Biotech bil­lion­aire faces ac­cu­sa­tions of fraud for $1.3B 'catch-and-kil­l' can­cer drug deal


When biotech bil­lion­aire Patrick Soon-Sh­iong arranged a $90 mil­lion up­front pay­ment to Sor­ren­to from Nant­Phar­ma 4 years ago to ac­quire Cynvil­oq — promis­ing $1.2 bil­lion more in mile­stones — he her­ald­ed the deal, say­ing an “op­por­tu­ni­ty to de­vel­op com­bi­na­tion reg­i­mens of low-dose metro­nom­ic use of this ac­tive drug is an im­por­tant step in trans­form­ing can­cer care as we know it to­day.”

For his part, Sor­ren­to CEO Hen­ry Ji said he was “ex­cit­ed” that Soon-Sh­iong had stepped in to speed these new com­bos along.

To­day, he calls it the first act in a years-long swin­dle. And he’s su­ing Soon-Sh­iong.

As spelled out in the law­suit, which was wide­ly dis­trib­uted to the press, Ji al­leges that Soon-Sh­iong not on­ly played out a “catch-and-kill” plan to elim­i­nate a com­peti­tor to Soon-Sh­iong’s Abrax­ane, which he sold to Cel­gene in a deal that left him with more than a bil­lion dol­lars in Cel­gene stock, he used a big chunk of the mon­ey Sor­ren­to got in the up­front to help cov­er his costs for do­ing it.

Late Wednes­day evening, though, Soon-Sh­iong blast­ed back with a de­tailed re­sponse:

The law­suit is a cyn­i­cal at­tempt to de­flect from Sor­ren­to’s own breach of con­tract. The al­le­ga­tion that we have not de­vel­oped Cynvil­oq to pro­tect the sales of Abrax­ane is false and it ig­nores the facts. Be­cause it is to­tal­ly with­out mer­it, we shall de­fend our­selves vig­or­ous­ly against this base­less al­le­ga­tion.

There’s lots more, in­clud­ing breach of con­tract and a woe­ful lack of fol­low through, which I’ve in­clud­ed in its en­tire­ty be­low the al­le­ga­tions.

Ini­tial­ly, Ji says, Soon-Sh­iong was in­ter­est­ed in hav­ing Cel­gene buy it to pro­tect the Abrax­ane fran­chise, us­ing the sales from the new drug to pay off any loss­es from the bioe­quiv­a­lent Abrax­ane. Cel­gene, though, passed on an­titrust grounds, leav­ing Soon-Sh­iong to han­dle it when San­doz came call­ing with a deal in hand for the drug.

Hen­ry Ji, Sor­ren­to

“When Soon-Sh­iong heard about the po­ten­tial San­doz deal, he pan­icked,” says the law­suit, which was writ­ten as some­thing of a pot­boil­er. “He re­al­ized that if Cynvil­oq were sold to San­doz — a di­rect com­peti­tor to Cel­gene that had deep ex­pe­ri­ence bring­ing biosim­i­lars or gener­ics like Cynvil­oq suc­cess­ful­ly to mar­ket — it could dev­as­tate the sales of Abrax­ane, sig­nif­i­cant­ly dam­age Cel­gene’s share price, and there­fore per­son­al­ly cost Soon-Sh­iong hun­dreds of mil­lions of dol­lars.”

At the same time the sale went through in 2015, the suit con­tin­ues, Ji and Soon-Sh­iong cre­at­ed a joint ven­ture ded­i­cat­ed to im­munother­a­peu­tic an­ti­body can­cer drug R&D. Ji put up $40 mil­lion from his up­front for it. Then he al­leges that Soon-Sh­iong and his chief le­gal ad­vis­er Charles Kim se­cret­ly con­spired to pay Nant­Phar­ma its $90 mil­lion, drain­ing the JV’s ac­count of the cash it had, in­clud­ing Sor­ren­to’s $40 mil­lion.

As for Cynvil­oq, the suit says Soon-Sh­iong put it on a shelf, let­ting patents ex­pire and any val­ue in it leak away. Dur­ing that time, Cel­gene has been a reg­u­lar in­vestor in Soon-Sh­iong’s com­pa­nies, giv­ing them a role to play as the big Bris­tol-My­ers Squibb deal faces a share­hold­er vote in com­ing days. And Ji wants to have the $90 mil­lion re­turned to the JV so it can do its work, among oth­er things.

This isn’t the first time Soon-Sh­iong has been ac­cused of shady ac­tiv­i­ty. STAT pub­lished a se­ries of ar­ti­cles claim­ing that the bil­lion­aire had re­cap­tured a large do­na­tion to the Uni­ver­si­ty of Utah, while Politi­co fo­cused on an ap­par­ent scheme in which one of his com­pa­nies ob­tained a prop­er­ty from a non­prof­it at an un­der­val­ued price.

Through­out it all, Soon-Sh­iong, who’s cast him­self in the role of an R&D war­rior out to cure can­cer, has de­nied any wrong­do­ing and gone on to buy the Los An­ge­les Times. I asked Soon-Sh­iong and Cel­gene rep­re­sen­ta­tives if they had any com­ment.

Cel­gene’s me­dia shop has been dead silent for months. But they did re­spond here, with a spokesper­son say­ing “we don’t have a com­ment” about the suit.

Here’s the more de­tailed re­but­tal from Soon-Sh­iong.

Here are the facts:

When we ac­quired Cynvil­oq from Sor­ren­to, it was part of a larg­er trans­ac­tion in which we al­so ac­quired the ex­clu­sive rights to over 75 an­ti­bod­ies. Sor­ren­to has on­ly pro­vid­ed 15 an­ti­bod­ies to date, in breach of its con­trac­tu­al com­mit­ments, and has re­fused to oth­er­wise hon­or its ex­clu­siv­i­ty and oth­er oblig­a­tions. As one ex­am­ple, de­spite hav­ing ex­clu­sive­ly li­censed a PD-L1 an­ti­body to us, Sor­ren­to has since li­censed the same PD-L1 an­ti­body to a Ko­re­an com­pa­ny and an­nounced a Phase 1 study, in breach of our agree­ment.

Nant­Phar­ma ac­quired the Pa­cli­tax­el drug with the pub­lic rep­re­sen­ta­tion from Sor­ren­to that the mol­e­cule was found to be bioe­quiv­a­lent to Abrax­ane and that the FDA had agreed with Sor­ren­to’s find­ing of bioe­quiv­a­lence based on a meet­ing with the FDA. Fol­low­ing the ac­qui­si­tion, we dis­cov­ered that Sor­ren­to had mis­rep­re­sent­ed this in­for­ma­tion. Up­on dig­ging in­to the raw da­ta from the Sor­ren­to clin­i­cal tri­al, our sta­tis­ti­cians in fact dis­cov­ered that the drug was in­deed not bioe­quiv­a­lent and re­port­ed this find­ing to the com­pa­ny. We shared these find­ings with Sor­ren­to and in­formed them that it would not be pos­si­ble for us to file un­der the bioe­quiv­lance ap­proval path­way be­cause the da­ta did not sup­port that ap­proach.

Fur­ther­more, when we re­quest­ed a new sup­ply of the drug from the Ko­re­an man­u­fac­tur­er, we al­so dis­cov­ered that the for­mu­la­tion con­tained an im­pu­ri­ty and this re­quired the sup­pli­er to iden­ti­fy the cause of the im­pu­ri­ty and to mod­i­fy the man­u­fac­tur­er’s process to re­move the im­pu­ri­ty. This process was at­tempt­ed by the sup­pli­er who pre­sent­ed their re­sults to us re­cent­ly, but un­for­tu­nate­ly the process im­prove­ment fur­ther in­creased the in­sta­bil­i­ty of the drug. The need for fur­ther de­vel­op­ment to im­prove the sta­bil­i­ty by the man­u­fac­tur­er is cur­rent­ly un­der re­view while we pur­sue the safe­ty analy­sis of the orig­i­nal for­mu­la­tion in a Phase 1 study.

Be­cause the drug re­quired a new process, fur­ther sta­bil­i­ty test­ing, and a com­plete new Phase 1 clin­i­cal study, we sold the drug to our JV with Sor­ren­to, which had both reg­u­la­to­ry and for­mu­la­tion ex­per­tise. We ini­ti­at­ed  a Phase 1 study and this study is cur­rent­ly open and we are ac­tive­ly try­ing to re­cruit pa­tients as of this date. The state­ments and claims made by Sor­ren­to are thus puz­zling in light of our  dili­gent and re­spon­si­ble ac­tiv­i­ty ever since we ac­quired the drug, and can on­ly be viewed as a cyn­i­cal at­tempt to de­flect from their breach of con­tract.”

Steven Feld­man, an at­tor­ney with Hue­ston Hen­ni­gan rep­re­sent­ing Sor­ren­to, was ea­ger to re­ply.

It de­fies cred­i­bil­i­ty that a sci­en­tist and busi­ness­man as so­phis­ti­cat­ed and suc­cess­ful as Dr. Patrick Soon-Sh­iong en­tered in­to a $1.3 bil­lion trans­ac­tion with­out ex­am­in­ing the da­ta or con­duct­ing due dili­gence. Dis­cov­ery in this case will re­veal the nu­mer­ous false as­ser­tions in Dr. Soon-Sh­iong’s re­sponse.  We look for­ward to lit­i­gat­ing this case.


Im­age: Patrick Soon-Sh­iong (NHS Con­fed­er­a­tion)

A New Fron­tier: The In­ner Ear

What happens when a successful biotech venture capitalist is unexpectedly diagnosed with a chronic, life-disrupting vertigo disorder? Innovation in neurotology.

That venture capitalist was Jay Lichter, Ph.D., and after learning there was no FDA-approved drug treatment for his condition, Ménière’s disease, he decided to create a company to bring drug development to neurotology. Otonomy was founded in 2008 and is dedicated to finding new drug treatments for the hugely underserved community living with balance and hearing disorders. Helping patients like Jay has been the driving force behind Otonomy, a company heading into a transformative 2020 with three clinical trial readouts: Phase 3 in Ménière’s disease, Phase 2 in tinnitus, and Phase 1/2 in hearing loss. These catalysts, together with others in the field, highlight the emerging opportunity in neurotology.
Otonomy is leading the way in neurotology
Neurotology, or the treatment of inner ear neurological disorders, is a large and untapped market for drug developers: one in eight individuals in the U.S. have moderate-to-severe hearing loss, tinnitus or vertigo disorders such as Ménière’s disease.1 With no FDA-approved drug treatments available for these conditions, the burden on patients—including social anxiety, lower quality of life, reduced work productivity, and higher rates of depression—can be significant.2, 3, 4

Joe Jimenez, Getty

Ex-No­var­tis CEO Joe Jimenez is tak­ing an­oth­er crack at open­ing a new chap­ter in his ca­reer — and that in­cludes a new board seat and a $250M start­up

Joe Jimenez is back.

The ex-CEO of Novartis has taken a board seat on Century Therapeutics, the Versant and Bayer-backed startup focused on coming up with a brand new twist on cell therapies for cancer — a field where Jimenez made his mark backing the first personalized CAR-T approved for use.

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Credit: Shutterstock

Can we make the an­tibi­ot­ic mar­ket great again?

The standard for-profit model in drug development is straightforward. Spend millions, even billions, to develop a medicine from scratch. The return on investment (and ideally a tidy profit) comes via volume and/or price, depending on the disease. But the string of big pharma exits and slew of biotech bankruptcies indicate that the model is sorely flawed when it comes to antibiotics.

The industry players contributing to the arsenal of antimicrobials are fast dwindling, and the pipeline for new antibiotics is embarrassingly sparse, the WHO has warned. Drugmakers are enticed by greener pastures, compared to the long, arduous and expensive path to antibiotic approval that offers little financial gain as treatments are typically priced cheaply, and often lose potency over time as microbes grow resistant to them.

Top Har­vard chemist caught up in FBI’s 'T­hou­sand Tal­ents' drag­net, ac­cused of ly­ing about Chi­nese con­nec­tions, pay

The FBI’s probe into the alleged theft of R&D secrets by Chinese authorities has drawn Harvard’s top chemist into its net.

The agency accused Charles M. Lieber, who chairs the university’s chemistry and chemical biology department, with lying about his involvement in China’s Thousand Talents campaign, which was established as a way of drawing in innovators from around the world. And the scientist, 60, was charged with making false statements about his ties to China.

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Eye­ing a trio of tri­al ini­ti­a­tions, Jim Wilson's gene ther­a­py start­up woos Bruce Gold­smith from Deer­field as CEO

Passage Bio — Jim Wilson’s self-described “legacy company” — has wooed a seasoned biotech executive to steer the clinical entry of its first three gene therapy programs.

Bruce Goldsmith jumps to the helm of Passage after a brief CEO stint at Civetta, a cancer-focused startup he helped launch while a venture partner at Deerfield. He takes over from OrbiMed partner and interim chief Stephen Squinto, who will now lead the R&D team.

The FTC and New York state ac­cuse Mar­tin Shkre­li of run­ning a drug mo­nop­oly. They plan to squash it — and per­ma­nent­ly ex­ile him

Pharma bro Martin Shkreli was jailed, publicly pilloried and forced to confront some lawmakers in Washington riled by his move to take an old generic and move the price from $17.50 per pill to $750. But through 4 years of controversy and public revulsion, his company never backed away from the price — left uncontrolled by a laissez faire federal policy on a drug’s cost.

Now the FTC and the state of New York plan to pry his fingers off the drug once and for all and open it up to some cheap competition. And their lawsuit is asking that Shkreli — with several years left on his prison sentence — be banned permanently from the pharma industry.

UP­DAT­ED: Ac­celeron res­ur­rects block­buster hopes for so­tater­cept with pos­i­tive PhII — and shares rock­et up

Acceleron $XLRN says that its first major trial readout of 2020 is a success.

In a Phase II study of 106 patients with pulmonary arterial hypertension (PAH), Acceleron’s experimental drug sotatercept hit its primary endpoint: a significant reduction in pulmonary vascular resistance. The drug also met three different secondary endpoints, including the 6-minute walking test.

“We’re thrilled to report such positive topline results from the PULSAR trial,” Acceleron CEO Habib Dable said in a statement. The company said in a conference call they plan on discussing a Phase III trial design with regulators.

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Short at­tack­er Sahm Ad­ran­gi draws crosshairs over a fa­vorite of Sanofi’s new CEO — with PhII da­ta loom­ing

Sahm Adrang Kerrisdale

Kerrisdale chief Sahm Adrangi took a lengthy break from his series of biotech short attacks after his chief analyst in the field pulled up stakes and went solo. But he’s making a return to drug development this morning, drawing crosshairs over a company that’s one of new Sanofi CEO Paul Hudson’s favorite collaborators.

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Amber Saltzman (Ohana)

Flag­ship's first ven­ture of 2020 is out, and it's all about sperm

A couple years ago, Amber Salzman got a call as she was returning East full-time after a two-year stint running a gene therapy company in California.

It was from someone at Flagship Pioneering, the deep-pocketed biotech venture firm. They had a new company with a new way of thinking about sperm. It had been incubating for over a year, and now they wanted her to run it.

“It exactly fit,” Salzman told Endpoints News. “I just thought I had to do something.”