Remember Sam Waksal? The former CEO of biotech company ImClone Systems rose to dubious fame for an insider-trading scam that sent him and homemaking diva Martha Stewart to prison. But after five years behind bars, Waksal is back. On Oct. 25 he announced another biotech deal: His drug company Kadmon Pharmaceuticals has bought privately held Three Rivers Pharmaceuticals.
In 1984, Waksal founded ImClone, which developed Erbitux, a successful drug for colon cancer. When the U.S. Food and Drug Administration was about to initially reject the drug in 2002, Waksal tipped off relatives and friends. Several of his family members and Stewart sold shares before the rejection was made public.
Waksal was convicted of securities fraud, bank fraud, obstruction of justice and perjury. Stewart was sentenced for five months in prison for lying about her role in the case. Waksal paid $4.3 million in fines and was sentenced to over seven years in prison, but was released after five in February 2009.
"A New Paradigm"
The U.S. Securities and Exchange Commission also barred Waksal from serving as a director or officer of any public company. But earlier this year, just one year out of prison and sitting at No. 7 in Time Magazine's Top 10 Crooked CEOs, Waksal raised $50 million to start Kadmon, which then made several other smaller deals this year. And now, not even two years out of prison, Waksal was able to go through with a private deal estimated at over $100 million. If only all ex-cons could rehabilitate this fast.
Three Rivers will serve as the commercial and operational cornerstone for Kadmon, the company said. It currently has treatments for hepatitis C, infections and cancer. It's also developing some generic oncology products.
Waksal, an immunologist, said "Kadmon is building a new paradigm for bringing pioneering medicines to market more rapidly and cost effectively." He added that "Hepatitis treatment is on the verge of major change. With Three Rivers as a cornerstone, Kadmon will play an important role in the evolution of this global market."
The acquisition was financed through debt and equity capital, with Colbeck Capital Management serving as a financial adviser to Kadmon, and Lombardo Dufresne as legal counsel. Kadmon's lead investor is SBI Holdings of Japan, Reuters reports.
Only a month after his release, Waksal talked to New York magazine about his past, present and future, mentioning his plans to return to the biotech scene. "It's as if I wasn't gone a day!" But the magazine also quotes colleagues who say, "Cutting corners for Sam was like substance abuse." Well, according to a 2005 study, Report of the Re-Entry Policy Council, approximately two out of every three people released from prison in the U.S. are rearrested within three years of their release.
Erbitux, by the way, got FDA approval in 2004 and became a blockbuster. Eli Lilly (LLY) bought ImClone for $6.5 billion in 2008.