Hyperion terminates DaiPep277 program due to "misconduct"

Shares of Hyperion Therapeutics’ (Nasdaq: HPTX) plunged 11% to $24.61 in pre-market trading today, after the company announced it is terminating development of DiaPep277 for newly diagnosed type 1 diabetes.

The company has uncovered evidence that certain employees of Israel-based Andromeda Biotech, which  Hyperion acquired for what could have been nearly $600 million from Clal Biotechnology Industries (CBI: TA), engaged in serious misconduct, including collusion with a third-party biostatistics firm in Israel to improperly receive un-blinded DIA-AID 1 trial data and to use such data in order to manipulate the analyses to obtain a favorable result. The up-front payment was $20 million in cash and stock and there was a potential $550 million more in milestones.

Additional evidence indicates that the biostatistics firm and certain Andromeda employees continued the improper practice of sharing and examining un-blinded data from the ongoing DIA-AID 2 trial. All of these acts were concealed from Hyperion and others. The company has suspended the Andromeda employees known to be involved, is notifying relevant regulatory authorities, and continues to investigate in order to explore its legal options. Hyperion employees were not involved in any of the improper conduct.