In the biotech hurly-burly, a cautionary tale
For the CEO of a biotech startup, there may be no bigger asset than a compelling sales pitch. Frank Reynolds had a great one.
He hadn’t planned a career in biotechnology, the head of Cambridge-based InVivo Therapeutics would tell investors. His calling found him.
After a 1992 car accident left him paralyzed for eight days and bedridden for five years, he said, he was so moved by a film about an effort to cure a rare affliction that he set out to conquer his own. He learned everything he could about spinal cord injuries and, incredibly, got himself walking again.
Now, he told a TEDxBoston audience in 2010, he wanted to draw on the lessons of his hard road back and help others. He planned to bring a medical device to market that might overcome the devastation of paralysis.
If his story and that promise seemed almost too good to true, Reynolds had the advantage of some unimpeachable allies, a renowned MIT professor and a Nobel Prize laureate.
He was a comer in the surging Massachusetts life sciences industry. And the TEDx crowd erupted in a standing ovation.
Eight years later, no one is applauding Frank Reynolds. His story has become a cautionary tale, a reminder of how, in the hurly-burly of the biotech startup world, the premium on brains and drive and an improbable dream can sometimes obscure questions about character.
With Reynolds, there would be many such questions. First, InVivo ousted him and sued him to try to recoup about half a million dollars he allegedly squandered on personal expenses, from strip clubs to Broadway shows. Then this spring, he was arrested on federal charges stemming from his next sales pitch — a plan to develop a pain reliever that Reynolds predicted would end “thousands of years of morphine and opiate addiction.”
That was the extravagant goal for the second biotech Reynolds started, PixarBio Corp. But the Medford startup was largely a sham, say authorities, who allege Reynolds misrepresented his credentials and manipulated the company’s stock price in a scheme that raised about $12.7 million from over 200 investors.
If convicted, he faces up to 20 years in prison.
The criminal case is likely a long way from going to trial. But InVivo and Reynolds recently settled dueling lawsuits they filed after his 2013 ouster. Court filings provide an extraordinary glimpse of the turmoil and rancor that roiled the company during Reynolds’s tenure. As depicted by InVivo, Reynolds looks less like his heroic self-portrait and more like a blustering bully who antagonized everyone from secretaries to board members.
He spewed profanities in e-mails to employees. He complained about being treated like “a slave” — while earning a base salary of more than half a million dollars. He threatened to lead a shareholder revolt against his own biotech unless he got a raise, prompting a board member to describe him in an e-mail as a “pathologic liar.”
Reynolds, 56, who has lived in Salem, N.H., and Newton — and put up a condominium in Fort Myers, Fla., as security while awaiting trial — declined to be interviewed for this story. His lawyer, David L. Axelrod of Philadelphia, said his client “has done a lot of important work at InVivo and PixarBio, and we are going to vigorously defend him.”
But as more discrepancies about his resume have surfaced and the tale of his devastating car crash lies in tatters, the overarching question may not be how Reynolds’s once promising career could go so wrong, but this: How did he get to run two companies in the first place? Why did it take so many so long to see through the Frank Reynolds story?
. . .
As Reynolds has told it, his life irrevocably changed on Dec. 14, 1992, when he had a terrible car accident.
The Bronx native vividly recounted the incident in a flattering Inc. magazine profile in March 2010 titled “What Makes Frank Run.” He said he was driving to his job as a psychotherapist in Philadelphia when a car slammed into the back of his Oldsmobile Cutlass. He awakened at the University of Pennsylvania hospital, unable to move.
Reynolds told Inc. that he spent years at home in bed in Philadelphia, staring at the ceiling. Then his wife at the time, Robin Reynolds, brought home a videocassette of “Lorenzo’s Oil,” the based-on-fact 1992 movie about a couple who defied the medical establishment to find a treatment for their son’s rare deadly disease.
On a computer with a slow mid-1990s Internet connection, he said, he searched medical texts online, became an expert on spinal cord injuries, started his own treatment regimen, and got back on his feet and walking. But, as the host of the TEDx talk said when introducing Reynolds at the Boston Seaport event, “he still had a lot of friends left in wheelchairs’’ and wanted to help them.
After working at Xerox Corp. and then at Siemens Corp., Reynolds was named an MIT Sloan Fellow in 2005, entering a prestigious graduate business program for mid-career managers and entrepreneurs.
Reynolds was a swaggering “larger-than-life cartoon character,” another fellow who befriended him told the Globe. The friend, who insisted on anonymity because he didn’t want to get tangled in Reynolds’s legal problems, said Reynolds boasted that he had “fired” the three other students in his study group because “they’re not doing good work.”
Reynolds wanted to start his own company, and he soon met someone at MIT who would help him: Robert Langer.
One of the most decorated scientists in Boston, the prolific 70-year-old inventor runs a celebrated lab at the school. His name appears on 833 issued patents and roughly another 500 that are pending, according to the latest count.
Pat Greenhouse/Globe Staff
Almost every year, Langer delivers a lecture to Sloan fellows on the projects he and his graduate students are working on. In 2005, he mentioned an audacious one: an effort to develop a surgical implant to help patients recover from paralyzing spinal cord injuries.
Placed on the site of an injury after the spine has been stabilized, the small, spongy polymer scaffold would act as a protective bandage, reducing bleeding and the formation of scar tissue, and prevent the body’s immune system from causing more damage.
Captivated, Reynolds introduced himself to Langer. He mentioned his own history of paralysis, Langer recalled, and asked if he could write a thesis on creating a company based on the scaffold.
“He seemed like a go-getter,’’ Langer said. “The whole goal was to sort of write a business plan, not necessarily start a company.”
But that’s what Reynolds did. In May 2006, he submitted a 72-page thesis about a startup he called InVivo Therapeutics. Reynolds invested $225,000 of his own money, according to a Reynolds court filing last year. InVivo licensed the scaffold from MIT. Langer was named a cofounder and scientific adviser. He would later own more than 5 percent of InVivo’s stock and receive at least $204,000 in consulting fees, according to regulatory filings.
Another Sloan fellow, Ted Acworth, introduced Reynolds to a childhood friend on Long Island, Andrew Roberts, a Navy veteran who became a quadriplegic as a result of a car accident. Roberts’s father happened to be Sir Richard John Roberts, winner of the 1993 Nobel Prize in medicine.
Reynolds persuaded the elder Roberts to join InVivo’s board. Roberts declined to be interviewed by the Globe, citing the lawsuits InVivo and Reynolds filed against each other. Both sides told a state judge they had settled the matter on July 16, the day the suits were to go to trial. Terms of the settlement were confidential, and InVivo recently complained to the judge that Reynolds wasn’t fulfilling them.
Acworth said he almost joined InVivo, too, as chief technology officer. But the deal unraveled in a way that Acworth says left him puzzled and disgusted.
He and Reynolds spent months drafting an employment agreement. For reasons Acworth said he never understood, Reynolds insisted it be signed by April 28, 2007 — Acworth’s wedding day.
Acworth and Reynolds — who was one of about 150 guests at the wedding in New Orleans — frantically tried to finalize the deal in a hotel room before the ceremony, but a few details remained unresolved, Acworth said. Acworth implored Reynolds to put the matter off until after his honeymoon.
When Acworth returned a week later, he read an e-mail from Reynolds. It said Acworth had missed the deadline. The offer was off the table.
“I’m done with this guy,’’ Acworth recalled thinking. “I’ve had no dealings with him since.”
In 2012, when Katrin Holzhaus joined InVivo, the company had just moved to new quarters in Kendall Square. Its two dozen employees worked long hours and shared a sense of urgency about treating spinal cord injuries. Reynolds asked every employee to watch a DVD of “Lorenzo’s Oil,” hoping it would inspire them.
“It was a group of very smart people that didn’t feel threatened by each other and could get things done quickly,” said Holzhaus, 48, who became Reynolds’s senior executive assistant.
No one was more driven than Reynolds, she said: He was chief executive, chief financial officer, chairman of the board, and the largest shareholder.
Reynolds was beyond eager to move forward with the firm’s “neuro-spinal scaffold” device, former employees said. He had received encouraging lab results when it was tested in monkeys that were partially paralyzed. Now he wanted the Food and Drug Administration to let him test it in humans.
But not everyone was thrilled with how things were going — or with Reynolds.
Two months after his 2010 TEDx talk, the Globe published an article challenging the account of his accident.
Citing court records, newspaper stories, and other documents, the Globe reported that Reynolds actually appeared to have hurt his back loading a snack cake delivery truck in 1991 and 12 months later suffered complications from spinal fusion surgery that used controversial bone screws.
Reynolds sued the spine doctor who operated on him at the University of Pennsylvania hospital, alleging that the bone screws damaged nerves, muscles, and tissue. But the Globe noted that Reynolds didn’t allege paralysis in the 1995 suit. A jury nonetheless found the doctor negligent and awarded Reynolds $750,000 in damages.
The law firm that represented Reynolds in his malpractice suit described the case this way on its website: “Negligence resulted in neurological injury to snack cake route driver.”
Reynolds denied to the Globe in 2010 that he ever drove a delivery truck and insisted he was working as a therapist. But he also stopped claiming he was injured in a car crash.
It wasn’t just Reynolds’s discredited account of his injury that raised eyebrows at InVivo.
Working at a startup is often grueling, but Reynolds took the intensity to another level, say former employees. He swore at them in e-mails, peppering even casual comments with profanities, as he confirmed in his 2016 deposition in the dueling suits with InVivo.
“It looks like my calendar is totally [expletive] up,” he wrote his secretary and a bookkeeper in 2011, later reading the e-mail aloud in the deposition. “When the [expletive] are my meetings?”
In an e-mail to InVivo’s financial officer, Reynolds wrote: “What the [expletive] are you thinking?”
Reynolds said in his deposition that an InVivo attorney authorized him to swear at employees as long as it was gender-neutral.
“Idiot and [expletive] idiot were non-gender specific, so those were two that we used all the time,” Reynolds said.
InVivo’s chief science officer, Dr. Edward D. Wirth III, decried the atmosphere in a 2012 resignation letter to the company’s board: “Frank has created and maintained a hostile working environment that continues to this day.”
Reynolds also repeatedly clashed with the board. He earned a base salary of $545,000 in 2012, according to his deposition, but complained it was paltry compared with what other CEOs made. “I am not a slave,” he wrote in a July 2013 e-mail to Langer, who didn’t sit on the board but continued to advise him, according to the court file.
Board members, meanwhile, were upset that Reynolds “was spending money on things that he shouldn’t be spending money on,” Langer recalled — at a time when InVivo had no revenue.
Reynolds allegedly charged more than half a million dollars to the firm for trips to strip clubs from Miami to Boston, including the Glass Slipper; tickets to Broadway shows such as “Wicked” and “How to Succeed in Business Without Really Trying”; first-class air travel; cigars and liquor; and limousines he wanted driven by white-gloved chauffeurs, according to a court filing by InVivo.
The battle between the CEO and the board reached a showdown in the summer of 2013. In an e-mail to Langer, Reynolds threatened to “lead shareholder litigation” against his own company if he did not get a “fair paycheck.”
The Glass Slipper, left, in 2003.
The Boston Globe
The Glass Slipper, left, in 2003.
John McCarthy, a board member, was appalled.
“I find it a clear and horrifying example of a pathologic liar, paranoid schizophrenic and incurable narcissist,” McCarthy wrote, according to a copy of the e-mail in the court file. McCarthy did not return calls seeking comment for this story.
In August 2013, Reynolds quit, citing medical reasons.
Soon afterward, InVivo officials demanded reimbursement for the expenses. Reynolds paid back nearly $34,000, but InVivo officials said he owed over $487,000 more and sued. He countersued, saying the company owed him 47,864 shares of stock. Lawyers for InVivo declined to comment for this story.
And what became of the neuro-spinal scaffold Langer helped invent and InVivo tried to develop?
The device is in clinical trials. Nineteen patients have received it after suffering spinal cord injuries. Although three of the gravely injured people died soon after getting the implants, seven of the 16 surviving patients showed improvement at six months, according to a recently concluded study. It was a very encouraging result, and InVivo is planning a second clinical trial.
A week after leaving InVivo, Reynolds — again with encouragement from Langer — started PixarBio, which focused on developing what Reynolds touted as a game-changing non-opioid painkiller.
“You’re the Steve Jobs of life sciences,’’ Reynolds remembered Langer telling him, according to Reynolds’s deposition.
Langer remembers it differently. Yes, he says, he did mention Apple’s visionary cofounder, but only as an example of someone who was forced out of a company (Apple, after Jobs’s first stint there) and went on to huge success at another. “I wanted him to feel that he had some talent,” Langer told the Globe.
As in the case of InVivo, Reynolds named Langer a cofounder of PixarBio and featured him in a company video. But PixarBio licensed nothing from Langer’s lab, and Langer said he later told Reynolds to remove his name as cofounder.
Reynolds initially funded PixarBio mostly with cash from InVivo stock he sold, according to federal authorities.
Never shy about making bold claims, Reynolds predicted that PixarBio’s product, a painkiller called NeuroRelease, would replace morphine.
He had an added goal: crushing InVivo, which continued working on the implant to treat paralysis but he now considered a rival.
“They are going to be out of business,” he said in his deposition in the lawsuits involving InVivo.
Frank Reynolds, left, appeared in Lowell Superior Court for a pre-trial hearing in July.
Pat Greenhouse/Globe Staff
Frank Reynolds, left, appeared in Lowell Superior Court for a pre-trial hearing in July.
PixarBio began trading stock over the counter in late 2016. From the start, federal authorities say, Reynolds lured investors with false claims. He told them the FDA had accelerated the approval process for NeuroRelease and that PixarBio had a market value of $1 billion. That the startup was poised to start clinical trials in humans. That Reynolds personally invented InVivo’s medical device to treat spinal cord injuries. And that he was listed as a co-inventor on over 50 issued neurological patents.
None of it was true, say federal authorities, who assert that Reynolds has no formal neuroscience training and isn’t identified as a co-inventor on any issued patents.
To simulate market interest and push up the stock price, two associates of Reynolds — his longtime friend M. Jay Herod and Kenneth Stromsland, PixarBio’s vice president of investor relations — allegedly schemed with him to make manipulative trades. Herod and Stromsland would later be charged with securities fraud and arrested along with Reynolds. Stromsland pleaded guilty Friday to securities fraud and obstruction, and awaits sentencing.
In January 2017, PixarBio said it was mounting a takeover bid for InVivo and that the deal was expected to close by March 31. Federal authorities say no such deal was in the works.
Weeks later, the Securities and Exchange Commission suspended public trading of PixarBio.
In April of this year, federal authorities arrested Reynolds and his two associates, charging them with defrauding over 200 people who had invested about $12.7 million.
Since then, the Globe has found more discrepancies in Reynolds’s background. He lists six master’s degrees on his LinkedIn page, including two from the University of Pennsylvania — in technology management and drug discovery. But a Penn spokesman told the Globe he earned only one — a master’s of science in engineering, with a focus on technology management.
He also cites having a certificate in management of clinical trials from Harvard Medical School. A Harvard official said the continuing medical education program he participated in didn’t grant such a certificate.
At first, Langer didn’t want to be interviewed about Reynolds’s downfall. Later, the MIT professor said he was floored by the criminal charges and never imagined the Sloan fellow he mentored would be accused of securities fraud.
“You don’t like to be associated with somebody who’s done something criminal, if that, in fact, turns out to be the case,” he said.
But Langer stopped short of saying he regrets helping Reynolds.
“Regret’s a complicated thing,” he said. “The reason I got involved with starting these companies in the first place is because I want to see it help people. Here was an opportunity to help people that are paralyzed. I don’t regret that at all.”