Category Archives: Healthcare

Trading on Houston biopharma companies halted over COVID-19 claims

[UPDATE 5-28-2020: After both companies issued similar press releases on May 27, laying out more specifically the timeline for the drug to get approval, trading in both companies has resumed on 28 May].

The Nasdaq has halted trading on CNS Pharmaceuticals and Moleculin Biotech pending further information from the companies related to a drug candidate for the coronavirus illness COVID-19.

Moleculin Biotech is based in the Rice Military area of Houston and went public in June 2016. CNS is based in the Galleria and completed its IPO in November 2019.

The Securities and Exchange commission temporarily halted trading on May 5 of the two companies.  That temporary halt was due to expire on May 15, until the Nasdaq stepped in. The SEC also halted trading of Vancouver-based WPD Pharmaceuticals, which is traded on the Canadian Stock Exchange. However, WPD will resume trading on the CSE.

University of Frankfurt research

The saga began on March 11 when independent researchers at the University of Frankfurt posted a paper on a website, for peer review. The research found that 2-deoxy-D-glucose (“2-DG”) was able to reduce replication of SARS-CoV-2, the virus that causes COVID-19, by 100% in in vitro testing.

Three companies linked by common shareholder

On March 23, 2020 CNS announced that it had entered into an agreement with WPD for the development of several preclinical drug candidates, including WP1122. The founder and largest shareholder of CNS, Dr Waldemar Priebe, is also the founder and largest shareholder of WPD too.

WPD had previously licensed rights to a portfolio of drug candidates, including WP1122, from Moleculin Biotech for certain regions. Dr Priebe is one of the largest shareholders of Moleculin. He is also the chair of the Scientific Advisory Board of that company.

By day, Dr Priebe is also the Professor of Medicinal Chemistry, Department of Experimental Therapeutics at MD Anderson Cancer Center.

CNS states that WP1122 is a biologically inactive compound that can be metabolized in the body, to produce a form of 2-DG. The March 23 press release stated that WP1122 was being tested for a range of viruses, including SARS-CoV-2.

On April 8, Moleculin issued a press release touting the Frankfurt research. CNS issued its version of the press release on April 13.

Market capitalization rockets

Prior to the March 23 announcement, CNS had a market cap of $24 million. After the April 13 press release, it was $60 million. Likewise for Moleculin Biotech, the market cap rocketed from $24 million to $89 million.

The SEC is concerned that CNS and certain unnamed third parties may have overstated the status of development of WP1122, the status of testing the drug’s impact on COVID-19 and the ability to expedite regulatory approval of any such treatment.

https://www.globenewswire.com/news-release/2020/05/18/2034963/0/en/Nasdaq-Halts-CNS-Pharmaceuticals-Inc.html

Missouri City Physician to pay $450,000 to resolve fraud allegations

Dr Maaz Abbasi has agreed to pay $450,000 to resolve allegations that he falsely signed home help certifications and plans of care in exchange for money. He also agreed to a three-year exclusion from participation in any federal healthcare program.

Dr Abbasi was connected with Egondu ‘Kate’ Koko. In May 2019, she was sentenced to over 15 years in prison for her role in a $20 million medicare fraud. She owned a number of home health agencies. She admitted to paying illegal kickbacks and bribes to physicians and patients for paperwork necessary for the agencies to bill Medicare.

From 2015 to 2018, Abbasi certified patients for home health services without any knowledge of their medical condition or homebound status. One of the companies owned by Ms Koko paid Abbasi approximately $6,200 in exchange for signing these fraudulent Medicare home health certifications and plans of care. Abbasi also fraudulently signed a fellow physician’s name on these certifications and plans of care without that physician’s authorization, permission or knowledge.

The agreement resolves the allegations without a determination of liability.

https://www.justice.gov/usao-sdtx/pr/missouri-city-physician-pays-nearly-half-million-resolve-illegal-kickback-and-fraud

Houston biotech start-up files for IPO

Kiromic Biopharma has filed for an Initial Public Offering (IPO). It plans to raise $20 million. The company is based in the Medical Center district. It was formed in 2006, though it had minimal operations until 2012.

The company is developing immunotherapies for blood cancers and solid tumors. It will use artificial intelligence and its proprietary neural network platform to identify new surface tumor targets. These targets can then be used to create therapies such as antibody therapies, T cell therapies and vaccine therapies. The company has three early-stage product candidates.

The CEO is Maurizio Chiriva Internati. He has been in that role since February 2018, though he joined the company in 2012. He has been an Associate Professor at MD Andersen Cancer Center since August 2019.

Tony Tontat is the CFO and COO. He joined the company, initially as a consultant, in April 2018. He has helped raise funds for biotech public companies such as Sorrento Therapeutics and NantKwest.

The company plans to list on the NYSE American under the symbol ‘KRBP’. No pricing terms were disclosed.

SEC filing – Kiromic Biopharma S-1

 

 

Texas City man admits to $5 million health care fraud

Ravinder Syal, 57, of Texas City, has admitted to a nearly $5 million fraud in a Corpus Christi federal court.



Between February 2018 and March 2020, he acquired several physician practices in Harris County, Galveston County and Corpus Christi. He handled the administrative functions of the practices including staffing and billing. In each case, he switched the practices to electronic billing and hired an outside billing service, located in India, to handle patient billing.

The Defendant conspired with the outside billing firm to fraudulently bill Medicare, Medicaid, and several private health insurers. He billed for tests and services that were not rendered by a physician or performed during a patient visit.

Syal acted without the knowledge or assistance of the physicians. According to the charge sheet, this included his wife, who is a pediatrician!

He fraudulently billed services amounting to almost $4.9 million. Syal was paid $553,069 as a result of these claims.

Sentencing has been set for August 10. At that time, Syal faces up to 10 years in federal prison and a possible $250,000 maximum fine.

https://www.justice.gov/usao-sdtx/pr/texas-man-admits-role-nearly-5-million-health-care-fraud-scheme

 

Biopharma CEO leaves after 3 months

A big shake-up at Aravive results in CEO Rekha Hemrajani leaving the company, along with Chairman and former CEO Jay Shepard. Two other directors are also leaving the Board.



Investor and Pharma veteran Fredric Eshelman has bought $5 million of shares (just over 5%) in the company and installed himself as Non-Exec Chairman.

Aravive is a clinical stage biotechnology company, focusing on developing therapies for solid tumors and hematologic malignancies. It has its head office in downtown Houston. It went public in October 2018 via a reverse takeover.

Ms Hemrajani only joined the company in January 2020. She worked out of the company’s Palo Alto office. She came from Arcus Biosciences where she had been COO and CFO. Ms Hemrajani will receive a severance payment ($237,500) equivalent to six months salary as well as the accelerated vesting of 35,750 shares (worth about $250,000).

Dr Gail McIntrye has been promoted from Chief Scientific Officer to CEO. She has worked with the new chairman at two previous companies.

SEC filing – Aravive CEO

CFO postpones retirement at health services company

Back in January, Larry McAfee, CFO of US Physical Therapy, announced he would retire in October 2020. He turned 65 in January. Due to the current business environment, the company has now disclosed that Mr McAfee will postpone his retirement to a later date.



The company had begun a search for his successor, but that has now been put on hold.

The company operates 583 outpatient physical therapy clinics in 40 states. It also manages 26 physical therapy practices for unrelated physician groups and hospitals. The company (market cap $824 million) has its corporate office in west Houston.

The company has been adversely impacted by COVID-19. Many of its clinics have had to close due to ‘stay in place’ restrictions. Even those that remain open have seen a significant drop in patient volume. The company is taking steps to mitigate losses, including cutting salaries for senior executives.

SEC filing – US Physical Therapy – McAfee delayed retirement

 

Houston companies reduce salaries for senior executives

In recent days, a few public companies in the Houston have announced salary reductions for senior executives as they battle with the economic downturn. The changes are temporary though most haven’t set a timetable for when they will be restored. A summary of the changes announced for the CEO and CFO officers is set out in the table below.

A shout-out to Cactus, an oilfield services company, who were the first to announce changes.

[UPDATE 4/3/2020 – Since publishing this article, other companies have implemented reductions including Stage Stores (25%), NCS Multistage (20%), Target Hospitality (20%), Flotek (10%) and Team (10%)].

A couple of other comments

Occidental : All Executives had their salaries capped at $250,000. Furthermore, it appears that Oxy cut the salaries of all US employees making over $76,000 by 30%. It appears those making less got cut by 20%. Legacy Anadarko employees appear to have only got cut 4.9% to avoid breaching contracts in last year’s disastrous merger. That’s really going to help mesh the company cultures!

Group 1 Automotive : 3,000 US employees are furloughed for a 30-day period, with an option for a second 30-day period. 2,800 UK employees are furloughed for an initial period of 21 days. That’s about 40% of their workforce.

SEC filing – Group 1 Automotive

https://www.thelayoff.com/occidental-petroleum

 

CompanyPositionNameOld salary $000New salary $000% reduction
CactusCEOScott Bender30015050%
CactusCFOStephen Tadlock33526820%
Group 1 AutomotiveCEOEarl Hesterberg1,15057550%
Group 1 AutomotiveCFOJohn Rickel63050420%
Luby'sCFOScott Gray34217150%
Nabors IndustriesCEOTony Petrello1,7501,40020%
Nabors IndustriesCFOWilliam Restrepo65052020%
Occidental PetroleumCEOVicki Hollub1,25025080%
Occidental PetroleumCFOCedric Burgher72525066%
Superior Energy ServicesCEODavid Dunlap85068020%
Superior Energy ServicesCFOWesty Ballard44037415%
US Physical TherapyCEOChris Reading80048040%
US Physical TherapyCFOLarry McAfee51033235%

Woodlands Physician group pays $1.2 million to resolve false billing claims

Millennium Physicians Association has paid the US $1,248,964 to resolve claims that they falsely billed the Medicare program for sleep studies.

Millennium is based in The Woodlands and owns and operates two sleep centers in the Houston area doing business as Millennium Respiratory & Sleep Disorder Specialists.

The investigation began following the Jan. 4, 2018, filing of a whistleblower lawsuit. Millennium employed the whistleblower who alleged the company conducted sleep studies without the presence of properly credentialed technicians.

Medicare rules and guidelines require that properly-trained and certified sleep technicians administer sleep studies. However, the investigation revealed that from Jan. 8, 2015, through March 13, 2019, Millennium improperly billed and received payment for sleep tests when they did not have the required personnel present.

Medicare rules and guidelines also require facilities to be accredited or certified by the America Academy of Sleep Medicine, Joint Commission or Accreditation Commission for Health Care Inc. Millennium self-reported that from 2011 through 2019, two of its sleep test facilities did not have such accreditation or certification.

The whistleblower will receive $187,000 as a result of the settlement.

The settlement resolved the claims without a determination of liability.

https://www.justice.gov/usao-sdtx/pr/physicians-group-pays-over-1m-resolve-false-billing-claims

Houston Pharmacist guilty of $21 million fraud

George Tompkins, 75, of Houston, has been found guilty of charges related to health care fraud, wire fraud and money laundering. After a six-day trial, the jury took less than two hours to convict him of all charges (14 counts in all).



Tompkins owned Piney Point Pharmacy on Fondren Road in west Houston. According to evidence presented a trial, Tompkins billed the Federal Employees’ Compensation (FECA) program approximately $21.8 million for medically unnecessary compound gels and creams that were predicated on illegal kickback payments, which were disguised as legitimate marketing expenses.

The scheme began around September 2009 and continued through approximately September 2016. Of the $21.8 million billed, the Department of Labor paid out $11.7 million.  Tompkins referred to himself as the “Compound King”.

His wife, Marlene, was the Secretary and Treasurer of the business. She pleaded guilty in January 2020 and is awaiting sentencing. Anoop Chaturvedi, a legal permanent resident from India, was also charged. He is a fugitive and there is a warrant for his arrest.

Sentencing for Tompkins is set for May 27. He faces up to 20 years for the money laundering charges and 10 years for the other counts.

https://www.justice.gov/opa/pr/compound-king-convicted-21-million-health-care-fraud-scheme

 

Health services company begins search for new CFO

Larry McAfee, CFO of US Physical Therapy, has announced he will retire in October 2020. He turns 65 later this month. Mr McAfee has been CFO since joining the company in 2003. He also joined the board the following year.



The company is based in the Medical Center and has a market capitalization of $1.5 billion. The company operates 574 physical therapy clinics in 41 states. It also manages 26 physical therapy facilities for third parties (primarily hospitals) as well as having an industrial injury prevention business.

The company has started a formal search for a new CFO and expect to have a new person in place by the summer. Mr McAfee has a base salary of $500,000.

SEC filing – US Physical Therapy CFO retirement