Patrick Soon-Shiong's NantHealth Explodes onto Market in IPO Debut

Patrick Soon-Shiong's NantHealth Explodes onto Market in IPO Debut June 3, 2016
By Mark Terry, Breaking News Staff

Culver City, California-based NantHealth, the latest of Patrick Soon-Shiong’s NantWorks collection of companies, launched its initial public offering (IPO) yesterday, raising $91 million. The stock, which is listed on the NASDAQ under the symbol “NH,” started at $14 and jumped to $21 after the bell, although it closed at $18.59.

NantHealth develops software and medical records systems to hospitals. Soon-Shiong, who is often dubbed “the world’s richest doctor,” made about $9.7 billion when he sold his biotech companies APP and Abraxis. His NantWorks umbrella company has about nine units. Last July, Soon-Shiong took NantKwest public, whose share price increased by 39 percent on the day of the IPO, but is now down 77 percent. It is, according to Bloomberg, the second-worst-performing biotech or pharma IPO of 2015, beaten out for that dubious prize by Chiasma .

NantKwest is focusing on oncology cell therapies. NantHealth, the latest IPO, is trying to apply big data analytics to personalized medicine and electronic health records, saying in its SEC filing, “For nearly a decade, we have developed an adaptive learning system, CLINICS, which includes our unique software, middleware and hardware systems infrastructure that collects, indexes, analyzes and interprets billions of molecular, clinical, operational and financial data points derived from novel and traditional sources, continuously improves decision-making and further optimizes our clinical pathways and decision algorithms over time.”

It has generated some revenue, about $19 million in the first quarter. Max Nisen, writing for Bloomberg, says, “The company’s mission, as described in its IPO prospectus, is dizzyingly complex, ambitious, and driven 10 feet underground by the weight of its own jargon.” He also notes that the idea of a big-data healthcare electronic health system “sounds great. But hospitals still struggle just to keep electronic medical records straight.”

And its next loss in 2015 was $72 million on $58.3 million in net revenue.

And what didn’t get mentioned was the industry is dominated by Epic Systems, Meditech, Cerner, McKesson and Siemens Healthcare, while the big data industry has companies like IBM , GE, Accenture, and Oracle.

Another part of NantHealth’s offerings is the GPS Cancer test, which uses its supercomputers and big data to analyze tumor DNA and determine the best and most appropriate drugs for the cancer.

GPS Cancer is a key element of Soon-Shiong’s The Cancer MoonShot 2020 project. He organized a coalition of companies, academics, payers and oncologists to launch The National Immunotherapy Coalition (NIC) and the MoonShot. The focus is to develop and test therapies for various forms of cancers. Increasingly, drug makers are finding that two, three or more combinations of drugs used together are proving more effective in treating cancer.

Both NantWorks and NantKwest are part of the coalition, as well as Celgene , Amgen , Merck KgaA , and others.

Judy Hanover, research director at IDC, told the Los Angeles Times that the GPS Cancer test has plenty of potential, but integrating it into hospital and health system workflows present a serious obstacle. “I think it does need to become part of the diagnostic process and part of the workflow for physicians. I think that’s their biggest hurdle.”

“There is a lot of uncertainty around what sort of market share it can get,” said Matt Kennedy, an analyst with Renaissance Capital, to the Los Angeles Times. “It is a speculative play on a next-generation cancer test, so I think that after it’s traded for a few months, we’ll have a better idea of what investors see it’s actually worth.”

And analysts have some concerns over Soon-Shiong’s leadership of this newly public company. He has indicated he will remain as the company’s chief executive, operating out of the NantWorks offices, and will “devote on average at least 20 hours per week” to NantHealth, while the majority of his attention will go to NantKwest.

He’s part-owner of the Los Angeles Lakers and has invested $70.5 million in Tribune Publishing, which owns the Los Angeles Times and Chicago Tribune. Soon-Shiong will control approximately 58 percent of NantHealth.

“Soon-Shiong has overcome doubters in the past and made a lot of money as a result,” writes Nisen. “It’s hard not to root for him to develop better cancer treatments or any kind of improvement to patient care. But his recent track record does not inspire confidence.”

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