Stem cell company’s finances under fire
Stemedica helped sports legends but is behind on bills
The company that manufactured experimental stem cell medicine for several aging sports heroes is facing complaints in court for large, unpaid bills as well as a complaint by an investor who accuses the company of misusing funds and fraud.
The company, Stemedica Cell Technologies, had drawn praise from the families of Bart Starr, the legendary former NFL quarterback, and Gordie Howe, the hockey legend. Both families credited the firm’s stem cells for helping the two bounce back after debilitating strokes. John Brodie, another stroke victim and the 1970 NFL MVP quarterback for the San Francisco 49ers, also praised the company’s stem cell products after being injected with them in foreign countries.
But even after that boost from big names, a spate of recent legal and financial issues has challenged the company, whose business relies on selling hope in the form of new but unproven regenerative medicine:
An investor in Stemedica, Tiara Holdings, sued the company in April, accusing it of misusing funds to benefit company executives with excessive compensation and lavish personal expenses. Allegations in the suit come from a Nevada doctor, Anthony Marlon, who has been a member of the Stemedica board of directors and holds his shares in Stemedica through Tiara Holdings. In the suit, Tiara said it learned recently that Stemedica’s founders have a troubling history of misleading consumers who purchase their products and “have transitioned into doing the same with investors and shareholders in their latest company.”
Stemedica, based in San Diego, said Marlon’s accusations were “completely false” and described him as a disgruntled board member who had differing views on the company’s strategic direction. Maynard Howe, the company’s CEO, said in a statement that the company would vigorously fight the accusations.
“While the Tiara Holdings lawsuit has resulted in potential investors and strategic partners conducting additional due diligence prior to investment, Stemedica has now received written commitments from major investment resources which we anticipate will allow the company to advance its operations and accelerate clinical trial efforts as originally envisioned,” said Howe, who is no relation to Gordie Howe.
Court filings indicate that cash flow has been a problem for the company recently, with the company banking on those commitments coming through soon:
Stemedica failed to pay a $500,000 loan from July 2015 despite numerous extensions, according to a recent lawsuit filed against the company by the trust of William Gershen, a local businessman. The loan was due in November 2015 at a 20% annual interest rate, but the company indicated it needed more time to pay, “pending an infusion of money from an unidentified investor,” according to court filings. In June, a judge signed a stipulation for judgment against the company for $664,000, including interest.
Stemedica has been sued by the landlord of a building in San Diego where the company has kept its stem cell laboratory. The landlord accused the company of owing $41,000 in unpaid rent and recently reached an agreement for the company to pay at a later date. The company made a similar agreement over $82,000 in unpaid rent in November.
A public fundraising web page for a Stemedica project in Gordie Howe’s name has been taken down after USA TODAY Sports asked questions about its status. After being announced in May 2016, the Gordie Howe Initiative planned to test the effectiveness of Stemedica’s experimental stem cell treatments on traumatic brain injury patients in Ohio. The clinical trial at ProMedica Toledo Hospital expected to enroll its first patients in the summer of 2016, but the project has yet to begin due to lack of funding.
“We continue to work with the study sponsor, Stemedica, on operational plans so that when funding is secured, the trial can begin almost instantly,” said Callie Dudek, a spokeswoman for ProMedica.
Stemedica noted it continues to enroll participants in a clinical trial for Alzheimer’s disease and has completed parts of two clinical trials for stroke and chronic heart failure. Maynard Howe describes the preliminary data from the latter two as “very promising” and anticipates moving forward on both.
He said other clinical activities in the USA, including the Gordie Howe Initiative, are seeking funding in order to advance.
In June, the company was sued by a provider of clinical trials, eStudySite, which alleged Stemedica owed it $85,000, plus interest. The company, headquartered in San Diego, says Stemedica “intentionally claims an inability to pay for said services, which forces Plaintiff (eStudySite) to continually work without compensation to (ensure) the health and safety of the trial participants.”
The Stemedica products being tested by eStudySite don’t appear to be related to those received by Starr, Howe and Brodie. The lawsuit instead indicates they are related to StemCutis, a Stemedica subsidiary specializing in skincare products featuring “stem cell factors.” EXPENSIVE EXPERIMENTS
Stemedica operates in a promising but risky industry — for investors, businesses and consumers. The U.S. Food and Drug Administration (FDA) regulates the field but has not approved any stem cellbased products for use in the USA, other than cord blood-derived blood-forming stem cells for certain conditions.
A big reason for this is that the science is so new. FDA approval often requires years of expensive testing to determine whether such products are effective and safe.
“It’s unproven, and so when you invest in a company that’s at the clinical trial stage, it’s true: There is a risk,” said Larry Goldstein, a professor and stem cell expert at the University of California, San Diego. “On the other hand, stem cell therapies in general look as though they have great promise, and the only way to figure out what’s going to work is through good, randomized, double-blind clinical trials.”
Stemedica’s stem cell therapy products are not approved for use in the USA but are manufactured in the country in compliance with the law, the company said. The company then has shipped its products to other countries such as Kazakhstan and Mexico, where testing is cheaper and regulations have been less restrictive.
Howe, Starr and Brodie were injected with stem cells at Novastem, a clinic in Tijuana, Mexico, that purchased the cells from Stemedica for a clinical trial.
They received two types of stem cells: those that were derived from the bone marrow of an adult donor and those that were derived from the brain tissue of a donated fetus.
All showed signs of progress afterward, with the families of Howe and Starr reporting Lazarus-like recoveries.
Cherry Starr, Bart Starr’s wife, said her husband’s “first two (treatments) were very, very effective for him.” She said other health issues have set Starr back in the past year, negating gains he had made.
But it’s not clear the products really worked. Stem cell experts warn against experimental treatments in other countries and said that any positive results in these cases could have come from natural healing or from a placebo effect.
At the same time, it’s also possible their treatments did work to at least some degree. There’s just not enough data and testing yet to know for sure. Meanwhile, the costs of manufacturing and testing add up, with no guarantee of eventually gaining regulatory approval in the USA.
“I know it’s an expensive process for them,” Cherry Starr told USA TODAY Sports.
Novestem’s president, Rafael Carrillo, said the treatment received by Howe and Starr, 83, typically would cost patients about $30,000. Both received at least some of their treatments free of charge, leading some experts to criticize the companies about charging patients for experimental medicine while treating celebrity clients differently to boost marketing.
Cherry Starr acknowledges “they were going to use Bart as kind of a role model for everything ” and speaks highly of Novastem and Stemedica.
Howe received Stemedica stem cells in Tijuana in December 2014 and improved substantially before dying in June 2016 at age 88. Neither Starr nor Brodie, 81, plans to get more treatments.
“He’s doing well,” Brodie’s wife Sue said of her husband.
One purpose of the Gordie Howe Initiative in Ohio was to test the stem cells derived from bone marrow. Howe’s son, Murray, is a doctor who has worked at ProMedica in Toledo, where the testing was to take place. He didn’t return a message seeking comments. Attorneys for the plaintiffs suing Stemedica for payment also did not return messages.
“We continue to accept inquiries and have developed a list of potential patient participants for the trial,” ProMedica’s Dudek said of the Gordie Howe Initiative.