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Illumina to Pay $13.9 Million to Resolve Securities Class Action

March 18, 2021, 4:50 PM

Illumina Inc.'s $13.9 million settlement to resolve a securities class action claiming that the biotech company misled investors about its revenue and sales for the third quarter of 2016 has received the U.S. District Court for the Southern District of California’s final approval.

The settlement class approved by Judge M. James Lorenz on Wednesday comprises “all persons or entities who purchased or otherwise acquired a legal or beneficial ownership interest in Illumina’s common stock between July 26, 2016 through October 10, 2016, inclusive.”

The settlement represents only 4.5% of the approximately $300 million in potentially recoverable damages. But plaintiffs faced a “critical risk” on the question of whether the alleged misrepresentation was “forward-looking” and therefore covered by a safe harbor provision of the Securities Exchange Act of 1934, according to the order.

The defendants “would likely challenge this issue by introducing evidence that could prove dispositive at summary judgment,” Lorenz said. They might also challenge the shareholders’ ability to prove damages. Given the risk of adverse rulings and the costs associated with continued litigation, the settlement was fair, Lorenz said.

The lawsuit claimed that Illumina and certain individually named officers failed to disclose that the company had been “experiencing a material decline in sales” of its HiSeq genome sequencing system, that its earnings projections were misleading, and that the company lacked adequate internal controls over its financial reporting.

After Illumina’s forecasts of between $625 million and $635 million for its third-quarter 2016 profits turned out to be too high by about $18 million, Illumina’s stock price dropped from $184.85 per share to $138.99 per share, the ruling said.

Lorenz also approved attorneys’ fees of $2.13 million, equal to approximately 25% of the settlement fund, along with costs of $167,727 to lead counsel, Levi & Korsinsky LLP.

Three plaintiffs will receive incentive awards for their efforts in representing the class’s interests. Braden Van Der Wall and Steven Romanoff will receive $1,000 each, while Anton Agoshkov will receive $25,000.

The unusually high incentive award is a function of the “considerable time and expense” that Agoshkov spent assisting with the lawsuit.

In a declaration submitted in support of the request, Agoshkov said that he dedicated approximately 70 hours to the case, including time spent conferring with counsel, reviewing court filings, and traveling to New York from Moscow, Russia, for a full-day deposition.

Illumina and the individually named defendants are represented by Covington & Burling LLP.

The case is In re Illumina Inc. Sec. Litig., S.D. Cal., No. 3:16-cv-03044, 3/17/21.

To contact the reporter on this story: Holly Barker in Washington at hbarker@bloombergindustry.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Patrick L. Gregory at pgregory@bloomberglaw.com

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