Posted by Tom Gable
Can authentic no-spin PR, even in a crisis, help a company maintain a semblance of credibility, protect its reputation on the downside and set a vision for the future that even supports its stock price?
Sequenom Inc. in San Diego won’t know. On Monday, it issued a news release via PR Newswire with the headline: “SEQUENOM Announces Completion of Independent Investigation.”
The lead paragraph:
SAN DIEGO, Sept. 28 /PRNewswire-FirstCall/ — SEQUENOM, Inc. (Nasdaq: SQNM) today announced the completion of the independent investigation by a special committee of independent directors related to the test data and results for the company’s noninvasive prenatal test for Trisomy 21 (Down syndrome). The independent counsel engaged by the special committee interviewed over 40 witnesses and reviewed over 300,000 documents and emails.
Okay, so what’s the issue? Buried in the fourth paragraph is the bottom line of the investigation:
The company has terminated the employment of its president and chief executive officer, Harry Stylli, Ph.D., and its senior vice president of research and development…obtained the resignation of its chief financial officer…and one other officer… (and) also terminated the employment of three other employees. While each of these officers and employees has denied wrongdoing, the special committee’s investigation 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.
How did the news media play it? Here are the headlines and first paragraphs from stories in the San Diego Daily Transcript, San Diego Union-Tribune and Xcomony.
Sequenom fires CEO and others after investigation (SDDT)
Sequenom Inc. says it fired its CEO and its research chief following an investigation into the mishandling of test results for its Down syndrome blood test. A total of four executives and three other employees were terminated or resigned, the company says.
… Sequenom said Harry Hixson Jr., 71, a member of its own board and a former president and chief operating officer of Amgen Inc. (Nasdaq: AMGN), will take over as interim CEO. Another board member, Ronald Lindsay, 61, will be interim CFO, and controller Justin File, 39, will be the principal financial and accounting officer.
…Sequenom’s (Nasdaq: SQNM) SEQureDx test, which screened maternal blood to discover Down syndrome in fetuses, was on track to reach the market in June until the company disclosed in late April that study data had been “mishandled” by employees. That made the data unreliable and lead to delays, hammering the San Diego company’s stock price.
Sequenom ousts CEO, other execs (Union-Tribune)
The San Diego biotechnology company Sequenom said yesterday that it has ousted its CEO and several other executives after an investigation into the mishandling of study data.
The discovery of the data problems in April led the company to postpone the launch of the test and to suspend four research and development employees. The test remains on hold, though the company has not disclosed specifically what went wrong…Now the company says the public should not rely on any of its previously announced data for the test, and it is not disclosing a timetable for development of eventual commercialization.
Sequenom Shares Tank After Executives Ousted Over Data Mishandling (Xconomy)
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.
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.
How could this have been played differently by the company, to perhaps better results? One has to avoid the attempt to try short-term spin and think strategically about rebuilding credibility and creating a foundation to recover long-term reputation and valuation.
On positioning for the future, Hixson has impeccable credentials and credibility. During a conference call, he said the company is instituting new disclosure controls and procedures on all fronts, launching training in ethics and scientific processes and adding a new science committee on the company’s board of directors to oversee its research and development strategy and activities – definitely a positive direction.
The company said the data problems appeared to be confined to the Down syndrome program. It recently launched a separate test to identify parents with increased risk of having babies with cystic fibrosis, so is not a one-compound wonder, as happens with many biotech companies. The cystic fibrosis data, handled by a different unit than the one handling the Down syndrome data, has been validated by outside third-party collaborators. In addition, Hixson said the company still believes it has a valid approach to the detection of Down syndrome through genetic analysis of maternal blood. He said the company hopes to maintain its collaboration with Oxford University researcher Dennis Lo, who licensed his intellectual property to Sequenom for developing and commercializing its prenatal test.
He told the media that he and Lindsay were currently in the midst of strategic planning for the coming year and setting new priorities, with more to come as they get into it.
“We are determined to emerge from this experience stronger,” Hixson told the media.
What could have Sequenom done differently? One approach is to like a news organization rather than an attorney. How will the news be played? Then, be aggressive and pro-active in telling its story and making a few major points:
- Sequenom has completed an independent investigation of issues involving the mishandling of data and release of results that were not accurate
- As a result, the board has fired its CEO and removed others in top management and units involved with the mishandling
- The company and its technology are sound Harry Hixson, former president of Amgen and a board member, is taking over and has announced plans to move forward aggressively in correcting internal issues while also continuing to pursue important research
- The mishandled data related only to the Down syndrome studies and not to a promising study in identifying parents whose children could be prone to cystic fibrosis
- The new Sequenom team will be doing all it can going forward to rebuild trust in the company, its people and the promise of its technology and research
Admittedly, there are issues with an ongoing SEC investigation and the raft of class action law suits that will follow, requiring some legal scrutiny of all communications and news releases. But being more candid from the outset and NOT burying the news in the fourth paragraph would probably have enhanced company credibility, started rebuilding trust and shored up the confidence of some investors by setting a vision for future change and, perhaps, success.