I have not been a fan of Patrick Soon-Shiong and his approach to the biopharma business (and the publicity thereof). There’s a new lawsuit that (should its accusation hold up) will make anyone even less of a fan. Here’s a rundown at Endpoints, and one at Forbes. It’s a mess, so I’ll try to untangle the story:
Back in 2015, Sorrento Therapeutics sold one of its drugs to a Soon-Shiong company (NantPharma). That was Cynviloq, a nanoparticle formulation of paclitaxel (which is famously in need of formulation help, being quite insoluble and most likely to dissolve in vehicles that some patients can’t tolerate). Another Soon-Shiong company (Abraxis) had already developed its own paclitaxel formulation some years before (Abraxane), where the drug was already bound to albumin protein, and Celgene had bought the whole company in 2010 for $2.9 billion to get that one into their portfolio.
So this newer Soon-Shiong venture paid Sorrento $90 million plus potential milestone payments if the Cynviloq nanoparticle form went on to success in the clinic and approval. So far, this looks like a case of going back to the well with reformulated paclitaxel (after all, it worked great with Abraxis, didn’t it?) But this new lawsuit, filed by Sorrento, alleges something else. They claim that NantPharma was engaging in a “catch-and-kill” deal to protect the earlier drug’s market position, since Soon-Shiong was (after the earlier deal) Celgene’s largest individual shareholder. And if Cynviloq had been successful, it would have hurt Celgene’s business and Soon-Shiong’s stock position. The lawsuit alleges that Soon-Shiong had originally thought to sell Cynviloq to Celgene to add to their portfolio yet again, but that Celgene passed on the idea.
And here’s where things get complicated. Sorrento actually took $40 million of the $90 million they’d gotten from NantPharma, and turned right around and invested in a new joint venture with another Soon-Shiong company (NantCell) for developing antibody therapies. The lawsuit alleges that Soon-Shiong and his company’s legal counsel then caused the joint venture company to transfer all its cash over to NantPharma itself, effectively reclaiming $40 million of the upfront payment that they’d made to Sorrento and leaving the joint venture company as basically an empty husk. So Sorrento claims that they have been left without a useful joint venture, losing $40 million along the way, and with a drug that is not going to generate any further milestone payments because Soon-Shiong and NantPharma now intend to sit on it.
As the Endpoints article mentions, this is not the first time that Soon-Shiong has been accused of such creative accounting. STAT had a very interesting series of articles about how he donated money to the University of Utah but apparently structured the deal so that much of the money would flow back to one of his own companies (Soon-Shiong has denied the accusations), and this Politico article details several other controversies. So for what it’s worth, this isn’t a charge that comes out of a clear blue sky. I take the point that what we have so far is one side of the story, but it will be interesting to see where this goes. My guess is some sort of expensive settlement, after a few more rounds of legal maneuvers, but we’ll see.