Calling it “an unprecedented level of deceit,” Hyperion Therapeutics president and CEO Donald J. Santel told an analyst conference call the company is terminating its DiaPep277 development program for newly diagnosed type 1 diabetes.

Brisbane, Calif.-based Hyperion said it has uncovered evidence certain employees of Andromeda Biotech, which Hyperion acquired in June, engaged in serious misconduct, including collusion with a third-party biostatistics firm in Israel to improperly receive un-blinded DIA-AID 1 trial data and use the data to manipulate the analyses to obtain a favorable result.

Additional evidence indicates the biostatistics firm and certain Andromeda employees continued the improper practice of sharing and examining un-blinded data from the ongoing DIA-AID 2 trial. All of these acts were concealed from Hyperion and others.

Hyperion has suspended the Andromeda employees known to be involved, is notifying relevant regulatory authorities and continues to explore its legal options. Hyperion said its employees were not involved in any of the improper conduct.

"This new information leaves us with no viable regulatory path forward," said Santel. "We're shocked and disheartened at the serious misconduct and deceit by the implicated Andromeda employees, both before and after the close of our transaction.”

Santel said the company uncovered the deceit while analyzing efficacy results. Andromeda employees had reported excluding 34 blinded patients to arrive at their results. However, when those 34 patients were added back in, “treatment efficacy was lost,” Santel said. Further inquiry revealed those data on the 34 patients had been improperly un-blinded. It was “a coordinated effort to conceal and mislead,” he said.

He told analysts the level of data analysis necessary to uncover the deceit would not been possible before the acquisition was finalized, and that the deception, particularly to regulatory authorities, was “extraordinarily serious.”

“Patients and clinical investigators invested years of their lives in the expectation of an honest result,” Santel said. “We will be engaging with clinical investigators and are prepared to complete the DIA-AID 2 trial because the data may still yield useful insights into the natural history of type 1 diabetes. However, we will not invest further in DiaPep277 beyond completing the DIA-AID 2 trial and meeting our obligations to close out the investigational program as a whole."

The last patient visit in the DIA-AID 2 trial is anticipated to occur in the fourth quarter of 2014. The company expects to record a non-cash impairment charge in the range of $25 million to $55 million.

Hyperion Therapeutics is a commercial-stage biopharmaceutical company committed to developing and delivering life-changing treatments for orphan diseases. The company's first commercial product, RAVICTI Oral Liquid, was approved in February 2013.