Founder, stakeholders seek $300 million in damages.
March 16, 2010 | In a surprising twist in the next-generation sequencing horse race, Susan Hardin, co-founder of VisiGen Biotechnologies, has filed suit against Life Technologies, which acquired her company in 2008, for fraud and breach of contract. The suit seeks total damages in excess of $300 million.
Hardin, a former associate professor at the University of Houston, founded VisiGen in 2000 as one of the first biotech companies aiming to replace Sanger sequencing and crack the $1000 genome in less than a day using single-molecule DNA sequencing methods (see below). In August 2008, Invitrogen acquired VisiGen for $21 million. Invitrogen subsequently merged with Applied Biosystems to form Life Technologies. Hardin stayed on as a director of R&D for Life Technologies, a position she resigned last year.
Problems and Promises
In the law suit, a copy of which was first obtained by Bio•IT World, filed on October 23, 2009 in the district court of Harris County, Texas, Hardin (on behalf of herself and VisiGen stakeholders) alleges that Life Technologies “failed to comply with the promises they made to Dr. Hardin and the VisiGen stakeholders,” and had no intention of making additional milestone payments following the initial $21 million.
Without the assurance of additional payments, the suit states that Hardin would not have sold her company to Life. Moreover, the suit alleges that Life has used “this same pattern of non compliance in previous company acquisitions.” The suit claims the breach of fiduciary duty has caused actual damages of at least $55 million and is seeking exemplary damages (which come into play when there is an accusation of fraud) of at least $250 million.
The petition is rather generic, admits plaintiff attorney James ‘Wes’ Christian, senior partner with Christian, Smith & Jewell in Houston, who is representing VisiGen stakeholders including Hardin. “We want to do this fairly and honorably and we want to uphold any other [confidentiality] agreements we’ve made with Life Technologies—even though we’re suing them,” he told Bio•IT World. “The problem is, we were commissioned with baking the cake. We think the cake absolutely could have been baked if Life would have held up their end of the bargain. We believe that simply did not occur.”
“VisiGen was a company that had a very bright future,” said Christian. When Invitrogen bought the company, it simultaneously hired Hardin. “That was very important to her,” said Christian, “because she had extremely high hopes that ultimately Life Technologies, with her help and her staff’s help, would be able to accomplish some life-changing things. One of those was to allow genome sequencing to be very economical and do it for $1000 or less.”
Christian continued: “Dr. Hardin felt at the time—we think differently now—but at the time, Life Technologies could essentially provide her what they agreed to provide her contractually in order to aid her in accomplishing this task. Ultimately, we believe Life failed to do that—failed to keep the promises made in the agreement. We feel, further, they made several written and verbal statements to us that we now know are false. Because of those two things, we had no choice but to file a lawsuit.”
Citing confidentiality provisions, Christian did not elaborate on what those “promises” were. As for Life Technologies’ alleged use of “this same pattern of non compliance in previous company acquisitions,” Christian said simply: “Stay tuned.”
The only public document specifically cited in the suit is an SEC filing made by Invitrogen in 2008. Attention focused on that filing once due diligence on the potential lawsuit began, says Christian. The SEC report states that on August 29, 2008, Invitrogen bought Visigen “for a total cash consideration of $21.0 million.” Christian says the filing can be summarized as: “This is what we paid for the company, which would reflect no further intention to make any further payments.” VisiGen stakeholders fully expected there to be additional milestone payments beyond the $21 million, the extent of which can be surmised from the complaint.
Hardin resigned from her position at Life Technologies in 2009, “because in her mind, she could not work for a company that she believes was not truthful with her,” said Christian.
Since 2000, VisiGen has worked on a single-molecule imaging platform in real time, using FRET (fluorescence resonance energy transfer) as the principle means of image detection. In some respects, there were similarities to the platform of Pacific Biosciences. VisiGen received modest investments from fellow Houston biotech firm SeqWright and Applied Biosystems (in late 2005). In a CHI conference presentation in 2007, Hardin said her goal was to sequence a human genome for $1000 in less than a day. VisiGen’s target specifications were 1 million bases per second per machine (100 Gigabases/day), with read lengths above 1000 bases.
Life Technologies expects to place the first the sequencing instrument with early-access customers later this year. A spokesperson for Life, Tim Ingersoll, declined to comment citing company policy on pending litigation.
This article also appeared in the March-April 2010 issue of Bio-IT World Magazine.
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