A little more than 4 million children are born in the U.S. every year, and quite a few of those prospective parents are curious about potential genetic defects in their offspring. And so a group of investors are betting $20 million today that Redwood City, CA-based Gene Security Network is going to make some serious money from a variety of prenatal genetic tests for those curious parents.

Gene Security Network, which is being renamed Natera, is announcing today it has raised $20 million in a Series D financing led by Lightspeed Venture Partners, with participation from Claremont Creek Ventures and Sequoia Capital. The company, founded in 2004, has now raised a combined $42 million of venture capital in its four publicly announced financing rounds. Founders Fund, the West Coast’s largest in vitro fertilization center (Huntington Reproductive Center), and Google vice president Marissa Mayer have all participated in prior investment rounds in the company.

The company currently sells a test that examines the genetic profile of embryos that are candidates for implantation in a woman’s uterus through in vitro fertilization. The new investment will help Natera commercialize a noninvasive test that looks for Down Syndrome, as well as other genetic conditions. Several companies, including San Diego-based Sequenom (NASDAQ: SQNM) have been working for years on a test to detect chromosomal abnormalities like Down by looking at a drop of maternal blood, rather than using accurate but more invasive techniques like amniocentesis or chorionic villus sampling (CVS). Natera said today it is preparing to introduce the new commercial test in 2012.

Natera’s claim is that its test is less invasive than the other techniques, can be performed in the first trimester of fetal development, and approaches the accuracy of amniocentesis, as the company described in a story last month by Bloomberg News. The company generated $4 million in revenue in 2010, tripled that in 2011, and expects to triple that again to about $36 million in 2012, according to the Bloomberg report.

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Between the formation of the new $100 million West Health Investment Fund and the new wet-lab space Johnson & Johnson is hosting for as many as 20 startups, you’d have to say it’s been a good week for life sciences innovation in San Diego. Get briefed here or get left behind.

—San Diego’s Gary and Mary West, who provided $90 million to establish the West Wireless Health Institute, established the $100 million West Health Investment Fund to invest solely in startups that promise to drive down the cost of health care. Don Casey, the fund manager and West Wireless CEO, vowed that the fund would not cause a “balloon squeeze,” where innovation moves the cost from one part of the health system to another.

—Johnson & Johnson has refurbished part of its Pharmaceutical Research & Development facility in San Diego to provide lab and office space for as many 20 life sciences startups. Each startup will have to make monthly payments to stay at the Janssen Labs at San Diego, but J&J says there is no “quid pro quo,” and each tenant will get office space and access to a common area with wet lab research equipment that would be difficult for a company to afford on its own.

—Anadys Pharmaceuticals (NASDAQ: ANDS), the San Diego-based biotech developing antiviral drugs for treating hepatitis, agreed to an all-cash buyout offer worth $230 million from Roche, the Swiss pharmaceutical giant. Roche’s offer to pay $3.70 for each Anadys share was a 256 percent premium over the previous trading day’s close of $1.04. Anadys had just released encouraging results from a mid-stage clinical trial of its lead hepatitis C drug.

—Venture capital firms invested $6.95 billion in 876 deals throughout the United States—including $202 million in 21 venture deals in the San Diego area—during the three months that ended Sept. 30, according to the MoneyTree Report. The third-quarter survey from PricewaterhouseCoopers, the National Venture Capital Association, and Thomson Reuters also highlighted a shift in VC activity, with a pullback in funding for life sciences. That was also true in San Diego, where nine life sciences companies got $26 million, or 13 percent of total VC investments here.

—Following a two-year setback, San Diego’s Sequenom (NASDAQ: SQNM) rolled out a laboratory-developed blood test that can determine with … Next Page »

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San Diego-based Sequenom (NASDAQ: SQNM) says today it’s making a prenatal test for fetal Down syndrome available in 20 U.S. cities, 2 1/2 years after the company shelved the debut of an earlier Down syndrome test due to “mishandled” research data.

The proprietary test announced today is a laboratory-developed test (LDT) that detects an abnormal chromosome for Down syndrome in the fetal DNA fragments found in a maternal blood sample. A Sequenom-funded study that confirms that the technique is 99.1 percent accurate also is being published in the journal Genetics in Medicine by an independent group of researchers.

A spokeswoman for Sequenom says the test announced today is a “completely new” diagnostic approach that analyzes fetal DNA circulating in the mother’s bloodstream, using next-generation genetic “shotgun” sequencing technology developed by Illumina (NASDAQ: ILMN), the San Diego maker of genetic-analysis equipment.

The diagnostic technology that Sequenom shelved in 2009 was based on detecting fetal RNA in maternal blood samples. Following an internal investigation into the mishandled clinical data, Sequenom ousted CEO Harry Stylli, former R&D chief Elizabeth Dragon, and three other employees.

Sequenom says the 20 cities where its MaterniT21 test is now available are part of a phased rollout of the new test, which is intended for pregnant women who are at higher risk for Down syndrome (roughly half of the mental retardation cases in the United States). Out of 4.2 million births in the U.S. each year, about 750,000 are considered high-risk (based mostly on pre-screening or because the mother is 35 or older). Only about one out of five of these high-risk cases, however, undergo amniocentesis or chorionic villus sampling, two invasive procedures that can accurately determine Down syndrome but carry a slightly higher risk of miscarriage.

Sequenom is offering a different approach. A doctor would first send a maternal blood sample for the MaterniT21 test to the Sequenom Center for Molecular Medicine in San Diego, a lab certified under federal CLIA regulations just over a year ago.  (The company announced last week it is planning a similar CLIA-certified lab in North Carolina). The physician would receive the results in 8-10 business days, and determine if a higher-risk procedure is warranted. Andy Pollock of The New York Times wrote a thorough account of the technology here.

On Sept. 2, Sequenom said it had agreed to a SEC “cease and desist” order arising from an investigation into Sequenom’s misconduct, which securities regulators began in 2009. That order was focused on claims the company had made about its prior RNA technology, and included no monetary penalties.

The U.S. Attorney filed a criminal charge against Dragon in mid-2010 that alleged she had disseminated materially false information and had made misleading statements concerning tests of Sequenom’s RNA technology. She pleaded guilty, but died in February, before sentencing, according to the company’s last earnings filing.

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A noninvasive diagnostic test for fetal Down syndrome is the hoped-for outcome a deal announced today under which Sequenom, the genetic testing vendor, will obtain tools from Illumina, which develops large-scale systems for genetic analysis. No dollar value was put on the three-year agreement, which calls for Sequenom and its subsidiaries to purchase sequencing equipment and consumables from Illumina. The goal is to develop a noninvasive way to detect an overabundance of chromosome 21 in pregnant women, a possible sign of Down syndrome in the fetus. The two San Diego firms say they will collaborate to seek regulatory approval.

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A new 7,000-square-foot genetic testing laboratory is under construction at Sequenom’s San Diego headquarters. The San Diego Union-Tribune says today the new lab will open later this year, as the company begins to process samples in its “start-over” clinical trial intended to demonstrate the accuracy of its non-invasive test for Down syndrome. Sequenom (NASDAQ: SQNM) had to toss test results it had collected before April 2009, when the company scrubbed the launch of its test for Trisomy 21, the scientific name for Down syndrome, due to “mishandled data.” The clinical trial is being led by researchers at Women and Infants Hospital in Providence, RI, which is affiliated with Brown University. Sequenom hopes to introduce the Down syndrome screening test by late 2011. The test is sensitive enough to identify fetal DNA circulating in the pregnant mom’s blood.

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A former senior vice president for research and development at Sequenom (NASDAQ: SQNM) admitted today that she knew “blinded” studies the company was conducting of a genetic test for Down syndrome were falsified.

Elizabeth A. Dragon, a former Sequenom senior vice president for research and development, admitted in an appearance before a federal judge this morning that scientists involved in the clinical studies either knew the outcomes before testing the samples, or had been directed to change their initial results. As part of an agreement with prosecutors, Dragon pled guilty to a single count of conspiracy to commit securities fraud.

In her guilty plea, according to a statement released in San Diego by U.S. Attorney Laura Duffy, Dragon admitted that she participated in a conspiracy to defraud Sequenom shareholders in 2008 and 2009 by disseminating false and misleading information about the screening test for Down syndrome that Sequenom had under development at that time.

Sequenom said last month it was restarting development of its prenatal test for Down syndrome after abruptly postponing the long-planned commercial introduction of the test on April 29, 2009. The diagnostics company said at that time only that the delay was due to “employee mishandling of R&D test data and results.”

Less than five months later, an internal investigation prompted a special committee formed by Sequenom’s board to fire CEO Harry Stylli, Dragon, and three other employees. Sequenom’s CFO and another executive resigned also resigned in September.

In her appearance today before U.S. Magistrate Barbara L. Major, Dragon acknowledged that she and others “caused Sequenom to falsely claim that the test’s reliability and accuracy were nearly perfect” and that she personally made such assurances to analysts and investors at meetings in San Diego, New York, and Vancouver, BC.

Sequenom agreed earlier this year to pay $14 million to settle a consolidated shareholder suit over the matter. In restarting development of the test, which screens a sample of the mother’s blood for fetal markers of Down syndrome, Sequenom raised $51.6 million in a private stock placement. At the end of March, the company’s accumulated deficit stood at $614.2 million.

Assistant U.S. Attorney Eric Beste, who has been involved in the Sequenom investigation for months, tells me that no other public charges related to the fraud at Sequenom have been brought at this time. Beste also adds, though, that Dragon “has agreed to make herself available to cooperate with our ongoing investigation.”

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The sector was firing on all burners in the past week with fresh developments in devices, drug development, wireless health, and weight loss (just ask Larry Smarr). You can catch all the latest here.

—Sequenom (NASDAQ: SQNM), which scrubbed the launch of its diagnostics test for Down syndrome a year ago over “mishandled data,” is resuming development on a new testing schedule. The company also raised $51.6 million for R&D, commercial product development and general corporate purposes.

—Cytori Therapeutics reported (NASDAQ: CYTX) announced encouraging results from two small, placebo-controlled studies of its fat-derived regenerative cell therapy in cardiac patients. The double-blind studies, which were conducted in Europe, should pave the way for a larger test in 150-250 heart attack patients, the company said.

—Pathway Genomics fired the next salvo in the personal genome-testing wars with its announcement that it will begin selling genetic tests this week at 80 percent of Walgreens stores nationwide. Consumers can choose the $249 test that looks for a total of 46 genetic and health conditions, or a $179 test  that will look for either 23 genetic conditions or 23 health conditions.

—Sotera Wireless CEO Tom Watlington told me the company is preparing to test the ViSi, a wireless device that continuously monitors blood pressure, respiration, temperature, blood oxygen levels and heart rate, at five Southern California hospitals. If ViSi works, Sotera could begin marketing the device to hospitals during the first quarter of 2011, he said.

—Two San Diego companies were recognized for their innovations at the Wireless Life Sciences Investor Meeting in La Jolla, which was attended by 200 people, nearly double last year’s number. CortiCare, of San Diego, which provides remote and continuous electroencephalography monitoring of patients admitted to a hospital intensive care unit for signs of micro-seizures, was a finalist in the Best Clinical Applications category. Great Connections, which just moved to San Diego from Sweden, has technology that transmits ultrasound and X-ray medical images to any mobile device.

—Luke chatted with Internet pioneer Larry Smarr about his personal … Next Page »

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Sequenom can cross off another item on its long to-do list. The San Diego-based developer of diagnostic tests is announcing today that it has raised $51.6 million in a private placement, an important step toward regaining the confidence of investors. The much-needed funds will go toward R&D, product commercialization and general corporate purposes, Sequenom (NASDAQ: SQMN) says.

The announcement comes less than a week after Sequenom disclosed that it was resuming development of its prenatal test for Down syndrome. In April, 2009 Sequenom abruptly delayed launch of the test because of what it described as “employee mishandling of R&D test data and results.” The ensuing mess brought inquiries from the Justice Department, the Securities and Exchange Commission, and cost several executives, including then-CEO Harry Stylli, their jobs. Last week, Sequenom agreed to pay $14 million to settle a shareholder suit over the matter.

Purchasers of the 12.4 million shares sold in the private placement paid $4.15 a share, a 23 percent discount from Sequenom’s closing price of $5.37 on Tuesday, a sign that investors are somewhat skeptical of the company’s prospects, Hapoalim Securities analyst Raghuram Selvaraju told Reuters. The company’s accumulated deficit stood at $614.2 million at the end of March, up three percent from the end of last year. Sequenom’s shares were trading lower today.

Sequenom hasn’t said how much money it will need to restart its Down syndrome diagnostic development program. As Bruce reported last week, Sequenom had available cash and securities of $29.2 million on March 31 (it was also owed $8.6 million on unpaid bills). The company used net cash of $13.4 million in its first quarter to support operations. So if that spending trend continues, today’s cash infusion should last more or less a year.

Sequenom says a laboratory test for Down syndrome could launch in 2011. So Sequenom has a ways to go before it can cross everything off its list.

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San Diego’s Sequenom, which scrubbed the launch of its diagnostics test for Down syndrome back in April 2009 over “mishandled data,” says today it’s resuming development with a new testing schedule. Sequenom says it could launch a laboratory test “before the end of 2011″ if everything goes as planned.

In announcing its financial results for the first quarter that ended March 31, Sequenom laid out a timeline that begins with the optimization of a DNA sequencing-based test to be completed by the fall of this year. By the end of 2010, the company said it expects to have collected a sufficient number of blood samples from high-risk pregnancies for its blinded clinical studies. “These blinded studies represent the pivotal validation studies to support launch of a noninvasive T21 test,” the company says, using shorthand for Trisomy 21, the scientific name for Down syndrome.

In a surprise announcement last April 29, Sequenom postponed the long-anticipated debut of its flagship Trisomy-21 test, which screened a blood sample drawn from a pregnant mom for fetal DNA linked to Down syndrome-due to “employee mishandling of R&D test data and results.” A subsequent internal investigation prompted a special committee formed by Sequenom’s board to fire CEO Harry Stylli, senior vice-president of R&D Elizabeth Dragon, and three other employees. The CFO and another executive resigned.

The company, which is now headed by chairman and CEO Harry Hixson, still faces long odds on several fronts, including federal criminal and civil investigations as well as a looming shortage of cash. Sequenom did not say how much it will cost to restart development of its Down syndrome diagnostic test, but as of March 31, the company says it had total available cash and securities of $29.2 million—with another $8.6 million due from in unpaid bills. The company says it used net cash of $13.4 million in its first quarter to support operations.

Sequenom is reporting a loss of $16.9 million, or 27 cents a share, for the first quarter of 2010. That compares with a loss of $17.5 million, or 29 cents a share, in the same period a year earlier. The company says total revenue amounted to $10.6 million in the first quarter, a 22 percent increase over the 8.7 million in revenue during the same quarter last year.

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We saw a spate of deal-making in the past week. Those developments and more are summarized for you here.

—Avalon Ventures, one of the few San Diego venture capital firms that continues to invest in early-stage life sciences companies, embarked on fund-raising for its ninth venture fund with the intention of raising $150 million from its investment partners. The fund will split its investments between life sciences and Web and wireless companies.

—Erin identified four San Diego life sciences companies that raised less than $1 million in March. Leading her under-the-radar deals list is Tracon Pharmaceuticals, which is developing treatments for cancer and age-related macular degeneration.

—Sequenom (NASDAQ: SQMN) said a federal judge in San Diego approved its $14 million class-action settlement with shareholders who sued the company after it retreated from plans to introduce a diagnostic test for Down syndrome due to “employee mishandling” of R&D test data and results

—Cadence Pharmaceuticals (NASDAQ: CADX) re-submitted its new drug application for an IV form of acetaminophen (Ofirmev) to the FDA. In February, the agency told Cadence it could not approve the drug because it found deficiencies during its inspection of third-party manufacturer, Baxter International.

—Schrödinger, a New York and Portland, OR-based maker of chemical-simulation software for drug development and research, received a $10 million equity investment from Bill Gates through Cascade Investment. The company has an office in San Diego.

—Althea Technologies, a contract development and manufacturing company focused on biologics, acquired the assets and IP portfolio of Waltham, MA-based Altus Pharmaceuticals for an undisclosed price. Althea said applications of Altus’ technology range from therapeutics to protein purification and catalysis.

—Luke profiled Proteostasis Therapeutics, a Cambridge, MA-based biotech working on drugs for Alzheimer’s disease and Parkinson’s disease. Jeffery Kelly of the Scripps Research Institute in San Diego is one of the scientific founders of the company.

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Regulatory news dominated the headlines in the past week. We have it summarized for you here.

—Sequenom (NASDAQ: SQMN) said a lack of adequate controls, protocols and supervision were to blame for the mishandled data that led the company to scrub its launch of a diagnostic test for Down syndrome. Sequenom shares lost 76 percent of their value last April when the company announced that the data needed to support the test had been mishandled.

—Tomorrow is the deadline for an FDA decision on Somaxon‘s (NASDAQ: SOMX) request to market its experimental insomnia drug doxepin (Silenor). The company has warned investors that approval isn’t likely.

—The FDA delayed an application from San Diego-based Amylin (NASDAQ: AMLN) and Indianapolis-based Eli Lilly to start marketing once-weekly exenatide for diabetes. The FDA’s “complete response letter” raised issues around finalizing the prescribing information that guides physicians, along with a Risk Evaluation and Mitigation Strategy (REMS) program and “clarification of existing manufacturing processes,” the companies said.

—Luke located more than 170 alums of Hybritech, the company that gave birth to San Diego’s biotechnology industry.

—San Diego-based Ligand Pharmaceuticals (NASDAQ: LGND) said today that its partner, GlaxoSmithKline, won European clearance to start marketing eltrombopag for idiopathic thrombocytopenia purpura (ITP), a rare bleeding disorder in which the immune system attacks platelet cells that help people form clots. The drug is marketed in the U.S  as Promacta.

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San Diego-based Sequenom (NASDAQ: SQNM) is entering a critical phase in its management of the corporate crisis that erupted in its laboratories last year. It’s stepping back into the spotlight.

As a public company, Sequenom doesn’t have much choice. The maker of genetic diagnostic equipment and supplies says in its latest annual report that as of Dec. 31, it has an accumulated deficit of $597.3 million and available cash of $42.7 million. That means, as Sequenom chairman and CEO Harry Hixson told investors and analysts Monday, the company needs to secure additional financing this year.

Sequenom has been in its bunker since last April 29, after announcing a delay in the long-expected launch of its flagship test—a non-invasive genetic test for Down syndrome—due to “employee mishandling of R&D test data and results.” A subsequent internal investigation prompted a special committee formed by Sequenom’s board to fire CEO Harry Stylli, senior vice-president of R&D Elizabeth Dragon, and three other employees. The CFO and another executive resigned.

After several months of additional corporate governance cleanup, including tighter R&D controls and the appointment of two new scientific advisers and two independent directors, Hixson apparently decided Sequenom is ready to come out of the bunker and begin talking again. Hixson is scheduled to make a 30-minute presentation this morning at Roth Capital’s 22nd Annual Growth Stock Conference, which is being held at the Ritz Carlton in Dana Point, CA. Next week, he is set to make an appearance at the Barclays Capital 2010 Global Healthcare Conference in Miami, FL.

But Sequenom has yet to explain the what, why, or how certain employees mishandled its R&D data—and what consequences, if any, resulted. Remember, the mishandled R&D data were intended to … Next Page »

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Sequenom (NASDAQ: SQNM) has reached a legal settlement in a class action suit filed by a group of  shareholders. The San Diego-based company said today that it has agreed to pay shareholders $14 million from its insurance proceeds, and issue them new shares worth a 9.95 percent stake in the company.

The settlement still needs approval from the U.S. District Court in for the Southern District of California. The settlement agreement doesn’t include any admission of liability, but the company is settling the lawsuit “to avoid potentially lengthy, costly, distracting and time-consuming litigation,” according to a statement.

Sequenom’s troubles surfaced last April 29, when it said it “mishandled” clinical trial to support the commercialization of its non-invasive prenatal test for Down syndrome. The company hasn’t fully explained what happened, but after an internal investigation, the company ousted CEO Harry Stylli, former R&D chief Elizabeth Dragon, and three other employees in September. The SEC has opened an investigation to the company’s mishandling of its data and the Justice Department also is asking questions. There was no update today on the status of those inquiries.

Sequenom’s chairman and interim CEO, Harry Hixson, said in a statement that settling the shareholder lawsuit, “is in the best interest of the company and its shareholders. I look forward to closing this chapter for the company and focusing on meeting our 2010 milestones, which include the launch of a number of molecular diagnostic tests.”

Shares of Sequenom climbed about 5 percent to $4.35 at 10:05 am Eastern time after the announcement.

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San Diego-based Sequenom (NASDAQ: SQNM) disclosed in a regulatory filing it has issued 367,547 additional shares of its common stock, valued at $1.5 million, to settle claims stemming from its acquisition of Ann Arbor, MI-based SensiGen’s molecular diagnostic tests. Sequenom and SensiGen said last January the San Diego biotech was buying a variety of diagnostic tests from privately held SensiGen in a stock-and-cash deal valued at $8.7 million. The SensiGen principals who received an aggregate 71,836 shares as part of that deal notified Sequenom in July that they had suffered about $1.3 million in damages, based on Sequenom’s breached representations and warranties. Sequenom said a few months earlier that it had mishandled data from clinical trials for its non-invasive test for Down syndrome, a revelation that has triggered at least two federal investigations.

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San Diego’s embattled Sequenom, which halted the debut of a new diagnostic product over mishandled data, is now considering steps to conserve cash. In an SEC document filed Monday, the life sciences tools company says it expects to end the year with $39 million in cash — too little to fund operations and capital expenditures at current levels through the end of 2010. There is “substantial doubt about our ability to continue as a going concern unless we adopt measures to conserve our cash and prolong our ability to operate,” Sequenom (NASDAQ: SQMN) says in its filing.

During a conference call, Sequenom’s interim CEO Harry Hixson said the company was in the process of developing a strategic and financial plan for 2010, and until the plan was completed, he could not estimate how long the $39 million would last. Last month, Sequenom named former Ligand Pharmaceuticals CFO Paul Meier as its interim CFO, effective today. Hixon says Sequenom also has put into place a cost control program to reduce unnecessary expenses and expects to reduce the number of programs it currently supports. He says some projects could be shelved, sold, out-licensed or partnered.

Bad news seems to keep coming from Sequenom, which stunned investors last April 29 with an announcement that the launch of the prenatal Down syndrome test would be delayed because scientific data had been mishandled. The company’s shares lost 76 percent of their value in trading the next day and have not recovered. The disclosure was a shock because just six days earlier – on April 23 – the company said the Down syndrome test was on track for a June launch. The SEC has opened an investigation to the company’s mishandling of its data and the Justice Department also is asking questions. The company has not fully explained what happened.

Hixson stepped in as interim CEO in September after the board fired former CEO Harry Stylli following an internal investigation. R&D senior vice president Elizabeth Dragon was also fired. CFO Paul Hawran resigned, as did another officer who was later revealed to be Steven Owings. Three employees also were terminated. Each has denied wrongdoing.

The company had previously said that none of the departing officers had benefitted from selling shares, but Hixson, who is also Sequenom’s chairman, said yesterday that in fact one of the officers had sold some stock to make a down payment on a house. The Wall Street Journal identified that officer as Owings, formerly the Sequenom vice president who oversaw development of prenatal diagnostics. Owings made nearly $300,000 from a series of stock sales on March 24. Hixson said the sales were “properly and timely reported” to the SEC. In addition, two lower-level employees who were terminated in September also sold stock, Hixson said.

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Xenomics, a New York-based developer of molecular diagnostic technologies, says it has filed a suit in New York state court alleging that San Diego’s Sequenom fraudulently misrepresented the status of its prenatal Down syndrome test. Xenomics alleges the fraud induced them to exclusively license valuable patent rights to Sequenom.

According to a licensing agreement announced last October, Xenomics granted Sequenom (NASDAQ: SQMN) a worldwide license to its patents for development of prenatal and diagnostic products in return for an upfront payment of $1 million and royalties on sales. Xenomics also granted Sequenom negotiation rights to use its patents in cancer-related products. Xenomics, which trades on the pink sheets under the symbol XNOM.PNK, says is seeking compensatory and punitive damages not to exceed $300 million, and the termination of the license between the companies. A Sequenom representative declined to comment on the litigation.

The suit adds to the mounting problems facing Sequenom, which stunned investors last April 29 with an announcement that the launch of the prenatal Down syndrome test would be delayed because scientific data had been mishandled. The company’s shares lost 76 percent of their value in trading the next day and have drifted downward since. The disclosure was a shock because just six days earlier – on April 23 – the company said the Down syndrome test was on track for a June launch. The SEC has opened an investigation to the company’s mishandling of its data and the Justice Department also is asking questions. In addition, the SEC told Sequenom it wants information on another matter: Sequenom’s offer to acquire Exact Sciences in January 2009. Sequenom dropped a hostile bid for the Marlborough, MA-based company after Exact Sciences, acting to save itself, sold some assets to Genzyme. Sequenom has said it is cooperating with authorities.

Last month, Sequenom ousted CEO Harry Stylli and R&D senior vice president Elizabeth Dragon after an internal investigation. CFO Paul Hawran resigned, as did another officer who wasn’t identified. Three employees also were terminated. Each of the officers has denied wrongdoing. The company still has not given an accounting of what happened.

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The life sciences news was relatively light over the last week, except perhaps for Sequenom, the medical diagnostics company that has yet to publicly disclose much about its misconduct in handling clinical trial data.

—Sequenom (NASDAQ: SQNM) disclosed that it met with the FBI and the U.S. Attorney’s Office in San Diego in connection with the company’s mishandling of data from a clinical trial for its Down syndrome prenatal test. This latest development came a week after a five-month internal investigation led the company to fire CEO (and San Diego Xconomist) Harry Stylli along with three others. The company said it is cooperating fully with government investigators and the dismissed employees had denied wrongdoing.

—Accumetrics reeled in another $16.5 million from existing investors, including Essex Woodlands Health Ventures and Kaiser Permanente Ventures. As Bruce reported, the company sees a multibillion-dollar market for its diagnostic device that calibrates the right dosage of anti-clotting drugs.

—Transdel Pharmaceuticals (OTC BB: TDLP) saw mixed results from a clinical trial of its topical pain reliever. The cream containing ketoprofen was better than a placebo among patients who used the cream as directed, but had no advantage among patients who applied the cream incorrectly, or failed to follow the study protocol. CEO Juliet Singh told Luke the trial was a success and that the FDA would consider the two sets of data.

—Marval Biosciences, San Diego’s latest virtual biomedical startup, raised $2.5 million in venture financing from DFJ Frontier in Los Angeles and DFJ Mercury in Houston, affiliates of the Silicon Valley firm Draper Fisher Jurvetson. The company is working on next-generation contrast agents for medical imaging.

—LifeModeler of San Clemente, CA had a cameo in one of the biggest science stories of the week. The company’s biomechanical visualization software was used to determine how Ardi, a 4.4-million-year-old hominid fossil, walked and moved. Orthopedic surgeons use the software to plan and practice joint-replacement surgeries,

—Gen-Probe (NASDAQ: GPRO), which uses nucleic acid testing of blood samples to diagnose human diseases, agreed to pay $60 million in cash to acquire Wisconsin-based Prodesse, which is developing sophisticated reagents that can rapidly identify certain types of respiratory viruses, intestinal bacteria, and other infectious microbes.

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Sequenom (NASDAQ: SQNM), the San Diego medical diagnostics company that disclosed earlier this year it had “mishandled data” from a clinical trial, has met with investigators from the FBI and U.S. Attorney’s office looking into the matter, according to a regulatory filing today.

The company previously acknowledged the Securities and Exchange Commission was investigating, so it was not immediately clear if the Justice Department’s involvement reflects a more serious turn in the case. San Diego FBI spokesman Darrell Foxworth and Deb Hartman, a spokeswoman for the U.S. Attorney in San Diego, had no immediate comment on the company’s disclosure.

San Diego-based Sequenom said it was contacted by the U.S. Attorney’s office and NASDAQ officials after it announced on Sept. 28 that it ousted five employees, including CEO Harry Stylli and R&D chief Elizabeth Dragon, and two others resigned, following an internal investigation into mishandling of data to support the company’s non-invasive prenatal test for Down Syndrome. Company officials have met with representatives from the FBI and U.S. Attorney’s office, and added “we intend to cooperate fully” with their investigations, according to the regulatory filing.

Each of the officers who were dismissed has denied wrongdoing. A special committee of the board that investigated the matter since April said in a statement last week their work “has raised serious concerns, resulting in a loss of confidence by the independent members of the company’s board of directors in the personnel involved.”

The company’s new leader Harry Hixson, told investors last week that he will cooperate with an investigation by the Securities and Exchange Commission. Members of the Sequenom special committee and independent counsel have met with staff from the SEC’s Enforcement unit, the company said today in a regulatory filing.

Shares of Sequenom have plummeted 46 percent to $3.08 a share since the company announced the results of its internal investigation, and the dismissal of executives.

The company hasn’t said in detail what really happened, but it has repeated that the public and investors should no longer rely on the company’s previous claims to have developed a noninvasive prenatal blood test that was 100 percent accurate at detecting Down Syndrome when compared with the standard, more invasive tests known as CVS and amniocentesis. The company essentially said that its data handling protocols weren’t good enough, and that certain employees failed to provide adequate supervision of the process, leading to errors and inconsistencies in the data released to the public.

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Sequenom had the big story for San Diego’s life sciences community this week. We have the latest developments about that, as well as other biotech news.

—Sequenom (NASDAQ: SQNM) now faces a long rebuilding process after the San Diego medical diagnostic company ousted president and CEO Harry Stylli and a senior vice president of research and development over mishandled data in the development of a prenatal test for Down Syndrome. Five others also left the company after a five-month internal investigation invalidated studies that said Sequenom’s test, which uses a simple blood draw from pregnant women, was 100 percent accurate at detecting Down’s in a developing fetus. Now those tests will have to be re-done.

—A legal dispute over genetic-sequencing technologies and products is beginning to look more like a free-for-all. Carlsbad, CA-based Life Technologies (NASDAQ: LIFE) has filed a patent suit against San Diego rival Illumina (NASDAQ: ILMN) which is already engaged in similar litigation with Affymetrix (NASDAQ: [[ticker:AFFX) of Santa Clara, CA.

—San Diego-based Zogenix has collected $36 million in a $51 million equity financing round intended to fund the company’s January launch of its needle-free system for delivering a pain drug for migraines. Zogenix says its delivery system releases a quick increase in pressure to penetrate the skin and then injects liquid medicines—without needles.

—Fate Therapeutics CEO Paul Grayson says the San Diego biotech startup is in advanced talks about partnerships with several large pharmaceutical companies about partnerships. Luke says the fast-growing company is using genetically engineered proteins and small molecule compounds to nudge ordinary adult cells into becoming pluripotent stem cells, which have the potential to turn into any cell type.

—Juliet Singh knows how to rub it in. Singh, who oversaw efforts to Irvine, CA-based Allergan (NYSE: AGN) to get FDA approval for botulinum toxin (Botox), is now the CEO of Transdel Pharmaceuticals, a La Jolla, CA-based company. Transdel intends to develop ketoprofen, a common pain reliever used in pills, into a topical cream.

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Sequenom shares plummeted 44 percent today in after-hours trading after the San Diego-based company said it has ousted CEO Harry Stylli and its head of R&D in the wake of an investigation into mishandling of data for its prenatal genetic test for Down Syndrome.

Chairman Harry Hixson, 71, the former president of Amgen, has assumed the role of interim CEO of Sequenom (NASDAQ: SQNM), along with the responsibility for explaining the situation to investors on a conference call this afternoon. He couldn’t say much beyond his prepared remarks about what really went wrong with data handling procedures, because the company is facing class-action shareholder lawsuits, and is “fully cooperating” with an ongoing investigation by the Securities and Exchange Commission.

Whatever really happened, the company repeated that the public and investors should no longer rely on the company’s previous claims to have developed a noninvasive prenatal blood test that was 100 percent accurate at detecting Down Syndrome, when compared with the standard, more invasive tests known as CVS and amniocentesis. The company essentially said that its data handling protocols weren’t good enough, and that certain employees failed to provide adequate supervision of the process, leading to errors and inconsistencies in the data released to the public.

When asked by one analyst on the conference call today whether the company will seek to bring criminal charges against people responsible for the mishandling, Hixson would only say “we are fully cooperating with the SEC, and that’s all I should say.”

Sequenom shares fell $2.50, or 44 percent, to $3.20 in after-hours trading after the conference call. That’s a painful free fall for investors who bought last year on the enthusiastic news about Sequenom’s test, which drove shares up to $27.76 the day after the original announcement on Sept. 23, 2008.

Hixson, who said he plans to stay in the CEO job as long as he’s needed, acknowledged that he and Ronald Lindsay, the new senior vice president of R&D, have their work cut out. “This has been a significant setback and the company will face significant challenges ahead,” Hixson said on the conference call. He added, “It’s fair to say that Ron and I will have to work very hard to regain the confidence of investors.”

Even though the data can’t be relied upon anymore, Hixson said the company still … Next Page »

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