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)

Brian Kaspar. AveXis via Twitter

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Martin Shkreli [via Getty]

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ZHEN SU — Merck Serono’s Senior Vice President and Global Head of Oncology
ELLIOTT LEVY — Amgen’s Senior Vice President of Global Development
CHRIS BOSHOFF — Pfizer Oncology’s Chief Development Officer

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