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FORMER MERCK/SCHERING RESEARCHER INDICTED

Executive Summary

FORMER MERCK/SCHERING RESEARCHER INDICTED with an accomplice from pharmacological consulting firm, Biopharm Research, in trade secret conspiracy involving Merck's animal anti-parasitic ivermectin (Mecitzan) and Schering-Plough's anti-cancer drug alfa interferon (Intron-A), New Jersey U.S. Attorney Michael Chertoff announced Aug. 21. Bernard Mayles, PhD, and Mario Miscio, PhD, were arrested on Aug. 10 while attempting to sell ivermectin production documents and the microorganism needed to produce the drug for $1.5 mil. to an undercover FBI agent posing as a broker. Mayles and Miscio were each charged with one count of conspiracy, three counts of mail and wire fraud, and one count of interstate transmission of stolen property. Mayles was a senior research director at Merck from 1971 to 1982 and a former section leader in microbiological products and fermentation at Schering-Plough from 1982 to 1987. Miscio is director of Biopharm Research. Ivermectin is the largest-selling animal health product in the world. Merck also distributes ivermectin under the brand name Mectizan to residents of tropical areas of West Africa and South America for the treatment of river blindness. According to Schering-Plough, sales of Intron-A were over $100 mil. last year. Intron-A is currently indicated for Kaposi's sarcoma, hairy cell leukemia and genital warts and is in clinical trials for the treatment of hepatitis B, hepatitis C, AIDS and several forms of cancer. An FDA advisory committee recently recommended that the hepatitis C indication be approved. The indictment alleges that "the defendants obtained unauthorized possession of proprietary trade secret information from the pharmaceutical firms Merck and Schering-Plough and undertook to sell this information to potential buyers." The FBI was alerted to the scam by the security department of one of the pharmaceutical companies. If convicted, each faces up to 30 years in prison and millions of dollars in fines. Both pleaded not guilty to the federal criminal complaint preceding the indictment, and are free on$50,000 bail after appearing before an Atlanta federal court. The two will be arraigned within the next two weeks in Newark federal court. According to the U.S. Attorney's Office, "Mayles and Miscio had conspired since February 1990 to sell trade secrets relating to ivermectin." After asking $2.2 mil. for the ivermectin documents, the pair agreed to sell them for $1.5 mil. In subsequent discussions with the "broker," Miscio revealed that he had available for sale "information bearing on the processes for the production of specified product categories, including antibiotics, antivirals, anticancers, immunomodifiers, bioinsecticides, sweeteners, anti-ulcers and growth factors." On Aug. 10, Mayles and Miscio met with the "broker" in Atlanta and received $1.5 mil. in cash and bonds for 29 pages of information about the production of ivermectin and a sample of microorganisms needed to produce the drug. At the Aug. 10 meeting, Mayles also "discussed with the purchaser a prospective transaction for the sale of the technology for the manufacture of interferon for a price in the range of $6 mil. to $8 mil.," according to the indictment. The FBI subsequently arrested the pair and conducted simultaneous searches of the Biopharm Research labs in Hazlet, New Jersey, and Mayles' home in Manalapan, New Jersey. These searches also produced evidence of the defendants' plans to sell patent-protected information, the U.S. Attorney's Office said. Biopharm Research is not related to the contract clinical research firm Bio-Pharm Clinical Services, located in Blue Bell, Pennsylvania (see box, at left). BIO-PHARM CLINICAL SERVICES IS NOT TO BE CONFUSED WITH BIOPHARM RESEARCH, FIRM SAYS Excerpted and paragraphed by "The Pink Sheet" from an Aug. 22 letter from Bio-Pharm Clinical Services, Inc. VP-Finance and Administration Thomas Henwood. "Our company, Bio-Pharm Clinical Services, Inc. is an established, full-service contract clinical research organization. We were founded in 1985 and currently employ nearly 150 professionals at our Blue Bell, Pennsylvania headquarters (just outside of Philadelphia). Our clients include most of the large and mid-sized U.S. pharmaceutical firms and several European and Japanese firms as well. Within the Food and Drug Administration and with our clients, we enjoy a high-quality reputation and are well known in our business sector under the trade name "Bio-Pharm." For this reason we are concerned that existing and prospective clients may experience some confusion upon reading such articles; indeed we have already received some telephone calls to that effect. There is absolutely no connection between our firm and the company or the individuals mentioned in the published articles, and there has never been."

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