Former Hepion Pharmaceuticals (NASDAQ:HEPA) CEO, Robert Foster, PharmD, PhD, is suing the company and its Board members for illegal termination of his employment, breach of contract, and breach of the covenant of good faith and fair dealing.
Dr. Foster initially joined Hepion as CSO in May 2016, when Hepion merged with Dr. Foster’s privately held company, Ciclofilin Pharmaceuticals, where he and his clinical team discovered rencofilstat. He was appointed CEO of Hepion in October 2018.
In a complaint filed with the Superior Court of New Jersey last week and obtained by BioTuesdays, Dr. Foster accused Hepion of, among other things, making false statements to secure a $5 million investment from Armistice Capital to help the company “further develop its drug candidate, rencofilstat,” which was in Phase 2b testing.
Meanwhile, and unbeknownst to the investor, the chair of Hepion’s Audit Committee was developing and driving an austerity program at the company, “that would result in the layoff of almost the entire Hepion workforce with the goal of engineering a reverse merger to utilize Hepion’s Nasdaq listing and retaining a minimum $8 million of cash,” according to the court filing. Dr. Foster contends that he vehemently objected to the austerity plan, but it was nevertheless endorsed by the Board, despite management “presenting a cash runway with full operations in Q1, 2025.”
On the heels of all that, while the austerity plan initiative was still in secret development, Hepion announced additional data from its previous Phase 2 ‘ALTITUDE-NASH’ clinical trial of rencofilstat, demonstrating that 17 weeks of rencofilstat treatment significantly reduced liver stiffness in subjects with advanced F3 NASH. The improvements in liver stiffness scores were similar or better than scores shown by Akero, 89bio, Intercept, and Madrigal with their drugs in development for liver diseases, including NASH, and improvements in several biomarkers were also shown, according to the complaint.
Then, two weeks after the positive data release, on November 27, 2023, Hepion’s entire senior management team, including Dr. Foster, submitted a letter of protest about the austerity program that the Board was gearing up to implement. According to the court filings, the letter stated, “Our concern is that the Board’s abrupt and ill-conceived plan will not satisfy the test [fiduciary duty to stockholders under Delaware law] and will subject it and the company to a successful challenge by investors who believe that they have been misled into investing based on the belief that the Company is committed to developing rencofilstat.”
Despite everything, on December 4, 2023, the majority of the Hepion board voted in favor of implementing the austerity program, and Dr. Foster submitted his letter of resignation “with good reason as he refused to participate in implementing the austerity plan which he reasonably believed constituted a fraud on Hepion’s investors.” And Dr. Foster wasn’t the only one to leave the company. Peter LJ Wijngaard, PhD, also resigned from its board, and while no reason was cited in the company’s corresponding 8-K filing with the SEC, Dr. Foster asserts in his complaint that it was also in protest of the austerity program approval.
Later, on the same day of Dr. Foster’s resignation “with good reason,” Hepion’s board fired him, allegedly for cause. On December 7, 2023, Dr. Foster’s departure from the New Jersey-based pharma company was announced along with the Board’s approval of a “restructuring plan to enhance shareholder approval.”
Finally, on April 19, 2024, Hepion announced it had begun wind-down activities in its Phase 2b ‘ASCEND-NASH’ trial while it continued “to explore strategic alternatives.”
