The weekly round-up of failed trials, missed targets, and other business mishaps.
The U.S. Securities and Exchange Commission has charged GlaxoSmithKline’s Stiefel Laboratories subsidiary and its former chief executive officer, Charles Stiefel, with defrauding employees and other shareholders by buying back stock at severely undervalued prices. The SEC’s complaint alleges that between 2006 and 2009 (prior to Stiefel Laboratories being purchased by GSK) Stiefel used low valuations for stock buybacks to defraud shareholders.
Its says Stiefel did so by neglecting to tell his employees that their stock was worth much more, and keeping the information solely to himself and a few members of senior management. On one such occasion, during a period from 2006-2007, Stiefel Labs purchased 750 shares of company stock at a price of $13,012 per share despite having had five private equity firms submit offers to buy preferred stock based on valuations that were about 50 percent to 200 percent higher than the valuation later used for stock buybacks. This same strategy allegedly was employed many more times up through 2009 to cheat shareholders out of more than $110 million.
Pharmasset announced that it will be amending the design of a mid-stage trial and will discontinue all treatment arms of its experimental hepatitis C analog, PSI-938 due to abnormalities associated with liver toxicity. The news doesn’t threaten or trigger the “key product event” clause in Pharmasset’s pending Gilead deal, which is primarily focused on the company’s lead candidate against hepatitis C, PSI-7977. Although the news provoked a minor sell off in both Pharmasset and Gilead shares, both were down about 3 percent at the time of this writing, it had a bigger residual impact on other hepatitis C drug companies. Inhibitex’s lead analog INX-189 analog contains some similarities to PSI-938 and saw its shares dip more than 20 percent at the time of this writing. Burrill & Company, publisher of The Burrill Report, is an investor in Pharmasset.
Endocyte’s shares fell more than 70 percent after clinical trial results showed the company’s experimental ovarian cancer drug, EC145, led to shorter survival times than treatment with a standard cancer drug. The trial “was significantly underpowered for an overall survival analysis,” said Endocyte CEO Ron Ellis. “We really don’t know if there’s a benefit or not with the treatment of EC145.” Previous clinical trial results have shown that EC145 significantly increases the length of progression-free survival for ovarian cancer patients who have cancers that are resistant to treatment with standard platinum-based drugs. Investors, however, feared the worst and sold off large shares of stock.Burrill & Company, publisher of The Burrill Report, is an investor in Endocyte.
AstraZeneca’s breast cancer drug Faslodex was rejected by the National Institutes for Health and Clinical Excellence in its final guidance for the National Health Service, finding the drug does not offer significantly better results over existing drugs, and therefore is not an effective use of NHS resources. The recommendation by NICE was no surprise, as it had given a negative opinion of the use of Faslodex last month, even after AstraZeneca provided data that the drug could extend the lives of patients better than existing therapies. “While there is evidence that [Faslodex] can delay the growth of breast cancer…its effectiveness is uncertain compared to [other therapies],” said Andrew Dillon, chief executive of NICE.
Medtronic agreed to pay $23.5 million to settle claims it paid kickbacks to doctors who implanted its pacemakers and defibrillators in patients. The U.S. Justice Department alleges that Medtronic violated the federal False Claims Act by paying physicians upwards of $2,000 for every patient who was implanted with one of the company’s devices. Medtronic caused false claims to be submitted to Medicare and Medicaid by using two post-market studies and two device registries as vehicles to pay participating physicians illegal kickbacks to induce them to implant its pacemakers and defibrillators, the Justice Department said in a statement. Medtronic said in an e-mail statement to Bloomberg that it makes no admissions that the studies were “improper or unlawful.”
Onyx shares stumbled after the U.S. Food and Drug Administration rejected the company’s application for a priority review of its experimental multiple myeloma drug, carfilzomib. The FDA said that Onyx hadn’t conducted the clinical trials necessary for the quicker review and scheduled a July 27, 2012 date to decide whether to approve carflizomib. The new target date means Onyx will have to wait 4 months longer to hear whether or not its multiple myeloma drug will be approved. Onyx shares fell 4 percent on the day of the announcement, to $39.
AVI BioPharma will be cutting about 28 percent of its workforce as part of a restructuring maneuver. The move will eliminate 35 of the company’s 125 staff jobs. AVI has been dealt bad news recently, first missing out on a $500 million government contract for an RNA-based flu treatment and then failing to overturn a patent claim by Prosensa that it owns a stake in AVI’s lead muscular dystrophy program. The company has been trading at a 52-week low. The company says the restructuring will help it focus more on rare and infectious diseases.
A federal judge sentenced a former Synthes executive to eight months in prison for his role in the medical-device company’s illegal testing and promotion of a bone cement product. Richard E. Bohner, the former vice president of operations at Synthes, becomes the fourth ex-Synthes officer to be sentenced to prison in connection with the case. The other three executives were sentenced in November to prison terms ranging from five to nine months. The case stems back to 2003 and 2004 when three patients died after spine surgeons had used the Synthes bone cement product. Though it hasn’t been proved that the bone cement was the cause of the death, the U.S. Department of Justice says the deaths should have raised red flags and should not have been promoted for further use. U.S. District Judge Legrome Davis told Bohner that he failed and that “on the wrongful conduct scale, [his actions] were an 11 on a scale of one to ten. It’s over the top.”