Cryo-Cell alleges Duke acted “fraudulently” related to pediatric cord cell deal

Cord blood banker Cryo-Cell and Duke have had a long-running agreement.

The potentially multi-million dollar deal has focused on the development of possible umbilical cord blood therapies for pediatric patients. A major first goal has been to open an infusion clinic, which I have been very skeptical about for various reasons. For instance, one big problem has been that the cord blood data so far have, in my view, not clearly supported continued infusion of kids.

Even so, while the agreement has evolved over time, I imagined it would continue for many years in some form.

Now I’m wondering if this deal has soured as Cryo-Cell is demanding arbitration with Duke. They have made serious accusations against the university.

Duke and Cryo-Cell in conflict

Let’s start with the PR announcement this week based on Cryo-Cell’s third quarter report. The company’s net income was up, so that’s a positive, but tucked in the PR was this unusual statement:

“Also, please note that significant disclosures are available in the Company’s Form 10-Q, filed with the Securities and Exchange Commission on October 15, 2024, associated with the filing of the Company’s Demand for Arbitration with Duke University. Consequently, the Company’s proposed spinoff of Celle Corp. is currently on hold.”

I was just about to do a post this week on some other news involving the partnership’s use of cord blood, but that will have to wait.

The hold on the firm’s planned Celle Corp spinoff is also important news in its own right. My sense was that Celle was going to be the basis for the infusion clinic.

Allegation of fraudulent actions

If you look at the actual Cryo-Cell third quarter SEC report, the arbitration demand is based on serious allegations against Duke:

“On October 4, 2024, the Company filed a demand for arbitration (the “Arbitration Demand”) against Duke with the American Arbitration Association (“AAA”), alleging that Duke fraudulently induced Cryo-Cell to enter the Duke License Agreement and breached the agreement on various occasions. The Arbitration Demand includes five counts against Duke, as follows: Count I – Breach of the Duke License Agreement; Count II – Breach of Implied Contractual Covenant of Good Faith and Fair Dealing; Count III – Fraudulent Inducement to Enter the Duke License Agreement; Count IV – Violation of North Carolina’s Unfair Trade Practices Act; and Count V – Unjust Enrichment. In connection therewith, the Company has requested that the arbitrator enter an award in the Company’s favor and against Duke for damages in an amount to be proved at a final hearing, interest, attorneys’ fees, and arbitration fees and costs, along with all other relief to which the Company is entitled at law or in equity. As of October 15, 2024, Duke has not responded to the Arbitration Demand. See “Note 12” and “Risk Factors” for additional information regarding Duke.”

I’m not an attorney. For that reason, I can’t comment specifically on the allegations but they sound quite serious even to a non-expert. The filing goes on to link the alleged actions by Duke to the hold on the spinoff. It may be in this kind of conflict that the language used, probably written by attorneys, tends toward the serious.

End of the deal?

I reached out to Cryo-Cell to try to get more details yesterday by email but have not gotten a response. I may do an update if I do get more information.

Could this signal the beginning of the end for the Duke Cryo-Cell relationship? Their deal expires on January 31, 2025, which is not that far off.

Does this development impact the apparent plans of the Duke expanded access program (EAP) to keep infusing unproven cord blood and cells for various pediatric neurodevelopmental issues?

I do hope much of the EAP-based infusions end until there are more encouraging clinical trial data first, if that ever happens.

Concerns on past autism element of EAP

Note that I have been an outspoken critic of some of the Duke EAP’s action. For instance, I felt that their continued infusion of autistic kids with unproven cord blood was seriously problematic.

Possibly unethical.

They were charging families around $15,000 for something that in the end turned out not to work and did have some risks. As best as I can tell, the Duke team continued infusing autistic kids through the EAP for a time even after the team’s own clinical trial produced largely negative data.

For these and other reasons, I called on the FDA to freeze this Duke EAP.  Eventually Duke stopped offering cord cells for autism through the EAP, although the reason for the halt wasn’t clear.

The EAP continued infusing kids with unproven cord cells for other conditions such as cerebral palsy (CP). These infusions may be ongoing even now. The early clinical trial data on cord cells for CP are mixed and this approach does not yet have final FDA approval. It seems to me that the team should have more encouraging clinical trial data before continuing these EAP-based infusions for CP or they should only be infusing a very limited group of children who have the best chance of benefit based on the early data, if such predictions are possible.

Why criticize the Duke team?

Finally, it’s not easy for an academic like me to bring critical coverage to a Duke team. Frankly, it also poses risks for me.

So why do it?

The continued infusion of hundreds of vulnerable kids with unproven cells really bothers me. There are some risks to this. The kids have to go through difficult things like traveling, getting medical procedures, and being sedated too. I feel like families were also given false hope.

Many unproven stem cell clinics offer unproven cells for autism too and, over the years, I’ve seen some concerning reverberations between the Duke team’s actions/words and some clinics. For instance the clinics would use Duke’s statements, clinical trials, etc. for marketing.

While I can’t go into specifics, it is also important to mention that people inside of Duke have been supportive of my shining some light on this complex, troubling situation over the years.