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Shares tumble after CSIRO-linked company announces inquiry

Date

Linton Besser

CSIRO

CSIRO

DataDot Technology Limited, a CSIRO partner company which knowingly sold a compromised anti-counterfeit device to one of the world’s biggest pharmaceutical companies, has announced a top-level inquiry into the affair, as shares in the company fell dramatically in trading on Monday morning.

In 2010, DataDot’s joint venture with CSIRO, DataTrace DNA Pty Ltd, signed a five-year deal with Novartis to supply a custom-designed high-security "tracer" - to be manufactured by the CSIRO - to protect the company’s range of injectible Voltaren from the booming black-market trade in fake medicines.

The tracer was a microscopic phosphor-based powder mixed into ink and painted on to the neck of hundreds of millions of ampoules. The luminescent chemical was meant to emit a unique light frequency which could be identified with a hand-held portable spectrometer.

DataDot Technology: The joint venture between DataTrace DNA and CSIRO which convinced Novatiris to buy an easily compromised product.

DataDot Technology: The joint venture between DataTrace DNA and CSIRO which convinced Novatiris to buy an easily compromised product.

But a Herald investigation revealed last week that the company misled Novartis and instead issued it with cheap chemicals it had bought from China which were widely available at the time.

Shares in DataDot Technology were down 28 per cent in the first hour of trading on Monday, hitting 1.8¢ a share. Its market capitalisation fell accordingly from $12 million before the market opened to $8.7 million.

DataTrace’s key scientist, Gerry Swiegers, who had begun work on the project as a CSIRO employee, had repeatedly told the company not to proceed with the sale of the bulk tracer, warning of "life-and-death implications" should the drug be targeted in a counterfeiting attack.

Hundreds of people have died in recent years from the administration of fake medicines. Last year, Interpol and drug companies launched a co-ordinated strike force against counterfeiters, resulting in 80 arrests across the globe.

After the Herald’s report, the sharemarket announced last week that DataTrace’s parent company, DataDot Technology Ltd, had sought a trading halt until Monday to in order to generate a response.

In a long statement issued before the market opened on Monday, the company said there has been "insufficient time ... to establish all of the facts relating to the sourcing of materials and relevant manufacturing details for the European pharmaceutical customer".

"The Board has therefore commissioned DataDot’s General Counsel, with assistance from the Company Secretary, to conduct an investigation into all aspects of the matter and report his findings to the Board," the statement said.

"They will have access to all emails and other company records and will confer with staff, former staff if able to do so, the CSIRO and the European pharmaceutical customer if possible."

"DataDot is committed to observing ethical conduct of the highest standard among its employees, contractors and in its dealings with customers."

DataDot also said: ‘‘The Fairfax Media reports contain the false claim that in the case of the European pharmaceutical customer single tracers are bought in bulk by DataTrace, rebranded and re-sold to the customer. In fact, DataTrace supplies the European pharmaceutical company a suite of formulations using more than one formula.’’

But confidential internal company documents seen by the Herald show that both formulas used to make up the code issued to Novartis were purchased from DaMing, a fluorescent lighting supplier in China.

Indeed, in August 2011, DataTrace purchased from DaMing 150 kilograms of the two phosphor formulas it supplied to Novartis, according to company records.

Three months before the deal was announced to the market in mid-2010, Dr Swiegers warned: "The code which has been offered to Novartis may not be fit for purpose … because the code material is commercially available from a variety of vendors."

"If there is a serious counterfeiting threat to the Novartis ampoules, then this code risks being quickly and easily cracked in a counterfeiting attack. Serious questions could then be raised, especially if the successful counterfeiting attack resulted in injury or death."

The CSIRO has also launched an inquiry and is yet to make a detailed statement about the affair. Novartis too is investigating.

DataDot’s statement details a five-step process the company undertakes with its DataTrace technology, including ‘‘specific formulations’’ of rare earth compounds and ‘‘tuning’’ their own hand-held spectrometer to read each customer’s ‘‘customised’’ formula.

‘‘In order to counterfeit or reverse-engineer the DataTrace security solution, criminals must mimic not only the formulation process developed by DataTrace but also the customer’s production process, as well as having available a detection device with the same capabilities as the Reader.’’

‘‘The journalists responsible for the Fairfax Media reports did not report these components of the DataTrace security solution.’’

DataDot also said it was concerned about the leak of confidential information, saying it appears to have been made ‘‘by a person disgruntled with the CSIRO and ... not from anyone currently employed by DataTrace or DataDot’’.

‘‘Nevertheless, the company apologises unreservedly for this breach of confidentiality and reserves its rights against the person causing the breach.’’

Do you know more? Email investigations@smh.com.au

 

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