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.
“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)