The founder of a Medford biotech who said his company had developed a painkiller that would replace morphine was sentenced to seven years in prison Tuesday for defrauding investors of $7.5 million.
Frank Reynolds, the founder of PixarBio and a former fellow at the prestigious MIT Sloan School of Management, held up a bottle of NeuroRelease in court and insisted that his never-approved drug still had value.
But US Senior District Judge Douglas Woodlock in Boston called the disgraced businessman a “predator” whose comments in court showed he was “absolutely oblivious” to the harm he had inflicted on more than 100 investors.
“We have here an individual who doesn’t want to play by the same rules that everyone else does,” said Woodlock, who repeatedly used the term “grandiosity” to describe Reynolds’ behavior.
In addition to imposing the prison sentence, Woodlock ordered the 57-year-old businessman to repay $7.5 million to investors, forfeit $280,000, and spend three years on supervised release after he is freed.
Assistant US Attorney Sara Miron Bloom had recommended 10 years in prison. Reynolds never apologized to investors and had obstructed an investigation into his company by the Securities and Exchange Commission, she said.
In contrast, Reynolds’ lawyer, David Axelrod of Philadelphia, had asked Woodlock to sentence Reynolds to a year and a day in prison. The lawyer cited his client’s health problems, including heart and kidney disease, and pointed out that his career was in tatters.
He also noted that prosecutors were seeking a longer sentence than those received by any of seven former Insys Therapeutics executives last month for conspiring to bribe doctors to prescribe an addictive opioid painkiller. John Kapoor, the founder of Arizona-based Insys, received the longest sentence of those defendants: 5½ years in prison.
But Woodlock seemed more sympathetic to the argument of prosecutors, particularly after Reynolds defended his actions to the judge.
Reynolds, who spoke at a TEDxBoston talk in 2010 as the head of another biotech, Cambridge-based InVivo Therapeutics, took a bottle containing a 14-day dose of NeuroRelease from his pocket and placed it on the table.
“Despite what the government said, PixarBio does have value,” said Reynolds, who went on to say that product could ultimately win approval from the Food and Drug Administration.
In fact, federal authorities say, NeuroReleaset was carbamazepine — an anti-convulsant that was already on the market in other forms.
PixarBio’s assets were frozen in 2018 as a result of an SEC investigation.
Reynolds was convicted of one count of securities fraud and three counts of obstructing the proceedings of an agency, the SEC.
He and two associates were accused of engaging in manipulative trades of PixarBio’s stock in December 2016 to inflate its price and trading volume. Federal authorities said the scheme defrauded more than 100 people who had invested at least $7.5 million in PixarBio, which Reynolds started in 2013.
Both of the associates — Kenneth Stromsland, PixarBio’s vice president of investor relations, and M. Jay Herod, a longtime friend of Reynolds — had previously pleaded guilty to federal charges and testified at the trial.
PixarBio was supposed to be developing a non-opioid pain reliever that Reynolds predicted would end “thousands of year of morphine and opiate addiction.”
In fact, prosecutors said, he lured investors with false claims from the start. He told them the Food and Drug Administration had accelerated the approval process for NeuroRelease and that PixarBio had a market value of $1 billion. He told them the startup was poised to start clinical trials in humans, and that Reynolds had personally invented a medical device to treat spinal cord injuries. He also said he was listed as a co-inventor on more than 50 neurological patents.
None of it was true, say federal authorities. They assert that Reynolds had no formal neuroscience training and isn’t identified as a co-inventor on any issued patents.
Prosecutors contend that Reynolds lied from the very start about his career in biotech.
After a 1992 car accident left him paralyzed for eight days and bedridden for five years, he told investors, he was so moved by “Lorenzo’s Oil,” a film about an effort to cure a rare affliction, that he set out to conquer his own. According to Reynolds’ story, he learned everything he could about spinal cord injuries and, incredibly, got himself walking again.
At his TEDxBoston talk, he described how he planned to bring a medical device to market at InVivo that might overcome the devastation of paralysis.
Through the years, prosecutors said, he gave new hires at his companies a signed photograph of the ceiling tiles he supposedly stared at when he was lying on his back, paralyzed.
But during the trial last year in Boston, the government presented evidence that Reynolds was never paralyzed or injured in a car accident in Philadelphia in 1992, as he had claimed.
Jonathan Saltzman can be reached at firstname.lastname@example.org.