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Cancer researcher battling Semafore in court

May 29, 2010

A battle between a cancer researcher and Westfield-based Semafore Pharmaceuticals has been transferred from a federal court in Atlanta to U.S. District Court for the Southern District of Indiana.

Donald L. Durden, formerly a professor of pediatrics at Emory State University, filed suit against Semafore last October, in Georgia.

Durden had developed a promising anti-tumor compound and was working with Semafore toward product development. But Durden alleges Semafore breached its agreement with him and refused to pay royalty income after it appeared the compound, known as SF 1126, could generate “tens of billions” of dollars in sales.

Durden, who now works as a researcher at Moores University of California, San Diego, claims he’s owed more than $174,000.

He seeks a preliminary injunction to allow him to continue working with “a drug that he co-invented and that could potentially save millions of lives.”

Semafore in court filings has broadly denied his allegations.

Durden alleges that Semafore as far back as 2003 tried to modify or terminate various financial payments to him, including a right to 10 percent of the net licensing and royalty income.

After he resisted signing new agreements, Durden alleges, Semafore devised a complex scheme to transfer assets within the company.

“The fraudulent transfer that is the subject of the present litigation is the product of an incestuous relationship so extreme that the Court will probably hear banjo music in the background,” his attorneys wrote in a filing this month. He alleges in July of last year Semafore made a voluntary decision to surrender all its assets—including stock—to Park Funding LLC, a lender to the company, to satisfy debt.

Durden said some of the managing directors of Park were board members of Semafore.

“Because of this corporate shell game, the defendants now claim that Plaintiff Durden, the inventor of this promising cure for cancer, will be entitled to no compensation for his many years of effort.”

Lawyers for Semafore, in a filing last April, said Durden as part of his original agreement assigned any technology developed to Semafore.

Further, the company argues that its obligation to pay Durden was contingent on commercialization, among other prerequisites.

Semafore said that, before 2008, it financed its operations by selling equity stakes in the company to generate more than $20 million. It said when the money ran out in 2008, the company avoided bankruptcy by financing operations through the sale of $5 million in convertible promissory notes.

With further efforts to sell Semafore or to find partners failing, Park Funding exchanged its existing notes for new promissory notes to provide an additional $2 million in capital to operate through last June 30.

Semafore said it pledged its assets—including its intellectual capital—as collateral.

Semafore “was unable to sell the company or license its technology before June 30” and defaulted on the loan, according to court filings.

Park Funding is now the owner of the company’s assets, including the technology Durden helped develop, the company said.

Ultimately, Semafore argues, the technology does not revert back to Durden.

“Plaintiff (Durden) has no ownership interest in any of the Defendants’ assets and is not entitled to any payments under the agreement between the parties.”

In April, Semafore presented data at the American Association for Cancer Research’s annual meeting that SF 1126 has “broad preclinical anti-tumor activity” in myeloma and lymphoma.

The company also said it signed an agreement with North Carolina-based Technomark Life Sciences to help accelerate additional clinical research.

In 2006, Semafore received $4 million from a group of funders that included the state’s 21st Century Research and Technology Fund.•

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