PixarBio CEO Made Wild Claims About Curing Paralysis, According to a Former Executive's Testimony
Frank Reynolds, chief executive officer of PixarBio, made outlandish claims to investors and even compared himself to Apple’s Steve Jobs and Jesus Christ. Those were the claims of a witness made on the witness stand in an ongoing securities fraud trial.
On Tuesday, Steven Chartier, a former executive with Cambridge, Mass.-based PixarBio, testified that Reynolds told lies to potential investors about the company’s non-opioid pain reliever developed for post-surgical patients. According to the testimony, as reported by Boston University’s News Service, Chartier said Reynolds would tell investors that the company’s product, called NeuroRelease, could essentially cure paralysis. When meeting with investors, Chartier said Reynolds told them of his own journey dealing with paralysis and that he was able to put together a treatment plan that cured him of that condition. Chartier, the former head of regulatory and clinical affairs at PixarBio, testified that Reynolds called himself the “Steve Jobs of biotech” and claimed that only two people had cured paralysis, himself and Jesus Christ.
Although NeuroRelease had only been in preclinical stages, Reynolds told investors that the product was expected to be approved by the U.S Food and Drug Administration within a two-year frame, Chartier testified.
In addition to being CEO of PixarBio, Reynolds was also listed as the company’s chief financial officer, chief scientific officer, chairman and co-founder. He was charged with securities fraud in 2017, along with Kenneth Stromsland, head of investor and public relations at PixarBio, and M. Jay Herod, an independent consultant attached to the company. The U.S. Securities and Exchange Commission alleged that Reynolds and Stromsland misled investors with false claims about PixarBio's progress in developing a purported method of delivering non-opiate, post-operative pain medication. The complaint also alleges that Reynolds, Stromsland, and Herod engaged in a fraudulent scheme to acquire and merge PixarBio with a publicly-traded company and to secretly manipulate the sales of shares in the new entity.
According to the government’s complaint, the three men attempted to defraud investors starting in 2013 through the making of false and misleading statements about PixarBio’s prospects, financing and Reynold’s background, vis-à-vis his paralysis story. The three men were also accused of manipulating stock trading. As an example, the men claimed that PixarBio had a market valuation of more than $1 billion and that was likely to go up following the approval of NeuroRelease. The company’s chief product was also under question in the complaint. NeuroRelease, the government said, was the anti-convulsant medication Tegretol (carbamazepine), which the company claimed would be reformulated as a non-opioid substitute for morphine.
In January 2017, the company claimed it was seeking to acquire Cambridge, Mass.-based InVivo Therapeutics for less than $77 million. However, later in the month, the company said it withdrew its offer in order to focus on developing its NeuroRelease platform. The same day the company announced it was no longer seeking to acquire InVivo, the SEC halted trading of PixarBio stock over concerns of stock manipulation.
Last year Stromsland pleaded guilty to one count of securities fraud, relating to his manipulative trading in the company's stock, and one count of obstructing an agency proceeding, relating to his false testimony to the SEC during its 2017 investigation. According to the SEC, Stromsland’s false testimony included falsely denying that he had purchased shares of PixarBio to affect the company's share price and falsely denying that he had been instructed to do so by Reynolds.
In February of this year, Herod pleaded guilty to the same charges, including lying to the SEC about Reynolds directing his participation in the fraud.