Biotech Kahuna (Pg 3 of 5)

Soon-Shiong reported success with this approach in the early stages of research. His peers were unconvinced. In 1991 Soon-Shiong decided to prove out the technique by leaving UCLA and founding a diabetes research firm called VivoRx. Among the first investors was his older brother Terrence. The brothers also started a second firm called VivoRx Diabetes Inc. to pursue the same line of attack on treating diabetes.

Soon-Shiong’s big break came in 1993 when the firm received permission from the FDA to conduct human trials. Soon-Shiong personally transplanted his patented alginate capsules into the pancreas of Steven Craig, a 38-year-old who had been a severe diabetic since childhood. Over the next several months Craig’s insulin injections were reduced until he was able to go an entire month without any outside insulin.

Soon-Shiong lost no time blitzing the media with this apparent success. He did a whirlwind tour of TV talk shows and diabetes conferences. Publishing the results of experimental procedures in the mass media violated research conventions which called for results to be first published in a peer-reviewed medical journal. The scientific community was offended, and expressed its skepticism. But the results proved a bonanza for Soon-Shiong’s entrepreneurial efforts. In June of 1994 Mylan Laboratories Inc. invested $5 million for a 10 percent stake in Soon-Shiong’s VivoRX and also agreed to front $200,000 a month in research funds for a license to market Soon-Shiong’s diabetic treatment in the hope it would soon win FDA approval.

But by 1996 Soon-Shiong faced a series of setbacks in his efforts to reproduce the success he had apparently achieved with Steven Craig. He began shifting his focus away from diabetes. He formed VivoRx Pharmaceutical (later renamed American BioScience) as a vehicle for cancer research and wooed Premiere Inc., a major hospital buying group, into investing $4 million in his various research firms. Perhaps in acknowledgment of the apparent dead end developing on the diabetes front, Soon-Shiong gave Mylan a 10 percent stake in his new cancer research firm for a nominal $1,000.

By this time Soon-Shiong had become enough of a businessman to leverage the interest he had created in his prospective diabetes drug to launch American Pharmaceutical Partners (APP) as a broker of generic drugs to hospitals. Key to this launch was Premiere. Not only did it provide startup funds but also gave APP a running start by using it as a middleman for its drug purchases. Soon-Shiong had provided ample incentive by promising Premiere additional shares based on the amount of sales it generated. In July of 1997 APP was little more than a shell with only $85,000 in total sales but was listed by Premiere — which supplied 1,500 hospitals — as one of its “corporate partners” with multinationals like Merck, Baxter and Johnson & Johnson. Premiere’s determined backing gave APP access to customers like Fujisawa USA who hoped thereby to improve their sales access to Premiere. APP leveraged this bootstrapped status and paid fees tied to total sales to land as accounts buying groups like Novation, the industry leader.

Soon-Shiong pushed APP’s growth aggressively in 1998 by buying the money-losing Fujisawa to uses its plants in Melrose Park, Illinois and Grand Island, New York as a manufacturing base for injectable generics. The acquisition also gave APP 94 product lines with 193 approved product codes. Using its network of buying groups Soon-Shiong was able to reverse Fujisawa’s nine straight years of red ink within six months of the purchase. But the company also added to the quality-control problems with the FDA that was clouding APP’s reputation.

Soon-Shiong’s reputation also took a hit in 1998 when Steven Craig committed suicide. Though the first human test subject of Soon-Shiong’s diabetes drug had continued to praise the therapy, his widow later revealed that his suicide was brought on by depression over his failing health.

Meanwhile Soon-Shiong was also devoting energies to his cancer research conducted under the auspices of American Bioscience. The result was a lawsuit by VivoRx investor Mylan alleging that Soon-Shiong was neglecting those firms’ diabetes research. Mylan sued VivoRx and VivoRx Diabetes and both Terrence and Patrick Soon-Shiong. Terrence fired his brother and sued him for fraud for using consultants paid by VivoRX to conduct cancer research at American BioScience. In early 1999 the arbitration award found no liability against Patrick Soon-Shiong, who was then promptly rehired by Terrence.

In 2000 Soon-Shiong was again the lead defendant in a second suit filed by Terrence, Mylan and other investors on similar grounds. The suit appeared to have considerable merit since by then Soon-Shiong’s research efforts had shifted entirely to Abraxane, an experimental cancer treatment developed through American Bioscience. Using a similar strategy as for Soon-Shiong’s diabetes treatment, Abraxane encapsulated paclitaxel—the active ingredient in the best-selling chemotherapy drug Taxol — within a ball of the water-soluble protein albumin. The albumin coating protected the paclitaxel so it could be delivered intact to the cancerous cell. This novel delivery strategy also dispensed with the toxic solvent that was being used to deliver Taxol, eliminating severe side effects that had drastically limited the concentrations of the drug that could be delivered to cancer cells. Next

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