Illumina Inc. (NASDAQ:ILMN) has agreed to pay $9.8 million to resolve allegations it knowingly sold genomic sequencing systems with cybersecurity vulnerabilities to several U.S. government agencies.
The agreement stems from a whistleblower lawsuit filed under the False Claims Act by Erica Lenore, who will receive $1.9 million as part of the settlement.
According to the U.S. Department of Justice, the allegations involved false claims submitted between February 2016 and September 2023 for Illumina's genomic sequencing systems, which included models like MiSeq Dx, NextSeq 500, and NextSeq 2000.
These systems operated using software known as Local Run Manager (LRM) and Universal Copy Service (UCS), which were allegedly affected by security flaws.
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Federal authorities alleged that Illumina failed to implement adequate cybersecurity protections during the design, development, and monitoring of the LRM and UCS software.
The U.S. contended the company misrepresented compliance with key cybersecurity standards, including those established by the International Organization for Standardization and the National Institute of Standards and Technology.
The government argued that Illumina did not correctly support personnel and systems responsible for product security and failed to correct design flaws that introduced vulnerabilities.
The claims submitted were deemed false even though no actual cybersecurity breaches were reported.
The settlement covers transactions with multiple federal agencies, including the Departments of Justice, Health and Human Services, Veterans Affairs, and Defense, among others.
The allegations were brought to light by Lenore, who filed the suit in the U.S. District Court for the District of Rhode Island in September 2023.
While Illumina has denied the allegations and admitted no wrongdoing, it has agreed to pay the $9.8 million settlement, which includes $4.3 million in restitution. The payment will also accrue interest at a rate of 4.33% from March 6, 2025, until full payment is made.
Last week, Illumina reported second-quarter adjusted earnings of $1.19 per share, beating the consensus of $1.01.
Revenues fell 3% year over year to $1.059 billion, beating the consensus of $1.049 billion.
Price Action: ILMN stock is down 3.69% at $94.16 at the last check on Wednesday.
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