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'Pharma bro' Martin Shkreli launched 'unmonitored drug trial' in Cyprus for Retrophin drug without FDA oversight: Prosecutors

  • Pharma bro Martin Shkreli, as then-CEO of Retrophin, launched an unmonitored drug trial without FDA oversight, prosecutors said.
  • The drug was designed to treat the neurodegenerative disease PKAN.
  • Shkreli first gained public notoriety as CEO of Turing Pharmaceuticals, where he raised the price of the anti-parasite drug Daraprim by more than 5,000 percent.

Notorious "pharma bro" Martin Shkreli in 2014 launched an "unmonitored drug trial in Cyprus" — without FDA oversight — for a treatment being developed by his then-company Retrophin, federal prosecutors revealed Tuesday.

Prosecutors said Shkreli had the drug trial conducted without the Food and Drug Administration's "rigorous safety processes and procedures" in order to get "single-patient results that could be" — and later were — reported in a financial filing by Retrophin, the pharmaceuticals company that he had founded the prior year.

And Retrophin's initial filing on those results in August 2014 — during a time when Shkreli was still the company's CEO — "does not disclose that the study [was] being undertaken in Cyprus," prosecutors noted.

Prosecutors also said that Shkreli's "insistence on taking shortcuts ... drastically delayed" the development of the drug that treats a rare, often fatal genetic condition that typically develops in childhood.

Prosecutors laid out those facts in a court filing that requested Shkreli be sentenced on Friday to no less than 15 years in prison for securities fraud charges.

A spokesman for Retrophin and an FDA spokeswoman had no immediate comment on the prosecutors' claims. A lawyer for Shkreli did not return a request for comment.

The drug trial was mentioned by prosecutors to counteract what they said was a "highly misleading" portrayal by Shkreli's defense team about his work on a drug to cure the condition known as PKAN.

Prosecutors said that because of that portrayal, among other things, Shkreli does not deserve a sentence lighter than the very stiff one being recommended by federal sentencing guidelines.

PKAN is a neurodegenerative genetic condition disease that afflicts children, and which ultimately leads to death.

Shkreli and two other men, Andrew Vaino and Marek Biestek, hold the patent on a drug, RE-024, that they hope will cure PKAN.

In its own sentencing recommendations last week, Shkreli's lawyers wrote that, "With this patent, Retrophin was able to begin studies and clinical trials to drastically improve the lives of thousands of patients suffering from this terrible disease."

On its corporate website, Retrophin says that it is enrolling patients in a "phase 3 clinical trial" of RE-024.

That site says the trial is "being conducted under a Special Protocol Assessment (SPA) agreement, which indicates concurrence by the U.S. Food and Drug Administration (FDA) that the design of the pivotal trial can adequately support a New Drug Application (NDA) seeking U.S. approval of RE-024 for the treatment of PKAN."

Retrophin notes that PKAN is estimated to affect only about 5,000 people worldwide.

"There are no approved treatment options for PKAN and current therapeutic strategies are limited to symptom management," Retrophin says on its site.

But prosecutors in their filing Tuesday said that while Shkreli's name is on that patent, "his insistence on taking shortcuts in order to get PKAN [drug] to market drastically delayed the development of the drug while he was the CEO of Retrophin." Shkreli was ousted from Retrophin by its board in the fall of 2014.

"Because the Food and Drug Administration ... has rigorous safety processes and procedures that must be followed before a new drug can be provided to patients, even on an experimental basis, Shkreli was unable to give the drug directly to patients ... as he had promised," prosecutors wrote.

"Instead, he — as with any other drug developer — needed to secure a series of approves from the FDA, a process that can be long and painstaking," the filing said.

"Shkreli, however, did not want to wait for that process to play out and instead launched an unmonitored drug trial in Cyprus," the filing said.

Prosecutors said that because the trial did not have FDA controls, and because "its operation was unacceptable to the FDA," the trial was not, despite Shkreli's claims to the contrary, "part of Retrophin's 'efforts to receive FDA approval.' "

The filing said it was "instead a way to get single-patient results that could be — and subsequently were — reported in Retrophin's 8-K filings," dated Aug. 11, 2014.

"The 8-K does not disclose that the study is being undertaken in Cyprus," prosecutors wrote.

The 8-K says that one patient received a dose of RE-024 on May 21, 2014, and that two months later a second patient began being treated with the drug.

Prosecutors, in their sentencing memo Tuesday, said that "by the time Shkreli left Retrophin, no pre-clinical work that would qualify for FDA approval had been done to advance" RE-024.

"Ultimately, all steps toward the development for [RE-024] for FDA approval were taken after Shkreli's departure from the company," prosecutors wrote.

Eric Schmidt, a biotech stock analyst at Cowen, told CNBC that while he is not a legal expert, "We often hear of ex-U.S. trials being run all the time that are outside the purview of the FDA."

"I can't recall ever hearing about a study in [Cyprus] and it is possible there is something weird or strange about that territory that might make this instance particularly suspect," Schmidt said.

"But the simple fact that a company has gone outside of the FDA's jurisdiction for the purpose of running a study according to foreign law is not news."

Evidence at Shkreli's trial last summer revealed that he used Retrophin stock and cash from the company to pay back investors at two failed hedge funds he had run.

After being booted by Retrophin's board in late 2014, Shkreli launched another drug company, Turing Pharmaceuticals. While at Turing, he gained widespread public notoriety for raising the price of the anti-parasite drug Daraprim by more than 5,000 percent, from $13.50 per pill to $750 per pill.

Daraprim is used to treat a parasitic condition found in pregnant women, infants and people with HIV. Turing since has changed its name to Vyera Pharmaceuticals.

— Additional reporting by CNBC's Meg Tirrell.

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