Call Me a Wimp, but I'm Still Nervous

Investing is sometimes like betting on horse races. You take all the information you can get, synthesize it as best you can, and figure out if the potential payoff outweighs the risks.

Unfortunately for investors in Sequenom (Nasdaq: SQNM  ) , this company is like a horse running in two feet of mud, with blinders on, and a new jockey. Can it make it to the finish line? Maybe. Might it even win the race? Perhaps. But how do you handicap something like this? There's not enough information to make an informed decision.

What we do know is that the company cleaned house on Monday night. The president and CEO, Harry Stylli, and senior vice president of research and development, Elizabeth Dragon, were fired. Its chief financial officer, Paul Hawran, and Steve Owings, the vice president of commercial development for prenatal diagnostics, resigned.

The changes stem from the announcement in April of "employee mishandling of R&D test data and results" for its Down syndrome test. I've got no problems with heads rolling, and if the CEO needs to be fired for a lack of oversight, then so be it. The chairman of the board, Harry Hixson, who was formerly the chief operating officer of Amgen (Nasdaq: AMGN  ) and also has some experience with diagnostic testing at Abbott Labs (NYSE: ABT  ) , will take over as the interim CEO.

After the haircut yesterday, the company's shares closed about the same place they did when the scandal first broke last spring. Essentially, we're back where we started.

Despite rapid changes in the stock price, we never really left. Investors are still completely in the dark about what exactly "employee mishandling" really is. There's still an ongoing Securities and Exchange Commission investigation, so I guess it's understandable that the company might want to keep its mouth shut.

The bigger problem for investors is that they're equally in the dark about the path forward. No further timeline was given for getting the Down syndrome test to market, or even when we could expect initial test results. Beyond what the company has said earlier, that is, which hasn't been much.

Uncertainty can lead to outsized returns -- witness American International Group (NYSE: AIG  ) and Bank of America (NYSE: BAC  ) -- but with Sequenom, I've never been able to get a handle on exactly what the likelihood of those outsized returns might be. It's safe to assume that the company is worth north of $20 per share if -- and it's a big if -- the Down syndrome test turns out to work, but it's really difficult to determine how likely that is.

Call me a wimp if you will, but for that reason alone, I'll continue to sit this one out.

Sequenom is still sporting a three-star rating in Motley Fool CAPS. Think it's the comeback kid? Give it an outperform ranking and post a pitch to tell other investors your thoughts. It's free. It's fun. And, it's Foolish. 

Fool contributor Brian Orelli, Ph.D., doesn't bet on horses much because he has trouble with the "synthesize the data" step. He doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.


Read/Post Comments (5) | Recommend This Article (13)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 30, 2009, at 5:15 PM, portablegenomics wrote:

    I'm so sad for Sequenom people. I know most of them.

    As a molecular biologist I still strongly believe in the high power of mass spectrometry technology that SQN has brought (is trying to) into the molecular diagnostic market.

    They sure have made a big mess with their recent work on Down Syndrome, but which lab never did such errors? Of course we heard of SQN's because they are a unique company at a very front end of innovation.

    But SQN technology, its very high sensitivity and specificity (more powerful than PCR), is still here with a phenomenal potential.

    The experience acquired by SQN on this DS project is a tremendous advantage for SQN, a reason to continue on with this project, and for you the investors, to renew your support to the new executive team.

  • Report this Comment On September 30, 2009, at 7:56 PM, Fool wrote:

    I as as small invester sold most of my other stocks except SQNM, due to the soon to be released DS test, now i have lost 87% and am left with little to nothing, I put a lot of faith in SQNM and now feel betrayed by corprate America once again.

  • Report this Comment On September 30, 2009, at 9:43 PM, Employee9 wrote:

    Watch closley how we will get close to $25

    range P/S Ds test will be more than revolution .

    Down Syndrome Info was just misplaced and will be

    available shortly,I just know that,so do what you think is the best for you

    I'm adding to my position since is underpriced.

    T.

  • Report this Comment On October 01, 2009, at 12:32 PM, tommet wrote:

    This meeting should drive stocks higher regardless of the outcome. I believe the sub $4 price is based on the worse outcome and short term uncertainty.

  • Report this Comment On October 02, 2009, at 1:56 PM, rox7118 wrote:

    All companies have their hiccups. This is one of them for SQNM. I have faith in this company. Now is a good time to maybe buy because the pps is low if they do successfully relese the test, this thing should be over $15 easily. Buy now in the slump and hold. They cleaned house and the new management should be eager to get this thing resolved!

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