Patrick Soon-Shiong: Cures for cash

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1:18Welcome to Good, Bad, Billionaire, the podcast where we pick a billionaire and find out how they got so rich. And then we judge them. Are they good, bad or just another billionaire? I'm Simon Jack, I'm the BBC's business editor. And I'm Zing Sing, I'm a journalist, podcaster and author. And our subject today, I'll confess, I'd never heard of. But let's put it this way, he's got an interesting story that takes him all the way from apartheid era South Africa to the billion dollar halls of American biotech industry. Yeah, with a lot of famous friends along the way. It is Patrick Soon Chong, surgeon, businessman, biotech billionaire.

1:58So let's break him down by numbers. How much is he worth right now? Right now,$5 billion is his current net worth. Amazingly, he's not the richest doctor in the world, but he's certainly one of them. I mean, he's a dabbler. He's dabbled in curing a lot of things. Diabetes, cancer, even COVID-19. Although some of his colleagues in the medical profession would raise their eyebrows at the word cure. He's a good marketer, let's put it that way. In 2006, a dose of his cancer drug, Abraxane was selling for$4 ,200, which is 25 times the cost of the generic equivalent. Yeah, he owns the LA Times, which he bought along with the San Diego Tribune for$500 million.

2:38And he also likes splashing the cash. So he's got a full size basketball court under his LA mansion. In fact, it's right under his living room. And his friend, the late basketball superstar Colby Bryant, played on this court and said it was one of the best courts he'd ever played on. He's got other celebrity friends, Burt Bacharach, the songwriter, very close. And he's rubbed shoulders with some of the most powerful people in the world, Bill Clinton, Joe Biden, the Pope and Donald Trump. But he's not liked by everyone. So a lot of people say he exaggerates how effective his treatments are. And he has been sued a lot of times, including by his own brother.

3:13And even Cher, the pop star, also sued him. and it's interesting this thing because I want to look into some of that tension between the medical establishment and making a ton of cash and how easily those two things sit together. Right because at least in the UK I'm not so sure about America if you're a doctor and you kind of flash the cash like that I don't know if you come off well in the medical establishment. And if you tend to sort of overhype your work in the medical world people get very sniffy about that. So we're going to be asking, is he the ultimate good billionaire, literally trying to cure cancer, or do these lawsuits hint at something a bit murkier beneath?

3:50But let's hear from him himself. Here is Patrick Soon-Shiong talking to the BBC World Service in January 2022 about why he signed the Giving Pledge. Well, I just think it's a moral obligation. I was born in South Africa, grew up under apartheid, privileged to come to America, learnt what we've received, and it's the right thing to do. It just is the right thing to do. And it's not just me. And I think really, as I said, there needs to be a rallying cry from the developed countries to support this. And I think Europe, the EU, and hopefully the United States will, like they did with PITFAR for HIV, will step up to this need.

4:32So there he is talking about his starting out in South Africa. So let's wind back right to there because it's a fascinating background he's got, which I think does influence his future career. Oh, definitely. So he's born in South Africa in 1952 to Chinese immigrant parents. And for context, South Africa is actually home to one of the oldest and largest Chinese communities in Africa. And South Africa at the time in the apartheid era was discriminating incredibly severely against people of colour, mainly black Africans. But it was not easy as well for people of Asian heritage. I don't think that could have been easy for him.

5:06Yeah. And his father ran two small grocery stores. His mother was raising 10 children. That's a lot of children. And he says, interestingly, his father had been a herbalist in China, in Chinese herbal medicine. And he said every two months, a metal biscuit tin would arrive from China filled with what was described as foul smelling weeds. If anybody had a fever, a cough, a boil, there'd be a knock on the door. They'd walk into the house and he would concoct something out of these ingredients. Having had Chinese herbal medicine forced on me, I would add that foul-smelling weeds is a good description of it.

5:40And it's interesting that because clearly he's watching this, which is, you know, different, non-traditional, experimental medical treatment. That's kind of the inspiration for his career. Oh, yeah, like knocking stuff together. That is something that will define the way he approaches medicine. And he said that it started influencing his beliefs that in the human body, it has the innate ability to heal itself. and you've got to try and give that capability the best chance to thrive. And actually what we find out with some of his drugs is he tries to do that so the body doesn't fight against you.

6:12So in 1969, he goes to med school in Johannesburg. But under the strict apartheid rules, the med school only allows two Chinese students from the entire of South Africa, this is crazy, to go to med school. So he has to be an excellent student. Yeah, and so they set up experience in hospitals in black townships. But this is interesting. He asked to be moved to Johannesburg General Hospital for the white patients because he thought he'd get better training and more money there. Unfortunately, that did not turn out to be the case because after graduating, when he was one of the first non-white surgical residents on staff, he earned$1 ,000 a month.

6:49But that was half the rate of his white peers. So I kind of wonder if this was what lit a fire in his belly to want to earn more. Yeah, maybe. But the odd thing about South Africa, clearly it was cut off from a lot of the rest of the world. You had the Glen Eagles Agreement over sport. It was banned in lots of other areas. So it kind of was slightly out there, isolated. And that actually allowed it to have an experimental, adventurous medical culture. In 1967, a surgeon called Christian Bernard performs the world's first human heart transplant in South Africa. Yeah, and Sun Xiong himself trained under a guy called Bert Mayberg, who performed the country's first kidney transplant.

7:28So you've got some superstar surgeons operating in South Africa. But Patrick isn't happy just staying in South Africa. So in 1977, he marries a university friend called Michelle Chan, who is also Chinese and South African, and moves to Canada for his junior residency. She was actually a budding actress. And she ended up getting bit parts of MacGyver. MacGyver. Gosh, that takes me back. When I lived in the States for a bit, that was like daytime TV gold. I actually cannot remember what MacGyver is about. It's about some law enforcement guy who's, you know... Classic. Classic American, North American TV.

8:03So they moved to California. So he becomes the youngest professor of surgery at UCLA. I mean, that's superstar status. You know, if you're head of surgery at somewhere like UCLA, you really must have a streak of genius about you. And he says the big transition for him, right, It wasn't the jump in a small hospital to a big one or to somewhere prestigious like UCLA. It was the business of medicine in the US. It's one of the biggest changes I still haven't figured out. Yeah, that's what he said. The idea here in the UK, we're just not familiar with the industrialisation, the commoditisation, the corporatisation of medicine and some of the huge quantities of money.

8:41A friend of mine who worked in this area said that the worried well is a multi-billion dollar industry in the US. There's a pill for everything, you know, as well as a pill for everything in everyday life. There's also a very, very lucrative industry in tackling things like the big diseases like cancer, like diabetes, like leukemia. And I didn't understand how big an industry medicine was in the US until I went to my first ever pharmacy in the United States. And I saw how much choice they had and how many products there were. now. It's like, wow, this is big bucks here. Yeah. So he performed the first whole pancreas transplant ever done at UCLA.

9:17But he also is interested in less invasive alternatives than surgery to treat things like diabetes. And in 1991, he actually leaves UCLA to go and pursue his business interests. And he co-founds a biotech startup called Vivo RX with his property developer brother Terrence. Now, Patrick describes Terrence as being the businessman of the family. And these two brothers are going to form quite the alliance but they're also going to create an unholy fallout with each other. So he learns about this emerging technique called islet technology which is where you transplant islets which are cells that produce insulin into the pancreas.

9:54Now one of the problems with these kind of treatments is that often organs reject anything that's put into them and he comes up with a solution to this by wrapping these cells in a gel which is derived from seaweed, also used to thicken ice cream. It's kind of genius, but also it has that real vibe of just knocking stuff together, you know, like that old Chinese medicine kind of putting the weeds in. Yeah. And in 1992, he put these capsules into a dog, I think a pig as well, and that seemed to work. So by 1993, he implants these cells into a human diabetic patient, Stephen Craig, for the first time.

10:32And Stephen was very ill, so he needed to walk with a cane. You know, his eyesight was failing. He was not in a good way. Yeah, and a week after the surgery, CBS Evening News, big news channel there in the US, shows Craig eating a meal without insulin for the first time in 30 years. So they're making this a very high-profile, wow-e, eureka case. But, you know, crucially, if you're going to appear on TV a week after the surgery, you can't really determine the long-term results of this treatment yet. But that doesn't stop him. In fact, he published his results in the well-known medical journal The Lancet, claiming a new technique that might herald a cure for type 1 diabetes, which raises the eyebrows and some sharp words from medical colleagues.

11:13So the president of the American Diabetes Association, a guy called Dr. James R. Gavin III, called it inappropriate and premature to make that kind of declaration. We don't need this kind of inappropriate hype. So there was immediate pushback. And even his own boss at UCLA, Dr. Michael Zinner, said he told the world he was curing diabetes. But in the scientific realm, this is his quote, you need to have your results reproduced by others to have them validated. His results were controversial. And they remained controversial because after a couple of years, Stephen's remaining kidney begins to fail and he becomes depressed.

11:45And in 1998, he checks into a hotel in Orange County and takes his own life. Yeah. Now, his suicide has not been blamed on Sun Xiong, But Bussain John clearly benefited from the early publicity that Stephen Craig gave him. And you get the sense that there's a kind of almost budding sense of hubris here, right? You know, he's got a willingness to embellish or overstate things. Yeah. And it's funny having a surgeon's background in this world, because surgeons the world over sometimes do have this kind of godlike complex. I mean, you can understand it in a way. You're fixing people. Sometimes you've got someone's heart in your hand.

12:19You patch them together. and I know quite a lot of surgeons and this kind of complex in a way it can be quite prevalent. And also if you're not a surgeon or you're not in the medical establishment people have a tendency especially if they're not a doctor themselves to just award this kind of godlike confidence. Defer to them yeah exactly. And what's interesting is he perhaps takes that kind of feeling of supremacy from surgery into an area which he's not an expert in which is the development of medicines and the medical world is usually very, very specialised and specific. It's interesting, isn't it?

12:54Because on one hand, you can look at a billionaire like that and say, well, billionaires take risks. That's what they're supposed to do. But when the risk is potentially having people's lives in your hands, it kind of gives it a whole different kind of profile. A whole different complexion, for sure. So anyway, Stephen Craig takes his own life in 1998. A few years previous to that, VivaRx got$5 million worth of funding from a big generic drug maker called Mylan Laboratories, specifically to fund diabetic research. But at the same time, Patrick also forms American Bioscience, which is a company pursuing cancer research.

13:26So he's basically backing two horses. Diabetes over here, he's got cancer treatments over here. And in 1995, Mylon invests more for an exclusive licence to market and sell this revolutionary diabetes technology. It was a couple of years later where we think he hit that milestone of becoming a millionaire when the companies he controlled signed two big deals in two days. And those two companies are called American Bioscience and American Pharmaceutical Partners, which, you know, we'll call APP for short. First was a five-year deal with Premier, which is the USA's largest healthcare alliance. And the very next day, a deal with the massive drugs company Glaxo.

14:03Welcome for supplies of the generic version of Zovarax. And this is kind of a key strategy of Sun Xiong's to distribute generic drugs once the patent for those drugs had expired. And like all good millionaires, he invests it back into his company. So he purchases two pharmaceutical factories that manufacture generic injectable drugs. Yeah, both of them have been losing money for nearly a decade, but he turns them around. They become profitable. He doubles APP's revenue. So he is the beating heart of a businessman here somewhere. Yeah, not just a surgeon. And in 1998, Sun Xiong states that APP sales are$75 million annually.

14:41So he's well over the million dollar mark at this point.

14:54so patrick is now officially a millionaire at this point you think you know time to build the underground basketball court i'd be celebrating but then family drama rears its head this is a weird story in 1998 patrick's brother terence and the investors mylon fire him and sue him for fraud and self-dealing. They say that he used consultants paid for to work on diabetes research to actually work on another on cancer research. So essentially, he's using Mylon's money to pay for work on a company that he then owns. So he's basically appropriating their staff and getting them to work on his project.

15:33Right. So the case goes to an arbitrator, but Patrick is cleared of any wrongdoing and Terence rehires his brother in, I'm sure, what felt like a very magnanimous gesture at the time. But 40 months later, he's suing his brother again on similar grounds. And this time, Patrick doesn't come off quite so well. He has to pay£32 million for the balance of Milan's American bioscience shares and to fund Terence's diabetes research. And Patrick agrees not to work on diabetes at all until June 2003. And he says something quite important here. He said in a New Yorker interview that stopping him working on diabetes for that five-year moratorium, in his words, evil.

16:12You've hurt mankind because I was this close to, well, in his mind, curing diabetes. I mean, it seems kind of self-aggrandising to me, to be honest. And actually, when that moratorium period was up, he didn't then return to it. So clearly, he wasn't that close or just got bored of it. Yeah, he clearly didn't have a burning desire to cure diabetes. I mean, we've referenced succession on this show before, but this level of brotherly fallout is so succession. Yeah, it really is. I wonder what the other eight siblings made of it. Where are the other eight? Anyway, that was his diabetes exploits. But where he makes his big money is in a cancer drug called Abraxane, which basically repackage an existing drug, but put it inside a protein which is produced by the liver.

16:57I'm way out of my depth here, but because it's wrapped in a familiar protein to the body, its rejection rate is lower and it becomes marginally more successful. So the top brand, the pre-existing brand, dissolved it in a kind of castor oil product. but that could cause allergic reactions. Not that frequently, but occasionally and sometimes even fatally, which is not a nice way to go. He starts this drugs trial for Abraxane and results suggest a kind of marginal improvement in survival rates. So the patent on Abraxane was owned by American Bioscience, a private company 80 % owned by Sun Xiong. And it licensed Abraxane to APP for around$85 million.

17:39Remember, Sun Xiong was the chief executive and largest shareholder of both companies. To an outsider like me, it sounds like he's licensing his own drug to his own company. So he benefits in both ways. I mean, isn't that just putting money back in your own pocket? I work in business and complex company structures are not unusual. But the kind of cross holdings of these ones seem more complicated than most. more kind of, if you like, sort of company engineering and chicanery than would be normal for something like this. Right, but APP is making money. So profits in 2000 are over$6.6 million. And in December 2001, APP does its IPO, which we've come across before, which is when a company sells shares itself to the general public.

18:23You get a real view then at that point of what the company is worth. The IPO raises$144 million, but the company itself is worth much more than that because they only sell a bit of the company. But APP is being targeted by short sellers. Now, OK, what is short selling? Does this have anything to do with GameStop? Well, funnily enough, it does. GameStop was a classic example of this. But let's go back to basics. Short selling is betting that a company's share price will go down, that its value will decrease. What I do is I go along and I borrow some shares in the company. So I go and borrow 100 shares.

19:00So I am short. I owe you 100 shares. But I think the share price is going to go down. It goes down from$10 to$5. I then go back and buy them for$5, give you back the shares I owe you, but I've pocketed the difference. Does that make sense? That's great. That's the Margot Robbie in a bathtub big short part of this podcast. I hope I did a reasonable job on that. But anyway, it's very common in financial markets. Now, the reason people sort of bet against companies is because they think there's something not quite right. And that's exactly what people thought about APP. They had spotted issues with Abraxane being owned by American Bioscience, which was still a privately owned company, rather than APP, the public company.

19:43And some investors challenged this structure. They also raised questions about the drug trial, which is controversial because the American company which began the trial was fired and the trial is completed in Russia. So the investment community doesn't think that this doesn't pass the smell test for them. Right. So for them, they're like, this investment seems a bit dodgy. The value of the share is probably going to go down because something's up. Correct. They thought there was something up with this. So the company faced a whole slew of shareholder lawsuits after they lost one billion dollars in value of the company.

20:15Yeah, and the lawsuits were based on a press release touting these positive results for Abraxane, but they failed to include any trial data, so they weren't giving enough information. And Patrick said, you know, the company needs more time to analyse the data, but once again we see him kind of putting the cart before the horse. Yeah, but despite all these lawsuits, the FDA, which is the Food and Drug Administration, granted Abraxane fast-track status, so approval could come as soon as 2004. And in 2003, Patrick appears on the Forbes billionaire list for the first time with an estimated wealth of$1.4 billion.

20:52So clearly, the short selling and the lawsuits didn't really put a dent in his fortunes. No, it's interesting that Abraxane, which was the blockbuster drug, was quite controversial, but was the one that made his fortune. And when the FDA finally approved Abraxane in 2005, the stock of APP jumps 30 % in a single day. And here's a very illuminating thing. He commissions paperweights for staff at the company with an image of that day's stock chart. That tells you everything you need to know about whether he's focused on the money or not. Yeah, I mean, let's put it that way. It wasn't a statue of a cancer patient getting treated.

21:29Yeah, a little statue of Hippocrates, the Hippocratic Oath. It wasn't one of those. It was a stock chart. So that jump in the stock sees him move up the rich list with an estimated worth of over$2 billion. But the criticism continues, right? So the New York Times reports Abraxone is selling for$4 ,200 per dose, which is 25 times the cost of its generic equivalent. And because of, like we said, the industrialisation of the medical industry in the US, doctors who administer the drug can get in a percentage of the price. Having said that, however, Abraxone is much less likely to trigger allergic reactions, which, you know, has made it popular with some US doctors.

22:10Yeah, but an independent review in the annals of oncology concluded that Abraxane and similar drugs like that did not, in their words, not really offer a significant therapeutic benefit over established medicines. In fact, described them as old wine in a new bottle. And many years ago, I knew quite an eminent haematologist who's no longer with us, and they would organise these medical conferences which were paid for by the big drug companies, all expenses paid in places like, it would be in Hawaii or Niagara Falls or somewhere, or Vesuvius or something like that, a really kind of incredible place.

22:47They'd be all expenses paid. They'd be strongly encouraged to prescribe these drugs. And not only that, some of the academic research that went hand in hand was also paid for and sponsored by the drug companies. So there are plenty of nudges and incentives to get physicians, doctors to prescribe certain things. Some would say it's not as academically pure as it should be. And it's certainly a big money-making opportunity. And for someone like Patrick, who, you know, came to America and said, oh, I don't understand the US healthcare system at all. He seems to understand its capacity to make a lot of money.

23:25So from 2007, Sun Xiong's been setting up various different companies, all with Nant in their name. Apparently, it's inspired by a Native American basket he has in the background of all his Zoom calls. So the first is Nant Health. Then there's also Nant Works, the umbrella brand. Nant Omics, Nant K West, Nant Pharma, Nant Cell. You know, names are changed. Various companies are floated. But an IPO for Nant K West in 2015 reveals Soon-Shiong's compensation package. And it is staggering. It's$147 million, which puts him among America's best paid CEO that year. Yeah. And so he's doing incredibly well at this stage.