‘It will help us with our product’: Emails show how a billionaire’s philanthropy boosted his business
For weeks, biotech billionaire Dr. Patrick Soon-Shiong has been taking to social media to portray himself as a valiant warrior against cancer, unfairly maligned by the press.
He and his diagnostics company, NantHealth, have strenuously denied reports that they reaped benefits from a $12 million gift he made to support medical research at the University of Utah.
But emails and documents obtained by STAT make clear that executives at NantHealth and officials at the university viewed the deal through a transactional lens, intended, at least in part, to boost Soon-Shiong’s commercial interests.
The deal with Utah — which gave Soon-Shiong’s team access to genetic and health data on hundreds of patients — “will help us with our product,” Larry Fitzgerald, a NantHealth vice president, wrote in an email.
STAT reported last month that the university sent $10 million of Soon-Shiong’s $12 million gift right back to NantHealth to pay for genetic sequencing of blood, tissue, and tumor samples. Soon-Shiong, a showy entrepreneur who has vowed to “solve cancer,” denied that the contract had been set up to funnel money to his company or that he had benefited from the arrangement.
But those denials are contradicted by more than a dozen documents STAT obtained from critics of the deal, including email chains and internal memos that circulated at the university and at NantHealth as the deal was being planned and executed. They show that the plan to steer business back to Soon-Shiong and give him access to patient data to improve his product was baked into the deal from early on. Among the findings:
- A university memorandum from September 2014, days before the donation was made official, stipulates that the genetic analysis to be paid for by Soon-Shiong’s gift would be done by Soon-Shiong’s team.
- Another document circulated within the university noted that one of Soon-Shiong’s companies would for a time keep copies of the patient data involved in the sequencing job — and would use it to develop its “sequencing and bioinformatics platform.” Internal emails from NantHealth executives also indicated that they explicitly saw the deal as a means to boost their business.
- Though the deal was built around the idea that Soon-Shiong’s lab would do the genetic sequencing, the company was not yet prepared to do that work when the contract was signed. Emails show at least one NantHealth executive was scrambling to try to delay the university from visiting the lab because the company had not yet formally confirmed that its new DNA sequencing machines were working properly.
The documents offer new details about the way Soon-Shiong’s philanthropic and business interests intertwine. They deepen ethical and legal questions surrounding his donation to the University of Utah. And they raise new questions about why the university agreed to accept a gift on the understanding that it would send most of the money back to the donor’s company — especially when that company wasn’t yet ready to do the work.
NantHealth spokeswoman Jen Hodson said the documents in no way proved that the deal was structured to send money back to Soon-Shiong’s company, even though they repeatedly show early evidence of plans to do just that.
Hodson said the university was free to pay any qualified company to do the sequencing — though the university told its own scientists early on that “a bioinformatics team associated with the Donor” would be doing the work. (That memo was dated four and a half months before the university inked its research contract with NantHealth.)
Hodson also denied that Soon-Shiong reaped gains from the deal and said his companies did the work for Utah at a loss.
“There was no commercial benefit,” she wrote in response to STAT’s questions. “However there was a significant benefit to the learning system of mankind.” She referred to a recent paper about early-onset menopause that came out of the scientific research funded by Soon-Shiong’s donation.
Both Hodson and University of Utah spokeswoman Julie Kiefer said that NantHealth was transparent with the university that it was still getting its genetic sequencing machines ready for prime time, though the emails STAT reviewed suggest that at least one executive was worried about how much they still had to do.
“I worked to put them off a bit to later in March—so not to disclose we still have work to do on the validation front of samples,” NantHealth executive Laura Beggrow wrote to the company’s president in February of 2015, referring to the University of Utah team.
A defiant stance on social media
Soon-Shiong, NantHealth’s majority owner and CEO, has repeatedly used Twitter in recent weeks to dismiss his critics and to suggest that they’re out to derail him as he pursues the noble goal of curing cancer.
Nobody should be a target just because they want to help our country. Cancer affects all Americans …Red and Blue https://t.co/LH7eiiEHM0
— Dr. Pat Soon-Shiong (@DrPatSoonShiong) April 12, 2017
In his most recent tweets, Soon-Shiong blames the critical coverage on the fact that he met at least twice with President Trump prior to the inauguration. In January he was said to be in talks for a senior role in the administration overseeing the US health care system. That buzz has since quieted.
— Dr. Pat Soon-Shiong (@DrPatSoonShiong) April 12, 2017
STAT’s previous coverage of Soon-Shiong included the finding that his ballyhooed moonshot initiative, which aims to cure cancer by 2020, achieved little scientific progress in its first year, and instead became mostly a marketing tool for NantHealth’s pricey new diagnostic test, called GPS Cancer.
The STAT investigation of the Utah deal found that the arrangement could put Soon-Shiong and his foundations in violation of tax rules against indirect self-dealing. Since the publication of that investigation, NantHealth’s stock price has sunk 46 percent, to $3.86 per share, and at least three investors have filed suit against Soon-Shiong and NantHealth, alleging violations of federal securities law.
A Politico investigation last weekend found other examples of Soon-Shiong’s charitable foundations operating in a way that benefited his business interests.
NantHealth lost $184 million last year, the company reported last month.
‘It will help us with our product’
In the days before Soon-Shiong formalized his donation to the University of Utah, the university wrote up the terms in an informal memorandum of understanding, dated early September 2014.
The memo, circulated at the university, said academics could participate in research funded by the donation, so long as they agreed to various stipulations, such as that genetic analysis would be carried out “by a bioinformatics team associated with the Donor.”
The memo also says that “Donor-affiliated Scientists shall have the right to analyze the sequence data for any or all of the Heritage 1K projects,” which was the university’s umbrella term for the research funded by Soon-Shiong’s donation. (The memo indicated Soon-Shiong’s team would be able to keep that data for two years.)
Kiefer, the university spokesperson, said the memorandum did not commit the university to awarding the sequencing contract to NantHealth. She previously told STAT that the university looked around to see whether other facilities could meet the very detailed specifications in Soon-Shiong’s gift contract, but none of them could — except NantHealth and its associated lab, NantOmics.
The deal gave NantHealth access to lots of valuable data associated with the hundreds of samples it sequenced and analyzed for Utah scientists. The company learned which diseases ran in each patient’s family. Whether they were affected by certain medical conditions. And how closely they were related to other people who provided samples for analysis. (The patients’ identities were not disclosed.)
The contract prohibited Soon-Shiong’s team from using the data for purposes beyond the work it had been contracted to do. But it did allow a crucial exception: The owner of any algorithm could retain all improvements made to the algorithm in the course of performing the job.
That was a boon for Soon-Shiong’s business, because the algorithms that sift through large quantities of genetic data to identify patterns for researchers also power his commercial products, like his GPS Cancer diagnostic tool. He was also working on developing a second product, GPS Heritage, meant to assess a patient’s risk of inherited and rare diseases.
Soon-Shiong has denied that the Utah deal had anything to do with the development of GPS Heritage. But a company statement to investors belies that assertion; it explicitly says that the deal with University of Utah “will enable the development” of the new GPS Heritage product.
And the emails reviewed by STAT show that at least two top NantHealth employees saw the deal through a commercial lens.
“I know this research project is taking place with NantOmics and more to refine our algorithms. It will help us with our product,” Fitzgerald, the NantHealth vice president, wrote in an email dated in April 2015 and sent to colleagues.
“Larry is correct,” responded Beggrow, the company’s chief commercial officer.
(Hodson told STAT that, in fact, “the algorithms themselves were not affected or improved by the addition of these data.”)
In the earlier email to NantHealth’s president about the research project, Beggrow had suggested there was room for Soon-Shiong’s team to achieve even greater commercial gain, though she provided few specifics.
“I believe we all need to work collectively with effective communication throughout all of our Nant Families,” she wrote in February 2015, “and to optimize these opportunities for upselling along the way.”
Both Fitzgerald and Beggrow have since left NantHealth and are both now employed at a different biotech company. Neither returned STAT’s repeated requests for comment on their emails.
‘The ethics are messy’
Another University of Utah document, circulated in December 2014, underscored the point that that Soon-Shiong’s team planned to use the research data for commercial gain: “NantOmics will retain the data and DNA sequence for development of their sequencing and bioinformatics platform,” the document reads.
That document gave academics suggestions on revising their research protocols so as to allow Soon-Shiong’s team access to the patient data.
It’s common for scientists to ask their institutional review board to approve changes to their research protocol mid-way through a study. They must generally do so, for instance, any time they want to interrogate a new question.
But two experts who study institutional review boards and reviewed the University of Utah documents at STAT’s request saw potential ethical land mines in the deal.
Karen Maschke of the Hastings Center said it raised questions about what patients were originally told would happen to their samples when they agreed to provide them: Did they know, for instance, that their genetic and health data might be shared with a for-profit business?
Jennifer Miller, founder of the nonprofit Bioethics International, said that while the deal seemed to pose minimal privacy risks to patients, “The optics are bad and the ethics are messy.”
A lab not yet ready to carry out its work
Not long before the University of Utah deal was signed, Soon-Shiong’s team bought a new brand of sequencing machine, called the HiSeq X10 and sold by Illumina.
When a lab buys new machines, it can’t just start performing work for clients right away. There’s an involved process of developing new protocols, ensuring they work robustly, and then validating the performance of machines with a formal test, according to Heidi Rehm, medical director of the clinical sequencing research platform at the Broad Institute of MIT and Harvard.
Soon-Shiong’s team wasn’t using its machines to commercially diagnose patients at that point — they were just for research — so the validation wasn’t as complex. But it likely still would have involved running benchmarked samples through a start-to-finish process to ensure the machines were sequencing the DNA properly, Rehm said.
Beggrow’s February 2015 email indicates that NantOmics was at that time not yet ready to do the sequencing for Utah, even though the university had been planning for at least five months to have Soon-Shiong’s team do the work.
The NantOmics lab “hasn’t yet even begun to do validation work on samples,” Beggrow wrote.
She added that she “did NOT want to disclose this to this account [at the University of Utah] that we aren’t ready to accept their actual 1000 retro samples.”
Kiefer said the university knew “that this was a new state of the art facility and that the new equipment would require validation testing.” She added that the university did not start paying NantHealth “until it had been verified that the sequencing met the high standards documented in the contract.”
Hodson said that “nothing was hidden from the University of Utah.” The validation work Beggrow mentions in her email, Hodson said, “refers specifically to the University’s demand that NantOmics validate the accuracy and quality of the sequencing data against the University of Utah’s own work with other external vendors, by performing analyses of test samples.”
When it came to delaying the University of Utah’s lab visit, Hodson said, “This timing was openly communicated by NantOmics to the University scientists and it may be that NantHealth and NantOmics employee were not communicating the timely information back to one another.”
This article is reproduced with permission from STAT. It was first published on April 14, 2017. Find the original story here.