FDA alleges Cell Surgical Network links to US Stem Cell & COVID plan

The FDA has sought injunctions in federal court against two stem cell clinic firms including the clinic chain Cell Surgical Network headquartered here in California and US Stem Cell in Florida.

According to new documents filed by the government in federal court here in California there may be more ties between the clinic firms than both just being defendants in these parallel cases. Note that the Department of Justice (DOJ) represents the FDA in such cases.

In my view, the new DOJ documents make some surprising allegations.

US Stem Cell and Cell Surgical Network court cases

Sean Berman, Cell Surgical Network, American Cell Technology
Sean Berman of Cell Surgical Network and American Cell Technology.

US Stem Cell and Cell Surgical Network both have marketed versions of a type of fat stem cell-related product called stromal vascular fraction or SVF. A minor component of SVF appears to be stem cells. The composition likely depends on many factors including how you make SVF and each patient’s characteristics.

The FDA has said that SVF is a drug product and neither firm had the needed FDA approval prior to using it in patients. Hence the suits seeking injunctions.

The clinic firms have both argued that SVF should not be a drug subject to FDA approval.

US Stem Cell already has lost both the initial case against it and its appeal of the ruling so the injunction on that Florida firm stands. On that level SVF appears to be a drug.

However, it’s not that simple. The FDA suit for injunction against Cell Surgical Network, et al. is still pending a court decision so things remain unresolved.

Closing arguments before Judge Bernal here in California were supposed to start today, but have been delayed, probably substantially. I’m guessing we won’t see a final court ruling until at least late August. By way of disclosure I testified for the FDA in this case.

Prior to closing arguments, the plaintiffs and defense have been making various written statements with the court. It was one of these by the DOJ that struck me as particularly important.

Sean Berman, new Florida firm ACT, & US Stem Cell cryobank?

Here is the section from the new DOJ filing that caught my attention (emphasis mine on 3 passages):

“107. Additionally—and despite multiple misrepresentations to the contrary—Defendants did not stop manufacturing and administering their Expanded SVF product even after FDA sent a Warning Letter52 to Defendants’ third-party contract manufacturer in January 2018 and initiated this case. The evidence clearly shows that after that third party New Jersey laboratory received the Warning Letter and was advised by its own attorneys not to release any more expanded cells, Defendants did not stop providing the Expanded SVF product to their patients. Rather Defendants merely redirected their patients to an alternative source for expanded cells, namely from a Florida company called U.S. Stem Cell. When a federal court in the Southern District of Florida later enjoined U.S. Stem Cell from manufacturing its adipose tissue-derived SVF products, the Florida company promptly sold its stem cell-related inventory to American Cell Technology (“ACT”)—a newly formed Florida company managed by Defendant Berman’s son, Sean Berman, who serves as CSCTC’s Director of Scientific Research and CSN’s Head of Operations. On cross examination, Defendant Berman confirmed that CSN is currently working with ACT to treat COVID-19 patients pursuant to a CSN protocol.”

Note that CSCTC stands for California Stem Cell Treatment Center, the flagship clinic of Cell Surgical Network.

In the section I highlighted in green, the DOJ/FDA are claiming that patients were redirected by the defendants to US Stem Cell. If correct, that’s surprising to me. Why would one clinic firm redirect their patients to another firm? What’s in it for them? Would these patients still remain customers of Cell Surgical Network too?

Secondly, the DOJ is alleging in the section that I bolded in black that Sean Berman, who works in a leadership position at Cell Surgical Network and is the son of Dr. Mark Berman (co-founder of the network), is also in a leadership role in a new firm called American Cell Technology (“ACT”), which purchased the U.S. Stem Cell cryobank of cells.

So according to the DOJ, the new firm ACT seems to link the Cell Surgical Network and US Stem Cell firms together in an important way via Sean Berman. This is the first time I’ve seen this in the public domain.

Why buy the US Stem Cell cryobank?

In 2019 I had noted mention of Sean Berman as a leader of ACT and noticed ACT’s purchase of the US Stem Cell cryobank. At that time I reached out to the defendants about this and Sean Berman too, but didn’t get clarity on it.

Why would Cell Surgical Network/CSCTC or at least Sean Berman himself want to buy or at least have some role in the purchase of the cryobank of frozen customer cells from US Stem Cell via the new company ACT? It’s puzzling to me.

I would think that many of the vials of frozen cells actually belong to the customers of U.S. Stem Cell. If so, how could they be used by ACT potentially for other purposes?

Are there other materials of value in that same cryobank? For example, lab-expanded cells intended for allogeneic use? Or are there Cell Surgical Network customer cells in that cryobank that could be used in an autologous fashion?

Did Cell Surgical Network and US Stem Cell (and ACT) have some kind of agreement?

Too many questions and not enough answers so far.

Cell Surgical Network & COVID plan?

The red-highlighted part of the DOJ filing is also surprising to me if correct.

Cell Surgical Network is or was planning COVID-19 treatments?

How could Cell Surgical Network potentially try to treat COVID-19? The DOJ mentions later in the same filing that it would be done with laboratory-expanded MSCs.

The prior US vs. Regenerative Sciences case solidified FDA authority to regulate laboratory-amplified stem cells as drugs and I think that should include SVF. That case would seem to be relevant here.

What’s the rationale for using SVF to treat COVID-19? I’ve recently written in STAT News about how in my view so far there is no compelling evidence that stem cells or other cellular therapies can be used to effectively treat COVID-19.

Looking ahead on SVF & Cell Surgical Network

With closing arguments delayed, we’ll have to wait and see how each side might wrap up their cases and whether these factors come into play in those arguments or not.

While the DOJ/FDA have prevailed in Florida and with the appellate court on that case, if the California federal district court rules the other way, things could be left in a confused state as to FDA oversight of SVF and the firms that use it.

If instead Judge Bernal rules in favor of the FDA in congruence with the Florida ruling (and the appellate ruling), that would strongly solidify that SVF is a drug product subject to FDA oversight. Would Cell Surgical Network, et al. appeal?

The final ruling by Judge Bernal in this California case is going to be crucial either way it goes.

Another possible complication is that there could be a kind of split ruling as well. Bernal might find that certain uses of SVF make it a drug, but in other contexts it is not a drug.

4 thoughts on “FDA alleges Cell Surgical Network links to US Stem Cell & COVID plan”

  1. @Bill, You’re welcome. One other bit of minutia to note per my reply: The reasoning/reasons that judge Ungaro put said, “Stipulations as to all SVF is to be inventoried, cataloged, prominently labeled, not touched, etc” per her “Summary Judgement” ruling was, that IF she did not get overturned on appeal by the 11th circuit- the “SVF Product” instantly became an “Adulterated drug product” ! That is the key material fact on which all described in Dr Paul’s article above turns. Once the FL case was a “Win” for the United States as plaintiff- that SVF became an “adulterated and mis-branded drug product”. Thus, at that point it’s obviously illegal to handle it, ship it via interstate commerce to any “customer” or end user, etc. It’s contraband effectively, aka no different than street drugs from a legal stand point. Thus, the real puzzle in what Dr Paul points out above – is how did Sean Berman “take possession” of said SVF and how did CEO Tomas of U.S. Stem Cell Inc “legally” transfer it to him, etc? You can see – a bunch more questions are created, than answered here? Also, it’s patently clear on a time-line, that when CEO Tomas cut loose that cryo-bank to one Sean Berman, “they” had already seen or found out the results of “Permanent Injunction” and all stipulations as to “SVF being an adulterated drug” defined by judge Ungaro as I describe above. This one’s a head scratcher on many levels and IMO I’m not sure we’ve seen the last of it yet. Dr Paul above, raises even more puzzle pieces and un-answered questions to this very convoluted saga and on-going tale.

  2. @ Bill Jones – your comment IMO on its face is “interesting”. However, this matter as described in the article cited above is not that simple. One must go back to the original injunctive action that was the result of U.S. Stem Cell Inc and their clinic losing in both the FL lower district court and then on appeal at the 11th circuit. Judge Ursula Ungaro of the district court “summary judgement’ ruling, she put strict stipulations in her final ruling and they were to “stand” unless the 11th circuit overturned them which they of course did not; and one of those stipulations was ALL “SVF” held by U.S. Stem Cell in their cryo-bank service they offered, it was to be inventoried, labeled down to the minutia, marked with prominent displays “it’s not to be touched” and IF the 11th circuit stood by her ruling, it was then to be destroyed by the FDA.

  3. “I would think that many of the vials of frozen cells actually belong to the customers of U.S. Stem Cell. If so, how could they be used by ACT potentially for other purposes?” – because they can be used legally abroad?

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