Phillip Frost at 78 isn’t your usual Florida retiree. Rather than spending his days playing golf and relaxing, the billionaire former chairman of Teva Pharmaceutical Industries Ltd. has embarked on his life’s most quixotic quest: a blockbuster cure for obesity.
Many before him have have tried and failed. Medicines currently on the market haven’t sold well. And investors are a little skeptical about Frost’s latest wager.
“It’s kind of like the unicorn of the pharma industry,” said David Munno, head of drug research at Sphera Global Healthcare, a hedge fund in Tel Aviv. “So many companies have tried and had their drugs pulled out of the market or fail miserably.”
Frost believes he can achieve what billions of pharma dollars and decades of research have failed to produce by using the blueprint that allowed him to amass a $4.9 billion fortune: re-engineering an existing product to stifle its flaws.
“The chances of success are extremely high,” he said in a telephone interview from his office in Miami.
A native of South Philadelphia, Frost turned a $50,000 investment in Key Pharmaceuticals Inc., a struggling drug developer, in 1972 into a $825 million sale to Schering-Plough Corp. 14 years later. His next company, the maker of generic drugs Ivax Corp., he sold to Teva, the industry leader, for $7.4 billion in 2006.
Not Hungry
“We have a lot of respect for Phil Frost and we definitely wouldn’t write him off,” Munno said. Still, he gives any drug that hasn’t entered human clinical tests -- as is the case with Frost’s product -- a chance of success that’s less than 5 percent.
Frost, who retired as Teva’s chairman last year, was freed up to focus on Opko Health Inc., the drug development company he started after selling Ivax. Valued at $5.2 billion on the New York Stock exchange and based in Miami, Opko has been working on tweaking a hormone called Oxyntomodulin, a powerful appetite suppressant whose mechanism of action isn’t well understood, and which alone lacks the staying power required for a diet medicine.
“We’re talking about a hormone that tells our brain that we’re no longer hungry,” said Gili Hart, the company’s vice president of clinical development.
Obesity Paradox
Opko has licensed technology from Israel’s Weizmann Institute of Science that could change that, according to Hart. It allows the hormone to act longer in the body, requiring one injection per week instead of one every few hours, she said. Opko tested the product on obese mice and rats, which shed more than 20 percent of their weight with no worrisome side effects. Human studies are slated to begin this year.
Frost figures the drug’s revenue potential could be about $100 billion, leapfrogging the pharmaceutical industry’s all- time bestseller, Pfizer Inc.’s cholesterol medicine Lipitor. The market for an obesity medicine is huge -- even just in the U.S., where an estimated 79 million people are overweight or obese.
But so far no drugmaker has managed to convert that potential into a blockbuster, and it’s so early for the Opko drug that a lot could go wrong. Because obesity isn’t a disease, regulators have a low tolerance for worrisome side effects, and patients often give up treatment when they come to realize it’s no panacea.
No Blockbuster
“There have been many disappointments,” said Soeren Lontoft, an analyst at Sydbank A/S in Denmark. “Any company seeking to develop a blockbuster for this market will face major challenges.”
Opko shares have gained about 24 percent this year. They advanced 0.6 percent to $12.42 as of 10:05 a.m. in New York.
It takes 10 to 15 years on average for an experimental drug to make it from the lab to U.S. patients. Only one in 5,000 compounds that enter pre-clinical testing endure human trials and win permission to be sold, according to drugmaker Eli Lilly & Co.
In the last two years, four drugs have been approved to treat obesity in the U.S.: Novo Nordisk A/S’s Saxenda injection and Vivus Inc.’s Qsymia; a pill called Belviq from Eisai Co. and Arena Pharmaceuticals Inc.; and Contrave, a tablet developed by Orexigen Therapeutics Inc. and marketed by Takeda Pharmaceutical Co.
None of the products is forecast to reach anywhere near $1 billion in sales this year, the blockbuster threshold. Annual revenue for Qsymia and Belviq, both approved in 2012, have yet to surpass $100 million. Saxenda, cleared late last year, is only just going on sale. It’s expected to generate $470 million within two years, according to Bloomberg analyst estimates. Contrave, also approved last year, may be the exception: it’s too early to know if sales are taking off, but Simos Simeonidis, a senior analyst at RBC Capital Markets, estimates they could climb to $2.54 billion in 2027.
New With Old
“It’s not just finding the right drug,” said Munno, who warns he hasn’t studied Opko’s drug closely because it’s too early in the research process. “You need not only to produce enough weight loss but you need to get patients to change their lifestyles. No one has successfully done that yet.”
Older slimming medicines made by companies like Sanofi and GlaxoSmithKline Plc stumbled because they were deemed too dangerous or came with unpleasant side effects.
The Opko drug fits the profile of what Frost has been successful with in the past: not an entirely new product, but one that needed to be re-engineered to deliver.
Frost and partner Michael Jaharis built Key Pharmaceuticals in the 1970s by finding new ways to deliver familiar drugs that had already been tested in humans. In one case, they took an old asthma medicine called theophylline that was ineffective in small doses and unsafe in large doses and devised a time- released pill called Theo-Dur that went on to win regulatory approval and fuel sales growth.
Weekly Injection
At his next venture, Ivax, Frost was one of the early entrepreneurs to recognize the opportunity the 1984 Hatch-Waxman Act provided for generic companies that were first to present a file for approval. When Ivax developed a long-acting form of verapamil, a drug used to treat hypertension, sales shot up by more than 20 percent to over $600 million.
With the obesity challenge, Frost is taking a hormone known to the scientific community -- Oxyntomodulin by itself has been tested in humans and found to be safe -- and using new technology to prolong its action. Opko got the drug, known for now as MOD-6031, with the $480 million acquisition of drugmaker Prolor Biotech Inc. in 2013.
“We are taking a technology that extends the life of that hormone, which itself has already been proved in previous studies to reduce weight,” Frost said. “With a single injection a week, we think we can control obesity.”