Century City-based gene and immunotherapy company Renovaro Biosciences is trying to chart a new course to escape controversies surrounding its co-founder and inventor of its main drug platform.
This co-founder, Serhat Gumrukcu, as of late Februrary remained the company’s largest single shareholder. But he, along with other parties, has been sued by the company; the suit alleges he and the other parties falsified study data related to the drug platform.
Gumrukcu is also in custody in a separate case awaiting trial late next year on murder-for-hire charges related to the killing of a former business associate in Vermont.
Renovaro is now seeking to escape these controversies, which company Chief Executive Mark Dybul characterized in a shareholder letter earlier this year as “significant challenges that would have derailed many companies.”
The company in early August announced its name change to Renovaro (a variant of the Latin verb “to renew”) from Enochian Biosciences. Simultaneously, the company announced its intention to acquire an Amsterdam-based imaging-technology company, a deal that was formally agreed to late last month, though financial terms have not been disclosed.
The Dutch company, GEDI Cube, has been developing artificial intelligence-assisted imaging technology for early detection of cancers.
Renovaro, meanwhile, has been developing cell, gene and immunotherapy techniques designed to boost the body’s immune response to fight tumors. The company has said it expects to begin clinical trials late next year for its leading drug candidate to treat pancreatic cancer and other solid tumors.
The combined company, which will keep the Renovaro name and its Century City headquarters, plans to integrate this cancer-detection technology with its drug-development program; the long-term strategy is to offer a full suite of cancer-fighting services.
“By joining forces, our two technology divisions will collaborate to push new boundaries in precision diagnostics and targeted treatments. At the same time, we will maintain nimble independent operations, allowing each platform to advance rapidly,” Dybul said in a letter to shareholders earlier this month.
Renovaro shares nearly doubled in value on Aug. 9, the day of the first announcement of the merger with GEDI Cube, surging out of penny stock territory to close at $1.55. After ticking steadily upwards, Renovaro’s share price jumped another 24% in the three trading sessions following the announcement of a definitive agreement to merge with GEDI Cube, closing on Oct. 2 at $4.70.
The share price has continued to climb, breaking through the $5 barrier on Oct. 10 to close at $5.18, a 52-week high.
Alleged misdeeds
With the name change and merger, Renovaro Biosciences hopes to break free of the controversies surrounding Gumrukcu, a Turkish native who immigrated to the United States about a decade ago to develop new therapies for a range of diseases, including HIV and cancer. His alleged misdeeds have drawn significant attention from the media, including a 2,700-word profile last year in the Wall Street Journal.
According to the Journal article, by 2017, Gumrukcu had formed two companies and was consulting for a drug-development company backed by Danish businessman Rene Sindlev. In January of 2018, Gumrukcu sold his drug platform research to a new venture called Enochian Biosciences for $21 million; Sindlev became board chair.
That same month, the body of a businessman named Gregory Davis was found in a Vermont snowbank. According to the Journal article, citing local and FBI prosecutors, Davis and Gumrukcu were business associates in an earlier oil-related deal; the prosecutors have alleged Davis had threatened to expose some alleged improprieties on the part of Gumrukcu and that Gumrukcu had hired someone to kill Davis.
Gumrukcu was arrested in May of last year and charged with arranging Davis’ murder. His attorney at the time, Victor Sherman, said in a subsequent court appearance that Gumrukcu was innocent and that he would show that prosecutors had no case against his client.
Trial in that case is now set for late next year.
Manipulated results?
Meanwhile, last October, Enochian Biosciences, as it was then called, filed a civil suit against Gumrukcu, his husband, William Wittekind and two other parties in Los Angeles Superior Court alleging that they conspired to falsify study results for the drugs sold to Enochian in 2018.
“The defendants engaged in a concerted, deliberate scheme to alter, falsify, and misrepresent to (the Company) the results of multiple studies supporting its (Hepatitis B) and SARS-CoV-2/influenza pipelines,” the lawsuit alleged. “Defendants manipulated negative results to reflect positive outcomes from various studies, and even fabricated studies out of whole cloth. Defendants’ conduct amounts to nothing short of brazen fraud, which has caused Enochian substantial harm,” the lawsuit further alleged.
An email and call to the defense attorney for Wittekind and the other parties were not returned.
According to Enochian’s annual report, which was filed earlier this month, as of late February, Gumrukcu controlled 24% of shares, while his husband, Wittekind, owned another 10%, meaning that they controlled more than a third of the company’s shares. Gumrukcu was the company’s largest individual shareholder at the time, somewhat ahead of board chairman Sindlev’s 18% stake.
According to the court docket for this case, several mediation sessions are scheduled over the next year; a trial, if still necessary, would take place sometime after that.
‘Tremendous opportunity’
Regardless of the outcome of that case, Renovaro is pressing ahead with the development of the drug technology that it purchased from Gumrukcu’s companies more than four years ago. And it’s now going to integrate GEDI Cube’s imaging technology into a new division to be called Renovaro AI.
“The AI division intends to launch commercial products for early cancer detection and improved therapy selection in 2024,” Dybul said in his letter to shareholders earlier this month. “The rapidly expanding precision medicine market – which is projected to reach $175 billion by 2030 – represents a tremendous opportunity. We believe we are strategically positioned to capture a substantial share of a largely untapped market.”
Renovaro is not alone in pursuing artificial intelligence-assisted imaging technology. Indeed, just a couple miles away from Renovaro’s Century City headquarters, Sawtelle-based radiology imaging giant RadNet Inc. is going all-in on this technology. Three years ago, RadNet purchased artificial intelligence company Deep Health; for the past 18 months the company has been deploying this artificial intelligence technology at hundreds of imaging centers across the nation.
But RadNet isn’t developing any cancer-fighting drugs. Renovaro’s key differentiating feature is that it’s planning to do both: develop drugs and deploy advanced imaging technology.
“This could prove quite challenging, since these are two distinct markets right now,” said Bernie Jaworski, Drucker Chair in Management and the Liberal Arts at the Drucker School of Management, part of Claremont Graduate University.
Jaworski said Renovaro’s future may hinge on its ability to show positive clinical trial results for its lead drug candidate to treat pancreatic cancer. That could open up the possibility of licensing the drug to a more deep-pocketed pharmaceutical company for more extensive clinical trials.
And that’s where the past could catch up to Renovaro. Jaworski said the company must prove that it has found ways to overcome the shortcomings in this drug’s effectiveness that prompted Gumrukcu’s alleged study-data alterations.
“That would really allow the company to put the past behind it,” Jaworski said. “But if the clinical trial results aren’t favorable, that could make things very difficult, as it could make investors – or potential licensing partners – very wary.”
And then there’s Gumrukcu and his 24% stake in the company. Jaworski noted it’s not clear from public filings what percentage of voting shares Gumrukcu owns; if it’s anywhere near 50%, he could potentially block key company decisions, which in turn could deter future investors or licensing partners.
“This is one area that increased transparency could really help the company,” Jaworski said. “But they may be limited in what they can say right now because of the civil lawsuit.”
