The World’s Richest Doctor Got His Start with a #ReverseMerger

Sometimes I get tired of the industry touting Blockbuster, Berkshire Hathaway, Occidental Petroleum and Texas Instruments as the poster children for reverse takeovers. They’re certainly helpful, but I’m always on the lookout for stellar, recent examples. I just finished reading an interesting piece in Forbes about how the world’s richest doctor–Patrick Soon-Shiong–is trying to fix medicine with a combination of capital, big data and true grit. It’s a fascinating piece that not only outlines his plans for completely altering the landscape, structure and ultimate costs of the healthcare system, but also showcases that he began his foray into the billionaire boys club with a little reverse merger. Forbes writes:

…in 1991 he invented the drug that made his fortune: Abraxane, which packages the top-selling cancer drug, Taxol, inside the protein albumin. The idea was that tumors would eat the albumin and get the poison.

Top oncologists called it “old wine in a new bottle.” But Soon-Shiong was convinced he was on to something big. He decided on a novel–and personally risky–approach to fund Abraxane’s development. Rather than sell stakes to venture capitalists, the traditional route to bankrolling biotech research, he instead took out loans to buy a small, publicly traded generic drug business, which he renamed American Pharmaceutical Partners, folding his Abraxane initiative inside it. A physician buying group, which purchased drugs from APP, invested in it. Some said this was a conflict of interest; Soon-Shiong says the group contributed to help prevent drug shortages and sold its shares as soon as APP went public. But his reputation had been dinged again.

In 2005 he won a huge victory: The FDA approved Abraxane, defying short-seller interest, which ran as high as 100%. Shares jumped 47%. But once again Soon-Shiong became the center of controversy when, a few months later, he merged APP with a private vehicle he owned. Brian Laegeler, an analyst at Morningstar, called it a “raw deal for minority shareholders as it serves only to line the pockets of Patrick Soon-Shiong.” The stock dropped 18% the day the deal was announced. Soon-Shiong says the long-term rise of the shares vindicated the move.

It was a savvy move by a savvy doctor and an even more savvy businessman.

In 2007 after a wild ride which included a recall of competing brands due to a number of deaths and massive increases in the value of his companies’ stocks, he sold out: “The generics business, including heparin, went to Fresenius in 2008 for $4.6 billion. In 2010 the drug business, Abraxis, was bought by biotech giant Celgene for $4.5 billion. Soon-Shiong owned some 80% of each.” It shouldn’t take you long to do the simple math. I do want to be very clear: funding a startup with a reverse merger is actually an extremely risky proposition. Luckily Soon-Shiong’s long bet on himself and his technology paid off. Now he’s using his money to revolutionize things again. It’s a great story. Well worth the read.

Nate Nead on LinkedinNate Nead on Twitter
Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC which includes InvestmentBank.com and Crowdfund.co. Nate works works with middle-market corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He is the chief evangelist of the company's growing digital investment banking platform. Reliance Worldwide Investments, LLC a member of FINRA and SIPC and registered with the SEC and MSRB. Nate resides in Seattle, Washington.
  • Parts Unknown
    Posted at 19:14h, 16 September Reply

    Very interesting and timely as it looks like he may be up to
    executing another reverse merger to take NantWorks, LLC public. More specifically,
    a tax-free (re-organization) reverse triangular merger.

    He bought two publicly traded companies in the summer of 2011…RPTN and
    KEYO. He liquidated both. He sold the RPTN shell. He kept the
    KEYO shell. The KEYO shell is still actively trading.

    The article specifically talks about the NantWorks, LLC subsidiaries going
    public via IPO’s as Tracking Stocks. He never mentions how the Parent
    Company, NantWorks, LLC, will be going public.

    There’s gotta be a reason why? Insider trading laws perhaps preventing
    him saying or The Good Doc telling him?

    Can his third time executing a form of reverse merger be the biggest charm of
    them all for him?


    • Nate Nead
      Posted at 19:49h, 16 September Reply

      Interesting additional insight and info. Rarely will those with plans such as these divulge them in their entirety–whether for legal reasons or otherwise. My guess is a combo of potential insider trading and strategy. I’m sure his three-peat reverse merger will attempt to replicate (and potentially improve) on his past successes in this arena. Should be interesting to see it all play out. Your suspicions may ultimately prove prophetic—esp. in regards to the KEYO shell.

      • §tuball
        Posted at 21:20h, 16 September Reply

        Get it while you can!

      • BettyBoop
        Posted at 23:14h, 16 September Reply

        Nate…why take a business public via RM when he can file an IPO and make billions. The KEYO scenario doesn’t make much sense. The pumpers here on this board and elsewhere are telling everyone about KEYO being used as the RM candidate. It is very unlikely.

        • Nate Nead
          Posted at 23:19h, 16 September Reply

          Well put Betty. Well put.

          • BettyBoop
            Posted at 23:28h, 16 September

            When PSS went public in the past he was unproven and virtually unknown. Now he is hanging out with high profile people and visiting congress. A recent article mentioned him taking NantHealth public this coming spring with an IPO. When I pointed that out to the KEYO supporters…they said the fact checking was inaccurate in that article and the RM became a reverse triangular merger. A lot of ppl are getting sucked into this scenario and stand to lose a lot of money. I almost bought in until I looked into it further. Glad I didn’t.

          • Nate Nead
            Posted at 23:33h, 16 September

            Yes. Thank you for sharing. Great inputs.

          • Parts Unknown
            Posted at 06:55h, 17 September

            A TRACKING STOCK IPO. Did you not comprehend his writing? You pointed out incorrect information. Half info isn’t full info. Get it together. He stated the SUBSIDIARIES are designed to trade independently as TRACKING STOCKS. Do you know what they are? Do you know they need a PARENT COMPANY to be pubic FIRST? Where is Matt’s info on how the parent company will go public? Gee, he found out all about how the subs will go public, via IPO, but not the parent company worth MULTIPLE TIMES MORE??


            How do reverse mergers work?

          • Parts Unknown
            Posted at 06:57h, 17 September

            Make that, REVERSE TRIANGULAR MERGERS!?!?!?!?????

            School us, Betty.

          • Parts Unknown
            Posted at 07:01h, 17 September

            It’s simple, Betty…just answer…

            Why don’t you ever mention the fact that he mentions ONLY tracking stocks. What about the Parent Stock?

            What about NantWorks, LLC?

            How’s do you propose that’s going to go public?

            WHY NOT KEYO!?

            Seriously, why?

            It’s still his shell.
            It’s still trading.
            He has enormous tax benefits w/ it.

            If you owned it, would you “toss it to the curb”?

          • Nate Nead
            Posted at 19:39h, 17 September

            Dr. Soon-Shiong’s vehicle certainly has some great features that would make it an excellent candidate for a RM. However, the typical risks of better on what someone will/won’t do still remain. It’s still all just speculation at this point. Both You and Mr. BettyBoop outline some good arguments on either side.

            While we don’t offer investment advice here, there is certainly reason to be cautious, but also good reason to wonder:
            “Why KEYO?”
            “If not this RM, then how will KEYO eventually be used?” It’s such a good asset, I doubt it will just go away.

            Whether that’s NantWorks or not truly does remain to be seen. Thank you both for pointing it out. I suppose we’ll just have to wait and see who the true prophet is on this one 🙂

          • Parts Unknown
            Posted at 22:44h, 17 September

            Mr. Nead,
            Does or should a shell company have an active TA if they are still trading (and non-reporting)? If so, what would it mean if one cannot be located? Would this mean that the shell company is acting as it’s own TA (providing their own services there)? If so, would that tell one that somebody is still “manning the door” of the liquidated shell company? And, if so, why would somebody by “manning the door” of a shell company?

            My first time at your site here…impressive. You are obviously and expert in your field and as such, any insight you can share on the above questions would be greatly appreciated.

            Please let me know if you’d like me to fill out the official “contact” form to ask these questions.

          • Nate Nead
            Posted at 18:26h, 18 September

            I am not certain what is meant by “TA” in this context (?). If a company is non-reporting they have a problem to begin with; they are classed as a “pink sheet” and after the SEC rule changes of February 2008, there are some problems to consider with pink sheet shells. If a company has ever been a shell, it is virtually impossible to remove the 144 legend so that the stock can trade. Registration is required to do this which is expensive if it even can be done. Pink sheets don’t work well any more and the SEC, Finra, Brokerage clearing houses, DTC, etc., don’t seem to like them! There appears to be a market for “pink sheets” which is primarily pump and dump con artists, often from outside the U.S. and recently from marijuana companies, which have problems with reporting companies, partly because marijuana is still contraband from a federal standpoint.

            If TA is technical analyst or something similar, you can see that in our opinion if a company is pink there’s not much to analyze.

          • Parts Unknown
            Posted at 09:46h, 19 September

            TA = Transfer Agent

            Sorry for the confusion.

            Pinks sheets…Caveat Emptor (PN CE). Sometimes a reason for that “Buyer Beware” designation on a stock is the following…

            Undisclosed Corporate Actions — The security or issuer is the subject of a corporate action, such as a reverse merger, stock split, or name change, without adequate current information being publicly available.


          • Nate Nead
            Posted at 19:01h, 19 September

            Ah, yes TA 🙂
            Unfortunately, there is still not enough clarity to say anything definitively here. Manned shell companies, especially clean ones with NOLs is worthwhile as they can be used for other deals in the future. There are a number of “what if” scenarios that could play out here, only one of which is the RM with NantWorks.

          • Parts Unknown
            Posted at 18:03h, 20 September

            Thanx, Nate. I agree and think the possible reward definitely outweighs the risk on this one, by a country mile. Cheers.

        • Parts Unknown
          Posted at 01:52h, 17 September Reply

          Explain why, Betty? What exactly doesn’t “make sense”? An unverifiable email and supposed conversation as opposed to solid DD? Really??? You do know that an insider will go to jail if they spill the beans on a R(t)M w/ a publicly traded shell BEFORE any OFFICIAL SEC word goes out. Don’t you?

          You need to bring more here than just that garbage about “pumpers”.

          Provide some REAL VERIFIABLE EVIDENCE OR DD to support you claim that “it’s very unlikely”.

          Can you?

          WHY NOT KEYO!?!?!?!?????

  • §tuball
    Posted at 21:18h, 16 September Reply

    The writing is on the wall. Can you read?

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