Columbia Trustee Got Sued for Securities Fraud — Then Left Her Pharma Firm Under a Cloud

For more than a year and a half Shoshana Shendelman has been at the epicenter of one of the biggest stories in the country the raging campus battles over Israel s war on Gaza Earlier in the year Columbia University an institution deeply entwined with Shendelman s life was the site of the first major university protest encampment And the university cracked down inviting police onto its New York campus where they made violent arrests Shendelman who got two masters degrees and her doctorate from Columbia and whose child right now attends the school had sat on the board of trustees of the university since March According to a current New York Magazine story Shendelman was one of the most of working board members in the pro-Israel camp pushing for action to restore order on campus The university meted out harsh punishments for pupil protesters short circuited due process and critics say stifled pro-Palestine speech The hard-line faction of trustees had long since gained the upper hand on the board but the campus and the nation continued to be rocked by the debate over Israel s war on Gaza including as part of an onslaught from Donald Trump s administration that has cost the school hundreds of millions in funding In November tumult would reach Shendelman s life not however in her role on the Columbia board but in her professional career In the six months that followed Shendelman would see debate erupt over the pharmaceutical company she started and led including statements from the federal regime of statutory and regulatory violations in clinical trials and a shareholder lawsuit alleging fraud on her part Shendelman has since denied doing anything wrong but she lost her leading roles at the firm She maintained however her position on the Columbia board of trustees as the body pushed for harsh responses to pro-Palestine protests and sought to consolidate power over the school Now the controversies around her pharmaceutical work are raising questions about her role on the university board Keeping Shendelman on the board is just one more indication of how deeply the board has lost its way At a moment when the board of trustees is leading with a very heavy and misguided hand keeping Shendelman on the board is just one more indication of how deeply the board has lost its way commented a tenured professor at Columbia s Irving Anatomical Center who inquired to remain anonymous for fear of retaliation from the university Shendelman did not respond to inquiries from The Intercept Columbia s administration did not offer responses to questions for the board of trustees by press time Shendelman had been the CEO of a pharmaceutical firm called Applied Therapeutics a company hoping to bring two drugs to area Shendelman was a central figure in the firm She had founded the company fundraised for it including taking it masses and spearheaded the expansion of its lead drug candidate govorestat as well as its clinical studies Then on November Applied Therapeutics reported that govorestat was rejected by the U S Food and Drug Administration On the same day Shendelman was issued a stern warning by the FDA In a letter addressed to her the agency s Center for Drug Evaluation and Research which regulates drugs called out Applied Therapeutics for the deletion of sensitive input ahead of an FDA inspection and failing to disclose crucial information about errors made during clinical trials for their lead drug candidate The problems the FDA commented amounted to apparent statutory and regulatory violations Applied Therapeutics did not respond to The Intercept s request for comment In a podcast interview this month Shendelman revealed there were no safety or efficacy concerns about govorestat and that it had been rejected by the FDA for bureaucratic reasons The FDA letter commented Applied Therapeutic s failure to disclose certain information to the agency created issues with performing an evaluation of the safety and effectiveness of the drug Following the regulator s letter the company s stock price tanked dropping percent in three days Within weeks shareholders filed a lawsuit against Applied Therapeutics Shendelman and another company officer alleging that Shendelman in particular had known about problems with clinical trials since May and committed securities fraud by failing to disclose information about the issues to investors in a series of rosy citizens statements The stock continued to rise on this incomplete information the suit alleges and Shendelman sold off stocks totaling more than million at an artificially inflated share price as the suit put it The majority of the sales more than million worth came in a three-day flurry in August just days after Shendelman gave a positive assessment of the company s FDA application process to investors In separate responses to the lawsuit Applied Therapeutics denied all wrongdoing and Shendelman s lawyers moved to dismiss the indicates They argue that none of the insists in the suit constitute fraud that she sold only a fraction of her shares in the company and that the assertions are based purely on conjecture hindsight and statements that Dr Shendelman was unduly optimistic about the possibility of approval On December a little over three weeks after the FDA issued its letter Shendelman signed an agreement that terminated her employment at the company she had founded According to the agreement Shendelman would be paid millions on her way out The Board Even amid the dramatic changes at work Shendelman s role at Columbia remained steady Five months after leaving Applied Therapeutics she remains on Columbia s powerful -member board of trustees as the body undertakes what critics say is a broad power grab at the university Her role on the board has stirred little argument thus far but the contours of her unceremonious exit from Applied Therapeutics are taking on heightened relevance amid a predicament at Columbia that has escalated dramatically since Trump took office I am appalled to see the FDA s warning letter and the impending class action lawsuit regarding Applied Therapeutics for their mishandling of evidence collection and storage commented a second professor at Columbia s Irving Physiological Center a curative clinician who requested for anonymity for fear of professional retaliation Until shortly after The Intercept sent requests for comment to Columbia and Shendelman her board of trustees biography listed her as the vice chair of the Clinical Advisory Board of Columbia s Irving Biological Center and its Vagelos College of Physicians and Surgeons There s little online information about a clinical advisory board except a letter from the head of the anatomical center announcing its formation Hours after The Intercept sent questions about the clinical advisory board the word clinical was removed from Shendelman s trustee biography which now described her as a vice chair of the board of advisors at the biological center Columbia students and faculty are finding ourselves wondering about the real commitments and values of our board It s a fundamental responsibility for all of us who conduct research at the biological center to do that work in accordance with the highest standards of ethical research announced the first tenured therapeutic professor I don t understand how we can have someone in a senior advisory position who doesn t adhere to those same standards The school is undergoing an unprecedented upheaval Columbia s governance structure used to be a triumvirate with the board of trustees the president of the university and the university senate each playing influential roles Amid the row over pro-Palestine participant protests however the trustees appointed one of their own as acting president of Columbia Now the administration and board are seeking an overhaul of the university s storied senate a democratically elected body and the only part of the three-pronged governance structure where students and faculty hold mandated positions Looming over the power struggle is Columbia s protracted million fight with the Trump administration a fight where according to New York Magazine critics think the hard-line pro-Israel wing of the board of trustees are ushering in Columbia s capitulation In the battle with Trump the trustees and their allied university administration have shied away from answering to the senate faculty and other stakeholders Among the students and faculty raising questions about the need for greater scrutiny of the trustees Shendelman s record at Applied Therapeutics is seen as a vindication of their concerns A third member of the Columbia faculty who requested for anonymity to avoid retaliation from the university reported Whether it s cooperating with the Trump attacks on science and dissent the horror and cost of the Hadden affair or now this Columbia students and faculty are finding ourselves wondering about the real commitments and values of our board far more often than we should A demonstrator is arrested as Columbia University students hold a rally in assistance of Palestine in New York City on May Photo Timothy A Clary AFP via Getty Images Warning Letter The FDA conducted an inspection in the spring of into Applied Therapeutics s lead drug candidate govorestat With govorestat Applied Therapeutics hoped to bring to arena the first FDA-approved therapy for a rare pediatric metabolic disorder The inspection was carried out under an FDA activity to ensure compliance with standards around human test subjects in clinical trials The FDA inspection that followed reviewed the inspection record related documents and the company s response On November the regulatory agency sent a letter addressed to Shendelman This Warning Letter informs you of objectionable conditions observed during the U S Food and Drug Administration FDA inspection conducted between April and May the letter says Applied Therapeutics inspectors ascertained likely ran afoul of the Federal Food Drug and Cosmetic Act as well as federal regulations that govern clinical studies In a dense summary of a long back-and-forth with the company the FDA specified two categories of deficiencies with the clinical trials The first was a failure to give FDA inspectors access to records related to clinical trials On March the FDA had informed Applied Therapeutics about a forthcoming inspection Two days later according to the letter a third-party vendor deleted electronic records for all subjects in one part of its clinical trials Read our complete coverage Chilling Dissent As a product during the sponsor inspection FDA was unable to access and copy and verify records and reports relating to the examination the letter says In response to an earlier correspondence from the FDA according to the November letter Applied Therapeutics noted that it was able to recover statistics for all but subjects And the company communicated the FDA that the vendor had not informed Applied Therapeutics about the deletion of the records While we acknowledge Applied Therapeutics response as well as the corrective and preventive actions that Applied Therapeutics has taken and plans to take your response is inadequate because you did not include sufficient details about your corrective action plan the letter says Additionally we remain concerned that electronic details collected for critical eCOAs electronic clinical outcome assessments was deleted and cannot be verified which raises concerns about the validity and integrity of the facts collected during the clinical scrutiny The second major concern revolved around doses of the drug in question stated to the FDA Because of mislabeling from March to June at least subjects in the Applied Therapeutics investigation had been administered a lower dose than required by the protocols of its examination In June Applied Therapeutics realized the error and notified its clinical sites providing them with correct doses and updated pharmacy manuals In late two years after catching these mistakes the company submitted a analysis to the FDA that did not according to last year s warning letter disclose the nature and extent of the dosing errors It s certainly a serious complication for a company that doesn t account this fully to FDA Henry Greely a healthcare ethics expert and professor of law at Stanford University explained The Intercept The November FDA warning letter laid out further issues created by the delayed notification This failure raises considerable concerns about the validity reliability and integrity of the records the letter says Furthermore Applied Therapeutics failure to disclose this critical information raises essential concerns about the sponsor s oversight and conduct of clinical investigations including its compliance with the reporting requirements for human drug products The FDA warning letter concludes We emphasize that as a sponsor Applied Therapeutics has ultimate oversight of the clinical study and was responsible for ensuring compliance with all applicable FDA regulations governing the conduct of clinical investigations The drug regulator gave Applied Therapeutics business days to outline how it would prevent similar violations in the future The Lawsuit Just over a month later on December shareholders in Applied Therapeutics filed a class-action lawsuit against the company Shendelman and Riccardo Perfetti the firm s chief curative officer who remains in his position in current times The plaintiffs sought compensation and damages for losses sustained due to what they alleged was securities fraud among other wrongdoing linked to deceiving shareholders Perfetti did not respond to a request for comment The lawsuit alleges that Shendelman was made aware of issues with the application to the FDA after the agency s spring clinical site inspection Shendelman the suit says continued to make positive statements about the drug trials and the New Drug Application or NDA process despite knowing about the problems with the review In May shortly after the inspection the lawsuit quotes Shendelman saying things are going very well with the FDA and that there are no major sticking points We are incredibly pleased by the ongoing collaborative dialogue with the FDA during the NDA review process and we look forward to continuing to work together with the agency to bring the first likely healing to Classic Galactosemia patients Shendelman noted in a September press release issued weeks after an exchange of letters with the FDA over the deletion of clinical details On November less than three weeks before the drug was rejected and the warning letter issued Shendelman gave another rosy assessment As we approach the final stages of the NDA review process for Classic Galactosemia in parallel with a near-term NDA submission for SORD Deficiency another rare metabolic affection we remain confident in the promise of govorestat and its ability to address the underlying mechanisms of both diseases Shendelman revealed We look forward to the opportunity to bring govorestat to patients in The November press release came two months after another exchange of letters between Applied Therapeutics and the FDA in early September where the company sought to explain that deletion of the records had been at the hands of a third-party vendor As Applied Therapeutics s FDA application process moved forward optimism about the company s business prospects grew The stock had made steady gains more than doubling from around a share at the start of to more than on the eve of the FDA s rejection In retrospect the shareholders in the class-action suit disclosed Shendelman s rose-tinted assessments had buoyed the stock value Defendants materially false and misleading statements artificially inflated the price of Applied common stock the lawsuit asserts Plaintiff and the Class would not have purchased or otherwise acquired Applied securities at the prices they paid or at all had they known the truth Defendants materially false and misleading statements artificially inflated the price of Applied common stock As she went back and forth with the FDA over the emerging problems with Applied Therapeutics s clinical tests Shendelman began to sell off her substantial holdings in the company according to the lawsuit Between early January and late November she sold more than million shares worth million The biggest sell-off came from August to a three-day period that saw Shendelman get rid of three-quarters-of-a-million shares worth more than million The average price per share over those days was around In a filing responding to the lawsuit Shendelman mentioned specific of her stock sales were for tax purposes and that after selling off millions in stocks she still owned a vital stake in the company The court filing reported that the sheer size of Dr Shendelman s holdings after the Sales is entirely inconsistent with fraudulent intent Her response says that her rosy society releases by a business can t constitute fraud Statements regarding the outlook and progress of drug enhancement and interactions with the FDA are quintessential puffery and expressions of corporate optimism that cannot give rise to securities fraud under settled precedent her motion says Perfetti the chief healthcare officer moved to dismiss the lawsuit last Friday At its core this incident is about a plethora of allegedly false and misleading statements made or caused to be made to the investing residents by Applied Therapeutics Inc Applied or the Company and by Dr Shoshana Shendelman his motion reported To be sure Plaintiff does not allege a single message by Dr Perfetti not one about the NDA or the regulatory process let alone an actionable message Nor does Plaintiff plausibly allege any manipulative or deceptive acts by Dr Perfetti that would make him a participant in Dr Shendelman s alleged scheme or that he somehow controlled Applied or Dr Shendelman and is therefore liable for their alleged violations Within two days of news of the FDA rejection on November the stock price tumbled to around Five days after Shendelman received the FDA warning letter the company acknowledged it in a Securities and Exchange Commission disclosure A day later the FDA posted a copy online Termination On December two days after the lawsuit was filed Shendelman signed an agreement that terminated her employment at Applied Therapeutics effective right now Regardless of whether you sign this Agreement the last day of your employment with the Company will be December the agreement commented Shendelman left her positions as Applied Therapeutics s CEO president and chair of the board of directors A day later on December the stock fell to Since the eve of the FDA s rejection less than a month earlier the stock had lost around percent of its value Her termination agreement revealed Shendelman would receive more than million on her way out of the company Her termination agreement explained Shendelman would receive more than million on her way out of the company She was paid a lump sum of nearly million in cash severance plus more than million of payment for restricted stocks of which particular would go directly to her attorney According to an examination of the Internet Archive Columbia had not updated her board of trustees biography to reflect Shendelman s departure from Applied Therapeutics until mid-April By then she already had other prospects Since March according to her LinkedIn profile Shendelman has been working as president of Retension Pharmaceuticals and Response Pharmaceuticals Once in her new positions at Retension and Response Shendelman began inveighing against what she saw as one of the ills of the pharmaceutical world FDA regulations Now is the time for us to overhaul the archaic procedural measures including the Food and Drug Administration s FDA outdated policies and procedures Shendelman wrote in an op-ed earlier this month If we continue to permit bureaucracy to impede the advancement of science then people will continue to die waiting for therapeutic advances and that is unacceptable Then on a podcast that aired earlier this month Shendelman again ripped FDA regulations in an episode titled Innovation on Hold The FDA s Regulatory Standstill When the podcast host sought Shendelman for an example of a drug slowed down by the FDA regulatory process that should have been pushed through Shendelman responded with her own drug govorestat I believe that we displayed a very strong safety and efficacy profile she noted Shendelman then added that there were no individual safety issues or any case safety concerns characterizing the FDA rejection as being purely bureaucratic an assessment out of step with the FDA warning letter which mentioned the problems were relevant to the agency s ability to draw solid conclusions about how well the drug worked or whether it was safe Even as she advocated for curtailing FDA meddling in drug expansion the Columbia board of trustees she serves on was looking to involve itself in everything from academics to hiring to discipline The small circle running the prestigious New York research university sought to be the ultimate regulatory body of campus life At a time when the university s federal and research funding is under threat from the Trump administration the trustees have been accused of running the university without seeking input from faculty staff and students Their latest efforts to overhaul the university senate reinforced those concerns Columbia s governance structure resembles a triangle with each side representing the Trustees the President and the University Senate respectively the university senate pupil affairs committee co-chairs wrote in an April report That triangle is now collapsing The senate has been from time to time a thorn in the side of the board of trustees In March the senate issued the sprawling Sundial Review documenting what it reported were university actions since October that ran afoul of the school s norms traditions and mission The board came in for thinly veiled criticism the statement stated the trustees ought to be ultimately responsible for institutional fidelity to the University s mission integrity and efficiency of its operations For the clinical center professor who was shocked by the FDA letter the missteps made by Applied Therapeutics when Shendelman was at the helm also spoke to her ability to serve on the board It shouldn t be tolerated for anyone serving on the university s board of trustees the professor commented Shendelman is someone who is responsible for our fiduciary commitments at the university The post Columbia Trustee Got Sued for Securities Fraud Then Left Her Pharma Firm Under a Cloud appeared first on The Intercept