Case 3:16-cv-02054-JAH-BLM Document 54 Filed 07/24/17 PageID.915 Page 1 of 59 1 ROBBINS GELLER RUDMAN & DOWD LLP 2 MICHAEL J. DOWD (135628) RANDALL J. BARON (150796) 3 DAVID T. WISSBROECKER (243867) DAVID A. KNOTTS (235338) 4 655 West Broadway, Suite 1900 San Diego, CA 92101 5 Telephone: 619/231-1058 619/231-7423 (fax) 6 [email protected] [email protected] 7 [email protected] [email protected] 8 Lead Counsel for Plaintiff 9 [Additional counsel appear on signature page.] 10 UNITED STATES DISTRICT COURT 11 SOUTHERN DISTRICT OF CALIFORNIA 12 In re SEQUENOM, INC. ) Lead Case No. 16-cv-02054-JAH-BLM 13 STOCKHOLDER LITIGATION ) ) CLASS ACTION 14 ) ) 15 CONSOLIDATED AMENDED CLASS This Document Relates To: ) ACTION COMPLAINT ) 16 ) ALL ACTIONS. ) 17 ) JURY TRIAL DEMAND 18 19 20 21 22 23 24 25 26 27 28 1272847_2 Case 3:16-cv-02054-JAH-BLM Document 54 Filed 07/24/17 PageID.916 Page 2 of 59 1 SUBSTANTIVE ALLEGATIONS 2 Lead Plaintiff James Reilly (“Plaintiff”), by the undersigned attorneys, 3 individually and on behalf of all others similarly situated, respectfully brings this 4 direct class action complaint for violations of §§14(e) and 20(a) of the Securities 5 Exchange Act of 1934 (the “Exchange Act”) against the herein named defendants and 6 allege the following: 7 SUMMARY OF THE ACTION 8 1. This is a stockholder class action brought on behalf of the former holders 9 of Sequenom, Inc. (“Sequenom” or the “Company”) common stock against Sequenom 10 and its Board of Directors (the “Board” or the “Individual Defendants”). This matter 11 arises out of defendants’ dissemination of a false and misleading 12 solicitation/recommendation statement in connection with the sale of the Company to 13 Laboratory Corporation of America Holding (together with its subsidiary Savoy 14 Acquisition Corp., “LabCorp”) (the “Acquisition” or “Merger”). 15 2. Sequenom was a molecular diagnostic testing and genetics analysis 16 company. In 2011, Sequenom launched MaterniT21, a noninvasive prenatal test 17 (“NIPT”) test that screened for Down syndrome and other conditions with an extra 18 chromosome by using only a sample of the mother’s blood. MaterniT21 was the first 19 of its kind in the U.S. market. 20 3. “There’s been about 800,000 women in the past year in the U.S. who 21 have had an NIPT,” stated Eric Topol, a professor of genomics at the Scripps 22 Research Institute in March 2015. “It’s the hottest molecular test ever in the history of 23 medicine.” 24 4. Since launching the first NIPT, Sequenom delivered a constant stream of 25 innovations in the prenatal market. Sequenom expanded MaterniT21 to be able to 26 detect a myriad of additional fetal chromosomal abnormalities. Sequenom developed 27 a variety of other prenatal tests, including NIPTs for average-risk pregnancies and 28 carrier screen tests to identify risks and markers for hundreds of genetic disorders and 1272847_2 - 1 - 16-cv-02054-JAH-BLM Case 3:16-cv-02054-JAH-BLM Document 54 Filed 07/24/17 PageID.917 Page 3 of 59 1 conditions. Around the time of the Merger, Sequenom’s new products were in various 2 stages of development and marketing, with all signs pointing to success. Sequenom 3 was well-positioned to remain market leader in the reproductive health market, which 4 Sequenom management expected to be a $5 billion addressable market by 2020. 5 5. In 2015, Sequenom entered the oncology market. Over the course of the 6 NIPT tests conducted by the Company, the Company learned that they could detect 7 circulating tumor cells and fragments of tumor DNA (ctDNA) in the blood stream. 8 Sequenom began developing liquid biopsies - i.e., non-invasive blood tests to screen 9 for tumor cells and ctDNA. Sequenom and its management called its liquid biopsy 10 program the “next $10 billion opportunity.” Through 2015 and 2016, Sequenom 11 invested in its liquid biopsy program with leading hospitals and academic institutions 12 around the world, with the expectation that the liquid biopsy program would be 13 extremely profitable and provide significant revenue streams to Sequenom in the 14 future. 15 6. On July 27, 2016, Sequenom and LabCorp announced the Agreement and 16 Plan of Merger (the “Merger Agreement”) pursuant to which LabCorp would 17 commence a tender offer on August 9, 2016 to acquire all the shares of the Company 18 for $2.40 per share (“Tender Offer”). 19 7. On August 9, 2016, defendants issued the Solicitation/Recommendation 20 on Schedule 14D-9 (together with all amendments, the “14D-9”), recommending that 21 Sequenom shareholders accept the $2.40 LabCorp offer and tender their shares into 22 the Tender Offer. 23 8. The central question for the Company’s stockholders in determining 24 whether to accept LabCorp’s offer and tender their shares into the Tender Offer was 25 whether LabCorp’s $2.40 offer represented fair compensation for the value of their 26 shares, which necessarily included an assessment of the Company’s future prospects. 27 In other words, the question that stockholders needed to assess was: is $2.40 per share 28 1272847_2 - 2 - 16-cv-02054-JAH-BLM Case 3:16-cv-02054-JAH-BLM Document 54 Filed 07/24/17 PageID.918 Page 4 of 59 1 a fair tradeoff for giving up the value Sequenom stockholders might obtain if 2 Sequenom remained independent and delivered on management’s growth plans? 3 9. The 14D-9 was materially misleading as to this issue. 4 10. First, the 14D-9 stated that a set of projections – referred herein as the 5 Reduced Forecast – represented the most accurate view of the Company’s prospects. 6 This representation was both objectively and subjectively false. 7 11. The Reduced Forecast did not, in fact, reflect an accurate view of the 8 Company’s prospects. The Reduced Forecast ignored a significant value component 9 of the Company – the oncology program – and assumed a reduction in the Company’s 10 revenues that were inconsistent with recent achievements and management’s 11 statements regarding Sequenom’s expected growth trajectory with respect to 12 Sequenom’s reproductive health business. 13 12. The Individual Defendants did not, in fact, believe that the Reduced 14 Forecast reflected an accurate view of the Company’s prospects. Each Individual 15 Defendant had specific information showing that the Company’s oncology program 16 was valuable and viable and that the growth assumptions in the Reduced Forecast 17 were inaccurate. Yet, after (and only after) receiving the $2.40 per share to LabCorp, 18 the Individual Defendants instructed the Company’s financial advisor to ignore a 19 higher set of projections (in line with management’s statements regarding Sequenom’s 20 expected growth trajectory) and use only the Reduced Forecast to conduct its 21 valuation of the Company. The Company’s financial advisor calculated a value of 22 “between approximately $2.00 and $2.55 per share” based on the Reduced Forecast. 23 In the 14D-9, the Individual Defendants pointed to this valuation as support for their 24 recommendation that stockholders accept the $2.40 per share offer and tender their 25 shares into the Tender Offer. 26 13. In addition to the above, the 14D-9 omitted financial information 27 regarding the value of Company’s oncology program and information in the Board’s 28 possession showing that the valuation performed by the Company’s financial advisor 1272847_2 - 3 - 16-cv-02054-JAH-BLM Case 3:16-cv-02054-JAH-BLM Document 54 Filed 07/24/17 PageID.919 Page 5 of 59 1 J.P. Morgan Securities LLC (“JPM”) was flawed. Without this information, 2 stockholders were prevented from accurately assessing what they were leaving on the 3 table by accepting the $2.40 per share offer and were put in a position where they 4 were unlikely to reject JPM’s valuation and the Board’s recommendation of the 5 Tender Offer and Merger. 6 14. These defects in the 14D-9 prevented the Company’s shareholders from 7 making a fully informed decision on the Tender Offer and Merger and induced the 8 Company’s shareholders into accepting an offer that was unfair compared to the actual 9 intrinsic value of the Company. 10 15. As a consequence, Plaintiff and the Class were injured. 11 JURISDICTION AND VENUE 12 16. The claims asserted herein arise under §14(e) of the Exchange Act, 15 13 U.S.C. §78n(e). 14 17. This Court has jurisdiction over this action pursuant to §27 of the 15 Exchange Act, 15 U.S.C. §78aa, and 28 U.S.C. §1331. The claims asserted herein 16 arise under §14(e) of the Exchange Act, 15 U.S.C. §78n(e). 17 18. Venue is properly laid in this judicial district because the acts and 18 transactions constituting the violations of federal law complained of herein have 19 occurred in this District, including the dissemination of the 14D-9 to residents of 20 California through the means and instrumentalities of interstate commerce and the 21 mails. 22 PARTIES 23 19. Plaintiff was, at all times relevant hereto, a shareholder of Sequenom. 24 20. Before the Merger, Sequenom was a Delaware corporation headquartered 25 in San Diego, California. 26 21. Kenneth F. Buechler (“Buechler”) was a Sequenom director from 27 December 2009 to the closing of the Merger. 28 1272847_2 - 4 - 16-cv-02054-JAH-BLM Case 3:16-cv-02054-JAH-BLM Document 54 Filed 07/24/17 PageID.920 Page 6 of 59 1 22.