Patrick Soon-Shiong is known as L.A. richest man. He also happens to be the world’s most financially successful biotech entrepreneur, having managed the virtually impossible feat of building not one but two multi-billion-dollar pharmacentical firms simultaneously without having to give away more than small minority stakes in either. What’s more, he’s already cashed out for $6.4 billion while investing into a startup in the promising area of wireless medical monitoring systems.
Even more inspiring is that Soon-Shiong’s stature as a pharmaceutical tycoon is now being superseded by his generosity as a medical philanthropist, having made over $200 million in donations and pledges to Los Angeles-area hospitals.
Patrick Soon-Shiong was born in 1952 in Port Elizabeth, South Africa to immigrant parents who had fled China during World War II. Patrick’s father had been an herbalist in China. In South Africa the elder Soon-Shiong continued to practice herbal medicine though his main source of income was the family’s general store.
“My father was a village doctor, practicing Chinese herbal medicine,” Patrick told an interviewer from Los Angeles Business Journal in October of 2008. “People would come to the house for advice. He’d make up some herbal concoction to give them. I’d watch all that. It was very inspiring and influences what I do today.”
Patrick graduated from high school at age 16 with good enough grades to win acceptance to the University of Witwatersrand Medical School. The elite all-white Johannesburg General Hospital where he hoped to do his internship had never admitted a Chinese student. His medical school department chairman stipulated that he would not sponsor Soon-Shiong’s application to intern there unless he graduated among the top four in his class of 189. Soon-Shiong did just that at the age of 23.
“I was determined to have my internship at this particular prestigious white hospital because I knew that’s where I’d get the best training and work with the best doctors,” Soon-Shiong recalls. Even then he had to take half the salary of white interns. “My peers wanted to go on strike over that, but I said, no, I’d be glad to take the lower salary just so I could learn from the best.”
In 1977 Soon-Shiong finished his internship and turned down an offer of a staff position at an academic hospital. Instead he worked for six months at a tuberculosis clinic for blacks while seeking opportunities outside of South Africa. He received two offers from Canada. He accepted a surgery residency at Vancouver General Hospital at the University of British Columbia.
By the time Soon-Shiong left South Africa he was married to a struggling young actress named Michele Chan who was facing her own racial barriers. Her race precluded her from landing roles on South African TV.
At Vancouver General Soon-Shiong showed exceptional surgical skills. He also began showing the split focus that would characterize the working style that led to his later success. He worked in the surgical ward by day but devoted evenings to earning a masters of science degree by working with an eminent pancreatic cancer researcher. By the time Soon-Shiong earned his masters in 1978 he became the first resident to win multiple research awards simultaneously from the American College of Surgeons, the Royal College of Physicians and Surgeons of Canada, and the American Association of Academic Surgery.
In 1980 his work also secured him an offer from UCLA Medical School where he completed the training to win board-certification as a surgeon. In 1983 he was invited to join the faculty. Soon-Shiong conducted research on new techniques for delivering chemotherapy. He also performed the UCLA Medical Center’s first pancreas transplant.
Meanwhile Michele too was enjoying career success in their new hometown. In 1984 she landed a regular role on the children’s TV series Danger Bay.
“Here’s a wonderful irony,” says Soon-Shiong. “They refused to put Michele on South African television when we lived there. But after she got a role in Danger Bay, of course South African TV bought that show and aired it.”
UCLA became interested in having Soon-Shiong start up a new transplant program. He was more interested in developing a less invasive way to treat diabetes by transplanting healthy islet cells that could produce insulin inside the patient’s own pancreas. The technique had led to a dead end a decade earlier when researchers were unable to devise a way to keep the patient’s immune system from destroying the cells before they could begin producing insulin. In 1987 Soon-Shiong came up with the strategy of encapsulating the islets in a gel made from seaweed. He believed the coating would protect the islet cells from being attacked by the immune system while providing oxygen through photosynthesis.
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. It was 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.
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.
By 2000 when Soon-Shiong was again the lead defendant in a second suit filed by Terrence, Mylan and other investors on similar grounds, 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.
Abraxane was then years from any potential FDA approval for commercial use, but Soon-Shiong was quick to exploit its financial potential. In 1999 his American BioScience granted North American rights to Abraxane to APP for $60 million plus $25 million more in milestone payments. The deal gave Soon-Shiong insurance against the drug’s failure to win approval at the expense of APP shareholders, various critics pointed out. But that bit of self-dealing would turn out to benefit, rather than hurt, APP’s investors. In December of 2001 the appeal of Abraxane’s potential to become a blockbuster drug gave APP the sizzle to raise $144 million in an IPO that gave the company a valuation of over a billion dollars and made Soon-Shiong a billionaire, at least on paper. Soon-Shiong immediately used some of his new wealth to settle the lawsuit against him by paying $32 million to Terrence and Mylan and $5 million to the other investors of VivoRx and VivoRx Diabetes.
Despite these setbacks Soon-Shiong was taking big strides toward becoming a genuine pharmaceuticals tycoon. APP received FDA approval on many additions to its injectables line. Sales jumped to $351.3 million in 2003 from $192 mil. in 2001 while net income rose to $71.7 mil. A company that had been a mere shell in 1997 had mushroomed into a major supplier of injectables.
In January of 2003 the FDA granted fast-track status for Abraxane despite its reservations about the fact that 75% of the patients slated to participate in the proposed clinical trial were located in Russia. In December of 2003 APP released supporting data from the clinical trial. It showed Abraxane to be 31% more effective than Taxol in fighting breast cancer. APP shares jumped only to plunge again as analysts began delving into the data. In particular, the fact that 75 percent of the patients were from Russia raised suspicions that were reinforced by the fact that those patients reported much lower results for Taxol than had been reported in other studies.
In late September of 2004, while the SEC commissioner was mulling a formal probe, Soon-Shiong stepped down as APP’s CEO whle retaining the title of executive chairman to focus on “strategic initiatives” and the researching of new proprietary injectable pharmaceutical products.”
In early 2008 APP was favored by a major stroke of luck thanks to a tragic comedy of errors involving rival Baxter International’s heparin supply. An undetected production flaw allowed the shipment of large quantities of contaminated heparin which caused the deaths of at least 62 patients and illness of tens of thousands more. By February of 2008 Baxter began recalling its heparin. By April it was forced to stop selling heparin altogether.
APP’s heparin too was manufactured in China, but without quality issues.
“We ended up with the safest supply of heparin in the U.S. after the Baxter recall because of the investment we made to make sure our plant in China was safe,” Soon-Shiong boasted.
APP’s market share soared, making the company a far more attractive target for the German distributor Fresenius. On July 7, 2008 Fresenius struck a deal to buy APP for $4.6 billion. Patrick Soon-Shiong’s personal 80 percent stake netted him $3.7 billion.
Meanwhile, by 2008 Soon-Shiong’s Abraxis BioScience (formerly American BioScience) had grown to employ nearly 5,000. Much of that growth came after Abraxane won FDA approval in 2005 to treat serious breast cancer cases that had turned metastatic. That year Abraxane sales of $315 million accounted for about 90 percent of Abraxis’s revenues and wasn’t quite enough to make Abraxis profitable. But Abraxane’s novel approach to delivering chemotherapy, as well as the research platform created to develop the drug, proved attractive to Celgene, a firm that had made its mark in the oncology field with drugs for blood-borne cancers.
In late June of 2010 Celgene bought Abraxis BioScience for $2.9 billion in cash and stock. Over 80% of Abraxis shares were owned by Soon-Shiong himself. The sale boosted Soon-Shiong’s personal fortune to somewhere around $6 billion, placing him comfortably among the world’s top 100 billionaires. That October Soon-Shiong indulged his longtime passion for basketball and the L.A. Lakers in particular by buying Magic Johnson’s 4.5% stake in the organization for an undisclosed amount.
Soon-Shiong and wife Michele have created a family foundation through which some of his wealth is funneled to expand healthcare to those who can’t wait for a utopian future to develop. The couple began by pledging $55 million to St. John’s Medical Center in nearby Santa Monica in 2008. Since then they have increased the pledge to over $100 mil. and has provided another $100 mil. in underwriting guarantees to help reopen L.A.‘s Martin Luther King Jr. Medical Center. The hospital had served impoverished South Central Los Angeles before being shut down in 2007 for repeated complaints of medical malpractice. In September of 2009 he joined Bill Gates, Warren Buffett and about three dozen other billionaires in making the pledge to donate half his wealth to charity.
Soon-Shiong carefully arranges his schedule so he can drive his daughter to school each day and to be there for her soccer games. He plays tennis with her as well. With his son he goes surf fishing for perch. The entire family surfs and plays basketball together.