Phosphagenics under microscope over irregular accounts
by: REBECCA URBAN From: The Australian July 06, 2013 12:00AM
AS a chief executive, Esra Ogru was a marketer's dream. Photogenic, personable and smart, the head of Melbourne-based biotech Phosphagenics was equally at home spruiking the company's "cosmeceutical" products on the television shopping networks as she was serving on high-level government advisory bodies or speaking out about biotechnology industry issues.
The molecular biologist, who was plucked from inside the laboratory to run the company three years ago, seemingly had the world at her feet. Held in high regard by the company's board, she was recently awarded a 23 per cent pay rise, taking her salary package to $338,000 a year.
But now Ogru, who is married with two young children, is understood to be "devastated" following the discovery of irregularities in the company's financial accounts that resulted in her immediate suspension from her duties -- just one day before her 38th birthday.
The revelation by the company earlier this week has shocked the tight-knit biotechnology community and speculation about what might have occurred has been rampant.
Although a team of forensic accountants began their work only yesterday, early indications are that the irregular transactions in relation to the invoicing and accounting records of the company had led to the removal of funds over a period of time, possibly several years.
The discovery, however, was made only following the recent appointment of new chief financial officer Anna Legg, who joined the company in January and is believed to have taken her concerns directly to the board.
The Weekend Australian understands that Phosphagenics sought legal advice last week before making the decision to suspend Ogru. It is also understood that her suspension stemmed from "prima facie evidence" of her alleged involvement in the irregular transactions, rather than any management oversight that might have contributed to the losses.
Her personal assets, which include several properties, will be subject to the accountants' probe. Property and real estate records show that Ogru was the co-purchaser of a house in Melbourne's Noble Park for $350,000 earlier this year.
She also owns properties in Wheelers Hill, Mount Waverley and in the Victorian seaside town of Portarlington.
Phosphagenics is understood to be considering possible steps to recoup the funds, which it has described as "material".
Ogru has not spoken out about the matter and she did not respond to calls this week.
There is little doubt, however, that the scandal couldn't have come at a worse time for Phosphagenics, which is widely known for its Elixia and BioElixia skincare ranges that include an anti-cellulite cream whose hero ingredient happens to be the same peptide at the centre of the Essendon Football Club doping scandal.
The products are sold in department stores David Jones and Myers as well as several international retailers.
The company's main game, however, is its drug delivery technology, known as Targeted Penetration Matrix, or TPM.
It has spent 10 years and more than $60 million developing the technology in a bid to be the first to deliver an oxycodone patch to the market.
Advanced trials of the much anticipated pain relief patch are due to start in the next six months.
And while Phosphagenics has stressed that its finances remain sound -- it has about $14m in the bank -- some investors are concerned about the possible reputational damage to the company when it is in the process of seeking commercial arrangements with larger pharmaceutical companies.
One fund manager, who declined to speak on the record, said it was natural that questions about the company's financial management would flow on to include questions about the scientific merits of its projects.
One analyst said the company's board would also be called on to explain how the irregular transactions could have occurred.
Its unusual management structure also might come under questioning.
Company founder Harry Rosen, who has been based in the company's New York office, returned to Australia earlier this week to assume the role of chief executive. Having mentored his colleague across many years, he is said to be in disbelief over what may have transpired.
Stockbrokers Bell Potter and RBS Morgans have both suspended coverage of the company pending the outcome of the investigation.
POH Price at posting:
10.5¢ Sentiment: LT Buy Disclosure: Held
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