The legal scrutiny follows a dismal Q1 2026 earnings report that revealed a massive tenfold increase in net losses compared to the previous year. Central to the complaint is the acquisition of Fabric Genomics, which GeneDx previously touted as a key driver of future profitability. Instead, the unit contributed to a $31.2 million impairment charge—roughly 94% of the cash originally paid for the business just one year prior. Investors allege that the company’s public narrative regarding technological synergy masked internal financial instability.

Beyond the acquisition fallout, GeneDx reported an unexpected shift in product mix toward genome testing, which generated only half the Annual Recurring Revenue of exome testing. This misalignment forced the company to slash its 2026 revenue guidance by 12%. Reed Kathrein, the Hagens Berman partner leading the investigation, stated that the firm is examining whether leadership knowingly presented a disconnect between public projections and internal fiscal realities. The company recently appointed Mark Gardner as President, a move now being scrutinized to determine if it relates to the failures preceding the May stock crash.