Source: Flickr user stockmonkeys.com.
Biotech investing isn't for the faint of heart, but for those willing to take a risk, biotech stocks can lead to great rewards -- especially if shares in those biotech companies soar thanks to a merger or acquisition. That's exactly what happened for investors who bet on companies run by Phillip Frost, Lonnie Moulder, and Patrick Soon-Shiong in the past. All three of these dynamic biotech leaders helped develop new medicines that led to their companies being acquired by larger peers.
Because each of these been-there-done-that managers is at it again with other companies, let's see whether or not investors might want to invest alongside them again.
No. 1: Phillip Frost
A long career of biotech dealmaking has made Phil Frost one of the most widely followed biotech entrepreneurs. Between 1987 and 2005, an ongoing series of deals orchestrated by Frost turned Ivax Corporation into a leader in generic drugs, and in early 2006, Frost rewarded shareholders by agreeing to sell Ivax for more than $7 billion.
Today, Frost is at the helm of Opko Health (OPK +2.27%), a diversified healthcare company that's marketing a diagnostic test for prostate cancer. It's also developing next-generation therapies for use in the treatment of various conditions, including chemotherapy induced nausea, vitamin D deficiency, and human growth hormone deficiency.
Last year, Opko Health launched its 4kscore blood test for the detection of advanced prostate cancer, and sales of the 4kscore could begin to ramp as it becomes part of early detection standards of care, and as deals are cut with healthcare payers for reimbursement. Opko Health could also get good news from the FDA in September when the agency decides whether or not to approve the chemotherapy-induced nausea and vomiting drug Rolapitant, which was acquired by Opko Health in 2009, and licensed to Tesaro in 2010.
Regulators could also soon make a decision on Opko Health's vitamin D prohormone Rayaldee. Opko Health filed for FDA approval of Rayaldee in May for use in chronic kidney disease patients with low vitamin D levels, a market that Opko Health thinks is valued at $12 billion annually. Additionally, Opko Health is developing hGH-CTP, a long-lasting human growth hormone that it licensed late last year for $295 million upfront and the potential for future milestone and royalty payments.
Overall, Opko Health is an intriguing company with a lot of irons in the fire, but it's also a pricey stock. After it completes its $1.49 billion pending acquisition of laboratory testing company Bio-Reference labs, it will boast annualized sales of about $900 million; yet its market cap is already north of $7 billion. That could make this stock one to watch rather than to chase higher.
Source: NantWorks LLC
No. 2 Patrick Soon-Shiong
According to Forbes, Patrick Soon-Shiong is the world's richest doctor, with a net worth that's north of $12 billion. Soon-Shiong owes a lot of his success to founding American Pharma Partners, a marketer of generic injectibles to hospitals that was sold for $5.6 billion in 2008, and Abraxis BioSciences, the company he founded after he pioneered the cancer drug Abraxane, an encapsulated version of the chemotherapy drug paclitaxel, which was sold for $2.9 billion in 2010.
Today, Soon-Shiong, through his NantWorks family of companies, has taken a big stake in Sorrento Therapeutics, (SRNE 43.75%).
In December, NantWorks' Nantibody LLC acquired 19.9% of Sorrento Therapeutics as part of a collaboration to develop cancer and autoimmune therapies. In March, Soon-Shiong's NantCell LLC entered into another immunotherapy deal with Sorrento. Most recently, NantPharma, another NantWorks subsidiary, acquired the rights to Sorrento's Cynviloq for $90 million upfront plus promises for up to $1.2 billion in potential milestones and royalties on any eventual sales.
Soon-Shiong's interest in Cynviloq is particularly intriguing given that Cynviloq is a next-generation version of paclitaxel that is formulated differently than Abraxane. Cynviloq is being developed under the bio-equivalency pathway, which may allow it to reach the market more quickly than if it was being developed as a new medicine.
Because Soon-Shiong was willing to hand over big money to secure Cynviloq, it would seem that he thinks Cynviloq could be as good as, or better than, Abraxane. If that proves to be true, Soon-Shiong could end up with a blockbuster on his hands given that Abraxane sales totaled $223 million in the first quarter of 2015, up 21% year-over-year.
Although Soon-Shiong's NantWorks isn't publicly traded -- rumors are swirling of a public offering -- investors can invest in Sorrento Pharmaceuticals. However, investors should remember that Soon-Shiong owns less than 20% of Sorrento Pharmaceuticals, and that any number of things could derail Sorrento Pharmaceuticals' various collaborations with Soon-Shiong's companies.
No. 3 Lonnie Moulder
Lonnie Moulder is best known for his big-time success in the top seat at MGI Pharma, where his team developed and launched the chemotherapy-induced vomiting and nausea drug Aloxi before being sold for $3.9 billion in 2007. Moulder also served as CEO of Abraxis BioSciences for a brief stint before Soon-Shiong sold it.
Today, Moulder is trying to duplicate his previous success with Aloxi at Tesaro, where he's teamed up with Frost on Rolapitant. If Moulder secures an FDA nod for Rolapitant in September, Tesaro will receive the lion's share of any Rolapitant sales, while Frost's Opko Health will be paid a double-digit royalty.
Moulder's Tesaro is also developing niraparib, a therapy for ovarian cancer and BRCA-mutation positive breast cancer that Moulder acquired the rights to in 2012. Currently, niraparib is in a slate of human trials, including two phase 3 studies.
Source: Tesaro.
Because Moulder has had significant success with cancer drugs in the past, and he's shown a willingness to sell to suitors, Tesaro may be worth keeping a close eye on, too.
Following footsteps
Owning biotech companies backed by proven leaders can be a recipe for success, but there's no guarantee that Frost's, Moulder's, and Soon-Shiong's past successes will translate into profit for investors in Opko Health, Tesaro, or Sorrento Therapeutics. For that reason, investors should approach these companies cautiously. However, for risk-tolerant investors, it may be worth considering each of these three companies.
