Behind Kapa’s Multi-billion Rand Covert Sale

Over two months ago the chief executive of Technology Innovation Agency (TIA), Barlow Manilal, informed the public that the state agency was taking our revelations of fraud against his Agency very seriously and “is handling the matter through appropriate internal processes.” The ‘handling’, it appears, has hit a brick wall: TIA’s board is out of its depth.

Our report revealed how Americans Ronald and Paul McEwan conspired with certain experts to swindle billions of rands from TIA, which had funded their gene technology start-up in 2006. An arm of TIA (then known as Cape Biotech Trust) provided R25 million seed capital to Kapa Biosystems to start a research, development and manufacturing facility in Cape Town, South Africa. But when father and son decided to sell the operation to Swiss multinational healthcare company Roche Holding AG, they deliberately concealed crucial details of the take-over negotiations from TIA, which held 49% of its shares. The McEwans offered to refund the seed capital plus some interest, which the state agency happily accepted.

TIA was duped by some of its executives who colluded with highly paid experts contracted to annul the partnership with Kapa Biosystems. It now appears the state agency wasn’t the only victim of the multi-billion rand scam. Information we have since obtained indicates Roche may have been duped as well. Also left licking wounds are some unidentified American angel investors who were roped in to supplement the R25 million that Cape Biotech Trust had committed in 2006.

Since publishing the report, uSpiked has been sifting through a convoluted web of deceit to understand what exactly Roche bought from the Americans for R6.464 billion. The digging returned the acronym IP (Intellectual Property), and so our team retained IP Attorneys to establish exactly what Roche was willing to pay billions of rands for. It appears the scheme for the hefty payout was initiated in 2009.

Hidden in plain sight: The real value of technological out-fits lies in their IP. Did the outsourced experts working on the Kapa buyout mess up?

Kapa Biosystems, the entity Roche purchased, owned (but not exclusively) all the rights to the four Intellectual Properties (patents) that had been applied for and registered to its name. In all the four applications, Kapa Biosystems deliberately surrendered the respective rights to its employees who were also the inventors of the products. So, by buying the gene technology company for $445 million, Roche was essentially buying the rights to own and use the four inventions worldwide, except in the United States of America. The executives of Kapa Biosystems deliberately assigned exclusive rights for the US to its inventors, including Paul McEwan, the son of the founder of the outfit.

In the unlikely event Roche never negotiated the rights for the US separately, the company would in perpetuity dig into its shareholders’ dividends to keep the Americans happy. One of the consulting IP attorneys doubted that Roche would have failed to pick up on the multiple registrants. “You wouldn’t go to Air Salvage International to shop for a new jet unless you are a collector. Roche wasn’t shopping just for parts of what Kapa guys had invented. It would have been cheaper to negotiate with the all the rights holders at the same time instead of waiting to burn shareholders’ money.”

Could this explain why one of the South African inventors, Gavin Rush, got an eight-figure payout when the deal was finally signed? Since his registrant rights for the US are still in place, was the hefty payout meant to quell any uncomfortable questions from him and his likes? We called his telephone number several times to find out more, but the calls went unanswered.

All the four granted patent applications linked to Kapa Biosystems that our IP attorneys managed to trace have Cape Town base as the common factor, and are dated after the cash injection by Cape Biotech Trust. The other common element with these IP applications and subsequent registration is the identification of the registrants as South Africans while most of them are actually Americans. These beef up our earlier assertion that without the initial seed capital from TIA, there would have been nothing for Roche to purchase.

CHIMERIC DNA POLYMERASES

On November 3, 2009, the company made an application under application number 2742593. In the application’s abstract, it stated: “The present invention provides, among other things, chimeric DNA polymerases containing heterologous domain having sequences derived from at least two DNA polymerases that have at least one distinct functional characteristics and methods of making and using the same. In some embodiments, the present invention can combine desired functional characteristics of different DNA polymerases in a chimeric polymerase.” Listed as its inventors were: Paul McEwan, Bjarne Faurholm, William Bourn and Gavin Rush [all of Republic of South Africa].

This application for patent registration smartly ring-fenced a country that is known for its lead in genome matters, United States of America. Analysis of data provided to our team from World Intellectual Property Organization, there were five applicants; McEwan, Faurholm, Bourn and Rush [the applicants for the US and its territories only]. Kapa Biosystems was the applicant for the rest of the world excluding the US.

According to our consulting IP attorneys, even without the sale to Roche, Kapa Biosystems would have required a license from the four had they wanted to use the technology in the US.

MODIFIED TYPE A DNA POLYMERASES

Also applied for on November 3, 2009 and assigned application number 2742574, the application’s abstract stated “The present invention provides improved DNA polymerases, in particular, type A DNA polymerases, that may be better suited for applications in recombinant DNA technologies. Among other things, the present invention provides modified DNA polymerases derived from direct evolution experiments designed to select mutations that confer advantageous phenotypes under conditions used in industrial or research applications.” Its inventors were listed as Maryke Apple, William Bourn, Gavin Rush, John Foskett and Paul McEwan [all of Republic of South Africa].

As in the first application, all the inventors were listed as the applicants for the US territorial areas, while Kapa Biosystems was listed for the rest of the world excluding the US.

MODIFIED DNA POLYMERASES

The application was also made on November 3, 2009 under application number 131274225, and was described as; “The present invention provides, among other things, modified DNA polymerases containing amino acid alterations based on mutations identified in directed evolution experiments designed to select enzymes that are better suited for applications in recombinant DNA technologies.” Its inventors were provided as Bourn, Faurholm and Foskett [claimed to be of Republic of South Africa]. The three were similarly listed as the applicants for the territorial US while Kapa Biosystems was the applicants for the rest of the world excluding the US.

MODIFIED DNA POLYMERAES FOR IMPROVED AMPLIFICATION

Patent application for this invention was made on January 13, 2012 under application number 1397509. The abstract stated: “This present invention provides improved DNA polymerases that may be better suited for application in recombinant DNA technologies, in particular, technologies involving plant-derived samples. Among other things, the present invention provides modified DNA polymerases derived from directed evolution experiments designed to select mutations that confer advantageous phenotypes under conditions used in industrial or research applications.” Its inventors were provided as, Wolfgang Schafer, Paul McEwan, Eric van der Walt, John Foskett and William Bourn. Like in the previous applications, all the inventors were logged applicants for the United States and all its territories while Kapa Biosystems was the applicant for the rest of the world excluding the US.