Business

Dispute over HIV treatment featured in movie sparks lawsuit

UPI

Dr. Solomon H. Snyder and doctoral candidate Candace B. Pert in a lab at Johns Hopkins University.

On an early spring day in 1989, Candace Pert and Michael Ruff held a news conference at the Fenway Community Health Center in Boston to open one of the first clinical trials for their experimental anti-AIDS drug, Peptide T.

It was a controversial treatment — one that would feature prominently in the 2013 Oscar-winning film “Dallas Buyers Club,” based on a real-life underground market for unapproved therapies.

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More than a quarter of a century later, in a drama straight out of Hollywood, the winding path of Pert, Ruff, and a drug that became their life’s work has circled back to Massachusetts for a bitter legal battle over control of their research and a Swiss pharmaceutical company that the husband-and-wife team founded together.

In a lawsuit filed last month in federal court in Boston, Pert and Ruff’s firm, Rapid Pharmaceuticals AG, contend the founders were victims of fraud and betrayal at the hands of the very person they hired for legal counsel and later trusted to run the business.

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The company alleges that former chief executive Gaytri Kachroo concocted an elaborate scheme to steer Rapid into bankruptcy and transfer its intellectual property to another business she created, Arise BioPharma Inc., of Cambridge.

Kachroo, an attorney with a practice in Cambridge, said in an interview that she is “categorically denying any and all wrongdoing.”

But Ruff, a widower since Pert’s death two years ago, claims Kachroo preyed on the naivete of scientists who were focused on curing a deadly disease, beginning as their personal attorney in 2012 and gradually working her way into the boss’s chair and a 27 percent stake in the business through a series of unethical maneuvers.

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“She manipulated us, she betrayed us, she violated our trust, and she violated her fiduciary duty to the shareholders,” Ruff said.

Kachroo resigned in July, according to e-mail records submitted in court, and Rapid shareholders elected a new board of directors that includes Stephen Kennedy Smith, a nephew of John F. Kennedy and Edward M. Kennedy who owns less than 1 percent of the company.

Kachroo said she believes the board election was illegitimate, and she’s added one more plot twist: Shortly before the leadership change, Rapid — with Kachroo still in charge — sued Ruff in Maryland, alleging that he and Pert never actually owned a commercial license for Peptide T, which they developed while working at the National Institutes of Health.

David H. Rich, an attorney representing Rapid’s current management, said the company will no longer pursue the case against Ruff, believing he and Pert did obtain a license.

An NIH spokeswoman said she could not immediately comment on the license issue.

Pert was a prominent figure in the field of neuroscience before she died of cardiac arrest in 2013 at age 67. She first gained notice in 1978, when she protested her exclusion from a share of the prestigious Albert Lasker Award. Pert had been a graduate student in the Johns Hopkins University laboratory that discovered the so-called opioid receptor in the brain — an advance that helped explain why opiates such as morphine work — but sole credit went to lab chief Solomon H. Snyder.

Her work with Ruff on Peptide T, which they believed could suppress the HIV virus, drew widespread attention in the 1980s — hailed by some as a potential breakthrough and panned by others as a total bust.

Despite never achieving FDA approval, the couple maintained their faith through several commercial ventures and finally incorporated Rapid Pharmaceuticals in Switzerland in 2007, aided by $4.1 million from a Swiss investor named Michael Laznicka.

Disagreements about management and ownership caused their relationship with Laznicka to deteriorate over the next five years, according to court documents in Boston, and Pert and Ruff hired Kachroo to represent them in dueling lawsuits with their Swiss backer.

Kachroo’s original compensation included a 5 percent stake in Rapid, according to a contract submitted in court; in the years that followed, she allegedly persuaded Pert and Ruff to give her more shares and more power (she became CEO in 2013) while driving the company into debt with exorbitant legal fees charged by her own law firm.

The lawsuit filed last month alleges that Rapid’s June bankruptcy filing in Switzerland was part of a plot by Kachroo to create a restructured company, Arise BioPharma, that “would kill Rapid AG and leave Kachroo with enough shares in the new company to control it and to enrich herself.”

“You can’t mix your personal business with the business of the company,” Smith said in an interview. “We’re alleging that her multiple, conflicting, inconsistent roles made her inappropriate as the CEO and made her violate her fiduciary duty to shareholders.”

Rapid is seeking unspecified damages for breach of contract and fiduciary duty, among other charges.

Kachroo offered a different version of events, saying she did not financially cripple the company but rather kept it afloat during her tenure as CEO by investing roughly $500,000 of her own money. She called the lawsuit an attempt to defame her reputation.

“They’re trying to make things that are perfectly normal and reasonable — if you knew all the circumstances — seem wrong,” Kachroo said. “I think there’s a whole bunch of gender bias here too. I’m not going to get into the facts because that’s something we’ll get into in the litigation, but suffice it to say that the company filed for bankruptcy based on the advice of its auditors.”

Ruff said the power struggle has hampered operations at Rapid, further delaying the promise he and Pert felt on that day 26 years ago when their clinical trial began in Boston. The company has branched into treatments for other conditions, too — its lead drug candidate is for a brain disease called progressive multifocal leukoencephalopathy that afflicts some AIDS patients — but Ruff is still holding out hope for an FDA-approved HIV therapy.

“We started as an HIV drug,” he said. “I’d like to go back and finish that work for Candace.”

Callum Borchers can be reached at callum.borchers@globe.com. Follow him on Twitter @callumborchers.
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