.
The SEC alleges that Elizabeth A. Dragon, the former Senior Vice President of Research and Development at Sequenom, Inc., lied during at least three public events where she made presentations to analysts and investors. She claimed that the test could predict whether a fetus had Down syndrome with almost 100 percent accuracy. However, the SEC alleges that Dragon knew the test was far less accurate than she claimed publicly. When Sequenom later announced that it was no longer relying on the data that Dragon presented and the test would not be launched as planned, the company's stock price plummeted by approximately 76 percent.
"Elizabeth Dragon knew the truth about Sequenom's Down syndrome test, yet she told the public it was a near-perfect success," said Rosalind Tyson, Director of the SEC's Los Angeles Office. "Her actions misled investors with exaggerated information about a significant new product that never materialized."
The SEC's complaint, filed in federal court in San Diego, alleges that Dragon presented materially misleading scientific data about Sequenom's prenatal screening test for Down syndrome. She falsely claimed that the test's highly accurate results were obtained on a "blinded" basis, meaning that scientists did not know whether the fetus had Down syndrome at the time they tested the maternal blood sample.
However, the SEC alleges that Dragon provided her scientists with the known outcomes of the samples, which allowed them to manipulate the data in order to produce more accurate results. Dragon falsified the number of samples allegedly tested by Sequenom and she lied about how well the test worked, claiming that it produced unambiguous results. In reality, the test results were often difficult to interpret, which is why she needed to "unblind" the known outcomes to her scientists.
Without admitting or denying the SEC's charges, Dragon has consented to a judgment permanently enjoining her from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and barring her from serving as an officer or director of a public company. The court will determine at a later date the amount of a financial penalty to be paid by Dragon.
The SEC's investigation has been led by Diana Tani, Marc Blau, and Sara Kalin in the Los Angeles Regional Office. The SEC's investigation is continuing. The SEC thanks the U.S. Attorney's Office for the Southern District of California and the Federal Bureau of Investigation for their cooperation and assistance in this matter.
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For more information about this enforcement action, contact:
Michele Wein Layne
Associate Regional Director, Los Angeles Regional Office
Marc J. Blau
Assistant Regional Director, Los Angeles Regional Office