SEC wants to sanc­tion a PwC ac­coun­tant for fail­ing to flag Steven Bur­rill as he loot­ed a biotech fund

Once a high-pro­file ven­ture in­vestor in biotech, Steven Bur­rill be­came no­to­ri­ous in biotech af­ter ac­cept­ing re­spon­si­bil­i­ty for loot­ing one of his funds to pay for busi­ness and per­son­al ex­pens­es, in­clud­ing gifts for a mis­tress. Now the SEC is go­ing af­ter his ac­coun­tant at PwC, look­ing to bar him from num­ber crunch­ing af­ter lay­ing out al­le­ga­tions of how quick­ly he was will­ing to ac­com­mo­date Bur­rill’s theft.

The crux of the case against Adri­an Beamish cen­ters square­ly on the way Bur­rill and his col­leagues reg­u­lar­ly ad­vanced man­age­ment fees to the gen­er­al part­ner for the $283 mil­lion Bur­rill Life Sci­ences Cap­i­tal Fund III—fees that were paid well in ad­vance of the work. At the end of 2009, that fig­ure amount­ed to $4.9 mil­lion.  A year lat­er it was $9.3 mil­lion, and af­ter 2011 it was $13.4 mil­lion.

“These bal­ances were sig­nif­i­cant, far sur­pass­ing PwC’s in­ter­nal­ly-es­tab­lished thresh­old for ma­te­ri­al­i­ty and were rec­og­nized by the PwC au­dit team, and by Beamish par­tic­u­lar­ly, as un­usu­al in the in­dus­try,” the SEC al­leges in its com­plaint against the 44-year-old CPA. But he didn’t fol­low up on it, with pre­dictable re­sults.

The au­di­tors’ cal­cu­la­tion of the amount of fu­ture fees avail­able to the Gen­er­al Part­ner dur­ing the 2011 au­dit, how­ev­er, was in­cor­rect by a sig­nif­i­cant mar­gin. If his au­dit team had cor­rect­ly cal­cu­lat­ed the fu­ture man­age­ment fees to be earned, us­ing a con­ser­v­a­tive cal­cu­la­tion, Beamish would have re­al­ized there was, at most, $3.2 mil­lion in fu­ture fees to be earned—not the $10.2 mil­lion that the PwC team had cal­cu­lat­ed. Af­ter the ap­prox­i­mate­ly $3.2 mil­lion was paid, Fund III would have no con­trac­tu­al oblig­a­tion to pay ad­di­tion­al man­age­ment fees to the Gen­er­al Part­ner or its de­signee for the re­main­ing con­trac­tu­al term of the Fund.

By the end of 2012, the ad­vance had swelled to a whop­ping $17.9 mil­lion. And this time, Beamish made note of the is­sue in his au­dit. But when Bur­rill’s firm ob­ject­ed, he took it out. And when the firm of­fered an un­se­cured IOU for the amount, he agreed to take that note out of the au­dit as well, ac­cord­ing to the SEC. And he bad­ly mis­stepped by fail­ing to as­cer­tain how Bur­rill planned to pay that amount.

By the sum­mer of 2013, the Fund’s in­vest­ment com­mit­tee dis­cov­ered the is­sue for them­selves. And the mat­ter quick­ly blew up in a high­ly pub­lic scan­dal, as for­mer part­ners filed claims out­lin­ing the theft charges.

“Au­di­tors per­form a crit­i­cal check on fraud­u­lent con­duct, es­pe­cial­ly when re­lat­ed par­ty trans­ac­tions are in­volved,” said Ji­na L. Choi, Di­rec­tor of the SEC’s San Fran­cis­co Re­gion­al Of­fice. “We al­lege that Beamish’s re­peat­ed fail­ure to ex­er­cise pro­fes­sion­al skep­ti­cism pre­vent­ed him from rec­og­niz­ing that Bur­rill was steal­ing in­vestor mon­ey from the fund.”

Last spring, Bur­rill set­tled his dis­pute with the SEC, hand­ing over $6 mil­lion to cov­er what he had lift­ed out of the fund for ex­pens­es that in­clud­ed fam­i­ly va­ca­tions to St. Barts and Paris as well as jew­el­ry, gifts, car ser­vice, and pri­vate jets. The gifts went to both his girl­friend as well as his wife.

Now the SEC wants Beamish to be sanc­tioned — per­haps by los­ing his right to prac­tice ac­count­ing — for be­ing an un­wit­ting ac­com­plice, fail­ing to flag what any skep­ti­cal ac­coun­tant is ex­pect­ed to suss out for in­vestors.

Brent Saunders [Getty Photos]

UP­DAT­ED: Ab­b­Vie seals $63B deal to buy a trou­bled Al­ler­gan — spelling out $1B in R&D cuts

Brent Saunders has found his way out of the current fix he’s in at Allergan $AGN. He’s selling the company to AbbVie for $63 billion in the latest example of the hot M&A market in biopharma.

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Sanofi/Re­gen­eron mus­cle ahead of a ri­val No­var­tis/Roche team, win first ap­proval in key rhi­nos­i­nusi­tis field

Re­gen­eron and their part­ners at Sanofi have beat the No­var­tis/Roche team to the punch on an­oth­er key in­di­ca­tion for their block­buster an­ti-in­flam­ma­to­ry drug Dupix­ent. The drug team scored an ac­cel­er­at­ed FDA ap­proval for chron­ic rhi­nos­i­nusi­tis with nasal polyps, mak­ing this the first such NDA for the field.

An­a­lysts have been watch­ing this race for awhile now, as Sanofi/Re­gen­eron won a snap pri­or­i­ty re­view for what is now their third dis­ease in­di­ca­tion for this treat­ment. And they’re not near­ly done, build­ing up hopes for a ma­jor fran­chise.

Af­ter rais­ing $158M, this up­start's founders have star back­ers and plans to break new ground in gene ther­a­py

Back in 2014, Stephanie Tagliatela opted to take an early exit out of her PhD program after working in Mark Bear’s lab at MIT, where she specialized in the synaptic connections between neuronal cells in the brain. She never finished that PhD, but she and fellow MIT student Kartik Ramamoorthi — who was on the founding team at Voyager — came away with some ideas for a gene therapy startup.

Today, fully 5 years later, she and Ramamoorthi are taking the wraps off of a $104 million mega-round designed to take the cumulative work of their preclinical formative stage for Encoded Therapeutics into human studies. They’ve now raised $158 million since starting out in Illumina’s incubator in the Bay Area, and they believe they are firmly on track to do something unique in gene therapy.

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Novotech CEO Dr. John Moller

Novotech CRO Award­ed Frost & Sul­li­van Best Biotech CRO Asia-Pa­cif­ic 2019

Known in the in­dus­try as the Asia-Pa­cif­ic CRO, Novotech is now lead CRO ser­vices provider for the grow­ing num­ber of in­ter­na­tion­al biotechs se­lect­ing the re­gion for their stud­ies.

Re­flect­ing this Asia-Pa­cif­ic growth, Novotech staff num­bers are up 20% since De­cem­ber 2018 to 600 in-house clin­i­cal re­search peo­ple across a full range of ser­vices, across the re­gion.

Novotech’s ca­pa­bil­i­ties have been rec­og­nized by an­a­lysts like Frost & Sul­li­van, most re­cent­ly with the pres­ti­gious Asia-Pa­cif­ic CRO Biotech of the year award for best prac­tices in clin­i­cal re­search for biotechs for the fifth year. See oth­er awards here.

Richard Gonzalez testifying in front of Senate Finance Committee, February 2019 [AP Images]

Ab­b­Vie's $63B buy­out spot­lights the re­turn of ma­jor M&A deals — de­spite the back­lash

Big time M&A is back. But for how long?

Over the past 18 months we’ve now seen three major buyouts announced: Takeda/Shire; Bristol-Myers/Celgene and now AbbVie/Allergan. And with this latest deal it’s increasingly clear that the sharp fall from grace suffered by high-profile players which have seen their share prices blasted has created an opening for the growth players in big pharma to up their game — in sharp contrast to the popular bolt-on deals that have been driving the growth strategy at Novartis, Merck, Roche and others.

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Two biotech uni­corns swell pro­posed IPOs, eye­ing a $600M-plus wind­fall

We’ve been wait­ing for the ar­rival of Bridge­Bio’s IPO to top off the wave of new biotech of­fer­ings sweep­ing through Nas­daq at the end of H1. And now we learn that it’s been sub­stan­tial­ly up­sized.

Ini­tial­ly pen­ciled in at a uni­corn-sized $225 mil­lion, the KKR-backed biotech has spiked that to the neigh­bor­hood of $300 mil­lion, look­ing to sell 20 mil­lion shares at $14 to $16 each. That’s an added 5 mil­lion shares, re­ports Re­nais­sance Cap­i­tal, which fig­ures the pro­posed mar­ket val­u­a­tion for Neil Ku­mar’s com­pa­ny at $1.8 bil­lion.

No­var­tis holds back the copy­cat brigade's at­tack on its top drug fran­chise — for now

A fed­er­al judge has put a gener­ic chal­lenge to No­var­tis’ block­buster mul­ti­ple scle­ro­sis drug Gilenya on hold while a patent fight plays out in court.

Judge Leonard P. Stark is­sued a tem­po­rary in­junc­tion ear­li­er this week, forc­ing My­lan, Dr. Red­dy’s Lab­o­ra­to­ries and Au­robindo Phar­ma to shelve their launch plans to al­low the patent fight to pro­ceed. He ruled that al­low­ing the gener­ics in­to the mar­ket now would per­ma­nent­ly slash the price for No­var­tis, even if it pre­vails. 

Top an­a­lyst finds a sil­ver lin­ing in Ab­b­Vie’s $63B Al­ler­gan buy­out — but there’s a catch

Af­ter get­ting beat up on all sides from mar­ket ob­servers who don’t much care for the lat­est mega-deal to ar­rive in bio­phar­ma, at least one promi­nent an­a­lyst now is start­ing to like what he sees in the num­bers for Ab­b­Vie/Al­ler­gan.

But it’s go­ing to take some en­cour­age­ment if Ab­b­Vie ex­ecs want it to last.

Ab­b­Vie’s mar­ket cap de­clined $20 bil­lion on Tues­day as the stock took a 17% hit dur­ing the day. And SVB Leerink’s Ge­of­frey Porges can see a dis­tinct out­line of an up­side af­ter re­view­ing the fun­da­men­tals of the deal.

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While Ako­rn works to re­vive its for­tunes, the FDA hits it with an­oth­er warn­ing let­ter

Ako­rn just can’t dig it­self out of its hole.

The spe­cial­ty gener­ic drug­mak­er has re­ceived yet an­oth­er warn­ing let­ter from the FDA this year. With­out dis­clos­ing any specifics, the Lake For­est, Illi­nois-based drug­mak­er on Wednes­day said the US reg­u­la­tor had is­sued the let­ter, cit­ing an in­spec­tion of its Som­er­set, New Jer­sey man­u­fac­tur­ing fa­cil­i­ty in Ju­ly and Au­gust of 2018. The com­pa­ny’s shares $AKRX dipped about 1.7% to $4.65 be­fore the bell.