SEC accuses biotech billionaire Phillip Frost of joining a 'pump-and-dump' scheme that netted $27M
Over the years Phillip Frost has acquired quite a reputation in biotech. He chaired Teva, manages Opko Health — and now has to contend with accusations from the SEC that he actively participated in a scheme to pump up biotech share prices in order to reap millions in windfall profits ahead of their collapse.
According to the SEC, Barry Honig led an effort to pump up the share prices of three companies — identified by the Wall Street Journal as BioZone Pharmaceuticals, MGT Capital Investments and MabVax — paying for articles in Seeking Alpha that touted their potential. Frost, says the SEC, participated in two out of the three pump-and-dumps.
Opko’s shares $OPK cratered on the news, dropping 18%.
Altogether, says the charge, the conspiracy by Frost, Honig and several others netted the group $27 million, fleecing small investors that took the bait set by John H. Ford. Here’s one of the stories they allegedly paid for.
In a statement put out following the charges late Friday, Opko responded that Frost could have explained the whole thing if the SEC had bothered to follow the rules and inform him in advance of the charges that were being shaped against him. The accusations, the company added, contain “serious factual inaccuracies.”
Opko and Dr. Frost have always prided themselves on adhering to the highest standards of financial disclosure, and they are confident that once a proper investigation is completed and the facts of the case have been fully disclosed, the matter will be resolved favorably for them.
Frost chaired Teva from 2010 until late 2014, after Teva had acquired his company Ivax for $7.4 billion. That was all part of a distinguished biopharma career that includes chairing the department of dermatology at Mount Sinai Medical Center. In addition to being on the board of trustees at the University of Miami, he’s on the board at Cochrystal Pharma, formerly BioZone, one of the companies allegedly involved in the pump-and-dump.
Once dubbed the Warren Buffett of biotech, a Forbes article in early 2017 notes that Frost — with an estimated fortune worth $5 billion — has long had a big interest in a portfolio of stocks that includes a number of volatile micro cap biotechs. He also hasn’t hesitated to plug Opko’s potential.
“What we are building here is a company that will have a half a dozen products, each capable of doing more than a billion dollars in sales and some several billion,” he told Forbes. “In the case of human growth hormone, where we are partnered with Pfizer, that is a $3.5 billion market.”
Soon after that story appeared, though, Opko had to concede that its late-stage study of the hormone flopped. Company execs tried to blame the failure on “outliers” included in the study.
Image: Phillip Frost. YOUTUBE via FLORIDA INVENTORS HALL OF FAME