San Diego’s medtech giant Illumina Inc. is being sued by two shareholders who allege the company misled investors.
Plaintiffs Yi Fan Chen and Frontline Global Trading, of which Chen is president, filed the class-action lawsuit on Friday in the U.S. District Court for the Southern District of California. The suit is on behalf of persons and entities that bought Illumina stock between July 26 and Oct. 10 of this year.
The plaintiffs claim that defendants — Francis deSouza, president and CEO of Illumina, and Mark Stapley, the company’s CFO — made materially false and misleading statements regarding the firm’s business, operations, and prospects between the announcement of Illumina’s second-quarter and preliminary third-quarter financial results. The plaintiffs claim that this led to an inflated share price for Illumina.
Illumina, the world’s largest maker of DNA sequencing machines and San Diego’s largest public life science company, announced third-quarter revenue guidance of $625 million to $630 million in July 2016. But then in October, the company released preliminary revenue for Q3 that came in at $607 million. The announcement shook investors, leading to a one-day drop of 25 percent of the company’s stock.
In a statement made earlier this year, Illumina said the lower-than-expected revenue was a result of a decline in sales of its high-throughput sequencing instruments.
The complaint filed against Illumina alleges the following: that the company failed to disclose a decline in instrument sales that could impact its revenue prior to Oct. 10, that the company lacked visibility into trends that could impact its financial results substantially, that they provided unreliable and overstated revenue guidance, and that they made false and misleading positive statements about the company’s business, operations, and prospects.
Chen and Frontline allege that Illumina’s shares traded “at artificially inflated prices” from July 26 to Oct. 10, and that the plaintiffs and others “suffered significant losses and damages” due to the steep decline in the market value of Illumina’s shares.
The plaintiffs asked that the court award compensatory damages of a yet-to-be-determined amount, as well as costs and expenses.
Since that Oct. 10 announcement, Illumina’s stock price has fallen over 30 percent. As of midday Monday, shares (Nasdaq: ILMN) were selling for $129.42.
Illumina declined to comment on the lawsuit.