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[ABUJA] A pioneering attempt to commercialise an indigenous treatment for sickle cell anaemia is in serious trouble after the US-based company owning the rights to its development filed for bankruptcy.
Xechem International, whose five-year involvement with the drug, Nicosan, in Nigeria has been tainted by recent allegations of fraud and corruption, this month (10 November) filed voluntary petitions for relief under Chapter 11 of the US Bankruptcy code, for itself and one of its six subsidiaries.
The announcement followed an angry statement issued by shareholders a few days earlier (4 November) accusing Xechem International’s chief oversight officer, Robert Swift, of "colossal failures" of management and "systematic destruction" of the parent company.
Nicosan (formerly Niprisan) is based on extracts from West African plants and had been known to generations of a Nigerian family as an effective treatment for sickle cell anaemia.
Around 12 million people suffer from the painful genetic illness. It has been labelled "probably the most neglected serious public health disorder in Africa" by Charles Wambebe, chief executive officer of the International Biomedical Research Institute in Abuja, Nigeria.
A controversial deal
Initially, the family who owned the recipe drew up a Memorandum of Understanding for its development with Nigeria’s National Institute for Pharmaceutical Research and Development. This pioneering agreement has been widely cited as a case study in "benefit sharing" — allowing vulnerable groups to have a stake in the profits made from commercialising indigenous products.
In 2003, in a controversial move, Xechem bought the rights to develop Nicosan. By February this year its subsidiary, Xechem Nigeria, said it was producing some 50,000 capsules a year (see Sickle cell drug mired in controversy).
But the following month (March) a fraud complaint was brought before Nigeria’s Economic and Financial Crime Commission (EFCC) against Xechem Nigeria. The complainant alleged that US$3.5 million of public funding from the Nigerian government, which was supposed to have been spent on drug manufacture, had been misused.
Xechem had also borrowed nearly US$4 million from a Nigerian bank and US$4 million from a US bank. The destination of these loans has also been questioned.
In June, following an investigation by SciDev.Net that revealed a complex array of issues relating to Xechem, the EFCC announced an investigation into the affair. But, to date, there has been no outward sign of an investigation.
This month, shareholders said they were making their grievances public because "numerous" attempts to contact members of Xechem’s international board of directors had been unsuccessful.
They cited a 99 per cent reduction in the price of the Xechem International Common Stock from US$0.02 in July 2007 to US$0.0002 in November 2008.
They also said that the company had failed for 12 months to retrieve from customs in Lagos US$4.3 million in new equipment purchased for Xechem’s manufacturing facility in Abuja and US$2 million in equipment removed from Xechem’s former facility in New Brunswick, New Jersey.
There had been "no movement on Food and Drug Administration (FDA) approvals in 16 months; … the termination of planned clinical trials for Xechem’s sole marketable product, Nicosan; and numerous allegations against the managing director of Xechem Nigeria, with no apparent investigation or company update into the accuracy of those allegations”.
The shareholders called for the resignation of Swift and demanded an immediate shareholders meeting, noting that bankruptcy would be "an action that will destroy the investments of the shareholders”.
Separately, some have also called for the reinstatement of Ramesh Pandey, the founder of Xechem International, who lost his position as president and chief executive officer last summer following the injection of a new round of capital in the company by a group of investors.
A difficult decision
Swift said in the bankruptcy statement: "filing for Chapter 11 is never an easy decision, however, we view this process as an important step in our ongoing strategic restructuring. We expect to emerge from bankruptcy as a stronger, more able company, well positioned for growth and enhanced profitability."
The company said its financial problems had arisen "as a result of litigation and litigation expenses arising from the lawsuits of former officers, employees and consultants of the company — as well as third party lawsuits — and to protect the operations of our Nigerian subsidiary from default judgments and creditors, it became necessary to seek the protection of the court".
It added that its Nigerian subsidiary "will continue its normal operations".
But a visit by SciDev.Net to the main production site for Nicosan, in Abuja, revealed that activities have ground to a halt.
A staff member — who spoke to SciDev.Net on condition of anonymity — said that the managing director of Xechem Nigeria, Iretiolu Oniyide, had been "elusive" since SciDev.Net broke its story in June. Oniyide denied any wrongdoing in an interview with SciDev.Net earlier this year.
"We go about our work here looking behind us, thinking the team from EFCC has finally arrived. We hope they come before this place finally grinds to a halt,” the staff member said.
Meanwhile a proposal by minister of science and technology Grace Ekpiwhre to set up a committee to investigate Xechem Nigeria, has been dropped after a ministerial meeting decided the allegations were "baseless and untrue", according to a source.