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Science Foundation Ireland, the Director General and the Renovo Debacle

May 22, 2012

In the previous post, Stifling Discovery: Science Foundation Ireland’s New Mission and the Jobs Myth, we examined the recent policy shift at Science Foundation Ireland (SFI) that has led to the prioritisation of research commercialisation. From now on, research will only be funded where it can be claimed from the outset that it will make a profit and create jobs.  Basic scientific research and discovery will be marginalised and the previous post discussed the perils of this policy. The international evidence also suggests that even the purported economic gains from commercialisation are dubious and that wild claims about job creation are a fantasy of hapless government ministers.

This post examines Renovo, the spin-off company that was founded by SFI’s newly appointed Director General, Mark Ferguson. He was appointed on the back of his commercialisation experience at Renovo.  One would expect that Renovo is a model for successful commercialisation but in fact it is a remarkable case study about a resounding failure to commercialise academic research.

Renovo attempted to commercialise the scientific research that Ferguson had carried out at the University of Manchester. It grew rapidly from a small private company in 2000 to a publicly traded company with over 200 staff, claiming possession of “the most advanced regenerative medicine in the world”. It received large sums of money, including £63 million of investors’ money, £58 million of investment from the pharmaceutical company Shire, along with £16.5 million of British tax-payers money in the form of grants and research tax credits.

However, all of the drug products ultimately failed their clinical tests and none were commercialised.  In 2011, the scientific research was terminated and all of the employees were laid off.  The investors were wiped and the company was delisted from the main stock market.

Renovo Share Price

Despite this, the company directors received very substantial rewards over the five years that it operated as a listed company. Mark Ferguson received £3.6 million including a golden handshake of £700,000 from the derelict company. His wife Sharon O’Kane, the Chief Scientific Officer up to 2010, received over £1.6 million. In addition, between them they netted £9.4 million by exercising a director’s option when the shares were at their peak in 2007.

The Renovo case provides a unique insight into the nexus between financial markets and research science, the concomitant pressure for short term results and the disastrous consequences. It raises serious questions for Science Foundation Ireland, both in terms of its massive drive to pour money into commercialising research and its selection of a Director General to implement this policy.

Crocodiles’ Den: The Science

Mark Ferguson: Offered investors the prospect of scar healing drugs with a $4 billion market.

Renovo was set up by Mark Ferguson in 2000. A native of Northern Ireland, he first attended Queen’s University of Belfast where he qualified as a dentist. In 1984 he moved to the University of Manchester where he worked as professor of biology for the next twenty two years. His research at Manchester studied the healing properties of scars in alligator embryos. He published widely and was promoted to dean of the faculty in 1994.

In 2000, he and his wife Sharon O’Kane (a senior researcher at Manchester University) formed their own spin-off company (Renovo Limited) to commercialise the scar research. The patents and patent applications from Ferguson’s academic research were owned by the University of Manchester but were later handed over to the company in return for a small equity share (Renovo 2006, p14).

Renovo grew rapidly and over the next five years it raised millions from investors, as detailed below. They were attracted by the company’s financial projections that estimated a vast potential market for scar healing drugs. The prospect of scar-free healing after cosmetic surgery was a particularly enticing prospect for profit making.

During this time the company had five main drugs under development: Juvista, Zesteem, Judivex, Adaprev and Prevascar. The lead drug was Juvista and it could be administered by an intradermal injection in a manner similar to botox.  Renovo hoped that it could be used on a wide variety of other scars arising from reconstructive, cardiovascular, eye, tendon and nerve surgeries.

The Clinical Trials

Juvista succeeded in early phase one and two clinical trials for efficacy but in 2007 a phase two trial testing it to heal scars after mole removal was a failure (Renovo 2007, p10).  A 2008 phase two clinical trial using Juvista to heal scars after breast augmentation surgery also failed as differences between the treated scars and the placebo were not significant (Renovo 2008, p7). Juvista did succeed in trials concerning patient safety and Ferguson assured investors that the failed trials were down to the use of “sub-optimal doses” and “a sub-optimal trial design involving scars of different lengths and anatomical locations” (Renovo 2009, p7).

Below: Cosmetic Surgery Without Scars – A YouTube Video by Interactive Investor

The outcome of the phase three clinical trial of Juvista in scar revision surgery was announced in February 2011.  The results were cataclysmic – Juvista failed both its primary and secondary endpoints as there was no significant difference between the placebo and the treated scar. The failure was unequivocal as the efficacy of Juvista was “insufficient to demonstrate significant benefit when tested in a broad population of scar revision patients” (Renovo 2011, p2).

Ferguson described the trial results as “strange and perplexing’‘. Further analysis by Renovo of the failed trial found that Juvista did not demonstrate any significant benefit when tested in a broad sample of patients (Renovo 2011, p2). In March 2011, it closed down all of the development work on Juvista and laid off all of the remaining 100 Renovo staff.

Zesteem was another product designed to accelerate wound healing. It made some progress in early trials, but in 2008 Renovo’s phase three clinical trial for Zesteem failed to meet its primary endpoint for efficacy and all development on it was terminated (Renovo 2008, p8).

Judivex was a treatment that hoped to improve scarring and accelerate re-epithelialisation. However, in 2009, the phase two clinical trial for Judivex failed as the treatment showed no demonstration of a statistically significant difference in the time to complete wound closure (Renovo 2009, p8).

Another drug, Adaprev was also developed. Renovo hypothesised that this injectable formulation would prevent scarring and improve function following surgical repair of lacerated tendons. The trial results were announced in November 2011 and showed that patients treated with Adaprev had less range of motion than those in the standard care group (Renovo 2011, p2). The development of the drug was cancelled.

In November 2010, the company announced the development of Juvista Paediatric . This was a new scar healing formulation intended for use in children (Renovo 2010, p7). However, the drug was later terminated when Juvista failed in clinical trials.

Prevascar aimed to prevent scarring and restore function after peripheral nerve injury and was in the early phase of trials (Renovo 2006, p9). The trial results were announced on 16 April 2012: the drug failed badly as by month thirteen there was a small but significant improvement in the placebo scar width when compared to the treatment scar.

There are no products left in the Renovo development pipeline.

The Sales Pitch

Renovo never produced a single marketable product, never generated any product revenue and failed in its commercialisation of Ferguson’s alligator research. Indeed, it burned over £100 million of private and state investment. Driving this process was a constant sales pitch about the potential money to be made.

The company was sold to investors as a biotech firm with a ‘”deep pipeline with 23 drugs in clinical or pre-clinical development (Renovo 2006, p7).

Ferguson promoted Juvista as “the most advanced regenerative medicine in the world (Proactive Investors, 2010) and declared that Renovo was the “the world leader in scar reduction research” (Renovo 2007, p2). He estimated that Juvista could sell for US$400 per treatment and had a market of $4 billion per annum in the US alone (Renovo 2006, p12).

In September 2010, Renovo told investors about a ‘StockTube’ interview with Proactive Investors in which Ferguson explains “why there is little downside risk to investing in his company and why he expects shares to rise significantly” (Renovo, 2010).

He suggested that the fall in the share price was “nothing specific to the company” and that “if you take the worst case scenario your downside is actually quite low” (Proactive Investors UK, 2010).

The Wipe Out

For the investors who put money into Renovo and bought into the promise of a $4 billion market, no saleable product ever emerged and they were wiped out.

Renovo initially sold £30 million of shares to private venture capital funds in the early years after the formation of the spin-off in 2000. Ferguson was anxious to grow much larger and he set his sights on floating Renovo on the main market of the London stock exchange. Goldman Sachs was hired to manage the sale.

A first attempt in 2005 was ditched but in 2006 Renovo Plc was floated on the London stock market and £63 million of Renovo Plc shares were sold to investors.  The initial price was 87 pence and it rose to over £1 in the early trading.

Ferguson then left the university to become the full-time chief executive of Renovo and a new board was appointed with ten other directors. Sharon O’Kane was appointed as the director of research (Renovo 2006, p18).

In June 2007, Renovo sold the non-EU rights for potential future sales of Juvista to Shire Plc, a large biopharmaceutical company. Renovo obtained an initial payment from Shire of US$125 million (£58 million) consisting of a US$75 million upfront cash payment and a US$50 million share investment in Renovo. The deal was hailed by the financial markets and the shares soared to a high of over £2 per share.

By 2009, Renovo had spent over £81 million of the investors cash. With no revenue to show for all of the investment, the share price had fallen well off the earlier peak of £2 in 2007 down to a lowly 20 pence per share.

In April 2009 there was speculation about a takeover bid for Renovo but no buyer emerged. In the wake of the failed deal, fifty employees were laid off in a bid to cut expenditure. Ferguson assured the shareholders that “restructuring would deliver more near-term and long-term value for shareholders than any offer that could have been contemplated” (Reuters, 2009).

In February 2010, Sharon O’Kane left the company in order to pursue other business interests (Renovo, 2009). She was appointed as the entrepreneur in residence at Manchester University’s intellectual property business and gave masterclasses on spin-out company formation and commercialising university research.

The collapse of Renovo was sealed by the failure of Juvista in the phase three clinical trial in February 2011.  Ferguson described the failure as “extremely surprising and disappointing” (Renovo 2011, p2). The shareholders were rocked by the unexpected outcome (see the Interactive Investor Discussion Forum) and the shares plummeted by 75% to a new low of 17 pence.

Angus Russell, CEO of Shire: Terminated the Renovo Deal

Shire, the company’s commercialisation partner for Juvista, moved quickly to terminate the licensing agreement with Renovo in March 2011. It was a sore loss for Shire as it lost all of the $75 million dollars that it had paid to Renovo for the licensing rights back in 2007. It also wrote off another $44.3 million on the equity that it had in Renovo as it concluded that the by then 87% decline in value was “other-than-temporary” (Shire 2010 Annual Report, p85).

The collapse of the Shire/Renovo deal was ranked at number two in a list of the top ten biotech deal failures of 2011 that was compiled by the FierceBiotech site. It signaled the start of the winding up of Renovo.

By the end of June 2011 the company laid off all of the 100 remaining staff. The lease on the Renovo premises was surrendered at a cost of £1.6 million (Renovo 2011, p30). The lab equipment and the office furnishings were sold off (Renovo 2011, p3).

The shares in Renovo were delisted from trading on the main market of the stock exchange and put on to the alternative investment market (a trading exchange for small companies). Six of the company directors resigned from the board. The service contracts of the two remaining executive directors, Mark Ferguson (Chief Executive Officer) and David Blain (Chief Financial Officer) were terminated on 30 June 2011 Renovo 2011, p17).

Renovo never sold any products and all of the cash came from the investors (£63 million), Shire (£58 million) and British tax-payers money in the form of research tax credits and other grants (£16.5 million).

The current share price of 16.6 pence per share is a value that is purely based upon a distribution of the only remaining asset which is £36.5 million of unspent investor’s cash which is held by the company. There is some discussion among analysts about whether the company should be liquidated or used as a shell company for another firm to acquire.

The Winners

Between 2006 and 2011 the total paid to Renovo’s board of directors (including termination payments) was over £11 million (Renovo 2006 to 2011). Mark Ferguson was the highest earner with a total of £3.6 million over the five years. This included bonuses of £971,000 and a payment of £700,000 that was made in June 2011 when his contract as chief executive officer was terminated (Renovo 2011, p17). Renovo also paid an additional total amount of £451,118 into his pension fund over the five years (Renovo 2006 to 2011).

Sharon O’Kane earned a total of £1.6 million over her four years at the company (Renovo 2006 to 2011). This included a post-cessation payment of £200,488 on her resignation as chief scientific officer in February 2010 (Renovo 2010, p36).

In 2007, Ferguson and O’Kane also made huge gains by exercising Renovo share options. On 26 June, under the directors share option scheme, Ferguson and O’Kane acquired over 4.7 million Renovo shares for .004 pence per share (Renovo 2007, p35). They then sold them on to investors at the market price of £2 per share on 2 July (Renovo, 2007).  The company had announced the Shire licensing deal on 20 June 2007 and the shares were at their zenith.  In a single trade, Ferguson was enriched by £5.9 million and O’Kane by £3.5 million.

The aggregate scale of the directors’ pay and the share rewards is remarkable in light of the fact that Renovo never successfully commercialised a product from any of the drug developments.

The Questions

Minister Seán Sherlock: A ‘Coup’ For Ireland

In January 2012, Science Foundation Ireland announced the appointment of Mark Ferguson as its new Director General. The Minister for Research and Innovation, Seán Sherlock, expressed his delight that Ireland had secured someone with such “extensive commercialisation experience” and hailed the new appointment as “a tremendous coup” for Ireland.  The chair of SFI, Patrick Fottrell, cited Ferguson’s track record of excellence in both the academic and commercial spheres and noted that “his arrival marks the start of a new stage in SFI’s journey”.

Minister Sherlock recently indicated that the salary for the new director was “under consideration by the Minister for Public Expenditure and Reform”. There was controversy in 2010 when the media revealed that the former SFI director was paid a salary of over €250,000.

As discussed in the previous post, international evidence suggests that research commercialisation is never going to generate significant financial returns, while it distorts research culture and undermines the ethos of scientific research. The Renovo debacle illustrates the folly of pursuing commercialisation as the primary research mandate for Ireland.

Indeed, the Renovo debacle raises questions of public interest about research funding priorities. Why has SFI decided to wholly embrace such a failed strategy of research commercialisation? How can Mark Ferguson credibly head up the nation’s principal scientific funding agency on such a commercialisation platform?

REFERENCES

All of the sources for this post can be accessed by clicking on the red hyperlinks in the text above.

18 Comments leave one →
  1. theman permalink
    May 23, 2012 5:41 pm

    I lost 70k due to Mark Ferguson’s bloated opinion of his drug. All the while it
    was performing poorly in clinical trials. Why any company would hire him may be
    more to promote another drug that doesn’t work. He owes me my money back. Of which this article highlights exquisitely.

    • GOM permalink
      June 29, 2012 9:57 am

      I don’t mean to make light of your loss, but would point out that there are two sides to every trade and while the article clearly exemplifies the bloated ego and narcissism of Ferguson, the counterpoint to that is that his patter was believed and people invested at a time when a technology was still in a very speculative state. I am constantly surprised at the projection of responsibility people have for actions they contributed 50% of the input to.

  2. May 25, 2012 12:23 pm

    What is the salary of the SFI chief? May i speculate that it might be above the, er, ‘pay cap’ ?

  3. D. Ó Cléirigh permalink
    June 10, 2012 5:30 pm

    This is an appalling debacle for SFI. There can be no shadow of impropriety of its Director General. It is no coincidence that the best people have left SFI – or been pushed out. This needs investigation. It has far-reaching consequences not only for now but for the future of research in Ireland.

    • Eric Blair permalink
      June 22, 2012 10:36 pm

      Pushed out is a light way of putting it. In the last week I have received over 17 phone calls from people who have worked in SFI and left because of the arrogance and blatant bad manners of Ferguson. Minister Sherlock has a lot of explaining to do because Travers the old Haugher advisor will not be a fall guy on this one. So Sherlock should take his head out of his ass and start looking deeper into what happened in Manchester (review graph). How is this man is running SFI as if its his own private company needs answering? Irish taxpayers in this deep recession deserve better than Ferguson.

  4. D. Ó Cléirigh permalink
    July 1, 2012 4:09 pm

    Seen on Indymedia.ie and worth noting since the information comes from Renovo itself:

    Fact: Mark Ferguson, D-G of SFI, and his wife Sharon O’Kane still hold a considerable part of Renovo. See http://www.renovo.com/en/node/828 where as of 30 March 2012 their holdings amounted to 12.5 percent of the shareholder voting rights.



    By reputation now in SFI Ferguson is helping Renovo’s share price to rise. His meetings with investors, companies, government, science bodies, in the UK, Ireland, the US, and globally, constitute conflict of interest. Added to that his proxies in the inner circle in SFI are willfully or carelessly furthering this reputational support for his and his wife’s financial gain, now and in the future.



    There is direct conflict of interest in Ferguson’s oversight of Irish reseach and commercialisation of research. In Ireland he is well placed to take what he can or block what he needs to. He can work through his proxies in SFI to get this done.


    • D. Ó Cléirigh permalink
      July 4, 2012 9:00 am

      There is a further example posted there (on Indymedia.ie, see “SFI: massive conflict of interest – Example”, posted on Tue Jul 03, 2012) of how Renovo and L’Oreal have overlapping commercial interests; how Mark Ferguson representing Renovo was a speaker and L’Oreal a sponsor at an NUIG event in 2010; now, how Ferguson’s wife, Sharon O’Kane, and SFI are both involved in L’Oreal’s Women in Science Award. It does seem that Ferguson and his inner circle at SFI are working towards the financial gain of himself and his wife, on a very major scale.

      When this scandal is addressed by Government, here is a most important issue that needs to be addressed, and addressed extremely well. This is in a letter to the Irish Times by Peter Gallagher and Emma Teeling on the crucial role and need for fundamental science support in Ireland. See:

      http://www.irishtimes.com/newspaper/letters/2012/0703/1224319264661.html

  5. Eric Blair permalink
    July 7, 2012 9:20 pm

    Ferguson has vested interests along with Sfi which he seems to think he owns and behaves so arrogant to staff, It is time he stood down and went back to Manchester for the Taxpayers sake. Enough is enough at this crucial time for the future of maths and science of this country.

  6. D. Ó Cléirigh permalink
    July 8, 2012 8:54 am

    I am truly amazed by the lack of response by the SFI Board to what is going on. The following is from http://www.indymedia.ie.

    Questions for the SFI Board:

    1. Was the Board aware that Mark Ferguson (MF) had a 12% stake in Renovo at the time of his offer of appointment and if so what did the Board do to mitigate the risk of conflict of interest, real or perceived? Is the Board aware of any other holdings, or interests of any kind, MF may have currently in Biotech or ICT companies in Ireland or other jurisdictions?
    2. Is the Board aware that MF proposed two of Renovo’s current Directors (Max Royde and Jamie Brooke) to sit on SFI’s Impact Panels?
    3. Is the Board aware of MF’s disparaging language towards politicians, university Presidents and researchers at internal meetings of SFI?
    4. Is the Board aware of the damage being inflicted on Ireland’s reputation as a result of the ongoing revelations and has a Board meeting being convened urgently to consider the issues?
    5. Are there provisions in MF’s contract to deal with the above issues?

  7. Stefan Sjoberg permalink
    July 11, 2012 12:15 am

    Many questions on SFI and its inception that raise very serious concerns, see

    “Worked in SFI for approx 4 years” at http://www.indymedia.ie/article/102011

  8. D. Ó Cléirigh permalink
    June 16, 2013 11:53 am

    Noted the following on Indymedia, http://www.indymedia.ie/article/102011

    Mark Ferguson was involved in very unethical practice in the past, in deceipt and deception in a major way. This is highlighted in a New York Times article linked to from the above report.

    http://www.nytimes.com/1982/12/14/science/journals-combat-scientists-deceit-in-submitting-study-reports.html?pagewanted=all

Trackbacks

  1. Stifling Discovery: Science Foundation Ireland’s New Mission and the Jobs Myth « Network for Irish Educational Standards
  2. Ninth Level Ireland » Blog Archive » Science Foundation Ireland, the Director General and the Renovo Debacle
  3. Sean Sherlock Makes A Very Interesting Appointment To Head Science Foundation Ireland
  4. The Science Bit | Broadsheet.ie
  5. More Questions for Science Foundation Ireland Director General | Network for Irish Educational Standards
  6. Science Foundation Ireland and the Law of Unintended Consequences - Page 12

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