Recently, TrialSite News summarized a story that merited a deeper review. The small, Chicago-based biotech venture Errant Gene Therapeutics, LLC was engaged in a court battle against a well-funded biotech called Bluebird Bio (which has raised over $400 million) and a venture capital firm known as Third Rock Ventures. With allegations of breach of contract, tortious business interference, and fraud, TrialSite News initiated a project to review publicly available information, including court records, to derive a more thorough understanding of the case at hand. But first, let us go back to the start of a story that can only happen in America.

Update on court hearing here

Summaries of Errant Gene Therapeutics vs. Sloan Kettering Court Exhibits

Central Casting Chicago Grit: From the Streets of Bridgeport to the Commodity Pits

Patrick Girondi is a character out of Hollywood central casting. A charismatic Italian American, he grew up on the rough-and-tumble streets of the Bridgepoint district in South Side Chicago. One had to be able to hold his own to earn respect—and also keep that respect. This street-wise grit would benefit Girondi throughout the years to follow. As a teenager, Girondi got himself into trouble and was given a choice by his judge: either join the military or go to jail. He made the prudent choice of becoming an enlisted soldier. Girondi put in his military time, and, once discharged, returned to his home in Chicago.

Girondi secured a number of odd and end jobs—mostly blue collar in nature until one day he got in trouble again for “socking” someone who had it coming. He got himself terminated, but a trader from Singapore saw his talents and asked Girondi to support him in the Chicago commodity trading pits. Back in the 1970s, the Chicago Board Options Exchange (CBOE) was a rough place where traders that had muscle as well as brain and intuition, could go far. As it turns out, Girondi’s common sense was anything but common—he had an intuition for his own society—including economy and consumer sentiment, which led him to make large amounts of money on the Chicago commodity exchanges.

A Celebrity in the Chicago Circuit

With growing amounts of revenue from trading, Girondi became something of an item in Chicago, even being nominated Chicago’s most eligible bachelor at one point. He began to diversify in various businesses and even began performing music. Because of his insight in commodity trading, he met many well-connected individuals along the way, including one of the Walton (Walmart) family members. This would eventually become relevant and impactful to the research led by Girondi.

Toughness meets the Specter of Deadly Rare Disease

Girondi’s life progressed naturally as he married and had three children. In 1992, his eldest son was diagnosed with Thalassemia, a fatal blood disease. A devastating blow to the family, Girondi doubled-down on his own toughness and love of family. He became devout in learning about the disease and dedicating his life to finding a cure for his son (and for other children afflicted with deadly rare diseases).

Birth of Errant Gene Therapeutics (EGT)

Girondi founded EGT in 1993 to build a platform in which a cure for his son, as well as a cure for the many children afflicted with Thalassemia and other rare diseases, could be developed. Since then, EGT and its predecessor have built a grassroots organization to support the efforts made in finding cures for rare diseases around the world. Girondi would not channel his balance of street smarts, economic depth, and organic business wisdom to make an impact in the academic, high-brow world of drug discovery, development, and clinical trials. Instead, he would start utilizing those business and financial contacts he developed during his days spent in the commodity pits. After all, he made himself and others a substantial fortune.

In Pursuit of Thalassemia 

With Girondi’s backing, EGT was now fully engaged in Thalassemia research and development with the evolution of the “EGT Vector,” promising intellectual property that could possibly form the basis of a Thalassemia treatment (Girondi would later claim in court that over $35 million had been contributed into the asset). How did a tough street kid make it into the highly cultivated world of biotech? The same way he accumulated wealth in the Chicago trading pits—by leveraging his street-wise common sense; uncanny, sharp business intuition; charisma and leadership traits; intense drive and passion for people; and his deep, uncompromising commitment to find a cure for his son.

Girondi started networking with elite academic medical centers, clinical research sites, and commercial biotech ventures with a passion and fervor few could replicate. With the same intense passion and energy that often led him to the winning side of a commodity trade, he made his way into the world of drug development. Girondi and EGT established rapport, then relationships, and finally, formal partnerships with leading centers, such as Boston University, St. Jude Children’s Research Hospital, University of Milano, Gene and Cell Therapy Center in Thessaloniki (Greece), Nasik Hospital (India), and Children’s Hospital Oakland Research Institute in California.

As a result of powerful relationships, EGT progressed its vector as well as its potential ability to be approved by the Food and Drug Administration (FDA) for initial clinical in-man trials.

The Memorial Sloan Kettering Breakthrough

By year 2000, seven years after EGT’s inception, Girondi had learned a great deal about early stage drug development for Thalassemia. He was able to establish a company, raise investment capital, and partner with elite research institutions. In fact, he and team had even conducted a clinical study involving 38 patients. But, as one of their major findings, he and his team identified a potential breakthrough at Memorial Sloan Kettering Cancer Center (MSK) in New York City.  

Two researchers were in hot pursuit of Thalassemia treatment prospects: Stefano Rivella and Michel Sadelain, who had apparently cured five generations of Thalassemic-affected mice! Upon learning of this, Girondi and EGT immediately reached out and initiated support for these scientists and their work.

The Transition

By 2003, MSK notified EGT that they would be ceasing their Thalassemia work as they were not in the business of researching gene therapy for blood disorders but rather operated as a cancer center focusing on cancer research. Dr. Lucio Luzzatto confirmed to Girondi that they would not continue with the research, although it would be of interest that Luzzato personally become president of the ethics committee for gene therapy at the FDA for three years.

Finding a Sponsor

As MSK was dropping the Thalassemia gene therapy research, Girondi and supporters within MSK sought out biopharmaceutical companies interested in taking on the research. They found no takers. Although all the prospective company partners could identify with the appeal of the intent—a father on a mission to save his son—they all pointed to the fact that, at that time, gene therapy was premature and the project was frivolous. Girondi could find no suitors—no one that believed enough in the potential to make the leap of faith that an actual investment required.

EGT to the Rescue & the New Mission

No one was interested in the vector, so by March 2005, MSK sold the exclusive rights to leverage and exploit the vector to EGT for use in blood disorders known as hemoglobinopathies, which include Thalassemia (aka Cooley’s Anemia) and Sickle Cell Disease. Moving forward, EGT, with the passion, energy and commitment of Girondi, was driven to do one thing—genetically cure Thalassemic and Sickle Cell patients. 

According to plaintiff arguments in publicly available court documents, by 2005 (when EGT licensed the Thalassemic Vector), no group was willing to fund or support the research, and without the transfer to Chicago-based EGT, the research would have died right there on the spot.

A Living Hell for the Patient

The mission was time sensitive as Girondi’s son struggled with Thalassemia. It should be noted that for both Thalassemia and Sickle Cell Disease (Anemia), the world of the patient can be a living hell. The patient must have their blood hyper transfused and receive painful iron chelation treatments that reduce iron build-up associated with blood transfusions. The only possible cure for these diseases would be a bone marrow or stem cell transplant, but less than 30% of patients have compatible donors.    

Patients with Thalassemia face an average life expectancy of 28 years. Girondi was constantly in hospitals while his son received blood transfusions as it is a requirement in the United States that the patient cannot be at home for these transfusions. 

Consequently, Girondi, being fortunate enough to possess the financial wherewithal, established a second home in their ancestral homeland of Italy. There, his son could continue the painful transfusion process while remaining in the comfort of their home. Girondi always wanted to connect with Italy and he found a way to do so, despite the incredibly tough situation the family faced.

The Gene Therapy: Vector Drug Development

Once EGT possessed the license, they raised more funding and commenced the next wave of research. They financed a number of contracts with international specialists and MSK. In other words, EGT paid MSK to conduct vector research. This culminated into four years of research and development improvements, and, according to plaintiff-side court arguments, EGT performed all of its obligations under the 2005 licensing agreement between EGT and MSK.

EGT Progress

Between 1993 and 2008, EGT developed a network of research partners, including a number of academic medical centers, specialized research organizations, and commercial ventures—not to mention rare disease patient networks and foundations. Moreover, it was declared later on in court documentation that EGT used commercially reasonable efforts to develop and introduce the investigational gene therapy to the market. After all, Girondi had the most urgent of incentives—his very sick son, Rocco.

Major EGT Progress

By 2007, EGT had obtained U.S. FDA Orphan Drug Designation, which provides the designee a period of market exclusivity should the drug ever become approved. In addition, EGT obtained unanimous approval of the NIH Recombinant DNA Advisory Committee (RAC) for its vector development. RAC would be eliminated by 2018. Possibly an even bigger breakthrough was the pre-IND (Investigative New Drug) meeting with the FDA and an action to file the vector’s intellectual property (IP), trademarking it as “Thalagen” for its therapy for Sickle Cell Disorder and Thalassemia therapy, as reported in court documents. By 2009, EGT was awarded Orphan Drug Designation in Europe. Perhaps another notable event: researchers Sadelain and Rivella were awarded U.S. patents for the Vector—the underlying basis for Thalagen and the intellectual property that was developed by EGT under the 2005 agreement between EGT and MSK.

Production Milestones & The Emergence of Gene Therapy Awareness

Employing Good Manufacturing Practices (GMP) by 2010, EGT completed physical production of Thalagen—requiring 18 months time and over $1.3 million in additional funding raised by EGT. By 2010, gene therapy was a hot topic among biopharmaceutical industry circles—billions now were pouring into gene therapy and catching the attention of all the big industry sponsors, CROs, and investors. EGT claims in its court documents that it was ahead of the curve thanks to the early-stage bets it made, driven first and foremost by a father’s drive to one day cure his son. EGT was in a potentially valuable position based on what it accomplished with the vector, securing its rights in 2005 and investing in ongoing clinical research and state-of-the-art gene manufacturing capabilities.  

Complications & Competition Emerging

Moreover, EGT claims in the ongoing legal case that its vector was more closely associated to the endogenous (natural) gene than the unfiltered and possibly unsafe vector used by its sole competitor, Genetix, in French clinical trials. It is important to note that Genetix later became Bluebird, the defendant in the present litigation.

Now, by this point, the conditions became more tense, and it was the behavior at this point in time that ultimately led to the present litigation. EGT claims that its method of collecting patient bone marrow stem cells was safer and more novel than that of Bluebird. EGT’s legal position was that Bluebird relied on less patient-friendly procedures.  

Interestingly, during that time, MSK requested to EGT that it delay clinical trials of Thalagen until the confirmation of this new method of collecting stem cells. MSK declared, according to court documents, that first a study proving the efficacy of the method harvesting bone marrow stem cells must be completed. Hence, a pilot study that was conducted to FDA guidelines and standards was undertaken in Greece from 2008 through 2010.

Essentially, this request by MSK, according to plaintiff EGT, had the effect of delaying EGT’s approval as they could not apply for FDA approval until after the study evidenced the novel method of collecting stem cells from blood in thalassemia patients was effective.  

By 2009, EGT documents point out that the FDA halted all gene therapy clinical trials due to “improper dominance of certain cell growth in the Bluebird thalassemic patient.”

The Landscape Gets Meaner: An “Active” Investor

Venture capital firm Third Rock Ventures LLC (TRV) is known for being an active investor—creating companies by bringing together experts and proactively building companies from the ground up. They acquired Genetix (EGT’s only competitor) in early 2010. Moreover, TRV invested heavily in Agios Pharmaceuticals Inc., a company founded by Craig B. Thompson, President of MSK.  

A Brief Interlude: The University of Pennsylvania & Agios Litigation

Thompson faced some controversy of his own as he developed Argios while working for the University of Pennsylvania. When Thomson deserted Pennsylvania for MSK, the University of Pennsylvania sued, claiming that he was making use of intellectual property developed at Pennsylvania. The lawsuit was settled with an agreement wherein Agios and the University of Pennsylvania entered into a licensing agreement

Third Rock Ventures Gets Very Active

By this point, Third Rock Ventures had made their Bluebird investment (it was called Genetix at the time) and was actively seeking to build more value in this emerging gene therapy market. According to publicly available court documents, Dr. Philip Reilly of TRV visited Andrew Maslow, Director of the Office of Technology Development for MSK. Apparently, if the plaintiff’s published arguments are accurate, TRV sought to acquire the EGT Vector, claiming that it was superior to the Bluebird intellectual property, which they had just purchased for $35 million. 

The parties met in May 2010, including Bluebird CEO Nick Leschly. In this incredibly small world of ours, Leschly had also worked for TRV as well as Agios prior to gaining his position at Bluebird. Plaintiff-side court documents tell an interesting story: EGT apparently sought guaranteed use of the EGT vector as a condition of negotiations, due to the 2009 adverse Bluebird French trials. The negotiations were immediately halted as Leschly wasn’t going to entertain negotiations with such demands. 

An Apparent Green Light to Collaborate?

However, by September 2010, the MSK was requesting that EGT deliver the progressed vector for completion of a mobilization study. EGT claims in legal proceedings that it followed through on the MSK request under the instructions that the Vector was used to test live patient cells at MSK as well as for completion of the mobilization study. EGT requested that principal investigator Dr. John Tisdale, Senior Investigator at the NIH Molecular and Clinical Hematology Branch, be actively involved as his branch is a recognized center of excellence for developmental clinical activities using viral vectors for delivery of gene therapies to treat hemoglobinopathies and specifically Sickle Cell Diseases.

By this stage, according to court papers, the plaintiff claims that Thalagen was developed into a drug worth at least tens of millions of dollars—and possibly hundreds of millions upon commencement of a credible clinical trials program. 

Things Turn from Mean to Nasty

By late 2010, Thompson arrived at MSK as president (again, his departure from University of Pennsylvania triggered litigation). Upon Thompson’s arrival, conditions rapidly changed from the EGT point of view. The imminent EGT vector clinical trial was halted, claims the plaintiff in public documents. Moving forward, MSK sought $4 million cash advance to do the study or $400,000 per patient for up to 10 patients before even one clinical trial could commence at MSK. Apparently, EGT was already anticipating such hard ball tactics and secured an alternative trial site with the NIH—at 8 times less per patient cost of MSK participants. Moreover, EGT proposed that they treat one patient at MSK for $400,000 and the rest of the patients at NIH for a far more reasonable cost.   

MSK didn’t play ball and halted the trial by refusing to deliver the EGT vector to NIH, claims the plaintiff. MSK’s next ploy, claimed Girondi, was to hold the EGT vector hostage until the latter could find a big pharmaceutical company partner for commercialization purposes, despite the fact that not one single patient had been treated as of yet. 

EGT recruited Sigma Tau Pharmaceuticals (now called Leadiant Biosciences), which was picked up by a New York Times article. The parties met, and, according to the plaintiff EGT in court documents, Andrew Maslow of MSK point-blank told Sigma-Tau representatives: “The technology does not work. If I were you, I would not invest in it.”

Thereafter, relations become more heated when MSK claimed that EGT was in breach of contract for a $400,000 payment that EGT claims had been waived in 2008. EGT, in response, pointed to an Andrew Maslow letter in 2010 that didn’t mention payment or arrears. However, EGT subsequently made the $400,000 payment on December 7, 2010.

EGT & Sigma-Tau Partnership

MSK demanded that EGT sign up a bigger biopharma partner and they did—even despite the alleged fact that Andrew Maslow of MSK declared that they shouldn’t sign a partnership because the technology didn’t work. The contract inked January 2011 and included a $3 million down payment for the right for Sigma Tau to purchase 20% of EGT shares at a fair market valuation of $30 million, and, according to formal court documents, full financing of the clinical trials development costs. By any vantage, this was a solid deal that should have been approved if the MSK criteria was the mitigation of business risk since EGT was a small venture.

Excited and confident that the finish line was near, the parties (EGT & Signa-Tau) submitted the information to MSK. It was immediately rejected by MSK.

A Disturbing Possibility

Court documents tell a story that EGT sought every possible solution to get the EGT vector trial back on track but to no avail—MSK was not willing to deal. In fact, by January 21, 2011, MSK commenced an arbitration, claiming that EGT did not meet its development duties under the previous, pre-existing contract. Although, months earlier, EGT recorded in legal documents that MSK praised their development work.

What was very clear now was that MSK wasn’t going to deal with EGT. It didn’t matter what EGT did to meet them on their terms. Finally, a potential breakthrough appeared when Maslow of MSK recommended a deal structure where the MSK would control the clinical trials and commercial exploitation of the EGT vector.

From Nasty to Outright Ugly

Now from the plaintiff’s point of view, all deteriorated from a June 17, 2011 meeting onward as EGT claimed they were induced to enter into an agreement to finally partner with MSK based on “knowingly false statement.” An MSK representative, Maslow, now stated that MSK had spent $1.5 million to write an IND and that clinical trials would commence no later than October 2011. The parties proceeded to contract June 17, 2011, which triggered a change of control of the EGT vector from EGT to MSK. Much of the basis for this EGT/MSK deal was based on fraud, deception, and bad faith; therefore, the agreement shouldn’t have been valid. By 2015, EGT filed suit against MSK in the United States District Court for the Southern District of New York (Errant Gene Therapeutics, LLC et al, v. Sloan Kettering Institute for Cancer Research, Civil Action No. 15-cv-02044) with assertions of fraud and breach of contract.

The Art of War

What has made its way to light is that if the allegations are true in these cases, TRV and MSK—not to mention Bluebird—are true students of Sun Tzu and his warfare treatise Art of War. During the latest litigation, it was uncovered that TRV and SKI produced documents relating to Bluebird’s communications and dealings with MSK. They were designated as “attorneys eyes only” and thus not available to the public. There has been an ongoing claim that the plaintiff Girondi plays it too loose with confidential information. 

Still, based on our research, we have gleaned that by November 2012, MSK was structuring some type of deal with TRV giving the EGT/SKI Vector to Bluebird (the competitor for nothing). Essentially, it is speculated, they were engaged in an unscrupulous backchannel deal to shelf what arguably is a superior Vector—“Thalagen.” This by itself would raise serious ethical, moral, and legal questions should this actually be true. We certainly will monitor the court cases as the EGT and MSK case is headed for the New York State Supreme Court after the United States District Court Southern District of New York lets it proceed. Of course, the latest actions for tortious business interference, conspiracy to defraud, and other claims will be monitored carefully. This lawsuit was filed in Suffolk County Superior Court in Massachusetts.

David vs. Goliath

Now EGT has sued both TRV and Bluebird’s CEO for working to decimate the EGT vector behind the scenes. They claimed that the defendants designed a scheme to encumber the EGT clinical trial efforts so that Bluebird and TRV could achieve their objectives of getting this competitive product to market in as fast and beneficial a way as possible.

EGT now believes that MSK (via its president Craig Thompson), TRV, and Bluebird (modern-day Goliaths) utilized their relationships and position to block the EGT vector in order to protect and position the Bluebird Vector. Again, Thomson worked for MSK, which went into business with EGT initially. The lawsuit declares that TRV truly acted in an unethical and potentially faulty manner by actively participating in these disruptive actions. The lawsuit claims the plaintiffs “follow a troubling pattern of tortuous business practices undertaken by pharmaceutical companies to secretly and systematically ‘kill’ competing medical treatments.”

EGT would appear to be David in this analogous situation to the Biblical tale. After all, Patrick Girondi came from the streets of Chicago with no education and little pedigree applicable to the high-brow world of big biotech. Although he made more money than most trading in the Chicago commodity pits, he intentionally entered biotech to try to save his son from the deadly grip of Thalassemia. Hence, he launched EGT and worked his way into a complex world of academic research centers, advanced science and shark-like biopharmaceutical ventures—not to mention shrewd venture capitalists. Girondi should have already been tossed out of the game but he hasn’t. His street smarts, toughness, tenacity, and sharp business survival skills have helped him survive, but the love for his son, Rocco, keeps him going. Regardless of the legal outcome in these cases, the underdog will have made his point.

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