Phosphagenics CEO vows to rebuild company’s reputation after it was embroiled in a $6 million accounting fraud conducted by former CEO Esra Ogru to fund her lifestyle and support her sick daughter

http://www.theage.com.au/business/phosphagenics-ceo-vows-to-rebuild-companys-reputation-20150114-12o5gn.html

http://www.theage.com.au/business/biotech-ceo-took-money-for-need-greed-20141009-113thh.html

“Her lawyer David Grace QC said some of the embezzled money went on lifestyle, including travel, jewellery and mortgage repayments. “In some way she felt…she deserved more in terms of remuneration and wanted a better lifestyle in a hurry,” he told the Victorian County Court on Thursday. But Mr Grace said her motivation changed in May 2008 with the birth of her daughter, who had a life-long condition stemming from a missing gene. “Prior (to May 2008) can be characterised as greed, (but) post, greed and need,” he said. Mr Grace said the family home was renovated to accommodate the daughter’s needs and a special wheelchair was bought. But he also said a lot of money was spent on funding the girl’s medical needs. He said his client’s daughter became the first human in the world to trial an experimental therapy developed on animals in Germany, which had to be administered daily, and said the treatment had led to the drug becoming a prescription medicine worldwide.”

Phosphagenics CEO vows to rebuild company’s reputation

January 14, 2015 – 5:37PM

Jessica Gardner

New Phosphagenics chief executive Ross Murdoch will seek partnerships with pharmaceutical giants and consider simplifying the company’s many and varied projects, but says one of his main jobs will be rebuilding the reputation of the embattled drug delivery developer.

The company has struggled to impress investors after it was embroiled in a $6 million fraud conducted by Dr Murdoch’s predecessor, Esra Ogru, and two other staff members, which was uncovered 18 months ago.Dr Murdoch, a former Shire Pharmaceuticals senior vice-president, said he would need to “rebuild the reputation of the company, because it has taken a beating”.

However, he said despite the crime, morale at the $96 million company had held up fairly well. “One of the things that attracted me to Phosphagenics is it has a very good team,” he said. “I think they’ve been beaten up over the last little while and it’s unfortunate, but I was actually pleasantly surprised with how people have coped.”

Phosphagenics has developed a platform technology that allows drugs to be absorbed through the skin. Its Targeted Penetration Matrix technology has been applied to a number of different products across the pharmaceutical, animal health and cosmetics sectors.

In November 2014 the company said $19.3 million of freshly raised capital would be spent on putting its two leading products, oxymorphone and oxycodone patches used for pain relief, through phase two clinical trials. The company said it would seek a meeting with the United States drug regulator to discuss the design of the trials.

Dr Murdoch was hesitant to commit to any timelines around the trials or meetings, having begun his new job only on Wednesday. He said his initial priorities would be meeting the 40-member team to discuss their projects, confirming the technology was working consistently and ensuring there was a proper business case for each of the opportunities Phosphagenics was pursuing.

As well as pain relief, the company has applied its technology to acne treatment, stretch mark removal skin cream, gels for sore muscles and nutritional products for racehorse trainers. “You always want to have several strings to your bow but you don’t want them distracting you,” he said.

Baillieu Holst analyst Stuart Roberts said he was beginning to see Phosphagenics’ diversified portfolio as a “weakness”. “They need to pick one thing and focus on getting that one thing right,” he said. “If they’re up to that challenge then it is a $1 billion company in the making and Ross Murdoch will get fabulously rich.”

Mr Roberts said transdermal drug delivery had the potential to be lucrative and he urged Mr Murdoch to get the technology right, “so that it works every time”, and partner large drug companies.

“The real reputational damage is not that Esra Ogru looted $6 million, it’s the fact that we’re still waiting for the technology to be optimised and taken into late-stage trials,” Mr Roberts said.

Ms Ogru and her co-conspirators have agreed to pay back the fraudulently obtained money. The mother of two was sentenced to six years in jail last November, although she will be eligible for parole in two years.

Interim chief executive Harry Rosen, who owns 5 per cent of the company, will remain as a director.

Phosphagenics shares fell 6.6 per cent to 7.1¢ on Friday, from a 12-month high of 13¢ hit in January. The stock is down 38 per cent in the past year.

 

Biotech CEO took money ‘for need, greed’

October 9, 2014 – 5:34PM

Phosphagenics CEO Esra Ogru, 39, pleaded guilty to seven counts of obtaining a financial advantage by deception. Photo: Arsineh Houspian

A leading researcher and chief executive of a biotech company conned millions of dollars from her employer to fund her lifestyle and support her sick daughter, a court has heard.

Esra Ogru was part of a scam which used fake invoices and credit card claims to net about $6 million from biotech company Phosphagenics and its subsidiary Vital Health Sciences, between 2004 and 2013.

Her lawyer David Grace QC said some of the embezzled money went on lifestyle, including travel, jewellery and mortgage repayments.

“In some way she felt…she deserved more in terms of remuneration and wanted a better lifestyle in a hurry,” he told the Victorian County Court on Thursday.

But Mr Grace said her motivation changed in May 2008 with the birth of her daughter, who had a life-long condition stemming from a missing gene.

“Prior (to May 2008) can be characterised as greed, (but) post, greed and need,” he said.

Mr Grace said the family home was renovated to accommodate the daughter’s needs and a special wheelchair was bought.

But he also said a lot of money was spent on funding the girl’s medical needs.

He said his client’s daughter became the first human in the world to trial an experimental therapy developed on animals in Germany, which had to be administered daily, and said the treatment had led to the drug becoming a prescription medicine worldwide.

But Mr Grace said that if Ogru had told her co-chief executive – who knew nothing of the crime – about her daughter’s predicament, he probably would have helped her legally.

Mr Grace said Ogru knew jail was inevitable, but asked for it to be at the lower end of sentencing because of the exceptional circumstances of her daughter’s health.

Prosecutor Allan Sharp said about $3.8 million had already been reimbursed and about $5.2 million was expected to be recouped.

Ogru, 39, of Wheelers Hill, has pleaded guilty to seven counts of obtaining a financial advantage by deception.

Judge Felicity Hampel extended her bail until sentencing on November 5.

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