These Legendary CEO's Could Catch Lightning in a Bottle -- Again.

Great management can make a big difference in whether a company succeeds, especially in the highly regulated healthcare market. While healthcare CEOs may not be as well known as CEOs in other industries, we've identified four healthcare CEOs that investors ought to be watching closely. All four are been-there-done-that leaders who have handsomely rewarded investors in the past. Can they do it again?

In this episode of The Motley Fool's Industry Focus: Healthcare, analyst Kristine Harjes and contributor Todd Campbell discuss how these leaders plan to make Tesaro Inc. (NASDAQ: TSRO), NantKwest (NK), Opko Health (OPK), and Puma Biotechnology (PBYI -0.90%) some of healthcare's top performers.

A full transcript follows the video.

This podcast was recorded on July 27, 2016.

Kristine Harjes: Welcome to Industry Focus, the podcast that dives into a different sector of the stock market every day. I'm your host, Kristine Harjes, and it's July 27. As usual for Wednesday, we'll be talking about the healthcare sector, and healthcare contributor Todd Campbell is on the line. How is it going, Todd?

Todd Campbell: It's going great! I can't wait to dive in and talk to everybody about some really interesting people.

Harjes: Yeah. As you started to allude to, today's show is all about CEOs, the people that sit at the very top of these companies. We're going to walk you through a handful of different names that stood out to us as having wildly succeeded in the past and potentially could be poised to do it again. The inspiration for the show came last Thursday, when Biogen announced that their CEO, George Scangos, would be leaving in the coming months. He'd been at the helm since 2010, and I'd argue he was quite successful, even though shares were well down from their highs during his tenure, they stand today about 5 times higher than they were when he started. This story was all over the news. The stock itself actually hardly moved, but management shakeups create a stir. Sometimes they can really make or break a stock, so it got me thinking, why does it matter so much who sits at the top?

Campbell: Yeah. I think that from an investing perspective a lot of the leaders that are probably known to most people aren't necessarily healthcare leaders. They're leaders in other areas, like consumer electronics. Everybody knows who Steve Jobs is, everybody who Bill Gates is, but maybe they don't know so much who some of the most successful people are in the healthcare space. That's why I'm excited to talk about a couple pof different people today.

But I think that everyone should remember what matters. Who cares who's at the top? A lot of times when we're looking at individual stocks, we're making our decisions based on the numbers; we're not really thinking about the people who are behind those numbers. We have to remember that if you have somebody with a proven track record, with the experience, the been-there-done-that kind of background, it can go a long way to ensuring the success of in the future.

Harjes: Absolutely. With that in mind, we put together a list for you guys, our listeners today, of some CEOs that we think could be about to -- as you put it to me, Todd -- catch lightning in a bottle yet again. Meaning these are guys that have been very successful already and we think that they could be poised to make the same kind of humongous impact in their industries again.

Campbell: Yeah, we've got leaders at companies who've been around for decades, and they're doing a wonderful job, but what were most interested, I was most interested, in talking about today were leaders who not only succeeded in commercializing products, getting them through the FDA approval process, etc., on to market, but then succeeded in selling those companies for a big profit after they accomplished that feat. You've got a few different managers that we're going to talk about, or leaders we're talk about today. The first one I want to talk about is a guy named Lonnie Moulder. He runs a company call Tesaro Inc. now. That's probably a name that most listeners are not going to be familiar with.

Harjes: But it's a pretty noteworthy company. Its got a market cap of around $4.2 billion. They IPOed in June 2012. The stock is up 558% since then, so Lonnie Moulder's probably doing something right.

Campbell: Yeah. You've got to look at why do we care about Lonnie Moulder being at the helm of Tesaro, and why should I consider Tesaro or even have it on my watch list or whatever? Lonnie Moulder is the former CEO of a company called MGI Pharma. MGI Pharma successfully won approval of a chemotherapy induced nausea and vomiting drug called Aloxi. Aloxi became a pretty widely used drug in that indication, and he successfully sold that company to a Japanese major drugmaker for about $4 billion in 2008.

After he did that, he stuck around for a little while at that new entity, and then he went off to be the president and CEO of a company called Abraxis BioScience, which shortly thereafter got sold to Celgene (CELG) for about $2.9 billion. You start to see a trend -- here's a person who knows how to create value and then knows how to deliver that value to shareholders. Now at Tesaro he seems to be doing it again, because as you mentioned he's built a company with more than a $4 billion market cap, despite the fact that it only has one drug, very freshly on the market, and maybe another drug coming next year.

Harjes: These are both pretty interesting stories these 2 drugs. You have Varubi, which is another chemotherapy-induced nausea and vomiting drug, that was approved in September. If you recall with his experience with Aloxi, which is the drug that was sold for about $4 billion in 2008, that was also in the same indication. To me that indicates that there's a pretty good chance of success. They're actually teamed up with Opko on that drug, which we're going to talk about Opko somewhere later in the show. But before we do the other --

Campbell: Absolutely, absolutely. Varubi ... sales are a trickle right now, but I'm going to give Moulder a little bit of benefit of the doubt. He knows this market very well, we'll see how this plays out over the course of the next few quarters. But Varubi isn't even the one that gets me most excited about Tesaro.

Harjes: Totally agree. Yeah, that drug that we are a little more excited about, this is another one where I'm sure we're not pronouncing it correctly, so my apologies, but Niraparib. Yeah?

Campbell: Sure.

Harjes: OK. Let's go with that.

Campbell: Niraparib, sure.

Harjes: Tesaro bought the right to this drug in 2012 from Merck for $7 million, which that's pocket change in biotech talk. Right now the drug is being studied in breast cancer and also ovarian cancer, and it's showing some pretty great signs that that could have been a really, really smart pickup.

Campbell: Yeah. Recently they reported late-stage data showing that this drug significantly delays the progression of ovarian cancer in patients with a certain genetic makeup. This is really, really big news, because 85% of ovarian-cancer patients end up relapsing, and as a result, as you relapse, there's fewer and fewer treatment options. Unfortunately, the prognosis gets worse and worse as you go along. I think that there's a very big unmet need that this drug could target. Its success in trials caused the shares in this company to double in the past few months. Pretty good investment so far -- $7 million in 2012 and a doubling to $4 billion in market cap this year alone.

Harjes: Absolutely. It's a pretty interesting drug, too, the way that it works. It's called a PARP inhibitor. In the presence of a PARP inhibitor, DNA damage isn't repaired, so the cell eventually dies. That sounds like a bad thing, but when you're talking about somebody that has cancer, even though PARP activity is a good thing in health patients, it can be a bad thing in cancer patients, because it reduces that damage that the chemotherapy does to cancer DNA.

Campbell: Anything that helps cancer cell die is good for a sick patient, even if it's working counterintuitively to someone who's healthy. They plan to file for FDA approval later this year. That should mean that a decision will come next year. Who knows whether or not this will be a big seller or not, but it certainly would seem that Moulder's proving that he knows now with a second drug, how to get drugs to the finish line.

Harjes: Exactly. The next name that we want to talk about might ring more of a bell, Lonnie Moulder is not the biggest name out there, but Patrick Soon-Shiong is a good bit well known. He's the world's richest doctor. He's got a net worth of over $12 billion. He has a pretty long track record of success in the healthcare industry.

Campbell: Yeah. Soon-Shiong is definitely somebody that people should be watching. He's kind of like, I guess, the Steve Jobs, if you will, of healthcare. He's not a household name yet; he's in the making possibly. He is working on Cancer MoonShot 2020. He's leveraging his decade-plus of experience in running two multibillion-dollar companies and then selling them for big bucks. He's leveraging that experience and that network of people to form a collaboration of industry leaders that hope to make a really, really major impact on treatment in cancer over the next few years.

Harjes: This MoonShot 2020 collaboration was just announced in January, and I'm pretty sure we've actually talked about it on this show before. Essentially what it is, is a collaboration between some of the leading cancer companies to try to accelerate research, particularly in combination immunotherapy areas, which, that by all means seems like how immunotherapies should work, is in collaboration with one another.

Campbell: Right, the listeners can go back to January if they want to find out more about the MoonShot 2020 that Kristine and I chatted about on that episode. One of the companies that's participating in this MoonShot 2020 is Soon-Shiong's own company, and that company is NantKwest, symbol NK. It's an under-the-radar company; not many people are paying attention to it right now. And that's because it hasn't begun to enroll a lot of human trials yet. It's a very early-stage company, but just because of that I wouldn't ignore this company. I think it's definitely one to watch, because Soon-Shiong has said that he plans to have six human clinical trials under way before the end of this year.

Harjes: Yeah, I think this is a great example of a company where management really makes all the difference. If I were to look at this company and it didn't have this amazing CEO sitting up at the top, I'm not, if I would really think about it more than a few minutes or so. They're down about 80% since their IPO in July 2015. They're really early stage. They're working on something that's similar to CAR-T, potentially safer, we're not really sure. Their most advanced drug in phase 2.

But with Patrick Soon-Shiong at the helm, this is the guy that, we mentioned Abraxis earlier, that was his company, which was sold to Celgene for $3 billion. This is the company that makes Abraxane, which is a huge drug for Celgene. Celgene reported about $2.25 million in revenue just from Abraxane in Q1, just for some context on what a great acquisition that was for them. The other company that Soon-Shiong has created and then sold is called American Pharma Partners. They market generic injectables to hospitals. This one was sold back in 2008 for $5.6 billion.

Campbell: Yeah, he's had a lot of success, but to your point, this is a high-risk investment because there really have been no trials, no trial results to digest. We're not anywhere near commercialization. This is one to watch.

Harjes: The third one on our list today is Phillip Frost. This is the guy that is the CEO of Opko Health. He founded it in 2007. The ticker is OPK, and they've got a market cap of around $5.4 billion.

Campbell: Phillip Frost is definitely a "sum is greater than the parts" kind of manager. He has made billions of dollars over a lifetime career, 40, 50 years, by cobbling together different companies and then turning some into a big enough piece where he could then sell it to another company. The company that made him probably most well known to investors was Ivax, which he sold to Teva Pharmaceutical for about $7 billion back in 2006. He does have a penchant for going out and being very highly acquisitive. He's shown that he knows how to navigate the marketplace and to make money for investors. Hopefully he'll be able to do that again with Opko Health, which is a very intriguing company on its own already.

Harjes: They have taken a bunch of really interesting acquisitions already. Even just no more than a month ago they announced that they bought a company called Transition Therapeutics for $60 million, which is also a pretty small acquisition, but it's bringing some really interesting candidates to Opko. They're getting a little bit more beefy of a diabetes pipeline, some obesity drugs. I think there's even a mid-stage Alzheimer candidate in there. This has been called a classic Phil Frost deal by somebody that works with them, because this is what he does. He buys up these companies and he makes them better than they were. He makes them profitable.

Campbell: Yeah. You look at probably the biggest deal he's made for Opko so far, is last year's purchase of BioReference Labs, which is a specialty lab company. Immediately gives Opko health $1 billion roughly in sales that it can leverage. It puts the company on a path to turn profitable for the first time next year, and that of course gives it a lot more financial flexibility to be able to go out and do a lot of the deals like you just mentioned. In the past he's also orchestrated deals that have landed a fairly nice pile of late-stage pipeline, and now turning commercial, drugs. He licensed Varubi to Tesaro, which we just mentioned. That's one drug that's in his pipeline. They just won approval for a vitamin D pro hormone, which is being sold under the name Rayaldee, which Frost seems to think has a lot of potential to be a big seller.

Harjes: $12 billion potential.

Campbell: It's also got a human growth hormone drug in development with late stage data coming soon. That drug is licensed to Pfizer.

Harjes: Yeah, as you mentioned, this is a company that is expected to be profitable next year. They really appear to be on the cusp. They're supposedly going to have 3 FDA-approved drugs on the market by the end of 2017. We'll see what their future holds.

Campbell: Yeah, it's really interesting, too. You can't really look at it this way, but Frost has been around a long time. I think he's about 80 years old. I look at him and I say, "What's his goal with Opko?" If he's got a history and track record of doing M&A, is it possible that he wants to turn Opko into something big relatively quickly, and then be able to turn around and sell that? I don't know. We'll have to keep an eye on it. See how these drugs roll out. See whether or not they hit the profitability targets that are being set for them next year. But this is a very intriguing company that investors ought to know about.

Harjes: And a very intriguing person, too, that investors ought to know about. One last company and person that we wanted to talk about today. His name is Alan Auerbach. This is the CEO of Puma Bio.

Campbell: Yeah, Puma Bio is a very, very interesting company. It's been a roller coaster ride for long time Puma Bio investors. Shares took off back in 2014 on positive data for a drug for breast cancer that they were working on called Neratinib. However, concerns over safety that emerged because of some grade 3 and 4 cases of diarrhea kind of weighed down shares, and as a result they've retrenched a lot. However, investors may not want to be giving up on Puma at this point, because Auerbach is the person who's successfully behind the development of the top-selling prostate cancer drugs Zytiga, which now generates out about $2.4 billion in annualized revenue for Johnson & Johnson. Johnson & Johnson bought Cougar back in 2009 for about $1 billion. Puma Biotech, his new company, has just filed for FDA approval of its breast cancer drug Neratinib. It could have a drug theoretically that hits the market next year.

Harjes: Despite some of these issues that you mentioned with patients suffering from diarrhea, which it does of course mean that compliance could be an issue, they are looking at using another drug alongside of it to try to minimize some of that, and it's worked to some efficacy so far. It's a drug that's a tyrosine-kinase inhibitor. In theory, it should stop a process called signal transduction in order to halt the spread of breast cancer. As you likely know, breast cancer is extremely prevalent, so this is a market that could really, really use some new treatments available. There are about 1.6 --

Campbell: Right, Kristine! 1.6 million new cases of breast cancer every year. It's major health issue. Obviously, anything that can be done to delay the progression of breast cancer is important. At first, the approval is for its use in the adjuvant setting, so it's going to be used to try and help delay the progression of the disease after patients have already been treating with other drugs like Herceptin. But that could still be a very big patient population. Given the fact that Puma's market cap is only about $1.4, $1.5 billion, there could be some value in stepping up and paying attention to this one too.

Harjes: They're definitely tiny at the moment. As you mentioned, they used to have a much larger market cap, back in mid 2014 they peaked at around $8 billion. All things considered, if they can get back up to that level, those are some really strong gains from current levels. But it's a risky stock, too.

Campbell: Yeah. You never know how the FDA is going to view some of these things. I think that adding the agent that can help control the likely of the diarrhea side effects is important, and that could resolve a lot of FDA concerns regarding safety. Diarrhea does occur in cancer treatment, so it's not something like this is the only drug where this happens, but it is something that raises some question marks and makes me wonder, what are the odds of approval? We don't know. Again one to pay attention to, but it is a little bit risky.

Harjes: Todd, before we wrap up, we've talked about four different companies today -- Tesaro, NantKwest, Opko, and Puma. If you could only buy one of them, which would it be?

Campbell: That's a great question. I'm going to have to go with Phillip Frost and Opko Health. Mainly because we have a pathway to profitability on that one. We know that they've got drugs that are already approved. We know that they're doing a lot of business in the lab right now, in their lab business. We have a pretty good idea that they're going to be able to translate that into shareholder profit in a relatively short period of time. That would be the one that I would focus on if I were an investor today.

Harjes: OK, sounds good. Thanks for the pitch. Listeners, do you guys have any questions for us, or do you just want to say hey? You can shoot us an email at [email protected], or you can tweet at us; our handle is @MFIndustryFocus. As always, people on the program may have interest in the stocks that they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. For Todd Campbell, I'm Kristine Harjes. Thanks for listening, and Fool on!