As part of its deal with Roche Holdings Ltd. earlier this year, the company now called BioVeris Corp. signed off on transactions that appear to have bailed its chief executive out of two failing private investments in which he was the controlling shareholder as of Jan. 13.
According to documents filed with the Securities and Exchange Commission, BioVeris chief Samuel J. Wohlstadter also headed Wellstat Therapeutics Corp. and Proteinix Inc., two biotechnology companies with close ties to BioVeris's predecessor company, Igen International Inc. Proteinix's offices, for example, were at Igen's headquarters in Gaithersburg.
Igen in 1986 started providing administrative services to Wellstat and began doing the same for Proteinix in 1992. According to the documents, Wohlstadter funded the two companies.
But in 1993, Igen paid money into the two companies: $5 million for Wellstat and $3.2 million for Proteinix. Also that year, each company swapped licenses with Igen, allowing Wellstat and Proteinix to develop products based on Igen technology and vice versa. Over the ensuing decade, neither company developed a product through the Igen license and neither repaid Igen.
By the end of 2003, with the Roche deal pending, the Igen audit committee wanted to "minimize the number and complexity of relationships with related parties," so it accepted a deal that would require the companies to make modest repayments to Igen.
According to the SEC documents, Wellstat and Proteinix could give up their license agreements, return the Igen technology to BioVeris, and pay $1.7 million and $50,000, respectively, to be released from their obligations to the company. BioVeris confirmed that those payments were made, though they are $6.5 million less than what Igen put into the two companies.
Wohlstadter did not return calls for comment, nor did his lawyer. BioVeris executives did not respond to calls.
"This is just research that did not pan out," said one person familiar with the matter, who spoke on condition of anonymity because BioVeris has not authorized a public statement. Wellstat and Proteinix were involved in promising research that Igen believed could translate into lucrative treatments, this person said.
Igen's audit committee justified its decision to accept the reduced payments by saying the cash and other benefits Igen would receive "represented fair consideration," according to the SEC filings.