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Nucleonics Co-Founders Deny Misconduct Claims, Downplay CEO’s Role in Growing Co.

The co-founders of troubled expressed RNAi shop Nucleonics this week denied the charges of scientific misconduct leveled against them by the company and its top executive in an ongoing litigation.
In a court document filed this week and obtained by RNAi News, the co-founders and co-plaintiffs Catherine Pachuk and C. Satishchandran said that “any and all allegations of professional misconduct” on their part are untrue, and “further deny that any act or omission on their part caused … alleged harm to Nucleonics.”
At the same time, Pachuk and Satishchandran fired a salvo at Nucleonics President and CEO Robert Towarnicki, downplaying his efforts in building up the company and closing a key financing two years ago.
Specifically, the co-plaintiffs minimized the role Towarnicki played in guiding Nucleonics to become a key player in the RNAi drugs space and in closing a $50 million Series B round in mid-2004 (see RNAi News, 6/4/2004).
According to documents filed as part of Towarnicki and Nuclenincs’ countersuit against the pair, when Towarnicki joined the company in 2003, he “rewrote [its] business plan … redirected its focus, and professionally presented the company to the investment community.”
Further, “as a result of Towarnicki joining … the company as its president and CEO … Nucleonics closed the second largest venture capital financing in the biotechnology industry” through the Series B, the countersuit alleges.
But in their latest legal filing, the company’s co-founders said that Towarnicki’s rewriting of Nucleonics’ business plan incorporated a “very large part of the technology document” that had already been authored by the company’s former President and CEO Vincent Zurawski and Satishchandran.
In addition, the co-founders “also wrote part of this business plan,” the filing adds. “In short … Towarnicki did not make a substantial contribution of original material to [the company’s new] business plan.”
‘Misjudgment and Delusion’
The legal dispute began in May when Pachuk, who served as vice president of preclinical research, and Satishchandran, who was senior vice president of research and development, sued Nucleonics and Towarnicki for alleged wrongful termination, defamation, and other charges. Pachuk and Satishchandran’s employment at Nucleonics ended in March.
The following month, Nucleonics and Towarnicki responded by filing a countersuit charging the co-founders with allegedly falsifying and/or grossly misjudging certain preclinical data for the company’s lead drug candidate, the phase I hepatitis B treatment NucB 1000 (see RNAi News, 7/3/2008).

“Towarnicki did not redirect the company’s focus. At the time when [he] … was hired … the company way already focused solely on developing [expressed RNAi] therapeutics for diseases of unmet clinical need and had already been working on HBV.”

According to the countersuit, the discovery of the scientific misconduct promoted potential investors, including a venture capital arm of Johnson & Johnson, to withdraw from a planned $25 million Series C financing round. 
Specifically, Nucleonics alleged that work Pachuk and Satishchandran oversaw to “define and optimize a delivery nanoparticle for [the HBV drug candidate] … [was], if not fraudulent, the product of gross professional misjudgment and delusion.”
The countersuit added that an independent investigator hired by the company found that experiments presented and managed by the co-founders were “cherry picked” to “prove” a desired result.
But in their answer to the countersuit, Pachuk and Satishchandran said that this simply was not the case, and denied that any of their actions led to the failure of the Series C round.
They also cast doubt on Nucleonics’ claim that the company’s reputation was ruined when word of the alleged misconduct spread, suggesting that details about the situation appeared to be limited to allegations in legal filings related to the case.
Pachuk and Satishchandran further alleged that “Towarnicki did not redirect the company’s focus. At the time when [he] … was hired … the company was already focused solely on developing [expressed RNAi] therapeutics for diseases of unmet clinical need and had already been working on HBV.”
Instead, they maintain, it was Zurawski who originally changed Nucleonics’ direction “from one that was inclusive of functional genomics, target validation, and therapeutics to one focused on therapeutic development.”
As for the completion of the Series B financing, Pachuk and Satishchandran said that investors were swayed by the growing interest in therapeutic RNAi across the industry, not just by Towarnicki’s ability to sell to venture capital firms.
“The reason why Nucleonics closed the … venture financing was, in part, because RNAi was coming to the forefront as a drug format,” they said in the court filing. “In addition, many patents based upon RNAi technology had been filed, and many companies had been started and funded by VC funding based upon the increasing interest in RNAi technology.”

Game Over
Regardless of where the blame lies for Nucleonics’ troubles, the once-promising drug firm is officially out of the RNAi game.
In June, RNAi News reported that Nucleonics had put itself on the block after failing to close the Series C financing (see RNAi News, 6/18/2008). As part of that effort, the company laid off most of its staff and began liquidating much of its laboratory equipment.
At the time, Towarnicki said that it was “hard to predict” when a buyer might be found for the firm, and that the process had only just begun.
“We’ve reached out to a few [companies and] are trying to gauge the interest,” he told RNAi News. Although he declined to name the companies, he said that Nucleonics is approaching big pharmas, small biotechs, and pure-play RNAi drug shops.
As for a fair value for the company, Towarnicki said at the time that “we will let the market determine that.”
He was not available for comment this week.

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