Warning signs were always there for Novartis’s Avexis deal
High-profile departures at Avexis raise more questions about Novartis’s acquisition, but there were plenty of red flags before the deal was sealed.
Last week Novartis was rocked by revelations of data manipulation with its SMA gene therapy Zolgensma. And yesterday it emerged that the group had phased out top scientists from Avexis, the originator of Zolgensma, three months ago, raising more questions about conduct at the subsidiary.
The news last week took the markets by surprise, but the warning signs over Avexis were there to see for anyone looking hard enough. Indeed, these stopped one fund from investing in Avexis well before Novartis sealed its $8.7bn deal in 2018.
Dmitry Kuzmin, managing partner at 4Bio Capital, told Vantage that the UK-based group, which invests solely in companies developing innovative projects such as gene therapies, steered clear of Avexis because of some “large red flags”, including allegations involving several of Avexis’s founders.
One of people no longer with Novartis is Brian Kaspar, Avexis’s erstwhile chief scientific officer. Novartis yesterday said his involvement with company, and that of his brother, Allan Kaspar, former vice-president of R&D, had ended in early May.
Novartis did not disclose whether either brother had been involved in the data manipulation scandal that surfaced last week, but the latest move is not exactly a vote of confidence in the ex-Avexis execs.
And this is not the first time that Mr Kaspar has raised eyebrows among investors. While working for Avexis he was also a researcher at the Nationwide Children's Hospital (NCH) in Ohio, where Zolgensma, then known as AVXS-101, was originally developed.
This spurred concerns about a potential conflict of interest, as did the fact that the NCH stood to gain from Zolgensma’s success, in the form of milestones and royalties should the project get approved.
Any unease around potential conflicts of interest would not have been allayed by fact that the phase I study of Zolgensma, called Start, which was led by Dr Jerry Mendell of the NCH, was carried out solely at this hospital. Investors could rightly worry about the rigour of single-centre trials; added to this, there have also been questions about whether some patients in the study in fact had the most severe form of SMA. Any misclassification of patients might have flattered the results seen with Zolgensma versus historical controls.
But the FDA’s decision to give Zolgensma the nod partly based on a single-centre, uncontrolled trial could be seen as unwise, particularly after the agency attracted criticism for its reliance on another controversial NCH study; namely, the phase II trial of Sarepta’s Duchenne muscular dystrophy therapy Exondys 51, which was also led by Dr Mendell, and paved the way for that product's approval in 2016.
While any concerns about Mr Kaspar are so far largely circumstantial, two other Avexis co-founders, John Carbona and David Genecov, have much more colourful backstories.
Mr Carbona, who was Avexis’s chief executive until 2015, was found to have committed fraud when his previous company, CH Industries, was acquired by Mediq after allegations that he misrepresented the pre-sale state of the group to inflate his own bonus.
Meanwhile, Mr Genecov’s former company, a hospital chain called Forest Park Medical Center, was embroiled in claims that it paid kickbacks to doctors and one of its co-founders, Richard Toussaint, was found guilty of fraud.
Mr Genecov himself was never indicted and, like Mr Carbona, had left Avexis long before Novartis made its move. Still, recent developments have raised fresh questions about the culture at Avexis, and the history of the company will do nothing to reassure Novartis investors on this score.