NEW ORLEANS – Months after announcing a large investment from a private equity firm and a huge expansion partially funded by taxpayers, a local biotech lab is facing serious financial issues.
According to statements from employees at Renaissance Rx, who have asked not to be identified, the biotech firm is laying off staff after funding was pulled from a Medicare study - the source of tens of millions in revenue for the company.
Held up as an example of the success of New Orleans’ nascent technology start-up sector, Renaissance Rx has been an economic development darling, growing from three employees in the fall of 2012 to more than 900 nationwide as of late last year, of which 80 were headquartered in the start-up incubator New Orleans BioInnovation Center.
In September, the biotech firm announced it would be moving out of the business incubator by investing $8 million into a 30,000 square foot facility located on St. Charles Avenue in New Orleans. Louisiana Economic Development made a joint announcement with the company that the move would add 425 high paying jobs at an average annual salary of $54,100. The move also would in part be supported by tax incentives and other state programs, including grants worth $925,000 over the next five years.
In November, two months after announcing the multi-million dollar renovation of the new headquarters and staff increases, Renaissance Rx received an investment said to be worth more than $50 million by TPG Growth, an international investment fund, in return for a 20 percent stake in the business. On its face, the TPG investment would appear to value Renaissance Rx at $250 million.
However, in December, Medicare suspended funding pending review of Renaissance Rx’s purported cash cow–a government funded genetics information sharing study named the Diagnosing Adverse Drug Reactions Registry (DART) through which the company received tens of millions in payments for enrolling patients.
When business was apparently booming, the company reported processing between 1,200 to 1,600 of its advanced DNA tests daily at a cost of $600 each, and between 700 to 1,000 toxicology tests at $95, according to May 9, 2014 article in nola.com. The article also quoted company founder Dr. Tarun Jolly on Renaissance Rx's "intense, crazy growth."
In seeking comment regarding the suspension of funding for the study, both Novitas Solutions, the regional Medicare contractor overseeing the DART study, and the Centers for Medicare & Medicaid Services, refused to comment, citing privacy regulations.
"Under Privacy Act regulations there is nothing we can share on alleged situations, only convictions," said Tony Salters, spokesman for the Centers for Medicare & Medicaid Services.
The DART registry is billed as a cutting edge advance in genetics testing that was developed in part to identify genetic markers in patients that may point towards their predisposition to not be able to metabolize pharmaceutical drugs, thus making them ineffective or even harmful to the patient. In fact, according to company insiders, an estimated 75 percent of Renaissance Rx’s revenue last year – which could be as much as $250 million, according to employees’ anecdotal reports – was based on the company’s participation in the DART study alone.
Now that funding has been suspended, the company is said to be struggling to pay employees for work completed through the end of 2014.
A doctor of pharmacy who spoke to the Louisiana Record, and asked not to be identified, was hired just prior to the suspension of the DART study. The doctor was fired only weeks later, along with 90 percent of the firm’s doctor of pharmacy employees, the doctor said.
When asked to comment, a spokesperson for Renaissance Rx declined to answer any questions relating to the company’s finances or layoffs following the Medicare pullout.
Instead, spokesperson Amy Dye, via an emailed statement, said Renaissance Rx is still progressing as a company.
“The Company is continuing to make progress in the field of personalized medicine that is changing the way physicians treat their patients, choose the right medications and improve outcomes,” Dye wrote. “We remain focused on our business.”
However, a letter mailed to doctors enrolled in the Renaissance Rx study in early January stated that the firm had suspended its Medicare funded genetic testing while the DART study is under review. It also stated that the firm was “removing” collections staff to defray operational costs.
In recent weeks the owners and founder of the biotech firm have come under fire on medical service professional chat boards, such as www.cafepharma.com.
Genesis of Renaissance Rx
Renaissance Rx was first registered with the Louisiana Secretary of State under its former name UTC Laboratories LLC in June 2012 by founder Dr. Tarun Jolly. In July 2013, UTC Laboratories LLC was renamed Renaissance Rx and added medical sales and business veterans Patrick Ridgeway, of Jackson, Miss., and Barry Griffith, of Little Rock, Ark., to its roster of registered agents/owners alongside Jolly.
Both Ridgeway and Griffith had connections to a similar genetics company, Washington-based Natural Molecular Testing Corp., before its 2013 bankruptcy in which it named Ridgeway and Griffith as creditors. Notably, the author of the DART study, Karthik Kasirajan, was formerly chief medical officer at Natural Molecular in 2012 and later served in a similar capacity at Renaissance Rx.
In 2013, Ridgeway’s brother, Christopher Ridgeway, now a general manager at Renaissance Rx, was named in a federal lawsuit brought by medical device manufacturer Stryker for allegedly conspiring to steal $3 million worth of business in the New Orleans area. Among allegations in the suit filed in federal court in the Eastern District of Michigan are that Christopher Ridgeway, when his brother Patrick Ridgeway was area sales director/distribution for Natural Molecular, sold their products through his side business Stone Surgical while on the job for Stryker. Also, in the lawsuit, Stryker alleges that “[i]n August 2013, government complaints related to Natural Molecular forced Ridgeway to shut down this company, but Ridgeway began offering a similar product through Renaissance RX.”
In contrast, Jolly is listed as an agent and owner or partial owner in several medical businesses in the New Orleans area, most notably Louisiana Pain Specialists that has specialized in chronic pain management care for patients since its founding in 2009.
That company’s website currently lists five pain management centers in the New Orleans area under its operation. Louisiana Pain Specialists and Jolly are facing a legal challenge from business partner David Guzan.
In a lawsuit filed in Orleans Parish Civil District Court on Jan. 6, Guzan accuses Jolly of not having paid him $382,615.36 in wages and a bonus due for work as an executive at Louisiana Pain Specialists and also failing to provide him with a promised one percent stake in Renaissance Rx for serving as its interim CEO for a 10-month period as the company transitioned from UTC Labs to Renisassance Rx.
Guzan says in the lawsuit that for his services as interim CEO at UTC Labs and Renisassance Rx he was to receive part ownership in lieu of a salary and that further he was shown a draft of a membership interest listing him as owning one percent of the company with another partner, Aaron Dirks, owning five percent and Jolly owning the remaining 94 percent.
Guzan now claims that Jolly is trying to back out of the promise of granting him any ownership interest in Renaissance Rx and has instead offered payment in the amount of $75,000 for his services.
Additional legal trouble for Jolly has also surfaced through another company he owns, Renaissance Compounding. It is currently facing suit over the alleged default of a $15.15 million purchase of two suburban New Orleans pharmacies located in Destrehan.
In that lawsuit, the former owner of Destrehan Pharmacy, Bruce Burkenstock Jr., has alleged Jolly and Renaissance Compounding entered into an agreement in December 2013 to purchase two Destrehan Pharmacy locations.
Burkenstock claims Jolly and yet another business operated by Jolly, Tarun Jolly Enterprises LLC, were to pay him a $250,000 down payment as well as $14.9 million in monthly payments over a two-year period, but after only four payments Jolly defaulted on the contract by only paying him $600,000 when he was owed $2,664,740.64.
According to the lawsuit filed in Louisiana’s 24th Judicial District, Burkenstock is currently engaged in a battle with Jolly to retake control of the Destrehan Pharmacy locations following the alleged default and has filed a restraining order against Jolly and his associates to ensure they do not remove valuables from the pharmacies during the dispute.